On May 22, 2009, Northern Oil and Gas, Inc. (the “Company”) entered into an Exploration and Development Agreement (the “Agreement”) with Slawson Exploration Company, Inc. (“Slawson”) pursuant to which the Company acquired certain North Dakota Bakken assets (the “Properties”) from Windsor Bakken LLC as part of a syndicate led by privately owned Slawson.  Pursuant to the Agreement, the Company purchased a five percent (5.0%) interest in oil and gas rights covering approximately 60,000 undeveloped net acres.  The Company also acquired fourteen percent (14%) of the existing 59 gross Bakken and Three Forks producing well bores s in <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />North Dakota including approximately 1,200 barrels of oil production per day. In the transaction the Company purchased approximately 300,000 barrels of proven producing reserves as well as approximately 3,000 net undeveloped acres for a total cost of $7,300,000.  The acreage includes several high-rate Parshall Field wells that the Company believes offer significant infill drilling potential.  All consideration was paid in cash using additional borrowing made available under the Company’s credit facility with CIT Capital USA Inc. (“CIT”), as more fully described below. 

 

 

 

Under the Agreement, the Company and Slawson agreed to share pro-rata in the costs associated with Slawson’s acquisition of the Properties from Windsor Bakken LLC and certain continuing obligations and commitments in connection with future drilling activities on the subject Properties.  The Company may be subject to forfeiture of certain portions of the Properties in the event it does not elect to participate in drilling wells on the Properties, as fully described in the Agreement.  Slawson will be responsible for all operations concerning the Properties, and is expected to drill up to 45 gross Bakken wells on the newly acquired acreage through 2010.  The Company currently expects drilling to be focused on approximately 23,000 acres in the core Bakken prospects located in Mountrail County, encompassing a significant portion of the Company’s existing core Bakken acreage.  The acquisition of production and reserves at what the Company believes to be a very compelling value represents the types of opportunities the Company has been targeting in the current market environment.

 

 

 

A copy of the Agreement is included as Exhibit 2.1 to this Form 8-K.  The foregoing description of the material terms of the Agreement are qualified in their entirety by reference to the Agreement filed herewith.

 

 

 

 

 

 

 

 

 

In February 2009, the Company completed the closing of a revolving credit facility with CIT that provides up to a maximum principal amount of $25 million of working capital for exploration and production operations.  The borrowing base of funds available under the facility will be redetermined semi-annually based upon the net present value, discounted at 10% per annum, of the future net revenues expected to accrue from our interests in proved reserves estimated to be produced from our oil and gas properties.  Under this facility, $11 million of financing was initially made available to the Company.  In conjunction with the acquisition described above, CIT agreed to credit the Company with the reserves attributable to the acreage being acquired and immediately increase the current borrowing available under the facility to $16 million.