US independent Northern Oil & Gas has continued its 2021 acquisition spree, announcing a $406.5 million acquisition of assets in the Permian basin of western Texas and south-eastern New Mexico from Veritas Energy — but its stock was down more than 11% as investors indicated displeasure with the move.
As part of the deal, the Minnesota-based independent producer will acquire a non-operating position in 31.7 net producing wells with 5.6 net wells in process. Devon Energy, ConocoPhillips, EOG and Mewbourne Oil Company will serve as the operators for the wells in question.
According to Northern, the current production of the assets is between 9100 and 11,500 barrels of oil equivalent per day, with 60% of that amount being oil.
The company said it anticipates average production of more than 10,500 boepd from the assets, located in both the Delaware and Midland unconventional basins, in 2022.
“Northern expects the assets to be immediately self-funding at closing,” the company said. “Forward one-year unhedged cash flow from operations from the effective date is expected to be approximately $185 million and 2022 unhedged cash flow from operations is expected to exceed $180 million, based on current strip pricing.”
The acquisition is the fourth major move made by Northern this year, and the second in the Permian basin.
In June, the company spent $102.2 million for non-operating stakes in assets located in Texas and New Mexico.
In October, the company announced a $154 million acquisition of assets in the Williston basin of North Dakota, and the company closed on a $120.9 million deal in Pennsylvania's Marcellus shale in April.
“This transaction completes the strategic transformation of our business that began in 2018,” said Northern chief executive Nick O’Grady.
“It will drive immediate significant accretion across the board to our investors, increased cash returns, and importantly, creates a truly diversified business of scale, with substantial free cash flow that can self-fund future growth.”
That rationale did not resonate with investors, at least not immediately. Shares of Northern were down $2.78, or 11.83%, to $20.72 in mid-afternoon trading US time on the New York Stock Exchange.