Table of Contents
Through an official statement, Northern Oil and Gas (NOG) formalized its entry into the Canadian energy market through an agreement to acquire a 25% undivided interest in the light oil assets of the Duvernay Shale formation in Alberta. The initial unadjusted purchase price amounts to CAD 350 million, equivalent to approximately USD 259 million.
Financial details of the assets in the Duvernay Shale formation
Accordingly, the financing structure includes the issuance of CAD 113 million in NOG common shares to the seller, Parallax Energy Operating. The remaining amount will be covered with available cash, operating free cash flow, and revolving credit facilities. Likewise, the agreement stipulates an additional contingent payment of CAD 25 million payable in 2028, subject to crude price performance through the end of 2027.
Through this acquisition, NOG adds approximately 75,000 net acres in the Duvernay East basin with an inventory projected for 20 years of development. The acquired assets include nearly 500 gross locations with average breakeven points below $50 per barrel of WTI crude.
Consequently, NOG management estimates that the properties will contribute average production of 4,000 barrels of oil equivalent per day during 2027, of which 80% will be light oil. Projected operating costs will be below $7.50 per barrel of oil equivalent, a figure lower than the company’s current corporate average.
Regarding the technical development of the reservoirs, the transaction will be executed under a long-term joint development agreement that includes multi-year drilling commitments. Parallax Energy will retain operator status for most of the properties.
In addition, NOG anticipates capital spending of between $40 million and $45 million through the end of 2026, followed by an investment of between $45 million and $50 million in 2027. To manage market-related risks, the company will implement financial derivatives to hedge exchange-rate fluctuations in operating costs.
From a balance-sheet perspective, the transaction was structured at a purchase price multiple of less than 3.0x the expected unhedged operating cash flow for the next twelve months. Executive management confirmed that this move will deliver immediate value to metrics such as earnings per share, free cash flow, and the TEV/EBITDA indicator.
Finally, the effective date of the transaction was set for April 1, 2026, and final closing is expected toward the end of the second quarter of this year. To implement this operating structure, the U.S. company formally established its new subsidiary, NOG Energy Canada.
Source and photo: Northern Oil and Gas