NOG enters Canada with Duvernay acquisition

US-based Northern Oil and Gas (NOG) has agreed to acquire a 25% non-operated interest in light oil assets located in Canada’s Duvernay shale play that are owned and operated by Parallax Energy Operating. The initial unadjusted purchase price is CAD350mn ($259mn), NOG said in a May 26 statement. It added that the transaction marks its entry into Canada.

The company describes itself as the largest, publicly traded, non-operated, upstream energy asset owner in the US. To date, its focus has been primarily on the Williston, Uinta, Permian and Appalachian basins.

The assets are located in the Duvernay East portion of the play in Alberta and include both producing properties and “significant” undeveloped inventory. Net to NOG, the assets include roughly 4,000 barrels of oil equivalent per day (boepd) of production, with oil accounting for about 80%, and around 75,000 acres (304 square km).

The company said the assets being acquired included over 500 gross “high-quality, low-breakeven” locations. Substantially all the assets are operated by Parallax, and NOG will participate in their development under a long-term joint development agreement with multi-year drilling commitments entered into in connection with the acquisition.

The operating costs associated with the assets are expected to be less than $7.50 per barrel of oil equivalent, which NOG said was below its corporate average. The company anticipates incurring up to $40-45mn in capital expenditures on the assets after the transaction closes – which is targeted for late in the second quarter of this year – followed by a further $45-50mn in 2027.

NOG said the acquisition would be funded with CAD113mn ($83.5mn) of its common stock issued to Parallax upon the closing of the deal. The remainder of the purchase price will be covered by cash on hand, operating free cash flow and borrowings under NOG’s revolving credit facility.

NOG has also agreed to pay a potential additional consideration of CAD25mn ($18.5mn), dependent on certain average oil price levels being achieved between now and the end of 2027. If these price levels are achieved, the additional consideration will be payable in the first quarter of 2028 and NOG can choose to pay it in cash or common stock.

The company added that in connection with the acquisition, it intended to enter into derivatives transactions to “hedge currency fluctuations related to operating costs on a multi-year basis”. Depending on market conditions, NOG may also decide to repurchase a portion of the stock consideration in the open market, it added.

NOG is just the latest in a series of companies opting to enter or expand in the Duvernay.

“"Quality oil inventory is becoming increasingly scarce, and NOG's scaled non-operated model positions us to access opportunities that most in our sector cannot,” the company’s management stated. “Our ability to structure creative, accretive transactions with best-in-class operators is what sets NOG apart. The Duvernay is one of North America's premier light oil resources – high-quality, low-cost, long-life inventory with meaningful upside that remains largely untapped.”

Parallax is backed by Carnelian Energy Capital and entered into the Duvernay in 2024, when it closed its acquisition of Vesta Energy. At the time, Parallax said it had acquired a production base of over 17,000 boepd, with light oil accounting for around 75%. Its holdings in the play spanned roughly 230,000 net acres (931 square km) according to that announcement.