Northern O&G Signs LOI for Senior Secured Revolving Credit Facility

Northern Oil and Gas has entered into a letter of intent with a financial institution for a senior secured, reserve-based revolving credit facility providing up to $25 million of financing for future drilling activities.

As proposed, $15 million of financing would initially be made available for drilling projects, specifically developmental drilling on Northern Oil's North Dakota Bakken and Three Forks position. The remaining $10 million of financing under the facility could become available upon subsequent recalculations of reserves based on the deployment of the immediately-available principal amount.

The facility will be available for a period of four years and will feature a floating rate of interest competitive with other senior secured revolving credit facilities provided to other companies in the oil and gas industry. The facility will be subject to the usual and customary financial covenants. Final execution of a definitive agreement regarding the credit facility is subject to various conditions, including completion of due diligence and negotiation of definitive loan documentation, among other things.

Northern Oil Chief Executive Officer Michael Reger commented, "This facility will enable us to fund the development of our substantial Bakken and Three Forks position throughout 2009. In addition, the recent dislocation in near-term commodity prices has created an opportunity for us to aggressively exploit additional drilling opportunities. We believe that the factors creating the lower commodity price environment we are currently experiencing will prove to be relatively short term in nature and we anticipate that a return to more normalized pricing will reward the companies with the foresight to continue development in this growing field. With this facility and our forecasted cash flow from producing wells, we will be able to fund our 2009 development plans at a very competitive cost of capital."


Northern Oil participates on a heads-up basis in the drilling of wells in spacing units containing Northern Oil acreage. Based on current permitting activities, Northern Oil anticipates the following capital expenditures and operating expenses in 2009:

  • Developmental Bakken Drilling $31,000,000
  • Conventional Exploratory Drilling $850,000
  • Capitalized Costs, Interest $1,200,000
  • General & Administrative Expenses $2,000,000
  • Total Capital Expenditure and G&A $35,050,000