HIGHLIGHTS
- SM Energy Company (“SM”), with NOG as its non-operated partner,
purchasing the Uinta Basin assets (the “XCL Assets”) of XCL
Resources, LLC, an EnCap Portfolio Company, for a combined
unadjusted purchase price of $2.55 billion in cash
- NOG to acquire a 20% undivided stake in the XCL Assets (the
“Acquired Assets”) for $510.0 million in cash (all data below is
net to NOG)
- Current production of >10,500 Boe per day (2-stream,
excluding NGLs, >85% oil)
- ~9,300 net acres, located primarily in Duchesne and Uintah
Counties, Utah
- Over a decade of Tier 1 drilling with 97.6 net underwritten
undeveloped locations, with significant future upside from
additional zones and infill development
- Next twelve months unhedged cash flow from operations,
post-closing (assuming 10/1/24 start date) expected to be >$170
million, based on recent strip prices, representing a transaction
multiple of <3.0x
- Strong free cash flow profile with >$85 million expected
over the next twelve months (assuming 10/1/24 start date)
- NOG to fund transaction with cash flow from operations, cash on
hand and borrowings under NOG’s Senior Secured Revolving Credit
Facility
Northern Oil and Gas, Inc. (NYSE: NOG) (the “Company” or “NOG”)
today announced that it has entered into a definitive agreement to
acquire a 20% undivided stake in the XCL Assets in partnership with
SM Energy Company for a purchase price, net to NOG, of $510.0
million in cash, subject to customary closing adjustments.
The Acquired Assets are located primarily in Uintah and Duchesne
Counties, Utah and include approximately 9,300 net acres and 97.6
underwritten net undeveloped locations, normalized for 10,000 foot
laterals. Significant additional upside locations remain in the
Deep and Upper Cube. The prospective development plan is based on
conservative and widened spacing from the current operator. The
Company sees substantial return upside from increased lateral
lengths (extending to 3-miles) and cost savings from an integrated
co-owned sand mine facility scheduled to come online within twelve
months.
Upon closing and transition of services, the operator of
substantially all of the assets will be SM, with NOG participating
in development pursuant to cooperation and joint development
agreements entered into in connection with the acquisition.
Recent production on the Acquired Assets was >10,500 Boe per
day (2-stream, >85% oil). Post-closing in 2024, NOG expects
average production of >10,000 Boe per day (2-stream, >85%
oil) and approximately $45 million of capital expenditures. Long
term, NOG expects SM to turn in line an average of approximately 7
– 9 wells annually net to NOG, which is expected to sustain
production at >10,000 Boe per day (2-stream, >85% oil).
The effective date for the transaction is May 1, 2024, and SM
and NOG expect to close the transaction in late Q3 or early Q4
2024. As part of the transaction, NOG has placed a $25.5 million
deposit in escrow prior to closing. The obligations of the parties
to complete the acquisition are subject to the satisfaction or
waiver of customary closing conditions.
MANAGEMENT COMMENTS
“NOG continues to further define itself as the preeminent
national, non-operated franchise, with low leverage, growing cash
returns, diversified by both region and commodity mix. The XCL
acquisition is consistent with our strategy of investing in the
highest quality assets, with significant upside and long-dated
inventory, developed and run by leading operators,” commented Nick
O’Grady, NOG’s Chief Executive Officer. “The Uinta Basin has
emerged as one of the best and fastest growing oil resources in the
United States, and SM has a track record as one of our best and
most responsible operators. We look forward to working with them
for many years to come. We believe this transaction will be the
most accretive in our history, benefiting per share net profit and
free cash flow both immediately and over time.”
“With XCL, we are acquiring a multi-stacked pay acreage position
with significant long-term upside,” commented Adam Dirlam, NOG’s
President. “These assets are exemplary of our returns-focused
strategy: delivering immediately while offering significant
exploration potential further enhancing NOG’s optionality. Much
like our prior joint development transactions, we have devised an
aligned, conservative development and governance plan with a proven
E&P company. We continue to be the partner of choice for our
operators as the largest, best capitalized and most reliable
working interest owner in the United States.”
ADVISORS
RBC Capital Markets is serving as financial advisor to NOG for
the acquisition. Jefferies LLC is serving as sole financial advisor
to XCL.
Kirkland & Ellis LLP is serving as legal counsel to NOG.
Vinson & Elkins LLP is serving as legal counsel to XCL.
PRE-RECORDED DISCUSSION
NOG has posted a pre-recorded discussion and investor
presentation regarding this announcement on its website. You can
access the pre-recorded discussion here: XCL Joint Acquisition.
ABOUT NOG
NOG is a real asset company with a primary strategy of acquiring
and investing in non-operated minority working and mineral
interests in the premier hydrocarbon producing basins within the
contiguous United States. More information about NOG can be found
at www.noginc.com.
SAFE HARBOR
This press release contains forward-looking statements regarding
future events and future results that are subject to the safe
harbors created under the Securities Act of 1933 (the “Securities
Act”) and the Securities Exchange Act of 1934 (the “Exchange Act”).
All statements other than statements of historical facts included
in this release regarding NOG’s financial position, operating and
financial performance, business strategy, dividend plans and
practices, plans and objectives of management for future
operations, industry conditions, capital expenditures, production,
cash flow, hedging and other matters are forward-looking
statements. When used in this release, forward-looking statements
are generally accompanied by terms or phrases such as “estimate,”
“guidance,” “project,” “predict,” “believe,” “expect,” “continue,”
“anticipate,” “target,” “could,” “plan,” “intend,” “seek,” “goal,”
“will,” “should,” “may” or other words and similar expressions that
convey the uncertainty of future events or outcomes. Items
contemplating or making assumptions about actual or potential
future sales, production, drilling locations, capital expenditures,
market size, collaborations, and trends or operating results also
constitute such forward-looking statements.
Forward-looking statements involve inherent risks and
uncertainties, and important factors (many of which are beyond
NOG’s control) that could cause actual results to differ materially
from those set forth in the forward-looking statements, including
the following: changes in crude oil and natural gas prices; the
pace of drilling and completions activity on NOG's properties and
properties pending acquisition; infrastructure constraints and
related factors affecting NOG’s properties; cost inflation or
supply chain disruptions; ongoing legal disputes over and potential
shutdown of the Dakota Access Pipeline; NOG’s ability to acquire
additional development opportunities, potential or pending
acquisition transactions (including the transactions described
herein), the projected capital efficiency savings and other
operating efficiencies and synergies resulting from NOG’s
acquisition transactions, integration and benefits of property
acquisitions, or the effects of such acquisitions on NOG’s cash
position and levels of indebtedness; changes in NOG's reserves
estimates or the value thereof; disruption to NOG’s business due to
acquisitions and other significant transactions; general economic
or industry conditions, nationally and/or in the communities in
which NOG conducts business; changes in the interest rate
environment, legislation or regulatory requirements, conditions of
the securities markets; increasing attention to environmental,
social and governance matters; NOG's ability to consummate any
pending acquisition transactions (including the transactions
described herein); other risks and uncertainties related to the
closing of pending acquisition transactions (including the
transactions described herein); NOG's ability to raise or access
capital; cyber incidents; changes in accounting principles,
policies or guidelines; events beyond NOG’s control, including a
global or domestic health crisis, acts of terrorism, political or
economic instability or armed conflict in oil and gas producing
regions or elsewhere; and other economic, competitive,
governmental, regulatory and technical factors affecting NOG's
operations, products and prices.
NOG has based these forward-looking statements on its current
expectations and assumptions about future events. While management
considers these expectations and assumptions to be reasonable, they
are inherently subject to significant business, economic,
competitive, regulatory, and other risks, contingencies and
uncertainties, most of which are difficult to predict and many of
which are beyond NOG's control. Accordingly, results actually
achieved may differ materially from expected results described in
these statements. Forward-looking statements speak only as of the
date they are made. NOG does not undertake, and specifically
disclaims, any duty to update or revise any forward-looking
statements to reflect events or circumstances after the date of
such statements, except as may be required by applicable law or
regulation.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240626710322/en/
Evelyn Leon Infurna Vice President of Investor Relations (952)
476-9800 ir@northernoil.com
Northern Oil and Gas (NYSE:NOG)
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