Minnetonka, MN-based independent Northern Oil and Gas Inc. is looking to expand its Lower 48 oil and natural gas production this year after a slew of dealmaking in the final three months of 2020, including four transactions in the Permian Basin.
Management said in an update on activity that it saw “steady and continued improvement in operations” throughout the final three months of 2020, as operators were returning shut-in and curtailed volumes at a steady rate.
Northern works primarily in the Williston and Permian basins.
“Our team quietly executed throughout even the most challenging periods of 2020, adding high quality inventory and development with strong upfront returns and convexity to better pricing, one small deal at a time,” CEO Nick O’Grady said.
“Our work should pay off in 2021, as the positive trajectory throughout 4Q2020 was encouraging and provides strong momentum. We expect even greater free cash flow, growing volumes and stellar capital productivity on the horizon.”
Northern is seeing increased development and completion activity in part from improved pricing. The wells in inventory remained “at or near all-time highs” at the end of December, with 28.1 net wells.
Given the improved oil and gas pricing, along with stronger activity levels in November and December, Northern’s 4Q2020 production guidance was narrowed to 34,000-36,000 boe/d from 30,000-40,000.
“Additionally, with higher propane and natural gas prices, Northern expects steady improvements to its natural gas realizations, as higher prices absorb fixed gathering and processing fees,” management said.
There is an “increased backlog of acquisition opportunities, from individual wellbores to large asset packages.” Northern executed on $8.4 million total in acquisitions during the fourth quarter, adding one net producing well, 3.6 net in progress. The deals included 655 net acres and 373 net royalty acres.
Across the 11 transactions, four targeted the Permian.
“With the ‘Shale 3.0’ model taking hold for operators, we are seeing enormous opportunities to step into projects as nonoperated capital availability remains scarce,” COO Adam Dirlam said. “These ground game opportunities continue to have full-cycle returns well north of our already strong return on capital employed metrics.”
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