NORTHERN OIL AND GAS, INC. Q3 2023 Earnings Presentation
November 1, 2023
Contents
- Q3 2023 Highlights
-
Operations & Investment Activity Updates III. Guidance
IV. Value Proposition
V. Appendix
Q3 2023 Earnings Presentation | 2
Q3 2023 Financial & Operating Highlights
Q3 Free Cash Flow(1)Dividend Growth
$127.8MM | +52% | ||||
+169% vs. Q2-23, as 1H | vs. Q3-22, +2.7% vs. Q2-23 | ||||
investments convert to cash flow | |||||
Q3 Production | Q3 Adjusted ROCE (1) | ||||
102.3Mboe/d | 24.5% | ||||
+12.6% vs. Q2-23;Half-quarter | +160 bps vs. Q2-23 | ||||
contribution from Novo | |||||
Q3 Adj. EBITDA (1) | Q3 Leverage (1) | ||||
$385.5MM | 1.35X | ||||
+22% vs Q2-23 | Net Debt / LQA Adj. EBITDA | ||||
~Flat vs. Q2-23, despite partial Novo quarter |
- Free Cash Flow, Adjusted EBITDA, and ROCE are non-GAAP financial measures. See Appendix for methodology and reconciliations. We calculate ROCE with past impairments added back to Total Assets. Net debt is total debt less cash and acquisition deposits.
- Calculated as (i) total net debt as of 9/30/23, less $290.6 million in proceeds from October issuance of common stock, divided by (ii) LQA Adj. EBITDA.
Record Production & EBITDA; Positioned for 2024 Growth
Active Ground Game in Q3, D&C List Reaches New Record
- Adjusted EBITDA $385.5MM in Q3, +22% QoQ
- Q3 net production per day +12.6% QoQ, +29.3% YoY
- Net D&C in-process list now 74.2, up 21% YoY
- 2H FCF accelerating as 1H investments come online and contribute to revenues and production
- Recycle ratio of 2.9x and Adjusted ROCE(1) of 24.5%
Ground Game & Acquisition Landscape
- Completed Novo acquisition for ~$468 million adjusted closing price
- Significant Ground Game success in the third quarter
- Acquisition opportunities currently spooling in Permian and Appalachian
Shareholder Returns
- $0.38 Q3 Dividend declared, 52% increase YoY
- $0.40 Q4 Dividend declared, 33% increase YoY
- Anticipate Board to maintain recently declared dividend level through year-end 2024
Balance Sheet & Liquidity
- Leverage ratios roughly flat QoQ
- Pro forma for recent stock offering, leverage ratio approximated ~1.16x(2)
- Ample liquidity: over $875 million at quarter end, further increased by October common stock offering
- Leverage projected to be well below 1x at current pricing strip by Q2 2024
Q3 2023 Earnings Presentation | 3
Q3 23 Operations Highlights
Organic activity up 16% year to date vs. the same period of 2022. Scale driving organic growth.
AFEs
- $1.8B (gross) in AFEs
- Over 95% consent rate, expected IRR's well above hurdle rate
- Over 190 wells evaluated
- Net well evaluations driven by accelerated Permian activity
Wells in Process
- Drilling & Completions list grew nearly 34% vs YE22 to an-all time high
- Organic activity accounted for ~50% of adds
- The Permian accounts for ~60% of oil-weighted net wells in process
- Mewbourne, Oxy, and Permian Resources accounted for ~50% of adds
Well Completions
- Organic completion activity was higher vs. Q3 22 as operators worked through DUCs to capitalize on the commodity price environment
- The Williston and Permian each accounted for approximately half of organic completions
Q3 2023 Earnings Presentation | 4
D&C List Surging - Momentum Building for 2024
NOG's oil-weightedwells-in-process (D&C) list is at record levels, and the Company's recent investment cycle is poised to convert into production and cash flow over time. Diversity of regions remains important.
Q3 2023 Earnings Presentation | 5
Investment Activity Update | Bolt-On |
High quality bolt-on plays starting to emerge while capitalizing on larger ground game opportunities in the interim.
Opportunity Set
- M&A landscape still variable but quality opportunities emerging
- NOG's capital and solutions remain sought-after
- Variety of structures (Non- Op packages, Joint Development, Co-Bids)
- Wide range of partners
- Identifying plays to benefit NOG across a variety of time frames
Ground Game
-
Evaluated over 400 ground game opportunities
YTD - Completed 8 ground game deals in Q3, 31 deals YTD
- Deals closed across Permian and Williston
- Added 5.7 Net Wells1 and 514 Net Acres in Q3
- Added 24.9 Net Wells1 and 1,823 Net Acres YTD
Bolt-On
- Closed Novo acquisition
- Prospective 2023 bolt-on opportunities have to clear a high bar
- Remaining disciplined on return requirements
- Reviewing non-operated assets and operator partnerships
1) Includes current and future well locations.
Q3 2023 Earnings Presentation | 6
Permian Presence Doubles Year-to-Date in 2023
Since 2021, NOG has methodically expanded its presence in the Permian. With the addition of Forge and Novo, NOG has doubled its Permian acreage through two unique joint operating structures.
Year-End 2021 ~3,400 Net Acres | Year-End 2022 ~17,600 Net Acres | 2023 ~36,400 Net Acres | ||
NOG
Horizontal Producers 2021 - 2023
NOG
Horizontal Producers 2021 - 2023
NOG
NOVO Leasehold
Forge Leasehold
Horizontal Producers 2021 - 2023
. | Q3 2023 Earnings Presentation | 7 |
Novo Closed - Adds Scale and High Quality, Low Breakeven Acreage
KEY STATISTICS
• Purchased 33.33% undivided stake in Novo Assets for $468MM
• Gross NRI: ~77% (~78% Eddy, ~75% Culberson), net WI: ~29%
• Effective date May 1, 2023, closed August 15, 2023
• Eddy County assets represent ~80% of allocated value
• ~98% of Culberson County allocated value tied to PDP and WIPs, inventory provides significant long-term upside from increases in natural gas pricing
GOVERNANCE & OPERATOR
• Partnership governed by cooperation and joint operating agreement, with AMI in place.
• Agreements will continue unchanged by recently announced Permian Resources/Earthstone merger
• ESTE is operator on substantially all of the assets, until closing of merger with Permian Resources
• Permian Resources as future operator provides incremental benefits to NOG from PR's increased scale and anticipated cost synergies from the merger with Earthstone.
INVESTMENT RATIONALE
• Significant long-dated Tier 1 inventory
• Strong free cash flow profile
• NOG expects nearly a decade of self-funding continuous development of the primary target formations
NOG
Novo Leasehold
Horizontal Producers 2021 - 2023
Q3 2023 Earnings Presentation | 8
Q3 2023 Production by Basin
NOG's production mix continues to become more diversified and balanced. Permian gaining production share with contributions from MPDC, Forge and Novo.
10% | • Flat Williston production quarter over quarter |
48%
42%
Region
Williston Permian Appalachian
- Significant uptick in Permian production driven in part by the closing of Forge and partial credit from the Novo transaction
- September Permian volumes exceeded Williston for first time ever
- Appalachian production down modestly quarter over quarter, with activity targeted for 2024
- Typical seasonal weakness in differentials
Q3 2023 Earnings Presentation | 9
Q3 2023 Production by Commodity and Basin (% Boe)
Oil cut for the quarter was up materially to 62.1%, with the Williston and Permian both seeing increases. Overall, the Company continues to expect a 62.0% - 63.0% oil cut for 2023.
Williston
29%
Appalachia
38%
62%
Commodity Type
Oil | Gas | ||
71%
Oil Gas
100%
Permian
Gas
33%
67%
Oil Gas
Q3 2023 Earnings Presentation | 10
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Northern Oil & Gas Inc. published this content on 01 November 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 01 November 2023 20:16:20 UTC.
