Northern Oil and Gas (NYSE:NOG) has recently been in the spotlight after announcing a transformational acquisition in the Marcellus Shale on February 3rd, 2021. After looking at the rationale behind the acquisition, financials, and Company’s business model, I concluded that Northern Oil and Gas is a stock worth investing in. At the current price of $11.25 per share (02/03/2021), NOG can provide an upside of ca. 22% in the long term.
About the Company
Northern Oil and Gas (NOG) is an independent energy company. The Company is engaged in the acquisition, exploration, development and production of oil and natural gas properties. Its properties are primarily located in the Bakken and Three Forks formations within the Williston Basin in North Dakota and Montana. The Company’s operations in the Williston Basin include an acreage footprint of approximately 183,000 net mineral acres. The Company’s primary focus is oil exploration and production through non-operated working interests in wells drilled and completed in spacing units that include its acreage. The Company also holds an interest in assets and wells in Lea County, in the Delaware Basin.
Source: Company website
Business model
Throughout the years, Northern Oil and Gas has developed a non-operator business model that brings some benefits including low overhead costs, diversification of risk and the ability to accumulate acreage that other operators do not compete for due to the small working interest exposure. Moreover, a non-operated business model enables management to cherry-pick activity to the best well and be more flexible in timing. However, being a non-operator means that the Company has a lack of control over the drilling program, which is run by the operator. Northern Oil and Gas has been able to balance the benefits and drawbacks of the non-operated business model by gaining exposure to more than 40 different operators and participating in more than 6,500 wells.
