Northern Oil and Gas Inc. has agreed to acquire “substantially all” the nonoperated Permian Basin assets owned by affiliates of Veritas Energy LLC, including 6,000 oil-weighted net acres.

northern

The transaction for $406.5 million was announced earlier this month.

“This transaction completes the strategic transformation of our business that began in 2018,” CEO Nick O’Grady said. “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.”

The acquisition includes about 6,000 net acres and about 45 undrilled locations in the Permian’s Delaware sub-basin in the New Mexico counties of Lea and Eddy and the Texas counties of Loving, Reeves, Ward and Winkler.

The assets boast average production of 9,000-11,500 boe/d, 60% weighted to oil. The firm expects 2022 average production from the Permian acreage of 10,500 boe/d-plus, also 60% oil-weighted. 

The Veritas deal would give Northern 31.7 net producing wells, 5.6 net wells in process, four permitted net wells, aka authorized for expenditure, and 40.8 net future develop locations, said Northern. 

Of the assets being acquired, Northern said ConocoPhillips, Devon Energy Corp., EOG Resources Inc.  and Mewbourne Oil Co. manage about 64% of the expected 2022 production.

Delaware Dealmaking 

“The Veritas transaction marks our fourth significant transaction in 2021 as we return focus to the Delaware Basin, further scaling our business and building inventory with premier operators,” said COO Adam Dirlam. “Northern continues to set the standard for nonoperated energy management and will remain steadfast on our focus on consolidating high quality, low-breakeven assets.”

Northern has been on an expansion spree this year, with acquisitions in the Appalachian Basin, the Bakken Shale and the Permian. With its latest buy, the company now expects to produce more than 70,000 boe/d across its asset base in 2022 — with more than 40% of total output coming from the Permian and Marcellus Shale.

The company expects to close the deal by the end of March. Northern said it plans to submit a request to the board after the transaction is completed to raise the quarterly dividend 50%, to 12 cents/share from 8 cents, marking the third dividend increase since 2Q2021.