THIRD QUARTER HIGHLIGHTS
- Record quarterly production of 102,327 Boe per day (62% oil),
increases of 13% from the second quarter of 2023 and 29% from the
third quarter of 2022
- GAAP net income of $26.1 million, Adjusted Net Income of $161.2
million and Adjusted EBITDA of $385.5 million. See “Non-GAAP
Financial Measures” below
- Cash flow from operations of $263.9 million. Excluding changes
in net working capital, cash flow from operations was $347.0
million, an increase of 29% from the third quarter of 2022
- Generated $127.8 million of Free Cash Flow. See “Non-GAAP
Financial Measures” below
- Closed on the acquisition of a 33.33% undivided stake in the
Novo assets for $468.4 million
- Declared and paid $0.38 per share common dividend for the third
quarter of 2023, an increase of 52% from the third quarter of 2022,
and declared $0.40 per share common dividend for the fourth quarter
of 2023
Northern Oil and Gas, Inc. (NYSE: NOG) (“NOG” or “Company”)
today announced the Company’s third quarter results.
MANAGEMENT COMMENTS
“NOG registered a banner third quarter reflecting continued
strength in our operations, record organic growth and acquisition
success. We have entered into harvest mode, generating increased
free cash flow, but continue to pursue accretive acquisitions,”
commented Nick O’Grady, NOG’s Chief Executive Officer. “NOG’s
recent capital raise accelerated the achievement of the Company’s
leverage targets. Our balance sheet strength and growing scale
positions NOG to further enhance its growth prospects for 2024 and
beyond as we work through a multitude of investment
opportunities.”
THIRD QUARTER FINANCIAL RESULTS
Oil and natural gas sales for the third quarter were $511.7
million. Third quarter GAAP net income was $26.1 million or $0.28
per diluted share. Third quarter Adjusted Net Income was $161.2
million or $1.73 per adjusted diluted share. Adjusted EBITDA in the
third quarter was $385.5 million, a 22% sequential increase from
the second quarter and a record for NOG. See “Non-GAAP Financial
Measures” below.
PRODUCTION
Third quarter production was 102,327 Boe per day, an increase of
13% from the second quarter of 2023 and an increase of 29% from the
third quarter of 2022. Oil represented 62% of total production in
the third quarter with 63,564 Bbls per day, an increase of 16% from
the second quarter of 2023 and an increase of 41% from the third
quarter of 2022. NOG had 22.6 net wells turned in-line during the
third quarter, compared to 13.8 net wells turned in-line in the
second quarter of 2023. Production increased quarter over quarter,
driven primarily by growth in NOG’s Permian Basin production, which
increased by approximately 42% on a sequential quarter basis and
represented record quarterly volumes in the basin for the
Company.
PRICING
During the third quarter, NYMEX West Texas Intermediate (“WTI”)
crude oil averaged $82.32 per Bbl, and NYMEX natural gas at Henry
Hub averaged $2.66 per Mcf. NOG’s unhedged net realized oil price
in the third quarter was $79.48, representing a $2.84 differential
to WTI prices. NOG’s unhedged net realized gas price in the third
quarter was $2.19 per Mcf, representing approximately 82%
realization compared with Henry Hub pricing. Oil differentials were
modestly lower than in the second quarter, with in-basin prices in
the Williston Basin widening as WTI prices increased during the
quarter. Natural gas realizations were in line with forecast,
driven by a reduction to the NGL-to-natural gas price ratio to more
normalized levels and seasonally wider Appalachian
differentials.
OPERATING COSTS
Lease operating costs were $82.5 million in the third quarter of
2023, or $8.76 per Boe, a 14% decrease on a per unit basis compared
to the second quarter of 2023. The sequential decrease
quarter-over-quarter was driven primarily by increased Permian
volumes (which have lower costs), lower workover expenses and the
prior quarter’s annual expensing of firm transportation charges.
Third quarter general and administrative (“G&A”) costs totaled
$11.8 million or $1.26 per Boe. This includes $3.4 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 $7.3 million or $0.77
per Boe in the third quarter, down 16% on a per unit basis compared
to the second quarter of 2023.
CAPITAL EXPENDITURES AND ACQUISITIONS
Capital expenditures for the third quarter were $216.6 million
(excluding non-budgeted acquisitions and other). This was comprised
of $182.3 million of total drilling and completion (“D&C”)
capital on organic and Ground Game assets, and $34.3 million of
Ground Game acquisition spending. D&C spending was higher than
the prior quarter due to an increase in development activity
incurred in the period and significant Ground Game success. NOG’s
weighted average gross authorization for expenditure (or AFE)
elected to in the third quarter was $9.7 million, compared to $9.0
million in the second quarter of 2023. Higher well costs versus the
prior quarter were primarily a function of increased Permian Basin
development, as the Permian Basin made up 59% of the net well
elections in the quarter. NOG believes that higher recent commodity
prices and stable rig activity may limit cost reductions on a
forward looking basis.
NOG’s Permian Basin spending was 69% of the total capital
expenditures for the third quarter, the Williston was 30%, and the
Appalachian was 1%. On the Ground Game acquisition front, NOG
closed on eight transactions through various structures during the
third quarter totaling 5.7 net current and future development wells
and 514 net acres.
As previously announced, on August 15, 2023, NOG completed its
Novo acquisition with a $468.4 million cash settlement at
closing.
LIQUIDITY AND CAPITAL RESOURCES
NOG had total liquidity of $879.0 million as of September 30,
2023, consisting of $866.0 million of committed borrowing
availability under the Revolving Credit Facility and $13.0 million
of cash.
In August 2023, NOG completed its semi-annual redetermination of
its Revolving Credit Facility. The Borrowing Base increased to $1.8
billion (from $1.6 billion) and the Elected Commitment Amount
increased to $1.25 billion (from $1.0 billion). In addition, the
Company added two new lenders to the syndicate, increasing the
number to sixteen banks.
As of September 30, 2023, NOG had total debt of $2,089.1
million. The total debt consisted of $384.0 million of 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.
In October 2023, NOG completed an underwritten public offering
of 7,475,000 shares of its common stock resulting in proceeds of
$290.6 million, before offering expenses. Proceeds from the
offering were used to reduce the outstanding balance on the
Company’s Revolving Credit Facility and for general corporate
purposes.
Pro forma for the offering, total debt and liquidity at quarter
end would have been $1,798.5 million and $1,169.6 million,
respectively.
SHAREHOLDER RETURNS
In August 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 was paid
on October 31, 2023. This represented a 52% increase from the third
quarter of 2022.
On October 30, 2023, NOG’s Board of Directors declared a regular
quarterly cash dividend for NOG’s common stock of $0.40 per share
for stockholders of record as of December 28, 2023, which will be
paid on January 31, 2024. This represents a 33% increase from the
fourth quarter of 2023.
2023 ANNUAL GUIDANCE*
NOG is updating its annual guidance as shown in the table below.
The increase in budgeted capital expenditures is being driven by
accelerated development activity and Ground Game success, which are
primarily focused on 2024 turn-in-line activity. Overall, the
Company expects its 2023 well spud count to increase to a range of
76 - 79 net wells, compared to expectations of 68 - 71 net wells
implied in prior guidance. The Company has also tightened
production guidance, with the midpoint unchanged, and modestly
improved oil differential and gas realization guidance to reflect
year-to-date actuals.
Previous
Current
Annual Production (Boe per day)
96,000 - 100,000
97,000 - 99,000
Oil as a Percentage of Production
62.0% - 63.0%
62.0% - 63.0%
Total Budgeted Capital Expenditures (in
millions)
$764 - $800
$790 - $820
Net Wells Turned-in-Line (“TIL”)
75 - 78
75 - 78
Operating Expenses and
Differentials:
Production Expenses (per Boe)
$9.35 - $9.55
$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
$13.00 - $13.80
Average Differential to NYMEX WTI (per
Bbl)
($3.25) - ($4.25)
($3.00) - ($3.75)
Average Realization as a Percentage of
NYMEX Henry Hub (per Mcf)
85.0% - 95.0%
95.0% - 105.0%
General and Administrative Expense (per
Boe):
Non-Cash
$0.20 - $0.25
$0.20 - $0.25
Cash (excluding transaction costs on
non-budgeted acquisitions)
$0.80 - $0.85
$0.80 - $0.85
________________
*All forecasts are provided on a 2-stream
production basis.
THIRD QUARTER 2023 RESULTS
The following tables set forth selected operating and financial
data for the periods indicated.
Three Months Ended September
30,
2023
2022
% Change
Net Production:
Oil (Bbl)
5,847,894
4,149,841
41
%
Natural Gas and NGLs (Mcf)
21,396,966
18,776,821
14
%
Total (Boe)
9,414,055
7,279,311
29
%
Average Daily Production:
Oil (Bbl)
63,564
45,107
41
%
Natural Gas and NGLs (Mcf)
232,576
204,096
14
%
Total (Boe)
102,327
79,123
29
%
Average Sales Prices:
Oil (per Bbl)
$
79.48
$
90.54
(12
)%
Effect of Gain (Loss) on Settled Oil
Derivatives on Average Price (per Bbl)
(2.58
)
(19.12
)
Oil Net of Settled Oil Derivatives (per
Bbl)
76.90
71.42
8
%
Natural Gas and NGLs (per Mcf)
2.19
8.43
(74
)%
Effect of Gain (Loss) on Settled Natural
Gas Derivatives on Average Price (per Mcf)
0.95
(2.43
)
Natural Gas and NGLs Net of Settled
Natural Gas Derivatives (per Mcf)
3.14
6.00
(48
)%
Realized Price on a Boe Basis Excluding
Settled Commodity Derivatives
54.35
73.37
(26
)%
Effect of Gain (Loss) on Settled Commodity
Derivatives on Average Price (per Boe)
0.55
(17.16
)
Realized Price on a Boe Basis Including
Settled Commodity Derivatives
54.90
56.21
(2
)%
Costs and Expenses (per Boe):
Production Expenses
$
8.76
$
9.41
(7
)%
Production Taxes
4.48
5.81
(23
)%
General and Administrative Expenses
1.26
1.41
(11
)%
Depletion, Depreciation, Amortization and
Accretion
14.21
9.06
57
%
Net Producing Wells at Period
End
923.7
761.2
21
%
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 September 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:
Q4
21,724
76.00
2,291,252
1,991,676
86.02
72.74
2024:
Q1
16,497
$
77.19
2,218,397
1,567,178
$
84.56
$
70.00
Q2
15,583
76.22
2,128,387
1,486,267
84.32
69.23
Q3
16,451
74.71
1,012,056
860,256
80.70
68.92
Q4
12,299
72.94
953,749
779,800
81.75
68.99
2025:
Q1
4,808
$
72.20
413,286
314,849
$
79.20
$
67.84
Q2
4,589
72.42
273,171
199,233
75.49
67.63
Q3
4,504
71.90
234,994
161,970
75.76
67.88
Q4
4,466
71.90
208,511
135,487
76.87
67.63
2026:
Q1
2,930
$
69.05
43,226
39,289
$
70.25
$
62.50
Q2
2,930
68.98
43,707
39,727
70.25
62.50
Q3
2,930
68.91
44,187
40,163
70.25
62.50
Q4
2,930
68.83
44,187
40,163
70.25
62.50
_____________
(1)
Includes derivative contracts entered into
through October 26, 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 September 30, 2023.
The following table summarizes NOG’s open natural gas commodity
derivative swap contracts scheduled to settle after September 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:
Q4
105,619
$
3.82
6,052,500
6,052,500
$
6.47
$
3.91
2024:
Q1
117,161
$
3.57
4,725,000
4,725,000
$
5.21
$
3.29
Q2
119,514
3.45
5,062,500
5,062,500
4.50
3.05
Q3
108,048
3.47
5,520,000
5,520,000
4.74
3.06
Q4
73,890
3.46
6,181,586
6,181,586
5.15
3.09
2025:
Q1
16,500
$
3.61
6,971,417
6,971,417
$
5.58
$
3.14
Q2
10,110
3.60
6,471,297
6,471,297
5.23
3.14
Q3
10,000
3.60
6,107,569
6,107,569
5.31
3.14
Q4
8,261
3.52
5,473,723
5,473,723
5.46
3.14
2026:
Q1
5,000
$
3.20
4,048,249
4,048,249
$
5.66
$
3.13
Q2
5,055
3.20
4,184,706
4,184,706
5.66
3.13
Q3
5,000
3.20
4,184,706
4,184,706
5.66
3.13
Q4
4,946
3.20
2,774,642
2,774,642
5.66
3.13
____________
(1)
Includes derivative contracts entered into
through October 26, 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
September 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
September 30,
(In thousands)
2023
2022
Cash Received (Paid) on Settled
Derivatives
$
5,164
$
(124,911
)
Non-Cash Mark-to-Market Gain (Loss) on
Derivatives
(204,712
)
382,501
Gain (Loss) on Commodity Derivatives,
Net
$
(199,548
)
$
257,590
CAPITAL EXPENDITURES & DRILLING ACTIVITY
(In millions, except for net well
data)
Three Months Ended September
30, 2023
Capital Expenditures Incurred:
Organic Drilling and Development Capital
Expenditures
$
103.0
Ground Game Drilling and Development
Capital Expenditures
$
79.3
Ground Game Acquisition Capital
Expenditures
$
34.3
Other
$
2.6
Non-Budgeted Acquisitions
$
485.5
Net Wells Added to Production
22.6
Net Producing Wells (Period-End)
923.7
Net Wells in Process (Period-End)
74.2
Increase in Wells in Process over Prior
Period
6.2
Weighted Average Gross AFE for Wells
Elected to
$
9.7
THIRD 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,
November 2, 2023 at 7:00 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=QsVuR6Lo
Dial-In Number: (866) 373-3407
(US/Canada) and (412) 902-1037 (International) Conference ID: 13741092 - NOG third Quarter 2023
Earnings Call Replay Dial-In Number:
(877) 660-6853 (US/Canada) and (201) 612-7415 (International)
Replay Access Code: 13741092 - Replay
will be available through November 16, 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
September 30,
(In thousands, except share and per
share data)
2023
2022
Revenues
Oil and Gas Sales
$
511,651
$
534,050
Gain (Loss) on Commodity Derivatives,
Net
(199,548
)
257,590
Other Revenues
1,870
—
Total Revenues
313,973
791,640
Operating Expenses
Production Expenses
82,506
68,478
Production Taxes
42,158
42,273
General and Administrative Expenses
11,846
10,278
Depletion, Depreciation, Amortization and
Accretion
133,791
65,975
Other Expenses
1,235
—
Total Operating Expenses
271,536
187,004
Income From Operations
42,438
604,637
Other Income (Expense)
Interest Expense, Net of
Capitalization
(37,040
)
(20,135
)
Gain (Loss) on Unsettled Interest Rate
Derivatives, Net
—
(42
)
Gain on Extinguishment of Debt, Net
—
339
Other Income (Expense)
21
(1
)
Total Other Income (Expense)
(37,019
)
(19,839
)
Income Before Income Taxes
5,419
584,798
Income Tax Expense (Benefit)
(20,691
)
1,333
Net Income
$
26,111
$
583,465
Cumulative Preferred Stock Dividend
—
(2,610
)
Net Income Attributable to Common
Stockholders
$
26,111
$
580,855
Net Income Per Common Share – Basic
$
0.28
$
7.39
Net Income Per Common Share – Diluted
$
0.28
$
6.77
Weighted Average Common Shares Outstanding
– Basic
92,768,035
78,589,661
Weighted Average Common Shares Outstanding
– Diluted
93,742,407
86,141,293
CONDENSED BALANCE
SHEETS
(In thousands, except par value and
share data)
September 30, 2023
December 31, 2022
Assets
(Unaudited)
Current Assets:
Cash and Cash Equivalents
$
12,952
$
2,528
Accounts Receivable, Net
363,516
271,336
Advances to Operators
25,431
8,976
Prepaid Expenses and Other
2,567
2,014
Derivative Instruments
65,160
35,293
Income Tax Receivable
—
338
Total Current Assets
469,626
320,485
Property and Equipment:
Oil and Natural Gas Properties, Full Cost
Method of Accounting
Proved
8,135,649
6,492,683
Unproved
36,827
41,565
Other Property and Equipment
7,421
6,858
Total Property and Equipment
8,179,897
6,541,106
Less – Accumulated Depreciation, Depletion
and Impairment
(4,391,261
)
(4,058,180
)
Total Property and Equipment, Net
3,788,636
2,482,926
Derivative Instruments
29,543
12,547
Acquisition Deposit
—
43,000
Other Noncurrent Assets, Net
16,861
16,220
Total Assets
$
4,304,666
$
2,875,178
Liabilities and Stockholders’
Equity
Current Liabilities:
Accounts Payable
$
235,129
$
128,582
Accrued Liabilities
154,882
121,737
Accrued Interest
32,074
24,347
Income Tax Payable
2,051
—
Derivative Instruments
176,339
58,418
Contingent Consideration
—
10,107
Other Current Liabilities
2,016
1,781
Total Current Liabilities
602,491
344,972
Long-term Debt, Net
2,057,359
1,525,413
Deferred Tax Liability
7,291
—
Derivative Instruments
190,086
225,905
Asset Retirement Obligations
36,799
31,582
Other Noncurrent Liabilities
2,847
2,045
Total Liabilities
$
2,896,873
$
2,129,917
Commitments and Contingencies
Stockholders’ Equity
Common Stock, Par Value $.001; 135,000,000
Shares Authorized;
93,032,638 Shares Outstanding at
9/30/2023
85,165,807 Shares Outstanding at
12/31/2022
495
487
Additional Paid-In Capital
1,873,940
1,745,532
Retained Deficit
(466,642
)
(1,000,759
)
Total Stockholders’ Equity
1,407,793
745,260
Total Liabilities and Stockholders’
Equity
$
4,304,666
$
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) acquisition transaction
costs, net of tax, and (iv) (gain) loss 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) acquisition transaction costs, (vii) (gain) loss on
unsettled interest rate derivatives, and (viii) (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
September 30,
(In thousands, except share and per
share data)
2023
2022
Income Before Income Taxes
$
5,419
$
584,798
Add:
Impact of Selected Items:
(Gain) Loss on Unsettled Commodity
Derivatives
204,712
(382,501
)
Gain on Extinguishment of Debt
—
(339
)
Acquisition Transaction Costs
3,385
2,932
Loss on Unsettled Interest Rate
Derivatives
—
42
Adjusted Income Before Adjusted Income Tax
Expense
213,516
204,933
Adjusted Income Tax Expense (1)
(52,311
)
(50,209
)
Adjusted Net Income (non-GAAP)
$
161,204
$
154,724
Weighted Average Shares Outstanding –
Basic
92,768,035
78,589,661
Weighted Average Shares Outstanding –
Diluted
93,742,407
86,141,293
Less:
Dilutive Effect of Convertible Notes
(2)
434,944
—
Weighted Average Shares Outstanding –
Adjusted Diluted
93,307,463
86,141,293
Income Before Income Taxes Per Common
Share – Basic
$
0.06
$
7.44
Add:
Impact of Selected Items
2.24
(4.83
)
Impact of Income Tax
(0.56
)
(0.64
)
Adjusted Net Income Per Common Share –
Basic
$
1.74
$
1.97
Income Before Income Taxes Per Common
Share – Adjusted Diluted
$
0.06
$
6.79
Add:
Impact of Selected Items
2.23
(4.41
)
Impact of Income Tax
(0.56
)
(0.58
)
Adjusted Net Income Per Common Share –
Adjusted Diluted
$
1.73
$
1.80
______________
(1)
For the three months ended September 30,
2023 and September 30, 2022, this represents a tax impact using an
estimated tax rate of 24.5%.
(2)
Weighted average shares outstanding -
diluted, on a GAAP basis, includes diluted shares attributable to
the Company’s Convertible Notes due 2029. However, the offsetting
impact of the capped call transactions that the Company entered
into in connection therewith is not recognized on a GAAP basis. As
a result, for purposes of this calculation, the Company excludes
the dilutive shares to the extent they would be offset by the
capped calls.
Reconciliation of Adjusted
EBITDA
Three Months Ended
September 30,
(In thousands)
2023
2022
Net Income
$
26,111
$
583,465
Add:
Interest Expense
37,040
20,135
Income Tax Expense (Benefit)
(20,691
)
1,333
Depreciation, Depletion, Amortization and
Accretion
133,791
65,975
Non-Cash Stock-Based Compensation
1,178
1,341
Gain on Extinguishment of Debt
—
(339
)
Acquisition Transaction Costs
3,385
2,932
Gain on Unsettled Interest Rate
Derivatives
—
42
(Gain) Loss on Unsettled Commodity
Derivatives
204,712
(382,501
)
Adjusted EBITDA
$
385,525
$
292,385
Reconciliation of Free Cash
Flow
Three Months Ended
September 30,
(In thousands)
2023
Net Cash Provided by Operating
Activities
$
263,865
Exclude: Changes in Working Capital and
Other Items
83,131
Less: Capital Expenditures (1)
(219,234
)
Free Cash Flow
$
127,762
_______________
(1) Capital expenditures are calculated as
follows:
Three Months Ended
September 30,
(In thousands)
2023
Cash Paid for Capital Expenditures
$
612,762
Less: Non-Budgeted Acquisitions
(442,866
)
Plus: Change in Accrued Capital
Expenditures and Other
49,338
Capital Expenditures
$
219,234
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231101739962/en/
Evelyn Infurna Vice President of Investor Relations 952-476-9800
ir@northernoil.com
Northern Oil and Gas (NYSE:NOG)
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