SECOND QUARTER HIGHLIGHTS
- Record quarterly production of 90,878 Boe per day (60% oil),
increases of 4% from the first quarter of 2023 and 25% from the
second quarter of 2022
- Net income of $167.8 million and Adjusted EBITDA of $315.5
million. See “Non-GAAP Financial Measures” below
- Cash flow from operations of $307.8 million. Excluding changes
in net working capital, cash flow from operations was $280.4
million, an increase of 11% from the second quarter of 2022
- Generated $47.6 million of Free Cash Flow. See “Non-GAAP
Financial Measures” below.
- Closed on the acquisition of a 30% undivided stake in the Forge
assets for $167.9 million
- Entered into a joint acquisition agreement for a 33.33%
undivided stake in the Novo assets for $500.0 million with an
anticipated closing date of August 15, 2023
- Issued $500 million of 8.75% Senior Notes with a maturity date
of June 2031
- Completed underwritten public offering of 7,647,500 shares of
common stock raising $224.7 million in net proceeds
- Paid $0.37 per share common dividend for the second quarter of
2023, an increase of 9% from the first quarter of 2023, and
declared $0.38 per share common dividend for the third quarter of
2023
Northern Oil and Gas, Inc. (NYSE: NOG) (“NOG” or “Company”)
today announced the Company’s second quarter results.
MANAGEMENT COMMENTS
“NOG made meaningful strides in expanding its exposure to
high-quality, low-breakeven acreage in the second quarter by
executing on two highly accretive large-scale acquisitions with
Forge and Novo. It was also a banner quarter for the Ground Game,
completing 13 transactions that are expected to add over 16 net
wells to production over the next several years,” commented Nick
O’Grady, NOG’s Chief Executive Officer. “For the remainder of the
year, we see potential for record levels of production and elevated
cash flow from operations and free cash flow, as we begin to
harvest our first half investments.”
SECOND QUARTER FINANCIAL RESULTS
Oil and natural gas sales for the second quarter were $416.5
million. Second quarter GAAP net income was $167.8 million or $1.88
per diluted share. Second quarter Adjusted Net Income was $132.9
million or $1.49 per diluted share. Adjusted EBITDA in the second
quarter was $315.5 million, a 16% increase from the same period a
year ago. See “Non-GAAP Financial Measures” below.
PRODUCTION
Second quarter production was 90,878 Boe per day, an increase of
4% from the first quarter of 2023 and an increase of 25% from the
second quarter of 2022. Oil represented 60% of total production in
the second quarter with 54,738 Bbls per day, an increase of 2% from
the first quarter of 2023 and an increase of 31% from the second
quarter of 2022. NOG had 13.8 net wells turned in-line during the
second quarter, compared to 13.1 net wells turned in-line in the
first quarter of 2023. Production increased quarter over quarter,
driven primarily by growth in NOG’s Williston basin production,
which grew approximately 10% from the prior quarter and represented
record quarterly volumes in the basin for the Company.
PRICING
During the second quarter, NYMEX West Texas Intermediate (“WTI”)
crude oil averaged $73.68 per Bbl, and NYMEX natural gas at Henry
Hub averaged $2.32 per Mcf. NOG’s unhedged net realized oil price
in the second quarter was $71.03, representing a $2.65 differential
to WTI prices. NOG’s unhedged net realized gas price in the second
quarter was $3.18 per Mcf, representing approximately 137%
realization compared with Henry Hub pricing. Oil differentials
remained consistent from the prior quarter, with in-basin prices in
both the Williston and Permian basin at better than seasonal
average levels. Natural gas realizations were better than expected
due to higher than forecast natural gas liquids pricing and lower
than expected in-basin gas differentials.
OPERATING COSTS
Lease operating costs were $84.4 million in the second quarter
of 2023, or $10.20 per Boe, a 3% increase on a per unit basis
compared to the first quarter of 2023. This increase in unit costs
was driven primarily by the annual firm transportation charge in
the Marcellus, partially offset by lower processing and salt water
disposal charges. Second quarter general and administrative
(“G&A”) costs totaled $12.4 million or $1.50 per Boe. This
includes $3.6 million of legal and transaction expenses in
connection with bolt-on acquisitions and $1.2 million of non-cash
stock-based compensation. NOG’s cash G&A costs excluding these
amounts totaled $7.6 million or $0.92 per Boe in the second
quarter, down 2% on a per unit basis compared to the first quarter
of 2023.
CAPITAL EXPENDITURES AND ACQUISITIONS
Capital expenditures for the second quarter were $232.8 million
(excluding non-budgeted acquisitions) representing 31% of NOG’s
initial annual capital expenditure guidance range at the midpoint.
This was comprised of $210.0 million of total drilling and
completion (“D&C”) capital on organic and Ground Game assets,
and $22.8 million of Ground Game acquisition spending and other
items. D&C spending was higher than the prior quarter due to an
increase in development activity and workover expense incurred in
the period and significant Ground Game success. NOG has seen well
cost inflation moderate in the second quarter of 2023. NOG’s
weighted average gross authorization for expenditure (or AFE)
elected to in the second quarter was $9.0 million, compared to $9.6
million in the first quarter of 2023 and $7.2 million in the second
quarter of 2022.
NOG’s Permian Basin spending was 57% of the total capital
expenditures for the second quarter, the Williston was 39%, the
Marcellus was 3% and other items were 1%. On the Ground Game
acquisition front, NOG closed on thirteen transactions through
various structures during the second quarter totaling 16.7 net
current and future development wells and 942 net acres, a marked
increase from the first quarter.
As previously announced, on June 30, 2023, NOG completed its
Forge acquisition with a $167.9 million cash settlement at
closing.
LIQUIDITY AND CAPITAL RESOURCES
NOG had total liquidity of $1.01 billion as of June 30, 2023,
consisting of $1.00 billion of committed borrowing availability
under the Revolving Credit Facility and $14.8 million of cash. The
Company also had $37.5 million held in escrow as of June 30, 2023,
as a cash deposit for the pending Novo acquisition.
In May 2023, NOG completed an upsized offering of $500 million
of 8.750% Senior Notes due 2031. Net proceeds from the offering
were used to reduce the outstanding balance on the Company’s
revolving credit facility and for general corporate purposes.
In May 2023, NOG completed an underwritten public offering of
its common stock for net proceeds of $224.7 million, issuing
7,647,500 shares. Proceeds from the offering were used for the
Forge acquisition and for general corporate purposes.
On August 2, 2023, NOG completed its semi-annual redetermination
of its Revolving Credit Facility. The Borrowing Base will increase
to $1.8 billion (from $1.6 billion) and the Elected Commitment
Amount will increase to $1.25 billion (from $1.0 billion), subject
to the closing of the Novo acquisition and other customary
conditions. In addition, the Company added two new lenders to the
syndicate, increasing the number to sixteen banks.
As of June 30, 2023, NOG had total debt of $1,705.1 million, a
decrease of $69.0 million from the end of the first quarter. The
total debt consisted of no outstanding borrowings under the
Revolving Credit Facility, $705.1 million of outstanding 8.125%
Senior Notes due 2028, $500.0 million of outstanding 3.625%
Convertible Notes due 2029, and $500.0 million of outstanding
8.750% Senior Notes due 2031.
SHAREHOLDER RETURNS
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 was paid on
July 31, 2023 in the total amount of $34.3 million. The per share
dividend represents a 9% increase from the prior quarter, and a 95%
increase from the second quarter of 2022.
On August 1, 2023, NOG’s Board of Directors declared a regular
quarterly cash dividend for NOG’s common stock of $0.38 per share
for stockholders of record as of September 28, 2023, which will be
paid on October 31, 2023. This represents a 3% increase from the
prior quarter, and a 52% increase from the third quarter of
2022.
2023 ANNUAL GUIDANCE*
On July 25, 2023, NOG issued a press release containing updated
2023 guidance to reflect recent acquisitions and other matters, as
set forth in the table below.
Current
Annual Production (Boe per day)
96,000 - 100,000
Q3 2023 Production (Boe per day)
99,000 - 103,000
Oil as a Percentage of Production
62.0% - 63.0%
Total Budgeted Capital Expenditures (in
millions)
$764 - $800
Net Wells Turned-in-Line (“TIL”)
75 - 78
Operating Expenses and
Differentials:
Production Expenses (per Boe)
$9.35 - $9.55
Production Taxes (as a percentage of Oil
& Gas Sales)
8.0% - 9.0%
DD&A Rate (per Boe)
$13.00 - $13.80
Average Differential to NYMEX WTI (per
Bbl)
($3.25) - ($4.25)
Average Realization as a Percentage of
NYMEX Henry Hub (per Mcf)
85.0% - 95.0%
General and Administrative Expense (per
Boe):
Non-Cash
$0.20 - $0.25
Cash (excluding transaction costs on
non-budgeted acquisitions)
$0.80 - $0.85
________________
*All forecasts are provided on a 2-stream
production basis. Assumes 8/15/2023 closing date for Novo
acquisition.
SECOND QUARTER 2023 RESULTS
The following tables set forth selected operating and financial
data for the periods indicated.
Three Months Ended June
30,
2023
2022
% Change
Net Production:
Oil (Bbl)
4,981,162
3,801,663
31
%
Natural Gas and NGLs (Mcf)
19,732,243
16,878,481
17
%
Total (Boe)
8,269,869
6,614,743
25
%
Average Daily Production:
Oil (Bbl)
54,738
41,777
31
%
Natural Gas and NGLs (Mcf)
216,838
185,478
17
%
Total (Boe)
90,878
72,689
25
%
Average Sales Prices:
Oil (per Bbl)
$
71.03
$
106.26
(33
)%
Effect of Gain (Loss) on Settled Oil
Derivatives on Average Price (per Bbl)
1.31
(32.53
)
Oil Net of Settled Oil Derivatives (per
Bbl)
72.34
73.73
(2
)%
Natural Gas and NGLs (per Mcf)
3.18
8.63
(63
)%
Effect of Gain (Loss) on Settled Natural
Gas Derivatives on Average Price (per Mcf)
1.05
(2.29
)
Natural Gas and NGLs Net of Settled
Natural Gas Derivatives (per Mcf)
4.23
6.34
(33
)%
Realized Price on a Boe Basis Excluding
Settled Commodity Derivatives
50.36
83.09
(39
)%
Effect of Gain (Loss) on Settled Commodity
Derivatives on Average Price (per Boe)
3.30
(24.54
)
Realized Price on a Boe Basis Including
Settled Commodity Derivatives
53.66
58.55
(8
)%
Costs and Expenses (per Boe):
Production Expenses
$
10.20
$
9.77
4
%
Production Taxes
4.49
6.63
(32
)%
General and Administrative Expenses
1.50
1.22
23
%
Depletion, Depreciation, Amortization and
Accretion
12.87
8.28
55
%
Net Producing Wells at Period
End
872.8
735.0
19
%
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 June 30, 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:
Q3
20,870
$
76.73
1,823,989
1,441,613
$
86.38
$
71.57
Q4
20,224
75.67
1,969,252
1,577,676
85.53
71.44
2024:
Q1
10,497
$
76.02
1,945,397
1,292,178
$
84.84
$
69.82
Q2
10,583
75.10
1,946,387
1,306,267
84.61
69.12
Q3
11,451
73.60
782,056
630,256
80.43
68.15
Q4
7,299
70.42
723,749
549,800
81.80
68.15
2025:
Q1
1,308
$
67.92
323,286
224,849
$
78.69
$
66.98
Q2
1,089
68.01
273,171
199,233
75.49
67.63
Q3
1,004
67.94
234,994
161,970
75.76
67.88
Q4
966
67.81
208,511
135,487
76.87
67.63
2026:
Q1
430
$
63.25
43,226
39,289
$
70.25
$
62.50
Q2
430
62.74
43,707
39,727
70.25
62.50
Q3
430
62.28
44,187
40,163
70.25
62.50
Q4
430
61.70
44,187
40,163
70.25
62.50
_____________
(1)
Includes derivative contracts entered into
through July 31, 2023. 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 June 30, 2023.
The following table summarizes NOG’s open natural gas commodity
derivative swap contracts scheduled to settle after June 30,
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:
Q3
105,678
$
3.86
5,060,000
5,060,000
$
6.67
$
4.18
Q4
105,619
3.82
6,285,000
6,285,000
6.90
4.13
2024:
Q1
103,974
$
3.61
2,502,500
2,502,500
$
6.50
$
3.64
Q2
104,350
3.49
1,137,500
1,137,500
4.95
3.20
Q3
103,048
3.49
1,530,000
1,530,000
4.61
3.00
Q4
68,945
3.48
1,840,000
1,840,000
4.76
3.00
2025:
Q1
11,500
$
3.79
4,620,734
4,620,734
$
6.28
$
3.14
Q2
5,055
4.00
3,859,216
3,859,216
5.51
3.14
Q3
5,000
4.00
3,336,781
3,336,781
5.63
3.15
Q4
3,315
4.00
3,368,797
3,368,797
5.87
3.14
2026:
Q1
—
—
3,193,735
3,193,735
$
5.85
$
3.14
Q2
—
—
3,229,220
3,229,220
5.85
3.14
Q3
—
—
3,264,706
3,264,706
5.85
3.14
Q4
—
—
3,264,706
3,264,706
5.85
3.14
____________
(1)
Includes derivative contracts entered into
through July 31, 2023. 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
June 30, 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
June 30,
(In thousands)
2023
2022
Cash Received (Paid) on Settled
Derivatives
$
27,265
$
(162,314
)
Non-Cash Mark-to-Market Gain (Loss) on
Derivatives
30,503
54,117
Gain (Loss) on Commodity Derivatives,
Net
$
57,769
$
(108,197
)
CAPITAL EXPENDITURES & DRILLING ACTIVITY
(In millions, except for net well
data)
Three Months Ended June 30,
2023
Capital Expenditures Incurred:
Organic Drilling and Development Capital
Expenditures
$
184.8
Ground Game Drilling and Development
Capital Expenditures
$
25.2
Ground Game Acquisition Capital
Expenditures
$
20.2
Other
$
2.5
Non-Budgeted Acquisitions
$
173.8
Net Wells Added to Production
13.8
Net Producing Wells (Period-End)
872.8
Net Wells in Process (Period-End)
68.0
Increase in Wells in Process over Prior
Period
8.7
Weighted Average Gross AFE for Wells
Elected to
$
9.0
SECOND 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 Thursday,
August 3, 2023 at 7:30 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=flNDUuSD
Dial-In Number: (866) 373-3407
(US/Canada) and (412) 902-1037 (International) Conference ID: 13740011 - NOG Second Quarter 2023
Earnings Call Replay Dial-In Number:
(877) 660-6853 (US/Canada) and (201) 612-7415 (International)
Replay Access Code: 13740011 - Replay
will be available through August 17, 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
June 30,
(In thousands, except share and per
share data)
2023
2022
Revenues
Oil and Gas Sales
$
416,491
$
549,643
Gain (Loss) on Commodity Derivatives,
Net
57,769
(108,197
)
Other Revenues
2,294
—
Total Revenues
476,554
441,446
Operating Expenses
Production Expenses
84,350
64,642
Production Taxes
37,138
43,840
General and Administrative Expenses
12,402
8,064
Depletion, Depreciation, Amortization and
Accretion
106,427
54,796
Other Expenses
1,446
—
Total Operating Expenses
241,763
171,342
Income From Operations
234,791
270,104
Other Income (Expense)
Interest Expense, Net of
Capitalization
(31,968
)
(18,410
)
Gain (Loss) on Unsettled Interest Rate
Derivatives, Net
—
524
Gain on Extinguishment of Debt, Net
—
236
Contingent Consideration Gain
3,931
—
Other Income (Expense)
72
(185
)
Total Other Income (Expense)
(27,965
)
(17,835
)
Income Before Income Taxes
206,826
252,269
Income Tax Provision
39,012
1,006
Net Income
$
167,815
$
251,264
Cumulative Preferred Stock Dividend
—
(2,810
)
Premium on Repurchase of Preferred
Stock
—
(10,363
)
Net Income Attributable to Common
Stockholders
$
167,815
$
238,091
Net Income Per Common Share – Basic
$
1.89
$
3.08
Net Income Per Common Share – Diluted
$
1.88
$
2.74
Weighted Average Common Shares Outstanding
– Basic
88,800,994
77,366,704
Weighted Average Common Shares Outstanding
– Diluted
89,108,519
86,788,465
CONDENSED BALANCE
SHEETS
(In thousands, except par value and
share data)
June 30, 2023
December 31, 2022
Assets
(Unaudited)
Current Assets:
Cash and Cash Equivalents
$
14,805
$
2,528
Accounts Receivable, Net
265,042
271,336
Advances to Operators
34,249
8,976
Prepaid Expenses and Other
2,488
2,014
Derivative Instruments
68,674
35,293
Income Tax Receivable
495
338
Total Current Assets
385,753
320,485
Property and Equipment:
Oil and Natural Gas Properties, Full Cost
Method of Accounting
Proved
7,422,732
6,492,683
Unproved
44,977
41,565
Other Property and Equipment
7,360
6,858
Total Property and Equipment
7,475,069
6,541,106
Less – Accumulated Depreciation, Depletion
and Impairment
(4,258,089
)
(4,058,180
)
Total Property and Equipment, Net
3,216,981
2,482,926
Derivative Instruments
8,857
12,547
Acquisition Deposit
37,500
43,000
Other Noncurrent Assets, Net
15,658
16,220
Total Assets
$
3,664,749
$
2,875,178
Liabilities and Stockholders’
Equity
Current Liabilities:
Accounts Payable
$
154,020
$
128,582
Accrued Liabilities
178,783
121,737
Accrued Interest
28,925
24,347
Derivative Instruments
15,144
58,418
Contingent Consideration
—
10,107
Other Current Liabilities
1,879
1,781
Total Current Liabilities
378,751
344,972
Long-term Debt, Net
1,672,551
1,525,413
Deferred Tax Liability
30,528
—
Derivative Instruments
129,398
225,905
Asset Retirement Obligations
34,780
31,582
Other Noncurrent Liabilities
2,944
2,045
Total Liabilities
$
2,248,952
$
2,129,917
Commitments and Contingencies
Stockholders’ Equity
Common Stock, Par Value $.001; 135,000,000
Shares Authorized;
93,022,758 Shares Outstanding at
6/30/2023
85,165,807 Shares Outstanding at
12/31/2022
495
487
Additional Paid-In Capital
1,908,055
1,745,532
Retained Deficit
(492,753
)
(1,000,759
)
Total Stockholders’ Equity
1,415,797
745,260
Total Liabilities and Stockholders’
Equity
$
3,664,749
$
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 income
(loss) before income taxes, 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
June 30,
(In thousands, except share and per
share data)
2023
2022
Income Before Income Taxes
$
206,826
$
252,269
Add:
Impact of Selected Items:
Gain on Unsettled Commodity
Derivatives
(30,503
)
(54,117
)
Gain on Extinguishment of Debt
—
(236
)
Contingent Consideration Gain
(3,931
)
—
Acquisition Transaction Costs
3,612
514
Gain on Unsettled Interest Rate
Derivatives
—
(524
)
Adjusted Income Before Adjusted Income Tax
Expense
176,004
197,907
Adjusted Income Tax Expense
(43,121
)
(48,487
)
Adjusted Net Income (non-GAAP)
$
132,883
$
149,420
Weighted Average Shares Outstanding –
Basic
88,800,994
77,366,704
Weighted Average Shares Outstanding –
Diluted
89,108,519
86,788,465
Income Before Income Taxes Per Common
Share – Basic
$
2.33
$
3.26
Add:
Impact of Selected Items
(0.35
)
(0.70
)
Impact of Income Tax
(0.48
)
(0.63
)
Adjusted Net Income Per Common Share –
Basic
$
1.50
$
1.93
Income Before Income Taxes Per Common
Share – Diluted
$
2.32
$
2.91
Add:
Impact of Selected Items
(0.35
)
(0.63
)
Impact of Income Tax
(0.48
)
(0.56
)
Adjusted Net Income Per Common Share –
Diluted
$
1.49
$
1.72
______________
(1)
For the three months ended June 30, 2023 and June 30, 2022, this
represents a tax impact using an estimated tax rate of 24.5%.
Reconciliation of Adjusted
EBITDA
Three Months Ended
June 30,
(In thousands)
2023
2022
Net Income
$
167,815
$
251,264
Add:
Interest Expense
31,968
18,410
Income Tax Provision
39,012
1,006
Depreciation, Depletion, Amortization and
Accretion
106,427
54,796
Non-Cash Stock-Based Compensation
1,151
1,421
Gain on Extinguishment of Debt
—
(236
)
Contingent Consideration Gain
(3,931
)
—
Acquisition Transaction Costs
3,612
514
Gain on Unsettled Interest Rate
Derivatives
—
(524
)
Gain on Unsettled Commodity
Derivatives
(30,503
)
(54,117
)
Adjusted EBITDA
$
315,549
$
272,534
Reconciliation of Free Cash
Flow
Three Months Ended
June 30,
(In thousands)
2023
Net Cash Provided by Operating
Activities
$
307,786
Exclude: Changes in Working Capital and
Other Items
(27,410
)
Less: Capital Expenditures (1)
(232,801
)
Free Cash Flow
$
47,575
_______________
(1)
Capital expenditures are calculated as
follows:
Three Months Ended
June 30,
(In thousands)
2023
Cash Paid for Capital Expenditures
$
409,895
Less: Non-Budgeted Acquisitions
(211,319
)
Plus: Change in Accrued Capital
Expenditures and Other
34,225
Capital Expenditures
$
232,801
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230802253810/en/
Evelyn Infurna Vice President of Investor Relations 952-476-9800
ir@northernoil.com
Northern Oil and Gas (NYSE:NOG)
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