Saturday, May 14, 2011

It's only a Northern Conference Call

And if you are listening to this conference call
You might think the words are going wrong
But they're not.
They just say it that way

I was slow on this (which I blame on Blogger being down). Herb Greenberg has already published a story about Ashwood Resources and the wife of the CEO of Northern Oil. Its a great story though - so here is my slightly longer-winded version:


Northern Oil and Gas presented a very strange conference call with a very strange final answer.

You need some background to this and why it was so strange.

The Street Sweeper published an article about a company called Ashwood Resources which has purchased (possibly small) interests in almost 80 oil leases from Northern Oil.  The Street Sweeper meticulously documented their sources and whilst I have not checked the validity of the documents I was aware of the some of the documents including transfers of assets to Ashwood from my own research.

I was not the source for the Street Sweeper article.

According to the The Street Sweeper, Ashwood is an unusual vehicle. It was established by Isabel Esbensen – a very young adult about the time she graduated from beauty school.* (You can book a hairdo or manicure with Isabel here.)

Also according to The Street Sweeper, the chief manager of Ashwood is Jacob P Schaffer, a local realtor who was once the second largest shareholder of Northern Oil. My own research indicates that he is also associated with Voyager Oil the “sister company” of Northern Oil.

More pertinently the contact officer for Ashwood Resources is Brittany Reger – the wife of Michael Lewis Reger. Micheal Reger is the CEO of Northern Oil.

None of these details were denied by Northern in their conference call.

Obviously selling interests in 80 oil leases out of Northern Oil and into Ashwood looks like an undisclosed related party transaction. After all Ashwood seems to have no other presence in the oil industry. Its only identifiable business is to trade assets with Northern Oil.

In the conference call Northern argue that the interests in all these leases are minuscule. It was maybe 80 leases but they sometimes only owned 0.5 percent of the lease. This is true (I have seen some lease agreements). However the Street Sweeper follows a single well where Northern's interest was divested in a bunch of tiny transactions (I have not verified these transactions).

The defense offered was (a) Ashwood is not related and (b) the transactions with Ashwood are trivial in nature.

All well and good, but the CEO (Michael Reger) made this comment on which I did a double take:
In September of 2010, five months after Northern executed the agreement with Ashwood to divest these minute working interests, Brittany, my wife, began assisting Ashwood as an independent contractor to process the massive amounts of paperwork that's associated with owning over 90 minuscule well bores. She's paid a monthly fee as an administrative assistant. It's not dependent on the profitability of Ashwood or any other factor. 
The agreement with Ashwood makes sense for NOG, and it's not improper in any way. We stand behind the decision we made to divest the minuscule working interest. And I understand the goal of the article was to damage my credibility or my family's credibility or Northern's credibility. But nothing that's being alleged affects the value of Northern's assets. We haven't done anything wrong. This was not a related party transaction. 
Please – lets understand this.  Micheal Reger has cashed over 35 million dollars worth of Northern Oil shares in the past two years.  The Regers have joined the cash-super-rich.

And despite this Brittany Reger takes a job as an “administrative assistant”. A paper work job tracking lots of trivial oil leases that are not even worth Northern Oil's time and effort to track.

I can think of a lot of things the average CEOs wife would do when she newly comes into $35 million of (pre-tax) cash and when family wealth is over $100 million. She might go shopping. She might go to Paris or London.

She might spend more time dressing in fabulous fur coats backstage at fashion shows in New York. (She really does look fantastic here...)

She might want to spend more time with her family.

If she were charity minded she might want to donate her time to a charity. She may want to work out how they are going to give the money away someday.

But Brittany Reger chose to work as an “administrative assistant”. And not just for the local real estate agent or for a charity or a school. No – for the one company in the world where any decent lawyer or accountant would say “don't go there”. Britany Reger works for a company whose sole purpose appears to be to do transactions with Northern Oil. Northern Oil has made her wealthy and her husband is the CEO.

Brittany really might like work. She may aspire - despite the wealth - to be an "administrative assistant". But of all the places in the world why would she choose to work for Ashwood? It is staggeringly inappropriate.

The minimal interpretation is that the Regers lack basic judgement when it comes to the appearance of improper behavior.  The transactions with Ashwood might be trivial. The paper work associated with them might be too hard for Northern Oil to do. But allowing the CEO's wife to be employed by a company whose main function is to manage assets purchased from Northern Oil and to handle paperwork at that company - paperwork that is too hard or too messy for Northern Oil to do on its own is - to put it mildly - unusual.


PS. Next time I am in Minnesota I would love to pay Isabel - hairdresser and founder of Ashwood resources - a visit. I might even go for my first ever manicure.

If any of my readers in Minnesota want a manicure may I suggest booking an appointment with Isabel? I have a list of questions to ask.


Anonymous said...

John, I was hoping you could clarify something for me here. My understanding is that NOG acquires minority interests in leases held by operators (say 15%). Is it possible that management has an undisclosed interest in Ashwood and transferring the productive leases to Ashwood, with the intention of leaving NOG with a bunch of unproductive leases and hoping the market doesn't catch on?
Seems like an odd strategy (given that their market cap is much greater than the value of the productive leases), but everything about this firm is pretty bizarre, so it strikes me as a possibility.

Anonymous said...

Looks like the local press has picked up this story. His wife has since resigned and her rationale for the job was a chance to get out of the house...

With two kids and the cold Minnesota winter, I guess that could make sense, but with that kind of coin pretty sure they are some warm destinations she could afford to visit as well...

Anonymous said...


Sorry to be off topic, but do you have any ideas as to how to even begin to interpret the Yahoo/Alibaba saga over Aliplay?

This entire story seems absolutely surreal...

Anonymous said...


What do you thinkof VOG?

Anonymous said...

Don't forget about this gem from the NOG Conference Call.

In response to a question from Global Hunter's Phil McPherson, NOG's Ryan Gilbertson responds:

Yeah, absolutely. Northern Oil is not deficient in any way in its corporate governance, we don't feel. And we clearly have been the target of short selling of blogs, of paid bloggers, paid journalists, and whatnot. We recently found out that our shares were listed without our
knowledge on the Frankfurt exchange, which is a typical MO for naked short
. Short interest has climbed dramatically.

Yes, NOG management is pulling out the tired old Nekkid Short Bogeyman to distract investors from the glaring issues facing the company.

Anonymous said...

@Anonymous 4:38am

Alibaba has a history of shady dealing. See here:

To see Jack Ma attempt to outmanouver Carol Bartz is not a surprise. It was probably a surprise to him that he got caught. Business as a blood sport?

My own interpretation is that fraud against Westerners is endemic in China.

delvinj said...

If any of my readers in Minnesota want a manicure may I suggest booking an appointment with Isabel? I have a list of questions to ask.

Sounds exciting.

What are your questions?

Daniel (Minneapolis, MN)

delvinj said...

If any of my readers in Minnesota want a manicure may I suggest booking an appointment with Isabel? I have a list of questions to ask.

I'm in need of a trim. Wayzata is 10 minutes away.

What's on your list?

Daniel (Minneapolis MN)

Anonymous said...

BuyersStrike, is there any way to contact you by email?

Andrew S said...

sure you've seen but there's a force 12 consensus blowin' up.

Anonymous said...

Buyerstrike, the article you quote looks like a cheap shot at Alibaba:

The article if anything makes Jack Ma look ethical, and it makes you believe there might be some standard of ethics and corporate governance at Alibaba.

The article says two execs allowed fraudulent transactions to take place. The transactions were detected and Ma fired the responsible executives.

Anonymous said...


You're right, I suppose more context should have been provided.

My point was to show that Alibaba, while generally considered one of the best managed Chinese firms, is not without problems.

In fact, even today,one can find plenty of counterfeit, and even illegal merchandise offered for sale through Alibaba.

For example, do a quick search on for the controlled substance desoxyephedrine (better known as "methamphetamine" and also known by the more cryptic chemical name "1-Phenyl-2-(methylamino)-propan") and see what comes up. I found 10 suppliers listed on Alibaba, zero on Ebay.

Belcher said...

Perhaps I misunderstood, but might it be that the opposite is going on to what the first commenter said: The quote clearly says "minute working interests were transferred to Ashwood" ... it could be that these are non-performing wells, so NOG was attempting to rid itself of the working interest liabilities/costs.

Pretty ironic that the CAPTCHA for this comment is DEVEN, a respectable O&G company (NYSE: DVN).

Anonymous said...

NOG/VOG will become a headliner as the next in line, but first within O&G ponzi scheme, here in Minnesota/Wayzata.

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