Northern Oil & Gas Upbeat on Utah Shale

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Northern Oil and Gas Incorporated (NYSE:NOG) (Minnetonka, Minnesota) said Wednesday it closed on a transaction in Utah that brought it more than 15,000 net acres in shale oil and gas reserves.

NOG paid $511.2 million in cash to XCL Resources (Houston, Texas) for more than a decade's worth of prime inventory spread out across 15,800 net acres in the Uinta Basin, spread out over parts of eastern Utah.

Utah accounts for only about 1% of total U.S. crude oil production, but 16% of what's produced from the Rocky Mountain region.

"Utah's crude oil production declined in 2020 following the drop in petroleum demand and oil prices during the COVID-19 pandemic, but the state's output recovered and in 2023 reached a new high, surpassing the prior year's record output," analysis from the Energy Information Administration (EIA), the data arm of the U.S. Energy Department, read.

Utah also hosts some of the largest natural gas fields in the country, though output may have peaked by 2012 despite recent gains.

The Uinta Basin, from which most reserves in Utah are produced, yields around 20 million barrels of oil and 250 billion cubic feet of natural gas annually. EIA added, however, that shale oil is somewhat uneconomic to produce in part due to the amount of water needed, prompting at least one company to forfeit a lease in 2023.

In announcing the deal in June, NOG said the acquired assets were yielding around 10,500 barrels of oil equivalent per day (Boe/d). Despite EIA sentiment on oil, NOG Chief Executive Officer Nick O'Grady said the Uinta Basin "has emerged as one of the best and fastest growing oil resources in the United States."

SM Energy (SME) (NYSE:SM) (Denver, Colorado) joined the deal with NOG and will serve as the operator in the Uinta Basin.

SME produced 158,500 Boe/d during the second quarter, of which 46% was in oil. NOG produced 123,342 Boe/d, of which 57% was in oil. Both production levels exceeded corporate guidance.

NOG revised most of its metrics higher for the year. At the high end, net production was revised upward by 3.3% to 124,000 Boe/d. For just oil, guidance was revised higher by 4.1% to 76,000 BBL/d.

SME during the second quarter left its guidance unchanged. It expects to produce between 156,000 and 164,000 Boe/d for the year.

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