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NOG Announces First Quarter 2023 Results, Including Record Quarterly Production

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.

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

Derivative Swaps(1)

 

Crude Oil Commodity Derivative Collars

Contract Period

 

Volume

(Bbls/Day)

 

Weighted

Average

Price ($/Bbl)

 

Collar Call

Volume

(Bbls)

 

Collar Put

Volume

(Bbls)

 

Weighted

Average

Ceiling

Price

($/Bbl)

 

Weighted

Average

Floor Price

($/Bbl)

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

Derivative Swaps(1)

 

Natural Gas Commodity Derivative Collars

Contract Period

 

Volume

(MMBTU/Day)

 

Weighted

Average

Price

($/MMBTU)

 

Collar Call

Volume

(MMBTU)

 

Collar Put

Volume

(MMBTU)

 

Weighted

Average

Ceiling

Price

($/MMBTU)

 

Weighted

Average

Floor Price

($/MMBTU)

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

March 31, 2023

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.

SAFE HARBOR

This press release contains forward-looking statements regarding future events and NOG’s future results that are subject to the safe harbors created under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included in this press release are forward-looking statements, including, but not limited to, statements regarding NOG’s dividend plans and practices, financial position, operating and financial performance, business strategy, plans and objectives of management for future operations, industry conditions, and indebtedness covenant compliance. When used in this press release, forward-looking statements are generally accompanied by terms or phrases such as “estimate,” “project,” “predict,” “believe,” “expect,” “continue,” “anticipate,” “target,” “could,” “plan,” “intend,” “seek,” “goal,” “will,” “should,” “may” or other words and similar expressions that convey the uncertainty of future events or outcomes. Items contemplating or making assumptions about actual or potential future production, sales, market size, collaborations, cash flows, and trends or operating results also constitute such forward-looking statements.

Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond NOG’s control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following: changes in crude oil and natural gas prices, the pace of drilling and completions activity on NOG’s current properties and properties pending acquisition; infrastructure constraints and related factors affecting NOG’s properties; cost inflation or supply chain disruptions; ongoing legal disputes over, and potential shutdown of, the Dakota Access Pipeline; NOG’s ability to acquire additional development opportunities, potential or pending acquisition transactions, the projected capital efficiency savings and other operating efficiencies and synergies resulting from NOG’s acquisition transactions, integration and benefits of property acquisitions, or the effects of such acquisitions on NOG’s cash position and levels of indebtedness; changes in NOG’s reserves estimates or the value thereof; disruption to NOG’s business due to acquisitions and other significant transactions; general economic or industry conditions, nationally and/or in the communities in which NOG conducts business; changes in the interest rate environment, legislation or regulatory requirements, conditions of the securities markets; risks associated with NOG’s 3.625% convertible senior notes due 2029 (the “Convertible Notes”), including the potential impact that the Convertible Notes may have on NOG’s financial position and liquidity, potential dilution, and that provisions of the Convertible Notes could delay or prevent a beneficial takeover of NOG; the potential impact of the capped call transactions undertaken in tandem with the Convertible Notes issuance, including counterparty risk; increasing attention to environmental, social and governance matters; NOG’s ability to consummate any pending acquisition transactions; other risks and uncertainties related to the closing of pending acquisition transactions; NOG’s ability to raise or access capital; cyber-incidents could have a material adverse effect on NOG’s business, financial condition or results of operations; changes in accounting principles, policies or guidelines; events beyond NOG’s control, including a global or domestic health crisis, acts of terrorism, political or economic instability or armed conflict in oil and gas producing regions; and other economic, competitive, governmental, regulatory and technical factors affecting NOG’s operations, products and prices.

NOG has based any forward-looking statements on its current expectations and assumptions about future events. While NOG’s management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond NOG’s control. Accordingly, results actually achieved may differ materially from expected results described in these statements. Forward-looking statements speak only as of the date they are made. You should consider carefully the statements under the heading “Risk Factors” in NOG’s Annual Report on Form 10-K for the year ended December 31, 2022, as updated by subsequent reports NOG files with the SEC. NOG does not undertake, and specifically disclaims, any obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements, other than as may be required by applicable law or regulation.

 

CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

 

Three Months Ended

March 31,

(In thousands, except share and per share data)

 

2023

 

 

 

2022

 

Revenues

 

 

 

Oil and Gas Sales

$

426,234

 

 

$

456,458

 

Gain (Loss) on Commodity Derivatives, Net

 

153,656

 

 

 

(489,388

)

Other Revenues

 

2,324

 

 

 

 

Total Revenues

 

582,214

 

 

 

(32,930

)

 

 

 

 

Operating Expenses

 

 

 

Production Expenses

 

78,088

 

 

 

54,540

 

Production Taxes

 

34,918

 

 

 

34,616

 

General and Administrative Expenses

 

13,000

 

 

 

13,813

 

Depletion, Depreciation, Amortization and Accretion

 

94,618

 

 

 

53,185

 

Other Expenses

 

1,001

 

 

 

 

Total Operating Expenses

 

221,625

 

 

 

156,154

 

 

 

 

 

Income (Loss) From Operations

 

360,589

 

 

 

(189,084

)

 

 

 

 

Other Income (Expense)

 

 

 

Interest Expense, Net of Capitalization

 

(30,143

)

 

 

(17,977

)

Gain (Loss) on Unsettled Interest Rate Derivatives, Net

 

(1,017

)

 

 

1,290

 

Gain on Extinguishment of Debt, Net

 

659

 

 

 

 

Contingent Consideration Gain

 

6,176

 

 

 

 

Other Income (Expense)

 

4,619

 

 

 

 

Total Other Income (Expense)

 

(19,706

)

 

 

(16,687

)

 

 

 

 

Income (Loss) Before Income Taxes

 

340,883

 

 

 

(205,771

)

 

 

 

 

Income Tax Provision (Benefit)

 

692

 

 

 

789

 

 

 

 

 

Net Income (Loss)

$

340,191

 

 

$

(206,560

)

 

 

 

 

Cumulative Preferred Stock Dividend

 

 

 

 

(3,016

)

 

 

 

 

Premium on Repurchase of Preferred Stock

 

 

 

 

(14,957

)

 

 

 

 

Net Income (Loss) Attributable to Common Stockholders

$

340,191

 

 

$

(224,533

)

 

 

 

 

Net Income (Loss) Per Common Share – Basic

$

4.01

 

 

$

(2.92

)

Net Income (Loss) Per Common Share – Diluted

$

3.98

 

 

$

(2.92

)

Weighted Average Common Shares Outstanding – Basic

 

84,915,729

 

 

 

76,922,543

 

Weighted Average Common Shares Outstanding – Diluted

 

85,407,197

 

 

 

76,922,543

 

 

CONDENSED BALANCE SHEETS

 

(In thousands, except par value and share data)

March 31, 2023

 

December 31, 2022

Assets

(Unaudited)

 

 

Current Assets:

 

 

 

Cash and Cash Equivalents

$

6,073

 

 

$

2,528

 

Accounts Receivable, Net

 

274,399

 

 

 

271,336

 

Advances to Operators

 

40,985

 

 

 

8,976

 

Prepaid Expenses and Other

 

2,328

 

 

 

2,014

 

Derivative Instruments

 

72,156

 

 

 

35,293

 

Income Tax Receivable

 

 

 

 

338

 

Total Current Assets

 

395,941

 

 

 

320,485

 

 

 

 

 

Property and Equipment:

 

 

 

Oil and Natural Gas Properties, Full Cost Method of Accounting

 

 

 

Proved

 

7,019,244

 

 

 

6,492,683

 

Unproved

 

41,846

 

 

 

41,565

 

Other Property and Equipment

 

7,096

 

 

 

6,858

 

Total Property and Equipment

 

7,068,185

 

 

 

6,541,106

 

Less – Accumulated Depreciation, Depletion and Impairment

 

(4,152,245

)

 

 

(4,058,180

)

Total Property and Equipment, Net

 

2,915,940

 

 

 

2,482,926

 

 

 

 

 

Derivative Instruments

 

14,495

 

 

 

12,547

 

Acquisition Deposit

 

 

 

 

43,000

 

Other Noncurrent Assets, Net

 

16,490

 

 

 

16,220

 

 

 

 

 

Total Assets

$

3,342,866

 

 

$

2,875,178

 

 

 

 

 

Liabilities and Stockholders' Equity

Current Liabilities:

 

 

 

Accounts Payable

$

134,264

 

 

$

128,582

 

Accrued Liabilities

 

162,066

 

 

 

121,737

 

Accrued Interest

 

15,221

 

 

 

24,347

 

Income Tax Payable

 

353

 

 

 

 

Derivative Instruments

 

27,560

 

 

 

58,418

 

Contingent Consideration

 

3,931

 

 

 

10,107

 

Other Current Liabilities

 

1,905

 

 

 

1,781

 

Total Current Liabilities

 

345,300

 

 

 

344,972

 

 

 

 

 

Long-term Debt, Net

 

1,756,949

 

 

 

1,525,413

 

Derivative Instruments

 

156,603

 

 

 

225,905

 

Asset Retirement Obligations

 

32,905

 

 

 

31,582

 

Other Noncurrent Liabilities

 

3,042

 

 

 

2,045

 

 

 

 

 

Total Liabilities

$

2,294,799

 

 

$

2,129,917

 

 

 

 

 

Commitments and Contingencies

 

 

 

 

 

 

 

Stockholders’ Equity

 

 

 

Common Stock, Par Value $.001; 135,000,000 Shares Authorized;

85,370,223 Shares Outstanding at 3/31/2023

85,165,807 Shares Outstanding at 12/31/2022

 

487

 

 

 

487

 

Additional Paid-In Capital

 

1,708,147

 

 

 

1,745,532

 

Retained Deficit

 

(660,568

)

 

 

(1,000,759

)

Total Stockholders’ Equity

 

1,048,067

 

 

 

745,260

 

Total Liabilities and Stockholders’ Equity

$

3,342,866

 

 

$

2,875,178

 

Non-GAAP Financial Measures

Adjusted Net Income, Adjusted EBITDA and Free Cash Flow are non-GAAP measures. NOG defines Adjusted Net Income (Loss) as net income (loss) excluding (i) (gain) loss on unsettled commodity derivatives, net of tax, (ii) (gain) loss on extinguishment of debt, net of tax, (iii) contingent consideration (gain) loss, net of tax, (iv) acquisition transaction costs, net of tax, and (v) (gain) on unsettled interest rate derivatives, net of tax. NOG defines Adjusted EBITDA as net income (loss) before (i) interest expense, (ii) income taxes, (iii) depreciation, depletion, amortization and accretion, (iv) non-cash stock-based compensation expense, (v) (gain) loss on extinguishment of debt, (vi) contingent consideration (gain) loss, (vii) acquisition transaction costs, (viii) (gain) loss on unsettled interest rate derivatives, and (ix) (gain) loss on unsettled commodity derivatives. NOG defines Free Cash Flow as cash flows from operations before changes in working capital and other items, less (i) capital expenditures, excluding non-budgeted acquisitions and changes in accrued capital expenditures and other items. A reconciliation of each of these measures to the most directly comparable GAAP measure is included below.

Management believes the use of these non-GAAP financial measures provides useful information to investors to gain an overall understanding of current financial performance. Management believes Adjusted Net Income and Adjusted EBITDA provide useful information to both management and investors by excluding certain expenses and unrealized commodity gains and losses that management believes are not indicative of NOG’s core operating results. Management believes that Free Cash Flow is useful to investors as a measure of a company’s ability to internally fund its budgeted capital expenditures, to service or incur additional debt, and to measure success in creating stockholder value. In addition, these non-GAAP financial measures are used by management for budgeting and forecasting as well as subsequently measuring NOG’s performance, and management believes it is providing investors with financial measures that most closely align to its internal measurement processes. The non-GAAP financial measures included herein may be defined differently than similar measures used by other companies and should not be considered an alternative to, or more meaningful than, the comparable GAAP measures. From time to time NOG provides forward-looking Free Cash Flow estimates or targets; however, NOG is unable to provide a quantitative reconciliation of the forward looking non-GAAP measure to its most directly comparable forward looking GAAP measure because management cannot reliably quantify certain of the necessary components of such forward looking GAAP measure. The reconciling items in future periods could be significant.

 

Reconciliation of Adjusted Net Income

 

 

Three Months Ended

March 31,

(In thousands, except share and per share data)

 

2023

 

 

 

2022

 

Income (Loss) Before Taxes

$

340,883

 

 

$

(205,771

)

Add:

 

 

 

Impact of Selected Items:

 

 

 

(Gain) Loss on Unsettled Commodity Derivatives

 

(139,987

)

 

 

384,227

 

(Gain) on Extinguishment of Debt

 

(659

)

 

 

 

Contingent Consideration (Gain)

 

(6,176

)

 

 

 

Acquisition Transaction Costs

 

3,481

 

 

 

6,848

 

(Gain) Loss on Unsettled Interest Rate Derivatives

 

1,017

 

 

 

(1,290

)

Adjusted Income Before Adjusted Income Tax Expense

 

198,559

 

 

 

184,014

 

 

 

 

 

Adjusted Income Tax Expense

 

(48,647

)

 

 

(45,083

)

 

 

 

 

Adjusted Net Income (non-GAAP)

$

149,912

 

 

$

138,930

 

 

 

 

 

Weighted Average Shares Outstanding – Basic

 

84,915,729

 

 

 

76,922,543

 

Weighted Average Shares Outstanding – Diluted

 

85,407,197

 

 

 

88,051,830

 

 

 

 

 

Income (Loss) Before Taxes Per Common Share – Basic

$

4.01

 

 

$

(2.68

)

Add:

 

 

 

Impact of Selected Items

 

(1.68

)

 

 

5.07

 

Impact of Income Tax

 

(0.56

)

 

 

(0.58

)

Adjusted Net Income Per Common Share – Basic

$

1.77

 

 

$

1.81

 

 

 

 

 

Income (Loss) Before Taxes Per Common Share – Diluted

$

3.99

 

 

$

(2.34

)

Add:

 

 

 

Impact of Selected Items

 

(1.67

)

 

 

4.43

 

Impact of Income Tax

 

(0.56

)

 

 

(0.51

)

Adjusted Net Income Per Common Share – Diluted

$

1.76

 

 

$

1.58

 

____________

(1)

For the three months ended March 31, 2023 and March 31, 2022, this represents a tax impact using an estimated tax rate of 24.5%.

 

Reconciliation of Adjusted EBITDA

 

 

Three Months Ended

March 31,

(In thousands)

 

2023

 

 

 

2022

 

Net Income (Loss)

$

340,191

 

 

$

(206,560

)

Add:

 

 

 

Interest Expense

 

30,143

 

 

 

17,978

 

Income Tax Provision (Benefit)

 

692

 

 

 

789

 

Depreciation, Depletion, Amortization and Accretion

 

94,618

 

 

 

53,185

 

Non-Cash Stock-Based Compensation

 

2,151

 

 

 

1,447

 

(Gain) on Extinguishment of Debt

 

(659

)

 

 

 

Contingent Consideration (Gain) Loss

 

(6,176

)

 

 

 

Acquisition Transaction Costs

 

3,481

 

 

 

6,848

 

(Gain) Loss on Unsettled Interest Rate Derivatives

 

1,017

 

 

 

(1,290

)

(Gain) Loss on Unsettled Commodity Derivatives

 

(139,987

)

 

 

384,227

 

Adjusted EBITDA

$

325,472

 

 

$

256,623

 

 

Reconciliation of Free Cash Flow

 

 

Three Months Ended

March 31,

(In thousands)

 

2023

 

Net Cash Provided by Operating Activities

$

269,308

 

Exclude: Changes in Working Capital and Other Items

 

26,864

 

Less: Capital Expenditures (1)

 

(212,235

)

Free Cash Flow

$

83,937

 

____________

(1)

Capital expenditures are calculated as follows:

 

Three Months Ended

March 31,

(In thousands)

 

2023

 

Cash Paid for Capital Expenditures

$

460,982

 

Less: Non-Budgeted Acquisitions

 

(271,606

)

Plus: Change in Accrued Capital Expenditures and Other

 

22,859

 

Capital Expenditures

$

212,235

 

 

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