US-based Northern Oil and Gas (NOG) has signed a definitive agreement to acquire a 30% stake in certain assets of Forge Energy II Delaware, a portfolio company private equity firm EnCap, in partnership with Canadian oil and gas firm Vital Energy.
Recently, Vital Energy, in partnership with an undisclosed third party, announced the agreement to jointly purchase Forge Assets in the Delaware Basin for total consideration of $540m.
Vital Energy will acquire 70% of the assets for $378m and operate the assets, while NOG will buy the remaining 30% stake for $162m.
The transaction is expected to be completed by the end of June this year, with an effective date of 1 March 2023.
Upon closing, Vital will operate the assets, while NOG will participate in their development, under cooperation and joint operating agreements with Vital.
NOG chief executive officer Nick O’Grady said: “This transaction crystallises NOG’s position as a reliable and consistent partner for the purchase and development of high-quality properties.
“We are excited to work alongside our partners at Vital to develop the Forge Assets with strong alignment and cooperation.”
The assets included in the deal are primarily located in Ward and Reeves Counties, Texas, and their recent production was around 3,400Boe per day.
Spanning around 10,200 net acres, the assets host 30.5 net producing wells, 2.3 net wells-in-process and nearly 20 low-breakeven net undeveloped locations.
NOG expects the assets would produce an average of more than 3,750Boe per day, and require about $17m in capital expenditures, for the second half of this year.
Houlihan Lokey served as the financial advisor to Vital and NOG, while Kirkland & Ellis served as legal advisors to NOG on the transaction.
Also, RBC Richardson Barr served as the financial advisor and O’Melveny & Myers served as legal counsel to Forge.
NOG president Adam Dirlam said: “As we enter into this joint acquisition, we are taking NOG’s capabilities and opportunity set to the next level, adding yet another arrow to our M&A quiver.
“The Forge Assets are high-quality with the opportunity for clear and concise development to deliver the consistent performance our investors have come to expect.”
