Lower 48 producer Northern Oil & Gas Inc. saw its 1Q2021 output climb over the previous three months as more curtailments were eased in the Bakken Shale and well productivity improved.
The company, which has positions in the Bakken, the Marcellus Shale and the Permian Basin, reported overall production of 38,417 boe/d for the first quarter. That was 7.5% higher sequentially as curtailments put in place after last year’s oil price crash declined by 2,000 b/d, COO Adam Dirlam said. He discussed results during a quarterly earnings call. Well productivity outperformed internal estimates, he noted.
“This is driven by certain operators in areas where we have higher concentration levels,” Dirlam said. “We will continue to monitor these improvements.”
The company’s year/year production faltered, however, as some curtailments remained in place. NOG reported natural gas and natural gas liquids (NGL) production of 4.96 Bcf, 2% lower than in the prior-year quarter. Oil output was 2.63 million bbl, a 16% drop year/year. The company estimated that about 2,000 boe/d of curtailed production is still weighing on its output figures.
“Physical curtailments were eased, but those wells need to be re-pressurized, worked over,” CEO Nick O’Grady said on the call. “And so you saw a slew of workover rigs, one of our operators had seven alone in January going on to the acreage and basically flushing out and repairing those wells and doing basic maintenance to get them to produce what they should be producing.”
O’Grady said NOG is “almost there” in terms of getting its wells back to maximum production.
NOG has been on the hunt for acquisitions and executed on six transactions during the quarter. Details were sparse, but Dilam said NOG reallocated capital after deciding not to partner with an operator on new wells in step-out areas “where we have seen some meaningful decreases in productivity over the last 18 months.”
NOG continues “to take a barbell approach, picking up exposure to additional drilling opportunities in both the Bakken and the Permian,” he added.
There are more deals on the company’s radar. O’Grady said during the call that the company was looking at 15 different acquisition opportunities, 12 of which have not been formally marketed.
“We are inundated from everyone from private equity groups to large family offices looking to partner with us every day,” O’Grady said.
The bulk of the packages being considered are in the Bakken, Permian and the Eagle Ford Shale of South Texas, which would be a new area for NOG. However, O’Grady said he sees few opportunities to expand the company’s footprint in the Marcellus Shale of Pennsylvania.
“So far we’ve had a handful of little things show up here and there,” he told analysts. “It’s relatively blocked up compared to other areas. There are two very large high-quality nonop assets that we know in the Marcellus that we’ve kind of looked at, but they are not for sale. But they are really nice properties and certainly if they ever went to market, we would take a look.”
The disclosures come as signs point to a coming wave of consolidation in the Lower 48. When it comes to nonoperated assets, O’Grady said he sees about $10 billion in transaction opportunities on the market.
First quarter revenues from oil and gas sales totaled $157.33 million compared with $130.2 million in the same period last year. However, the company booked a $135 million loss on commodity derivatives, leading to $21.4 million in overall revenues for 1Q2021 from $506.78 million reported last year.
The company realized an average sales price for natural gas and NGL of $4.13/Mcf compared to $2.75 in 1Q2020. For oil, it realized $49.25/bbl, a 5% improvement year/year.
NOG reported a quarterly net loss of $94.19 million (minus $1.73/share) compared with net income of $364.56 million ($9.03) in 1Q2020.
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