NOG Tacks On Another Northern Delaware Basin Bolt-On for $130 Million

Northern Oil and Gas Inc. (NOG) agreed to acquire an additional core northern Delaware Basin bolt-on for $130 million on Oct. 11, marking three back-to-back acquisitions in the Permian Basin since August.

“NOG continues to press its advantage as a well-capitalized, reliable and consistent purchaser of high-quality nonoperated properties. More importantly, NOG’s technical team continues to underwrite for returns with precision and focus on the best assets available in the marketplace today,” NOG CEO Nick O’Grady commented in a company release.

Based in Minnetonka, Minn., NOG aims to be the go-to resource for operators that want to offload nonoperated working interests in leasehold. Originally focused in the Williston Basin, the company has also expanded into the Marcellus Shale and Permian Basin through a series of acquisitions.

NOG has significantly boosted its position in the Permian Basin in 2022. The company’s dealmaking this year was jumpstarted in January with the closing of a $406.5 million acquisition of Veritas Energy’s nonop position in the Permian, which marked the company’s largest acquisition to date.

Since then, NOG has added nearly $400 million worth of additional acquisitions in the Permian. Transactions have included a bolt-on acquisition of core northern Delaware Basin properties announced in late September for an initial purchase price of $157.5 million and the closing of a $110 million deal for Midland Basin properties from Laredo Petroleum Inc. on Oct. 6.

The additional northern Delaware Basin bolt-on acquisition unveiled by NOG on Oct. 11 includes core nonoperated working interest properties in New Mexico’s Lea and Eddy counties and Loving and Winkler counties in West Texas. The acquired assets cover roughly 2,100 net acres, 5.3 net producing wells, 2.1 net wells-in-process and approximately 17.2 net undeveloped locations.

“This transaction lies squarely in NOG’s fairway on a number of levels,” NOG President Adam Dirlam added in the release. “The assets contain high-quality, low breakeven development that is leveraged to some of NOG’s top operating partners, as our investors have come to expect.”

The primary operator of the assets is Mewbourne Oil Co., which NOG described in its release as “one of the most cost-efficient and active operators in the northern Delaware Basin.” Other operators include Coterra Energy Inc. and Permian Resources Corp.

Production of about 2,500 boe/d (68% oil, 2-stream) is expected from the acquired assets for 2023, generating an estimated $55 million of unhedged cash flow in 2023 at strip pricing as of Oct. 10 and resulting in a 2.4x transaction multiple, according to the company release.

NOG agreed to acquire the assets from a private seller for $130 million in cash. The effective date for the transaction is Nov. 1, and NOG expects to close the transaction in December.

Wells Fargo Securities is financial adviser to NOG for the acquisition. Kirkland & Ellis LLP is serving as the company’s legal adviser. TPH & Co., the energy business of Perella Weinberg Partners, served as financial adviser to the seller and Bracewell LLP is serving as the seller’s legal adviser.