Northern Oil and Gas, Inc. (NYSE: NOG) (“NOG” or the “Company”)
today provided an update to 2023 guidance and a preliminary second
quarter financial and operational update.
UPDATED GUIDANCE
NOG is updating guidance for full year 2023 to reflect the
following:
- Increase to production estimates reflecting better than
expected well performance, contributions from the Forge and Novo
acquisitions, and adjustments for certain changes to drilling and
completion plans in 2023
- Increase in budgeted 2023 capital expenditures driven by
capital associated with the Forge and Novo transactions, offset by
lower capital spending in the base budget
- Reduced per unit production expenses and G&A costs
- Improved oil differentials and gas realizations and adjustments
to oil mix for acquired volumes
- Initiation of depletion, depreciation, amortization, and
accretion (“DD&A”) unit guidance to aid calculation of adjusted
earnings forecasts
2023 Annual Guidance*
Previous
Current
Annual Production (Boe per day)
91,000 - 96,000
96,000 - 100,000
Q3 2023 Production (Boe per day)
—
99,000 - 103,000
Oil as a Percentage of Production
62.0% - 64.0%
62.0% - 63.0%
Total Budgeted Capital Expenditures (in
millions)
$737 - $778
$764 - $800
Net Wells Turned-in-Line (“TIL”)
80 - 85
75 - 78
Operating Expenses and
Differentials:
Production Expenses (per Boe)
$9.35 - $9.60
$9.35 - $9.55
Production Taxes (as a percentage of Oil
& Gas Sales)
8.0% - 9.0%
8.0% - 9.0%
DD&A Rate (per Boe)
—
$13.00 - $13.80
Average Differential to NYMEX WTI (per
Bbl)
($3.50) - ($4.50)
($3.25) - ($4.25)
Average Realization as a Percentage of
NYMEX Henry Hub (per Mcf)
80.0% - 90.0%
85.0% - 95.0%
General and Administrative Expense (per
Boe):
Non-Cash
$0.20 - $0.30
$0.20 - $0.25
Cash (excluding transaction costs on
non-budgeted acquisitions)
$0.80 - $0.90
$0.80 - $0.85
________________
*All forecasts are provided on a 2-stream production basis. Assumes
8/15/2023 close for Novo acquisition.
INCREASED PRODUCTION ESTIMATES
NOG is raising its production expectations for 2023 to a range
of 96,000 to 100,000 Boe per day (previously 91,000 to 96,000 Boe
per day) reflecting strong well performance, contributions from the
Forge and Novo acquisitions and adjustments for a lower expected
TIL count in 2023. The TIL count and cadence changes are driven by
modifications to the drilling plan for the MPDC Mascot project and
by price-driven deferrals from a large Williston Basin operating
partner. The Company is also adjusting the corporate oil mix to
account for the acquired volumes. The Company also is guiding to
production expectations of 99,000 to 103,000 Boe per day for the
third quarter of 2023, based on an August 15, 2023 closing date for
the Novo acquisition.
Well performance across all the Company’s active basins,
including the Mascot project, has been stronger than expected to
date. Production from the Forge and Novo acquisitions are reflected
in the updated 2023 guidance, based on June 30 and August 15
(estimated) closings, respectively.
The Company and its operating partners are adjusting 2023
activity and shifting select development into late 2023 and early
2024. A portion of TIL deferrals relate to the Mascot project,
where NOG and its partner have modified the completion
schedule.
The modification to the Mascot drilling plan should materially
improve well performance and reduce offset shut-in activity between
batches. The new plan contemplates drilling and completing an
increased quantity of wells (24 gross) in a single batch, as
opposed to multiple stages; the focus on larger batches of wells
will continue throughout the life of the project. Reduced downtime
during drilling and completion should also moderate project costs.
The longer spud to sales time for the larger batches will defer
some previously scheduled fourth quarter activity (6.4 net TILs)
into early 2024 and should drive further improvement to long-term
project returns on capital employed.
In response to lower oil prices in the second quarter, NOG has
experienced a deferral of TILs from a large Williston Basin
operating partner, which had represented significant production
additions originally scheduled for June 2023. The 3.8 net wells
associated with the Williston Basin partner are fully completed but
withheld from sales and are now expected to come online in late
2023.
REVISED CAPITAL EXPENDITURES
Total 2023 capital expenditures are expected to increase, at the
midpoint of guidance, by approximately $24.5 million, to $764 to
$800 million. The increase is comprised of an additional ~$37
million for the Forge and Novo acquisitions, offset by $10 to $15
million in reductions associated with changes to 2023 development
plans. The capital spending associated with the deferred Williston
activity and development capital associated with the Mascot project
will still be largely incurred in 2023, even as the completion
dates have shifted. NOG expects capital expenditures for the second
half of 2023 to be equally weighted by quarter. The changes to
drilling plans and TIL timing should provide uplift to production
volumes and improved capital efficiency of turn-in-lines in 2024,
as the Company will have already incurred significant development
costs for many of the changes to the development schedule in the
Williston and the Mascot project.
UPDATED ITEMIZED LINE-ITEM GUIDANCE
NOG is adjusting production expenses, oil mix, gas realizations,
oil differentials and G&A expectations to align with
year-to-date actuals as well as the impact of the Forge and Novo
acquisitions.
Production expense unit guidance is being revised slightly
lower. The Forge and Novo properties have lower production expenses
than NOG’s previous corporate average, offset slightly by higher
processing costs from increased expected gas realizations.
NOG has set improved guidance ranges for oil differentials and
natural gas realizations, both of which have been better than
expected year-to-date. Acquired production volumes will
additionally provide benefit to oil differentials, given better
in-basin pricing in the Permian basin.
Recurring cash and non-cash G&A costs are expected to
decrease modestly driven by acquired volumes, the cash portion of
which will be slightly offset by certain legal and accounting costs
associated with the acquisitions that will not be removed as
non-recurring expenses.
Per unit DD&A guidance has been added to reflect recent
acquisition activity as the Company’s asset base has grown. As
previously communicated during the Company’s fourth quarter
conference call, DD&A for 2023 prior to the Forge and Novo
acquisitions was expected to be in the range of $11.50 to $12.50
per Boe and is now expected to be $13.00 to $13.80 per Boe for the
full year, inclusive of the acquisitions.
SECOND QUARTER FINANCIAL AND OPERATIONAL UPDATE
During the second quarter of 2023, the Company saw curtailments
and deferments of wells turned to sales in the Williston Basin in
response to lower oil prices. The Company estimates that its
production was impacted in the quarter by approximately 900 Boe per
day (~90% oil). The Company still expects to achieve record
Williston Basin volumes in the second quarter. Despite the
curtailments, the Company saw material production out performance
across all three basins of operations, including the Mascot
project. NOG expects second quarter production volumes to be 90.5
to 90.8 Boe per day, but with lower quarter over quarter oil mix of
approximately 60% driven in part by improved gas production from
higher capture rates and the high oil-cut Williston deferments.
Total capital expenditures, excluding the acquisition of the
Forge assets, are expected to be in the range of $231.0 to $236.0
million for the second quarter, in line with prior guidance and in
accordance with the Company’s expectation of ~60% of the prior
budget being incurred in the first half of 2023. For the second
quarter, the DD&A rate is expected to be $12.85 to $13.00 per
Boe. The increase to the DD&A rate is primarily driven by the
closing of the Forge acquisition at the end of the second
quarter.
Despite the deferments, the Company turned-in-line an estimated
13.1 net wells during the second quarter, delivering similar levels
compared to the prior quarter.
The Company enters into derivative agreements to hedge a portion
of its commodity pricing exposure. For the second quarter of 2023,
unrealized mark-to-market gains on derivatives are estimated to be
$29.5 to $30.5 million and realized derivative hedge gains are
estimated to be $26.3 to $27.3 million.
MANAGEMENT COMMENTS
“NOG remains focused on maximizing returns on our assets,”
commented Nick O’Grady, NOG’s Chief Executive Officer, “We fully
support our operating partners and the decisions driving some
changes to the 2023 plan. We expect these changes to benefit our
shareholders through higher realized prices and by driving down
costs. Well performance continues to exceed our internal estimates,
which sets the stage for further capital efficient growth as we
look toward 2024. Our updated guidance also highlights the
continued path of reducing unit costs and improving margins.”
“Some of the deferrals in the Williston are already proving
fruitful, given recent significant improvements in realized oil
prices in the field,” commented Adam Dirlam, NOG’s President. “With
the Mascot project, we are thrilled with the results to date and
continue to work with our partners to find ways to further improve
project returns, reduce costs and augment long-term well
performance.”
ABOUT NOG
NOG is a real asset company with a primary strategy of acquiring
and investing in non-operated minority working and mineral
interests in the premier hydrocarbon producing basins within the
contiguous United States. More information about NOG can be found
at www.northernoil.com.
PRELIMINARY INFORMATION
The preliminary unaudited financial and operating information
and estimates included in this press release, including with
respect to production, capital expenditures and derivatives gains,
is based on estimates and subject to completion of NOG’s financial
closing procedures and audit processes. Such information has been
prepared by management solely based on currently available
information. The preliminary information does not represent and is
not a substitute for a comprehensive statement of financial and
operating results, and NOG’s actual results may differ materially
from these estimates because of final adjustments, the completion
of NOG’s financial closing procedures, and other developments after
the date of this release.
SAFE HARBOR
This press release contains forward-looking statements regarding
future events and future results that are subject to the safe
harbors created under the Securities Act of 1933, as amended (the
“Securities Act”), and the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). All statements other than statements
of historical facts included or referenced in this press release
regarding NOG’s dividend plans and practices (including timing,
amounts and relative performance), financial position, business
strategy, plans and objectives for future operations, industry
conditions, cash flow, and borrowings are forward- looking
statements. When used in this presentation, 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 sales, market size, collaborations, 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 NOG’s capitalization, changes in crude
oil and natural gas prices; the pace of drilling and completions
activity on NOG’s properties and properties pending acquisition;
NOG’s ability to acquire additional development opportunities; 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; general economic or industry conditions, nationally and/or
in the communities in which NOG conducts business; changes in the
interest rate environment or market dividend practices, legislation
or regulatory requirements; conditions of the securities markets;
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;
changes in accounting principles, policies or guidelines; and
financial or political instability, acts of war or terrorism, and
other economic, competitive, governmental, regulatory and technical
factors affecting NOG’s operations, products, services and
prices.
Additional information concerning potential factors that could
affect future plans and results is included in the section entitled
“Item 1A. Risk Factors” and other sections of NOG’s most recent
Annual Report on Form 10-K and subsequent Quarterly Reports on Form
10-Q, as updated from time to time in amendments and subsequent
reports filed with the SEC, which describe factors that could cause
NOG’s actual results to differ from those set forth in the
forward-looking statements.
NOG has based these forward-looking statements on its current
expectations and assumptions about future events. While 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. You are urged not to place undue
reliance on these forward-looking statements, which speak only as
of the date they are made. Except as may be required by applicable
law or regulation, 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.
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version on businesswire.com: https://www.businesswire.com/news/home/20230725166681/en/
Evelyn Leon Infurna Vice President of Investor Relations (952)
476-9800 ir@northernoil.com
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