Devon Energy Corp. has agreed to purchase RimRock Oil and Gas LP’s Williston Basin leasehold interest and related assets for $865 million. 

devon

“This bolt-on acquisition is highly complementary to our existing position and is immediately accretive,” said CEO Rick Muncrief.

The deal with RimRock, a portfolio company formed in 2016 by private equity giant Warburg Pincus LLC, would add 38,000 net acres (88% working interest) contiguous to an existing Williston position. 

Production from the RimRock acreage during 1Q2022 was about 15,000 boe/d (78% oil-weighted). Average output is slated to rise to 20,000 boe/d over the next year, according to Devon.

“RimRock’s directly adjacent acreage offers strong operational synergies, adds to our high-quality inventory in the core of the play and positions us to further increase the return of cash to shareholders,” said Muncrief.

The transaction is expected to add “more than 100 highly economic undrilled inventory locations, positioning the company’s Williston Basin assets to maintain production and strong cash flow for several years,” Devon noted.

In 1Q2022, Oklahoma City-based Devon reported Williston production of 48,000 boe/d. It plans to turn 15-20 wells to sale in the basin this year.

RimRock, which entered the Bakken Shale in 2017 via a $500 million deal with Whiting Petroleum Corp., has “built a strategic acreage position with a sizable inventory of core drilling locations, developing a clearly differentiated” Williston Basin asset, said Warburg Pincus’ head of Energy Peter Kagan.

Devon and RimRock expect to close the transaction in 3Q2022.

NOG Also Builds In Williston

Another company seeking to expand its Williston footprint is Northern Oil and Gas Inc. (NOG), which said Tuesday it plans to acquire about 3,500 acres in the basin spanning three North Dakota counties for $170 million.

Although the Permian Basin “continues to be a source of growth, we continue to find significant opportunities to grow our Williston Basin position,” said President Adam Dirlam.

Under the definitive agreement, NOG would add 9.2 net producing wells, 2.6 net wells-in-process, and 14.9 net engineered economic undeveloped locations in Dunn, McKenzie and Williams counties. After closing, expected in August, NOG expects another well to be turned to sales this year.

ConocoPhillips, Continental Resources Inc. and Marathon Oil Corp. operate the assets, said management.

“Anchored by significant inventory, high oil cuts, strong margins and existing ownership in over 50% of the properties, this bolt-on transaction fits perfectly with our strategy,” said Dirlam.

NOG expects the new production to top 2,300 boe/d (85% oil-weighted). Output over the ensuing 12 months is forecast to average 2,500 boe/d.

Management said the undisclosed seller could earn another $5 million in contingent payments in 2023 if West Texas Intermediate oil prices top $92.50/bbl at the end of this year.

NOG said operating costs for the new properties are lower than its corporate average on existing Williston acreage.

NOG’s production in 1Q2022 averaged 71,225 boe/d across its Marcellus Shale, Permian Basin and Williston acreage. The 1Q2022 figure marked an 85% year/year increase in output from 38,417 boe/d in 1Q2021.

Given the pending acquisition, NOG increased its 2022 production guidance to 73,000-77,000 boe/d from 71,000-76,000 boe/d. In addition, capital spending guidance for 2022 was raised to $405-470 million from $350-415 million.

Management also revised its full-year projection for net wells turned to sales, upgrading guidance to 52.5-56.5 net wells from the previous range of 48-52 wells.

“We are well ahead of our goals for this year, but these developments are setting the stage for material growth in volumes and cash flow for 2023,” said CEO Nick O’Grady.

North Dakota’s top oil and gas regulator recently reported two-year highs for the state’s drilling and hydraulic fracturing activity.

On Friday Baker Hughes Co. (BKR) reported that 38 drilling rigs were operating in the Williston Basin for the current week, unchanged from the previous week’s rig count but up 16 year/year.