Northern Oil & Gas, Inc. (NOG), an independent energy company, announced the pricing of a 5 million common shares offering to the public at $17.50 per share. Shares were trading down 6% at the time of writing.
Wells Fargo Securities, the sole underwriter of this offering, has also been given a 30-day option to purchase an additional 750,000 shares of the company on the same terms.
The offering, subject to certain closing conditions, is expected to close on June 21.
The net proceeds from the offering, along with the required cash on hand and borrowings under the company’s revolving credit facility, are intended to fund the pending Permian Basin Bolt-On Acquisitions.
Both the offering and the acquisition are independent of each other and are not conditional on each other’s completion.
The company also mentioned that if the Permian acquisition falls through, it will use the proceeds from the offering for general corporate purposes, including debt repayment. (See NOG stock chart on TipRanks)
The Permian Acquisition
On June 16, NOG entered into three definitive agreements to acquire non-operated interests across approximately 2,900 core Permian acres in Reeves, Lea, and Eddy Counties, for a combined purchase price of $102.2 million.
NOG acquired a portion of these assets in June and expects to acquire the remaining assets in Q3 of FY21. Upon closing, the company expects a boost in average production to 3,700 Boe per day in the second half of 2021.
Capital expenditure of up to $35 million is expected on the acquired assets in 2021.
Based on current strip prices, the company expects to generate over $100 million in Free Cash flow from these assets through 2025.
Nick O’Grady, the company’s CEO said, “These deals are immediately accretive to our enterprise and all relevant per share statistics. As promised, alongside a reduction in leverage ratios, it means an acceleration of our dividend strategy to shareholders, while augmenting our inventory and growth profile.”
The company also guided (excluding the acquisition) for preliminary April and May 2021 average oil production estimates to exceed 31,750 Bbl per day, above internal expectations.
RBC Capital analyst Scott Hanold recently reiterated a Buy rating on the stock with a price target of $24, implying 24% upside potential to current levels. Hanold expects NOG to report a loss of $1.73 per share in the second quarter.
The stock has a Strong Buy consensus rating based on 6 unanimous Buys. The NOG average analyst price target stands at $22.17 and implies upside potential of 14.6% to current levels. Shares have gained 118% year-to-date.
Citi’s Shares Drop as CFO Warns of Rising Expenses and Falling Revenue – Report
GM to Boost EV and AV Spend to $35B; Raises 1H21 EBIT Outlook
Why is Exxon Mobil Trending Higher?