Northern Oil and Gas has signed a definitive agreement to purchase VEN Bakken’s assets in the Williston Basin in the US.
VEN Bakken is a wholly owned subsidiary of Flywheel Bakken, a portfolio company of the Kayne Private Energy Income Funds.
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The assets comprise around 18,000 net acres containing 86.9 net producing wells and 2.7 net wells in process. As part of the package, Northern will also acquire 47.5 net undrilled locations in the Williston Basin.
During the second half of this year, these assets are expected to produce 6,600boed and generate $44.9m in cash flow from operations.
According to Northern, the acquisition will be accretive to earnings, cash flow per share, and future drilling inventory.
Furthermore, the company noted that the assets will require an estimated capital expenditure budget of $15.6m during the second half.
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By GlobalDataUnder the agreement, Northern will pay $165m in cash to VEN Bakken. The consideration also includes a $130m 6% three-year senior unsecured note due 2022 and around 5.6 million shares of Northern’s common stock.
Northern Oil and Gas CEO Brandon Elliott said: “This transaction furthers our stated goals of allocating capital to generate free cash flow in low commodity prices, keep debt metrics low, and grow our debt-adjusted cash flow per share.
“Durable cash flows, core drilling inventory, hedges and low leverage should help to generate long-term value for shareholders.”
The completion of the transaction is expected to take place on 1 July this year.
Northern chief financial officer Nick O’Grady said: “At an accretive acquisition price of less than 3.5x cash flow, this asset should see multi-year production growth while being self-funding and still generating excess free cash flow.
“The additional size and scale provided from this acquisition serve to continue to grow our borrowing base and reduce our per unit G&A costs to industry-leading levels.”
Northern Oil and Gas has operations in the core of the Bakken and Three Forks plays in the Williston Basin of North Dakota and Montana.
