Q&A: Bakken non-op reveals current challenges, opportunities

By Emily Aasand | July 08, 2015

Northern Oil & Gas Inc. is a nonoperator focused on the Williston Basin. As a non-op, changes to drilling schedules, well completions and low oil prices have presented the company with unique challenges. Brandon Elliott, vice president of corporate development and strategy for Northern Oil & Gas, has experience in several sectors of the industry. The following is a preview of Elliott’s perspective on the Williston Basin. To hear his full presentation, visit the Bakken Conference & Expo. 

From a nonoperator’s perspective, what do you see as the primary challenge in the Bakken?

There are a couple of issues we are seeing at this point.  Obviously the timing of well completions is a bit up in the air with all the talk of drilled-uncompleted-inventory.  I think the DUC talk could be as much a way for operators to keep from showing the capital expenditures to the investment community and avoid completions during the winter and road restriction risks in the first and second quarter of the year.  They also had a bit of contango in the market and completion companies were not giving pricing relief as much as the operators were expecting.  So they let a little time pass. I would expect that this inventory gets slowly worked off as we move through the second half of the year.  

How is the current oil price providing opportunities to grow Northern Oil & Gas’ business model? 

Northern has a very solid liquidity position.  Our borrowing base was reaffirmed at $550 million in the spring, we received  a debt covenant change from 4x Debt to TTM EBITDA to 2.5x Sr. Debt to EBITDA and then proceeded to raise $185 million in a debt raise that allowed us to pay down a majority of our line of credit, further creating excess liquidity.  So we are prepared should opportunities present themselves to grow the business through acreage acquisitions.  Almost unfortunately the public debt and equity markets opened up so quickly that distressed asset sales with sub $50 WTI didn’t really materialize.  However I do think there are still enough companies that are under some stress if oil prices stay sub-$65 for a while that we could see some imbedded non-op properties come to market.  We are hopeful. 

You’ve worked on the corporate side of the E&P business. How has that translated into what you’re doing with Northern Oil & Gas?

I started on the institutional investment side of the table in 1998 and spent 12 years as an analyst and portfolio manager.  That has helped me “translate” what the investment community is saying and watching with what the management team means to say and draw attention too.  Northern is my second opportunity on this corporate side of the table to help shape strategy and communication as it relates to the public markets.  I have a good feel for what the street is watching and thinking because I spent years on that side.  Hopefully Northern’s communication and interaction with the street is improving and as a company we are better able to understand and appreciate what the buy-side and sell-side is thinking and experiencing.