For full story (press release), click here.
NOG currently has 51.54 million shares outstanding.
9.2 million new shares represents 17.8% of current outstanding shares.
This announcement explains some, but not all, of the drop in NOG's share price today.
9 million shares x $18 = $162 million. Year-to-date, NOG spent $42 million acquiring acreage in the Bakken, and says it will use the proceeds of this sale to buy additional acreage.
Shortly after that announcement, NOG released its 2011 CAPEX program: NOG will spud 36 wells in 2011, compared with 25 wells in 2010.
NOG's CAPEX for 2011 is $227 million, compared with $132 million for 2010.
the announcement was posted at 4.01 pm, so the market had just closed. the drop in nog share price should come tomorrow and thursday. A 17% dilution is a big number no matter what company you are talking about. But if you are going to drill wells , you need money.
ReplyDeleteIt's a huge number! Obviously this has been in the works for some time, but the recent WMB purchase in the Bakken suggests there are still a lot of deals to be made.
ReplyDeleteI think the "back-of-the-envelope" calculations regarding the WMB purchase of acreage in the reservation gives one an idea of how much potential there is. Those calculations were here:
http://milliondollarway.blogspot.com/2010/11/i-am-re-posting-this.html
Bruce,
ReplyDeleteNOG states 36 net wells in 2011. They stated at the IPAA that they are currenty have about 10 percent interest in 90 current wells. I believe that you have stated that on average each rig drills 10 wells per year. That comes out to 90 net wells in 2011 for NOG. Are my facts right?
A number of points.
ReplyDelete1. NOG does not have any rigs. They are unique among the Bakken players with regard to their business plan. They partner with other drillers; they do not have any rigs, and I assume once drilling starts, they have no say in how to complete the well.
2. As you noted above, NOG says they plan to have 36 net wells next year. That means they could participate in several hundred wells, if they only have a small working interest in each. On the other hand, they might participate in far fewer wells if they take a greater working interest. In one of their presentations, NOG has a very neat slide that shows all the companies with whom they have participated.
3. When I was first starting the blog, I felt that a given rig could average 10 wells per year based on drilling time coming down to less than 30 days. Considering time to dismantle, move, and set up again, I figured the average rig should be able to drill 10 wells/year. That might be optimistic. At the end of 2010, there will be enough data to guestimate average number of wells/rig in one year. So, don't hold me to the 10 wells/year. I could be way off.
4. I don't know if this is how they do the math, but I would assume that if one has 10 percent interest in 90 wells, one has 9 net wells. That is a snapshot. The NOG rep was simply stating that at that moment in time, NOG was participating in 90 wells. Drillers are always looking for that outstanding well; the more wells they participate in, the odds increase they will hit some great wells.
5. But bottom line: a) NOG has no rigs of its own; b) they say they will end up with 36 net wells in 2011 (but that means they could participate in 360 wells with 10 percent working interest in each); and, c) number of wells one rig can drill / year was just a guess on my part, probably a bit optimistic.
Thanks for the clarification. NOG updated their guidance for 2010 net wells a couple of times to end up with 25 net wells. I suspect that they are under promising with their guidance for 36 net wells in 2011. It is OK if markets remain strong when they need to raise cash to meet the average well cost of $6.3 million.
ReplyDeleteI agree with you (about being conservative in their estimates of 36 net wells for 2011) especially if the price of oil continues to trend upward. I like their business model; I would hate to be a smaller player in the Bakken play trying to schedule fracking crews and trying to get my production into over-subscribed pipelines. With their business model, they can pick and choose the partners who have a track record of being most successful with fracking crews and pipeline companies, and they can pick and choose which wells they think are likely to be better than average.
ReplyDelete