FIRST QUARTER HIGHLIGHTS
- Record quarterly production of 87,385 Boe per day (62% oil), an increase of 23% from the first quarter of 2022.
- Net income of $340.2 million and record Adjusted EBITDA of $325.5 million. See “Non-GAAP Financial Measures” below.
- Cash flow from operations of $269.3 million. Excluding changes in net working capital, cash flow from operations was $296.2 million, an increase of 26% sequentially from the fourth quarter of 2022.
- Generated $83.9 million of Free Cash Flow, despite increased development activity and volatility in commodity prices during the quarter. See “Non-GAAP Financial Measures” below.
- Closed on the acquisition of a 39.958% non-operated working interest in the MPDC Mascot project in January 2023, for $319.9 million.
SHAREHOLDER RETURN HIGHLIGHTS
- Paid $0.34 per share common dividend for the first quarter of 2023, an increase of 13% from the fourth quarter of 2022, and declared $0.37 per share common dividend for the second quarter of 2023, representing a 9% increase from the first quarter.
- Repurchased $8.0 million, or 287,751 common shares in the first quarter at an average price of $27.82 per share.
- Repurchased and retired $19.1 million principal amount of 8.125% Senior Notes at an average price of 96.4% of par value.
- Increased the Senior Notes repurchase authorization by $100 million.
MINNEAPOLIS–(BUSINESS WIRE)– Northern Oil and Gas, Inc. (NYSE: NOG) (“NOG” or “Company”) today announced the Company’s first quarter results.
MANAGEMENT COMMENTS
“NOG is realizing the benefits of our successful growth efforts as we generated record production in the first quarter, ahead of internal expectations. While the team was primarily focused on the integration of our recent acquisitions, we did close on several substantive Ground Game opportunities,” commented Nick O’Grady, NOG’s Chief Executive Officer. “Our demonstrated ability to structure mutually beneficial transactions with operators and other parties has resulted in record levels of potential acquisition opportunities. We are excited about NOG’s prospects for 2023. We will continue our measured approach toward growth investments and shareholder returns as the year progresses to support our primary goal of maximizing total shareholder returns over the long term.”
FIRST QUARTER FINANCIAL RESULTS
Oil and natural gas sales for the first quarter were $426.2 million. First quarter GAAP net income was $340.2 million or $3.98 per diluted share. First quarter Adjusted Net Income was $149.9 million or $1.76 per diluted share, an increase of 17% from the fourth quarter of 2022. Adjusted EBITDA in the first quarter was $325.5 million, an increase of 23% from the fourth quarter of 2022. See “Non-GAAP Financial Measures” below.
PRODUCTION
First quarter production was 87,385 Boe per day, an increase of 11% from the fourth quarter of 2022 and an increase of 23% from the first quarter of 2022. Oil represented 62% of total production in the first quarter with 53,864 Bbls per day, an increase of 15% from the fourth quarter of 2022 and a 27% increase over the first quarter of 2022. NOG had 13.1 net wells turned in-line during the first quarter, compared to 19.1 net wells turned in-line in the fourth quarter of 2022. Production increased quarter over quarter, driven primarily by growth in NOG’s Permian production, which made up approximately 35% of volumes in the first quarter. Additionally, Williston volumes recovered from weather-related shut-ins experienced in the fourth quarter. Marcellus production was down 2% from the fourth quarter.
PRICING
During the first quarter, NYMEX West Texas Intermediate (“WTI”) crude oil averaged $75.98 per Bbl, and NYMEX natural gas at Henry Hub averaged $2.75 per million cubic feet (“Mcf”). NOG’s unhedged net realized oil price in the first quarter was $73.31, representing a $2.67 differential to WTI prices. NOG’s unhedged net realized gas price in the first quarter was $3.91 per Mcf, representing approximately 142% realization compared with Henry Hub pricing.
OPERATING COSTS
Lease operating costs were $78.1 million in the first quarter of 2022, or $9.93 per Boe, a 1% decrease on a per unit basis compared to the fourth quarter of 2022. The decrease in unit costs was driven primarily by increased lower cost Permian production, offset by higher processing costs associated with better than expected NGL prices. Additionally, service and maintenance costs and workover expenses were also slightly higher on a sequential quarter basis. First quarter general and administrative (“G&A”) costs totaled $13.0 million or $1.65 per Boe. This includes $3.5 million of legal and transaction expenses in connection with bolt-on acquisitions and $2.2 million of non-cash stock-based compensation. NOG’s cash G&A costs excluding these amounts totaled $7.4 million or $0.94 per Boe in the first quarter, down 7% from the prior quarter on a unit basis.
CAPITAL EXPENDITURES AND ACQUISITIONS
Capital expenditures for the first quarter was $212.2 million (excluding non-budgeted acquisitions) representing 28% of previously disclosed annual capital expenditure guidance range at the midpoint. This was comprised of $198.7 million of total drilling and completion (“D&C”) capital on organic and ground game assets, and $13.5 million of ground game acquisition spending and other items. D&C spending was higher due to an increase in development activity and workover expense incurred in the period and significant Ground Game success. NOG has experienced moderate well cost inflation continuing into 2023, but year-to-date well costs have been within NOG’s assumptions for the year. NOG’s weighted average gross authorization for expenditure (or AFE) elected to in the first quarter was $9.6 million.
NOG’s Williston Basin spending was 66% of the total capital expenditures for the quarter, the Permian was 32%, the Marcellus was 1% and other items were also 1%. On the Ground Game acquisition front, NOG closed on ten transactions during the first quarter totaling 2.6 net wells and 369 net acres, a marked increase from the fourth quarter.
As previously announced, during the first quarter of 2023, NOG completed its Midland Basin Mascot Project acquisition with a $319.9 million cash settlement at closing. The Company’s ability to perform on numerous large acquisitions has established NOG as a preferred non-op partner; as such, NOG’s opportunity set is at record levels.
LIQUIDITY AND CAPITAL RESOURCES
NOG had total liquidity of $437.1 million as of March 31, 2023, consisting of $431.0 million of committed borrowing availability under the Revolving Credit Facility and $6.1 million of cash.
As of March 31, 2023, NOG had $569.0 million of outstanding borrowings under the Revolving Credit Facility, $705.1 million of outstanding 8.125% Senior Unsecured Notes due 2028, and $500.0 million of outstanding 3.625% Convertible Notes due 2029.
SHAREHOLDER RETURNS
In February 2023, NOG’s Board of Directors declared a regular quarterly cash dividend for NOG’s common stock of $0.34 per share for stockholders of record as of March 30, 2023, which was paid on April 28, 2023. This represented a 13% increase from the prior quarter.
In May 2023, NOG’s Board of Directors declared a regular quarterly cash dividend for NOG’s common stock of $0.37 per share for stockholders of record as of June 29, 2023, which will be paid on July 31, 2023. This represents a 9% increase from the prior quarter.
In the first quarter, NOG repurchased $8.0 million of its common stock, or 287,751 shares at an average price of $27.82 per share.
In the first quarter, NOG repurchased and retired $19.1 million of its 8.125% Senior Unsecured Notes due 2028 at 96.4% of par value. The retirement of these notes will result in annualized interest expense savings of $1.6 million. At the end of the quarter, the Board of Directors increased the Company’s Senior Notes repurchase authorization by $100 million.
The Company also reduced the outstanding balance on its revolving credit facility by over $25 million during the first quarter, after the closing of the MPDC Acquisition.
2023 FULL YEAR GUIDANCE
(all forecasts are provided on a 2-stream production basis)
NOG is reaffirming its 2023 full year guidance for production and capital expenditures. The Company is increasing its estimates for natural gas realizations. As a result of this increase, the Company is also adjusting production expenses for the associated processing costs from higher realizations. The guidance does not contemplate potential acquisition or capital markets activity, beyond our regularly budgeted Ground Game capital.
|
|
2023 Guidance |
|
Annual Production (Boe per day) |
91,000 – 96,000 |
|
Oil as a Percentage of Sales Volumes |
62.0 – 64.0% |
|
Total Capital Expenditures ($ in millions) |
$737 – $778 |
|
Net Wells Added to Production |
80 – 85 |
|
Operating Expenses and Differentials |
|
|
Production Expenses (per Boe) |
$9.35 – $9.60 |
|
Production Taxes (as a percentage of Oil & Gas Sales) |
8.0% – 9.0% |
|
Average Differential to NYMEX WTI (per Bbl) |
($3.50) – ($4.50) |
|
Average Realization as a Percentage of NYMEX Henry Hub (per Mcf) |
80% – 90% |
|
General and Administrative Expense (per Boe): |
|
|
Non-Cash |
$0.20 – $0.30 |
|
Cash (excluding transaction costs on non-budgeted acquisitions) |
$0.80 – $0.90 |
FIRST QUARTER 2023 RESULTS
The following tables set forth selected operating and financial data for the periods indicated.
|
|
Three Months Ended March 31, |
|||||||||
|
|
|
2023 |
|
|
|
2022 |
|
|
% Change |
|
|
Net Production: |
|
|
|
|
|
|||||
|
Oil (Bbl) |
|
4,847,773 |
|
|
|
3,824,022 |
|
|
27 |
% |
|
Natural Gas and NGLs (Mcf) |
|
18,101,255 |
|
|
|
15,533,638 |
|
|
17 |
% |
|
Total (Boe) |
|
7,864,649 |
|
|
|
6,412,962 |
|
|
23 |
% |
|
|
|
|
|
|
|
|||||
|
Average Daily Production: |
|
|
|
|
|
|||||
|
Oil (Bbl) |
|
53,864 |
|
|
|
41,565 |
|
|
30 |
% |
|
Natural Gas and NGLs (Mcf) |
|
201,125 |
|
|
|
168,844 |
|
|
19 |
% |
|
Total (Boe) |
|
87,385 |
|
|
|
69,706 |
|
|
25 |
% |
|
|
|
|
|
|
|
|||||
|
Average Sales Prices: |
|
|
|
|
|
|||||
|
Oil (per Bbl) |
$ |
73.31 |
|
|
$ |
91.19 |
|
|
(20 |
)% |
|
Effect of Gain (Loss) on Settled Oil Derivatives on Average Price (per Bbl) |
|
(1.22 |
) |
|
|
(26.10 |
) |
|
|
|
|
Oil Net of Settled Oil Derivatives (per Bbl) |
|
72.09 |
|
|
|
65.09 |
|
|
11 |
% |
|
|
|
|
|
|
|
|||||
|
Natural Gas and NGLs (per Mcf) |
|
3.91 |
|
|
|
6.94 |
|
|
(44 |
)% |
|
Effect of Gain (Loss) on Settled Natural Gas Derivatives on Average Price (per Mcf) |
|
1.08 |
|
|
|
(0.93 |
) |
|
|
|
|
Natural Gas and NGLs Net of Settled Natural Gas Derivatives (per Mcf) |
|
4.99 |
|
|
|
6.01 |
|
|
(17 |
)% |
|
|
|
|
|
|
|
|||||
|
Realized Price on a Boe Basis Excluding Settled Commodity Derivatives |
|
54.20 |
|
|
|
71.18 |
|
|
(24 |
)% |
|
Effect of Gain (Loss) on Settled Commodity Derivatives on Average Price (per Boe) |
|
1.74 |
|
|
|
(16.40 |
) |
|
|
|
|
Realized Price on a Boe Basis Including Settled Commodity Derivatives |
|
55.94 |
|
|
|
54.78 |
|
|
2 |
% |
|
|
|
|
|
|
|
|||||
|
Costs and Expenses (per Boe): |
|
|
|
|
|
|||||
|
Production Expenses |
$ |
9.93 |
|
|
$ |
8.50 |
|
|
17 |
% |
|
Production Taxes |
|
4.44 |
|
|
|
5.40 |
|
|
(18 |
)% |
|
General and Administrative Expenses |
|
1.65 |
|
|
|
2.15 |
|
|
(23 |
)% |
|
Depletion, Depreciation, Amortization and Accretion |
|
12.03 |
|
|
|
8.29 |
|
|
45 |
% |
|
|
|
|
|
|
|
|||||
|
Net Producing Wells at Period End |
|
827.8 |
|
|
|
726.7 |
|
|
14 |
% |
HEDGING
NOG hedges portions of its expected production volumes to increase the predictability of its cash flow and to help maintain a strong financial position. The following table summarizes NOG’s open crude oil commodity derivative swap contracts scheduled to settle after March 31, 2023.
|
|
|
Crude Oil Commodity |
|
Crude Oil Commodity Derivative Collars |
||||||||||||||
|
Contract Period |
|
Volume |
|
Weighted |
|
Collar Call |
|
Collar Put |
|
Weighted |
|
Weighted |
||||||
|
2023: |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Q2 |
|
23,750 |
|
75.85 |
|
1,046,500 |
|
887,250 |
|
89.76 |
|
73.85 |
||||||
|
Q3 |
|
19,375 |
|
|
77.17 |
|
|
1,633,000 |
|
|
1,265,000 |
|
|
87.63 |
|
|
72.73 |
|
|
Q4 |
|
18,750 |
|
|
76.10 |
|
|
1,688,200 |
|
|
1,311,000 |
|
|
86.77 |
|
|
72.63 |
|
|
2024: |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Q1 |
|
7,075 |
|
|
78.10 |
|
|
1,672,125 |
|
|
1,080,625 |
|
|
85.68 |
|
|
70.42 |
|
|
Q2 |
|
7,050 |
|
|
77.04 |
|
|
1,663,025 |
|
|
1,080,625 |
|
|
85.52 |
|
|
69.68 |
|
|
Q3 |
|
6,875 |
|
|
75.34 |
|
|
632,500 |
|
|
494,500 |
|
|
82.36 |
|
|
69.53 |
|
|
Q4 |
|
2,825 |
|
|
69.63 |
|
|
586,500 |
|
|
425,500 |
|
|
83.98 |
|
|
69.86 |
|
|
2025: |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Q1 |
|
— |
|
|
— |
|
|
225,000 |
|
|
135,000 |
|
|
81.25 |
|
|
70.00 |
|
|
Q2 |
|
— |
|
|
— |
|
|
204,750 |
|
|
136,500 |
|
|
76.60 |
|
|
70.00 |
|
|
Q3 |
|
— |
|
|
— |
|
|
184,000 |
|
|
115,000 |
|
|
76.90 |
|
|
70.00 |
|
|
Q4 |
|
— |
|
|
— |
|
|
161,000 |
|
|
92,000 |
|
|
78.50 |
|
|
70.00 |
|
| ____________ | |
|
(1) |
This table does not include volumes subject to swaptions and call options, which are crude oil derivative contracts NOG has entered into which may increase swapped volumes at the option of NOG’s counterparties. This table also does not include basis swaps. For additional information, see Note 11 to our financial statements included in our Form 10-Q filed with the SEC for the quarter ended March 31, 2023. |
The following table summarizes NOG’s open natural gas commodity derivative swap contracts scheduled to settle after March 31, 2023.
|
|
|
Natural Gas Commodity |
|
Natural Gas Commodity Derivative Collars |
||||||||||||||
|
Contract Period |
|
Volume |
|
Weighted |
|
Collar Call |
|
Collar Put |
|
Weighted |
|
Weighted |
||||||
|
2023: |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Q2 |
|
57,495 |
|
4.483 |
|
4,777,500 |
|
3,202,500 |
|
6.577 |
|
4.190 |
||||||
|
Q3 |
|
65,185 |
|
|
4.350 |
|
|
5,060,000 |
|
|
5,060,000 |
|
|
6.674 |
|
|
4.182 |
|
|
Q4 |
|
62,304 |
|
|
4.308 |
|
|
6,285,000 |
|
|
6,285,000 |
|
|
6.902 |
|
|
4.134 |
|
|
2024: |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Q1 |
|
54,725 |
|
|
4.029 |
|
|
1,592,500 |
|
|
1,592,500 |
|
|
7.917 |
|
|
4.000 |
|
|
Q2 |
|
52,571 |
|
|
3.814 |
|
|
227,500 |
|
|
227,500 |
|
|
8.700 |
|
|
4.000 |
|
|
Q3 |
|
52,000 |
|
|
3.814 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Q4 |
|
36,217 |
|
|
3.774 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2025: |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Q1 |
|
11,500 |
|
|
3.791 |
|
|
900,000 |
|
|
900,000 |
|
|
5.650 |
|
|
3.250 |
|
|
Q2 |
|
5,055 |
|
|
4.000 |
|
|
910,000 |
|
|
910,000 |
|
|
5.650 |
|
|
3.250 |
|
|
Q3 |
|
5,000 |
|
|
4.000 |
|
|
920,000 |
|
|
920,000 |
|
|
5.650 |
|
|
3.250 |
|
|
Q4 |
|
3,315 |
|
|
4.000 |
|
|
920,000 |
|
|
920,000 |
|
|
5.650 |
|
|
3.250 |
|
|
2026: |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Q1 |
|
— |
|
|
— |
|
|
900,000 |
|
|
900,000 |
|
|
6.000 |
|
|
3.250 |
|
|
Q2 |
|
— |
|
|
— |
|
|
910,000 |
|
|
910,000 |
|
|
6.000 |
|
|
3.250 |
|
|
Q3 |
|
— |
|
|
— |
|
|
920,000 |
|
|
920,000 |
|
|
6.000 |
|
|
3.250 |
|
|
Q4 |
|
— |
|
|
— |
|
|
920,000 |
|
|
920,000 |
|
|
6.000 |
|
|
3.250 |
|
| ____________ | |
|
(1) |
This table does not include basis swaps. For additional information, see Note 11 to our financial statements included in our Form 10-Q filed with the SEC for the quarter ended March 31, 2023. |
The following table presents NOG’s settlements on commodity derivative instruments and unsettled gains and losses on open commodity derivative instruments for the periods presented, which is included in the revenue section of NOG’s statement of operations:
|
|
Three Months Ended March 31, |
||||||
|
(In thousands) |
|
2023 |
|
|
|
2022 |
|
|
Cash Received (Paid) on Settled Derivatives |
$ |
13,670 |
|
$ |
(105,161 |
) |
|
|
Non-Cash Mark-to-Market Gain (Loss) on Derivatives |
|
139,987 |
|
|
|
(384,227 |
) |
|
Gain (Loss) on Commodity Derivatives, Net |
$ |
153,656 |
|
|
$ |
(489,388 |
) |
CAPITAL EXPENDITURES & DRILLING ACTIVITY
|
(In millions, except for net well data) |
|
Three Months Ended |
||
|
Capital Expenditures Incurred: |
|
|
||
|
Organic Drilling and Development Capital Expenditures |
|
$ |
197.3 |
|
|
Ground Game Drilling and Development Capital Expenditures |
|
$ |
1.4 |
|
|
Ground Game Acquisition Capital Expenditures |
|
$ |
11.6 |
|
|
Other |
|
$ |
2.0 |
|
|
Non-Budgeted Acquisitions |
|
$ |
314.6 |
|
|
|
|
|
||
|
Net Wells Added to Production |
|
|
13.1 |
|
|
|
|
|
||
|
Net Producing Wells (Period-End) |
|
|
827.8 |
|
|
|
|
|
||
|
Net Wells in Process (Period-End) |
|
|
59.3 |
|
|
Increase in Wells in Process over Prior Period |
|
|
3.9 |
|
|
|
|
|
||
|
Weighted Average Gross AFE for Wells Elected to |
|
$ |
9.6 |
|
FIRST QUARTER 2023 EARNINGS RELEASE CONFERENCE CALL
In conjunction with NOG’s release of its financial and operating results, investors, analysts and other interested parties are invited to listen to a conference call with management on Friday, May 5, 2023 at 10:00 a.m. Central Time.
Those wishing to listen to the conference call may do so via webcast or phone as follows:
Webcast: https://event.choruscall.com/mediaframe/webcast.html?webcastid=eaPzTdtx
Dial-In Number: (866) 373-3407 (US/Canada) and (412) 902-1037 (International)
Conference ID: 13737814 – Northern Oil and Gas, Inc. First Quarter 2023 Earnings Call
Replay Dial-In Number: (877) 660-6853 (US/Canada) and (201) 612-7415 (International)
Replay Access Code: 13737814 – Replay will be available through July 4, 2023
ABOUT NORTHERN OIL AND GAS
NOG is a company with a primary strategy of investing in non-operated minority working and mineral interests in oil & gas properties, with a core area of focus in the premier basins within the United States. More information about NOG can be found at www.northernoil.com.
