Northern Oil and Gas (NOG) is expanding into the Canadian market with a $259 million acquisition in Alberta's light-oil Duvernay shale, betting the basin's low-cost inventory can bolster growth amid expectations for stronger long-term crude prices, RBC Capital Markets strategists said on Wednesday.
The US energy firm said it agreed to acquire an undivided 25% non-operated interest in assets owned and operated by Parallax Energy Operating, a private equity-backed firm.
The deal includes net production of about 4,000 barrels of oil equivalent per day, about 80% of which is light oil, along with 75,000 net acres and about 500 gross drilling locations in the Duvernay East Shale Basin in Alberta.
Northern Oil and Gas said the assets contain about 20 years of drilling inventory with breakeven oil prices below $50 per barrel, while operating costs are expected to remain below $7.50 per barrel of oil equivalent.
The acquisition marks the energy firm's first expansion into Canada, and provides exposure to what RBC described as "inventory-rich" light-oil acreage in a higher mid-cycle oil price environment.
The bank said the sellers will receive about $83.5 million in Northern Oil and Gas common stock as part of the transaction, with the remainder funded in cash.
The company also said it plans to hedge currency fluctuations tied to operating costs through multi-year derivative transactions. The transaction is expected to close in Q2.
Northern Oil and Gas said updated pro forma guidance tied to the acquisition remains in line with the high end of its previously issued low-activity outlook.
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