Northern anticipates more production growth in 2H 2017
Northern Oil and Gas, Inc. (ticker: NOG) reported total production of 1.2 million BOE for the first quarter, averaging 13,299 BOEPD.
Northern’s business model is as a non-operator franchise in the Bakken and Three Forks plays in the Williston Basin of North Dakota and Montana. Northern operates under a capital allocation model that calls for the company to acquire non-operated positions in high quality acreage about to be drilled, that provide for high internal rates of return on capital and to partner with leading E&P operators with a successful track record in the Williston Basin.
Northern’s GAAP net income for the first quarter of 2017 was $16.9 million. Adjusted net income for the quarter was a loss of $0.1 million. Adjusted EBITDA for the quarter was $29.6 million, the company reported.
Interim CEO and CFO Tom Stoelk said, “Increased well productivity is being aided by the enhanced completion designs, which is improving returns as we execute on our capital allocation focused business plan. As the weather improves, an increase in completions is expected to drive production growth during the second half of 2017.”
Northern leased approximately 151,672 net acres targeting the Williston Basin Bakken and Three Forks formations. As of March 31, 2017, approximately 84% of Northern’s North Dakota acreage position, and approximately 82% of Northern’s total acreage position was developed, held by production or held by operations.
Northern continues to expect 2017 total annual production to equal or modestly exceed 2016 total production. Northern expects that it will add approximately 12 net wells to production during the year, based on a preliminary capital budget of $102.2 million (including acreage and development capital). Net well additions will be weighted to the second half of 2017, which should result in sequential production growth in the third and fourth quarters. Management’s current expectations for 2017 operating metrics are as follows:
| 2017 | ||
| Operating Expenses: | ||
| Production Expenses (per Boe) | $9.00 – $9.30 | |
| Production Taxes (% of Oil & Gas Sales) | 10% | |
| General and Administration Expense (per Boe) | $3.00 – $3.50 | |
| Average Differential to NYMEX WTI | $7.00 – $9.00 |
At March 31, 2017, Northern had $134.0 million in outstanding borrowings under its revolving credit facility, a $10 million reduction from December 31, 2016. In May 2017, Northern completed the semi-annual redetermination under its revolving credit facility with the borrowing base established at $325 million. Based on this new borrowing base, Northern had available liquidity of $196.5 million as of March 31, 2017, composed of $5.5 million in cash and $191.0 million of revolving credit facility availability.
HEDGING
The following table summarizes Northern’s open crude oil derivative contracts scheduled to settle after March 31, 2017.
| Swaps | Collars | |||||||
| Contract Period | Volume (Bbls) | Weighted Average Price (per Bbl) | Volume (Bbls) | Weighted Average Floor – Ceiling Prices (per Bbl) | ||||
| 2017: | ||||||||
| 2Q | 631,000 | $51.75 | 75,000 | $50.00 – $60.06 | ||||
| 3Q | 632,000 | $53.36 | 75,000 | $50.00 – $60.06 | ||||
| 4Q | 632,000 | $53.36 | 75,000 | $50.00 – $60.06 | ||||
| 2018: | ||||||||
| 1Q | 450,000 | $53.67 | 90,000 | $50.00 – $60.25 | ||||
| 2Q | 451,000 | $53.67 | 90,000 | $50.00 – $60.25 | ||||
| 3Q | 452,000 | $53.68 | 90,000 | $50.00 – $60.25 | ||||
| 4Q | 364,000 | $52.94 | 90,000 | $50.00 – $60.25 | ||||
CAPITAL EXPENDITURES & DRILLING ACTIVITY
| Three Months Ended March 31, 2017 | ||
| Capital Expenditures Incurred: | ||
| Drilling, Completion & Capitalized Workover Expense | $26.5 million | |
| Acreage | $0.4 million | |
| Other | $0.4 million | |
| Net Wells Added to Production | 2.0 | |
| Net Producing Wells (Period-End) | 214.6 | |
| Net Wells in Process (Period-End) | 15.9 | |
| Weighted Average AFE for In-Process Wells (Period-End) | $7.3 million |
For the first quarter of 2017, the weighted average authorization for expenditure (or AFE) cost for wells that Northern elected to participate in (consented) was $6.6 million.
Northern said it plans to present at the upcoming summer conferences:
Louisiana Energy Conference – Al Petrie Advisors
May 30 – June 2, 2017, New Orleans, LA
2017 RBC Capital Markets’ Global Energy and Power Executive Conference
June 6 – 7, 2017, New York, NY
EnerCom’s The Oil & Gas Conference 22
August 13 – 17, 2017, Denver, CO
