Northern Oil and Gas Inc (NOG) has completed an agreement to acquire Delaware Basin assets from Forge Energy II Delaware LLC that include approximately 30 net producing wells.
Minnesota-based NOG now has a 30 percent stake in Forge’s assets after paying $167.9 million in cash for the joint acquisition with Vital Energy Inc, which will be the operator .
“In connection with the transaction, NOG and Vital entered into cooperation and joint operations agreements, which include a multi-year development plan for the Forge assets,” NOG said in a press release last week.
The acquisition of Forge, a company under EnCap Investments LP, is concentrated in Reeves and Ward counties in the state of Texas, totaling 10,200 net acres. Most of the wells in the area are already producing, with 2.3 net wells in process and about 20 net undeveloped low-balance locations, according to NOG’s first announcement of the deal on May 15.
“Recent production from the acquired assets was approximately 3,400 boe per day (2 streams, 79% oil). For the second half of 2023, NOG expects average production of >3,750 boe per day (2 streams, 79 % oil) and approximately $17 million of capital expenditures,” NOG said.
“Forge’s assets are of high quality with a clear and concise development opportunity to deliver the consistent performance our investors expect,” commented NOG CEO Nick O’Grady.
NOG has also entered into a definitive agreement with another EnCap company to acquire assets in New Mexico and Texas. The joint acquisition with Earthstone Energy Inc will give NOG a 33.33 percent stake in the assets of Novo Oil & Gas Holdings LLC for $500 million in cash, NOG announced on June 15, calling this acquisition the your biggest purchase ever.
“The acquired assets are located primarily in Eddy County, New Mexico and eastern Culberson County, Texas and include approximately 5,600 net acres, 29.2 net producing wells, 7.2 net wells in process and 59, 9 clean undeveloped locations,” he said. .
NOG expects production from Novo’s assets to be around 11,500 barrels of oil equivalent (boe) per day in the second half of 2023, 53 percent of which would be oil. It anticipates $20 million in capital expenditures for the assets.
“Upon closing and transition of services, the operator of substantially all of the assets will be Earthstone, and NOG will participate in development in accordance with the cooperation and joint operations agreements entered into in connection with the acquisition,” NOG added. “Furthermore, Earthstone and NOG have formed an area of mutual interest for further asset consolidation.”
It has partnered with Earthstone with the vision that, in the long term, the operator would deliver six to seven wells annually to NOG, “which should sustain production of approximately 10,000 boe per day (2 streams, excluding NGLs), with constant oil cuts.as a percentage of the total,” NOG said.
O’Grady commented: “Novo is NOG’s largest transaction to date and is among its most appreciated, with significant high-quality, long-standing inventory. We are delighted to work alongside our partners at Earthstone in developing these assets over the next decade and we believe this transaction will generate higher earnings per share, free cash flow and shareholder returns for our investors both immediately and over the long term.”
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