NOG must be lovin' life.
Here's nine guys (and gals?) and a $1.4 billion company (market cap).
Regular readers know that NOG's business model in the Bakken has a unique model, but I had forgotten about another secret to their success: buying up small bits of acreage the bigger operators cannot be bothered with. The result: they end up picking up acreage at "discount prices."
I missed this part of NOG. I thought it was mostly about cash, with NOG buying in with a working interest on wells being drilled by others. But in addition, they end up "trading" acreage for a working interest in wells.
NOG had no trouble raising $200 million with a new share offering back in November, 2010.
For another story on NOG, click here.
Nog really made the right moves a few years back.
ReplyDeleteThey somehow knew where leasing was happening by the majors (eog etc)
and went after small percentages in each section. Eog would not engage in a bidding war over a few acres and so nog got some leases. As the article points out, no way could nog be the operator, they were just along for the ride and low and behold, it worked. I say good for nog !!!!! If there was ever a case where it was all on the line, this is it !!
Before I started following the Bakken, I never really thought about "business models" in the oil industry. It seemed pretty straightforward, but having followed the Bakken so closely, I see myriad business models.
ReplyDeleteNOG's model is quite impressive. Thank you for taking time to comment.
Kinda reminds me of the book "the big short" .
ReplyDeletehttp://www.npr.org/templates/text/s.php?sId=124690424&m=1
In both cases, "outsiders" not only predicted what was going to happen,
they predicted how the "established" institutions would respond and made their
investments accordingly . Sounds so simple but really quite an accomplishment when you think about it. Very good exame of thinking out of the box.
I like this part...should be cash flow positive next year.
ReplyDelete>Meanwhile, revenue grows with the strong results coming out of Bakken drilling. In 2010, Northern revenue should total $62 million, Wangler says. That should more than triple next year to $195 million. In 2012 it should nearly double to $352 million, according to Wangler.<<
Nice link. Thank you for taking time to comment.
ReplyDeleteIt's hard to believe they can keep finding more acreage to buy. Sometimes one has to have a lot of faith/confidence in these companies.
ReplyDeleteThe bigger fool theory at work ???
ReplyDeleteas someone who delt with nog ,whatever they would offer 3 years ago you could find a real driller who would offer you double for a lease if you were patient enough
ReplyDeleteI'm mostly interested in the "Bakken story."
ReplyDeleteBut for investors, your point is well taken. I've always maintained that anyone investing must be able to withstand losing their entire investment.
That's one of the challenges going forward. Folks have a much better understanding of the value of their land.
ReplyDeleteOn the other hand, this knowledge has widened the moat.
Bruce,
ReplyDeleteI just received an offer from NOG to lease 62 acres . The offer is the same per acre as CLR paid during the land auction I believe in August. Your article seems to suggest that they are a decent company. One thing they wanted in the lease was a "180 day drilling clause". I am not familiar with that clause. Is it related to the Pugh clause. Help
I don't own any minerals, and I don't have any experience with leases. I was unable to find anything helpful on the internet but something is probably there somewhere.
ReplyDeleteI can guarantee you that the folks over on the Bakken Shale Discussion Group will know what the clause means. There is a link to this discussion group on the sidebar at the right (under "Commentary"). But if you don't find it quickly, here it is:
http://groups.google.com/group/bakken-shale-discussion
Based on what little I found on the internet, I can guess what it means, but it would only be an opinion. My hunch is that it is a standard clause that won't negatively affect you.
Good luck. It has to be quite exciting.
This may help. I believe (speculation on my part) that the 180 days may be part of a continuous operations clause.
ReplyDeletehttp://www.tlma.org/oilgasleasechecklist.pdf
I appreciate that. It makes sense.
ReplyDeleteIt really makes sense because the document you linked suggests 90 - 120 days is the norm.
180 days would be in favor of the producer.
If you are correct, there is so much work to be done in the Bakken, I can understand the producers needing a bit more time to get to the next unit.
However, in the big scheme of things, I would not let this (if I interpret this correctly) influence my thoughts too much -- whether it's 90 days, 120 days, or 180 days. But that comes from the perspective of someone who has lived many, many years and time becomes more relative; and from someone (me) who does not have mineral rights.
Thank you very much for commenting.