Saturday, August 25, 2012

For Those Who Think NOG is Over-Priced, and Other Myths


August 31, 2012: is NOG undervalued? -- Motley Fool

August 26, 2012: non-operators are undervalued in the Bakken -- SeekingAlpha. Non-operators who participated with Helis:
Black Hills Corp was able to sell 4,800 net acres and average first half 2012 production of 990 Boepd for $243 million. Sundance Energy was able to sell 3,900 net acres and 500 Boepd average production for FY2012 for $172.4 million. Finally, Unit Corp. announced it will receive $268 million for two separate transactions, including the QEP transaction and another in Texas, for an undisclosed acreage position and 1,200 Boepd in total production. The ability to combine with the operator did not impact the price they received for the producing oil and gas, but it did bring a premium for the future drilling locations since QEP will be able to control the pace of the development of the project.
Other companies mentioned in the article, but not part of the QEP acquisition: NOG, VOG, TPLM, and USEG.

Original Post

Z-Man's analysis of the QEP-Helis/Black Hills/Unit Corp $1.38 billion Bakken deal.

Note my usual disclaimer for this blog: it is not an investment site. I post articles of interest for education, information, and entertainment.

Z-Man points out that QEP acquired about 27,000 net acres in a very sweet spot in the Bakken, at a cost of somewhere between $10,000 and $50,000/acre. Most would agree that the price QEP paid was about $20,000/acre but could have been as high as $33,000/acre (other sources).

NOG has about 180,000 net acres. NOG's market cap is about $1 billion.

From my snapshot of NOG:
  • 2Q12: 180,000 net acres; average cost: $2,184/acre for most recent 7,060 net acres in key prospect area; 16 net wells in 2Q12;
  • June corporate presentation: 177K acres; average cost: $1,832; $15 - $20 million/quarter in 2012 for acreage acquisition
  • 1Q12 results: 173,000 net acres; average cost: $1,672/acre; acquired 10,278 net acres in 1Q12;
  • Dec 15, 2011, corp update -- 4Q11: acquired 7,600 acres; $19 million ($2,500/acre); exit 2011 w/ 160,000 net WB acres


  1. So you think fair valuation for nog is ......what?

    1. See:

      My usual disclaimer: this is not an investment site. I had never planned on blogging about investments in the Bakken when I started this blog, but I soon realized it was impossible to separate investment articles if one wanted to understand the Bakken, the geology, the technology, etc.

      Because it is not an investment site, I do not discuss share prices -- at least as a general rule. I suppose I have, but I honestly don't remember. If I find posts where I have discussed share prices I will delete them and let readers know.

      But for those interested, there is more than enough data on the blog for folks to come to their own answers regarding value.