Northern Oil and Gas, Inc. announced that it has entered into a definitive agreement to acquire certain non-operated assets in the Appalachian Basin from the Seller. The Seller is a subsidiary of Reliance Industries, Ltd.
At the effective date of July 1, 2020, the Assets were producing approximately 120 MMcfe/d of natural gas equivalents, net to Northern’s ownership. In 2021E, the Assets are expected to produce approximately 100 - 110 MMcfe/d (or approximately 19,000 Boe/d) net to Northern and consist of approximately 64,000 net acres containing approximately 102.2 net producing wells, approximately 22.6 net wells in process, and approximately 231.1 net undrilled locations in the core of the Marcellus and Utica plays.
The Assets are expected to generate approximately $55-60 million in unhedged cash flow from operations during 2021E with an estimated capital expenditure budget of $25-30 million (net to Northern).
Total consideration to be paid to Seller, net to Northern, consists of $175 million in cash and approximately 3.25 million warrants to purchase shares of Northern’s common stock at an exercise price of $14.00 per share. The cash portion of the consideration is subject to typical closing and post-closing adjustments. The transaction has an effective date of July 1, 2020 and is expected to close in April 2021, subject to the satisfaction of customary closing conditions.
The transaction is expected to be funded through a combination of equity and debt financings and is anticipated to be leverage neutral on a trailing basis and leverage accretive on a forward basis.
Northern will begin hedging expected PDP volumes commensurate with the signing of the transaction, including basis differentials, with a target of hedging up to 75% of volumes for approximately three years.
