| Item 1.01. | Entry Into a Material Definitive Agreement. |
The disclosures in Item 2.01 and Item 2.03 below relating to the entry into the Promissory Note (as defined below) in connection with the VEN Bakken Acquisition (as defined below) are incorporated by reference into this Item 1.01.
| Item 2.01. | Completion of Acquisition or Disposition of Assets. |
On July 1, 2019, Northern Oil and Gas, Inc. (the “Company”) completed its acquisition (the “VEN Bakken Acquisition”) of certain oil and gas properties and interests from VEN Bakken, LLC (“Seller”), effective as of July 1, 2019. Seller is a wholly-owned subsidiary of Flywheel Bakken, LLC, a portfolio company of the Kayne Private Energy Income Funds.
At closing the acquired assets consist of approximately 87.8 net producing wells and 4.1 net wells in process, as well as approximately 18,000 net acres in North Dakota, which the Company currently estimates will generate approximately 45.6 net undrilled locations of future drilling inventory.
In accordance with the purchase and sale agreement (the “Purchase Agreement”), the Company paid closing consideration to Seller consisting of $170.1 million in cash, 5,602,147 shares of the Company’s common stock, par value $0.001 per share (the “Shares”) and a 6.0% Senior Unsecured Promissory Note due 2022 in the aggregate principal amount of $130.0 million (the “Promissory Note”). The cash and Promissory Note portions of the consideration are net of preliminary and customary purchase price adjustments and remain subject to final post-closing settlement between the Company and Seller. The Company funded the cash portion of the closing payment with borrowings under its revolving credit facility.
The material terms of the Purchase Agreement were previously disclosed in Item 1.01 of the Current Report onForm 8-K filed on April 22, 2019 (file no.001-33999), which is incorporated herein by reference.
| Item 2.03. | Creation of a Direct Financial Obligation or an Obligation under anOff-Balance Sheet Arrangement of a Registrant. |
On July 1, 2019, in connection with the completion of the VEN Bakken Acquisition described above, the Company issued the Promissory Note to Seller. Fifty percent (50%) of the original principal amount of the Promissory Note is required to be repaid by the Company on or before January 1, 2021, and the remaining unpaid principal amount of the Promissory Note is required to be repaid by the Company on or before July 1, 2022, in each case together with all accrued but unpaid interest thereon. Interest, at a rate of 6.0% per annum, is due quarterly in arrears on the first day of each calendar quarter, commencing on October 1, 2019. The Promissory Note is unsecured.
The obligations of the Company under the Promissory Note may be accelerated, subject to certain grace and cure periods, upon the occurrence of an event of default. Events of default include customary events, including, without limitation, payment defaults, the inaccuracy of representations and warranties, defaults in the performance of certain affirmative or negative covenants, defaults on other indebtedness of the Company, and bankruptcy or insolvency related defaults. The Promissory Note contains negative covenants that limit the Company’s ability, among other things, to pay dividends, repurchase equity, incur additional indebtedness, sell assets, terminate or unwind certain derivatives contracts, change the nature of its business or operations and merge or consolidate. In addition, the Promissory Note is subject to a mandatory prepayment offer in connection with a change of control.
A copy of the Promissory Note is attached hereto as Exhibit 10.1 and is incorporated herein by reference. The description of the Promissory Note in this Current Report on Form8-K (this “report”) is a summary and is qualified in its entirety by the terms of the Promissory Note.
To the extent required by Item 2.03 of Form8-K, the disclosure set forth in Item 2.01 relating to the issuance of the Promissory Note in connection with the VEN Bakken Acquisition is incorporated herein by reference.
| Item 3.02 | Unregistered Sales of Equity Securities. |
The Shares were issued pursuant to the Purchase Agreement in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), to a limited number of persons who are “accredited investors” or “sophisticated persons” as those terms are defined in Rule 501 of Regulation D promulgated by the U.S. Securities and Exchange Commission (the “SEC”), without the use of any general solicitation or advertising to market or otherwise offer the securities for sale. None of the Shares have been registered under the Securities Act, or applicable state securities laws, and none may be offered or sold in the United States absent registration under the Securities Act or an exemption from such registration requirements.
