Yahoo Finance Northern Oil (NOG) Expands With Uinta Basin Acquisition
Northern Oil and Gas NOG has announced an important step in its growth strategy by acquiring a 20% stake in the Uinta Basin assets, marking the largest transaction in the independent upstream company's history. Partnering with another energy explorer SM Energy Company SM, this joint acquisition involves a combined purchase price of $2.55 billion, with NOG's share amounting to $510 million. This transaction promises substantial financial and operational benefits for NOG. The company plans to fund this acquisition through a combination of cash flow from operations, cash on hand, and borrowings under its revolving credit facility.
Strategic Acquisition in a Prime Location
The Uinta Basin, located in Utah, is renowned for its rich hydrocarbon resources. The acquired assets encompass approximately 9,300 net acres and boast a current production of over 10,500 barrels of oil equivalent per day (Boe/d), with more than 85% being oil. This acquisition aligns perfectly with NOG's strategy of investing in high-quality, high-return assets. The assets offer over a decade of Tier 1 drilling opportunities with nearly 98 net undeveloped locations, providing significant future upside.
Financial and Operational Gains
This acquisition is highly accretive to NOG's key financial metrics. It is expected to generate over $170 million in unhedged cash flow from operations in the next 12 months. Additionally, NOG anticipates a strong free cash flow profile with more than $85 million projected over the next year. These robust financial returns will enhance NOG's profitability and free cash flow per share, benefiting shareholders immediately and over the long term.
A Promising Partnership
SM Energy, the operator, will manage the development of the acquired assets. This partnership leverages SM's operational expertise and track record of co-developing multiple geological layers, maximizing the potential of the Uinta Basin assets. NOG's collaboration with SM is expected to enhance operational efficiency and deliver significant cost savings, particularly from an integrated co-owned sand mine facility set to come online within 12 months.
About Northern Oil and Gas
Northern Oil and Gas’ core operations are focused on three leading basins of the United States — the Williston, Permian and the Appalachian. The upstream operator employs a unique nonoperating business model, which helps it to keep costs down and increase free cash flow. NOG carries a Zacks Rank #3 (Hold) at present.
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