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Upsize Aug 07: Upsize Primer: Financial Guide •
Upsize Feb 07: Upsize Roundtable: Give and take •
Upsize Nov 02: No bootstraps: Where to look for capital
to grow • Raising start-up capital
In 2005, my uncle bought 60,000
acres of mineral rights in North Dakota.
They paid $20 an acre, sold it to Whiting
Oil for $100 an acre. At the time
they were thinking they were geniuses,
Whiting Oil went up by $2 billion.
Watching family members leave $2 billion
on the table caused me to start this
company, in 2005.
Another key thing, about 100 feet
below the Bakken is another layer
that’s sourced in the Bakken, as productive
or more productive than the
Bakken.
We’re trading on AMEX, with the
symbol NOG, 34 million shares outstanding.
We have no debt, 20 percent
insider ownership. We have
experienced management, sufficient
cash position for acreage and drilling.
RAISING
CAPITAL
Why Michael Reger,
Northern Oil’s CEO,
went ‘begging’
FIRST
PERSON
“My great-grandfather
was president of Mobil’s
Rocky Mountain division.
My grandfather was in the
business. My uncle was a lease broker.
Heck, my one-year-old son is a lease
broker, he just doesn’t know it yet.” So
says, Michael Reger, CEO of Northern
Oil & Gas Co., based in the Twin Cities.
“My Dad gets mad when I say it, but I
felt that the family business model
was flawed. The lease broker business
is simple. You pile up a block of leases,
then sell it to a larger operator.
Then you keep a sliver of the overriding
royalty.
I spent the year begging, begging for
money from family and friends, and
we started leasing in the North
Dakota Bakken play. We now have
70,000 acres right in the core of the
play.
Our acreage position has now been
run over by other operators. As a nonoperator,
we don’t own rigs. We’re
drilling 15 to 20 wells and on average
our working interest is 12 1/2 percent.
It’s the most productive oil field in the
country.
I bought everything around it I could,
in Mountrail County. We get calls
almost daily from people with farms in
Fargo, wanting to know if they’re in
this basin. All the sea life was killed off
and it laid down this layer of beauty.
Wells cost $5 million to drill. The
wells have Saudia Arabia-type of productivity.
You get your $5 million back
sometimes in 15 days.
Recently the entire management team
decided to trade in our salaries and
take stock instead, to increase our
ownership. We don’t burn any cash.
We have no overhead. We have four
people in Wayzata. We have a lot of
cash, to meet our cash drilling
calls…so you can see why our stock is
falling $10 a day! [ He laughs ruefully;
in October 08 during the market
crash.]
Because of my family’s history, we
have the largest seismic library in the
country. We’re in other plays, but
nobody asks us about anything other
than the Bakken. We have drilled the
26th Bakken well, with 100 percent
success.
We can recover a lot of oil over a long
period of time, and we have long-term
leases so it’s an exciting time.”
UPSIZE | 20 | ONLINE
NOV08