Northern Oil And Gas, Inc. · NYSE:NOG
Northern Oil And Gas — 2019 Bank of America Merrill Lynch Energy Credit Conference
44 slides from Northern Oil And Gas's conference presentation, Jun 10, 2019
Slide 1: June Conferences
NYSE American: NOG June Conferences JUNE 2019 NYSE American: NOG
Slide 2: Forward Looking Statements
FORWARD LOOKING STATEMENTS NYSE American: NOG This presentation contains forward-looking statements regarding future events and future results that are subject to the safe harbors created under the Securities Act of 1933 (the “Securities Act”) and the Securities Exchange Act of 1934 (the “Exchange A
Slide 3: Northern Oil & Gas: Dominant Non-Operator Franchise in the Williston Basin
NORTHERN OIL & GAS NYSE American: NOG DOMINANT NON-OPERATOR FRANCHISE IN THE WILLISTON BASIN Focused on disciplined growth, free cash flow generation and sustainable shareholder returns BY THE NUMBERS1 SCALE ACTIVITY CASH FLOW NYSE: NOG (US$)2 Shares ~160,000 34,598 $105 mm Outstanding: 382.2 mm NET
Slide 4: Northern Oil & Gas – Why Northern Is Better
NORTHERN OIL & GAS – WHY NORTHERN IS BETTER NYSE American: NOG RETURNS FOCUS Changing the way the market thinks about Upstream Investing BETTER BETTER BUSINESS BASIN MODEL BETTER BETTER LT CAPITAL GROWTH ALLOCATION POTENTIAL 4
Slide 5: A Better Business Model
NYSE American: NOG NYSE American: NOG A BETTER BUSINESS MODEL
Slide 6: Differentiated Upstream Investment Platform
DIFFERENTIATED UPSTREAM INVESTMENT PLATFORM NYSE American: NOG OIL-LEVERED VISIBLE LONG-TERM DISCIPLINED CAPITAL PROACTIVELY MANAGED WILLISTON PRODUCER GROWTH POTENTIAL ALLOCATION BALANCE SHEET Diverse operator group Multi-year well inventory Selective capex allocation Broad hedging program
Slide 7: 2019 Capital Allocation Strategy
2019 CAPITAL ALLOCATION STRATEGY NYSE American: NOG FREE CASH FLOW STREAM REINVEST CAPITAL Scale of capital reinvestment ORGANIC ACTIVITY dependent on market conditions for a ACQUISITIONS returns-focused strategy for all cycles DEBT REPAYMENT SHARE REPURCHASES DIVIDENDS Capital allocation ensures st
Slide 8: The Non-Operator Model: What We Do
THE NON-OPERATOR MODEL: WHAT WE DO NYSE American: NOG A flexible and moderated approach to E&P, offering capital discipline, cost control & protection from downside exposure We do not drill wells or We acquire minority working operate rigs interests in drilling units & wells Ability to control cap
Slide 9: The Non-Operator Model: Consent Process
THE NON-OPERATOR MODEL: CONSENT PROCESS NYSE American: NOG Northern's land & engineering teams review every well AFE to determine participation or non-consent WELL PROPOSAL AFE REVIEW ANALYSIS DECISION GO! Operator must Minority partners Use proprietary data to Consent to only those Drill well and
Slide 10: The Non-Operator Model: Capital & Cost Benefits
THE NON-OPERATOR MODEL: CAPITAL & COST BENEFITS NYSE American: NOG CAPEX CONTROL Ability to increase and decrease capital quickly • No rig or drilling contracts, no embedded personnel at the field level Costs limited to drilling and acreage CAPITAL FLEXIBILITY Northern’s flexibility to increase capi
Slide 11: The Non-Operator Model: NOG Advantage
THE NON-OPERATOR MODEL: NOG ADVANTAGE NYSE American: NOG LEVERAGING EXPERIENCE Proprietary Northern database, built from participation in over 5,000 wells, 30%+ of all Bakken and Three Forks wells drilled play to date • 300+ internally generated type curves by operator, by field, by formation − More
Slide 12: Williston Basin – A Better Basin
NYSE American: NOG NYSE American: NOG WILLISTON BASIN – A BETTER BASIN
Slide 13: Williston Basin: Northern's Home Field
WILLISTON BASIN: NORTHERN’S HOME FIELD NYSE American: NOG Northern is a pure-play Williston Basin company, with long-term relationships with premier operators and land owners Presence in basin since Northern’s inception in 2006 7.4 15k Participated in >5,000 wells, ~30% of the wells drilled in
Slide 14: The Bakken: The Williston's Sweet Spot
THE BAKKEN: THE WILLISTON’S SWEET SPOT NYSE American: NOG Bakken shale meets the optimal criteria for profitable returns in the current fundamental climate Oil cut and high BTU gas Drilling efficiency is helps enhance overall SIGNIFICANT OIL MANAGED DRILLING & offsetting increased returns PRODUCTI
Slide 15: Focused Williston Basin Core Footprint
FOCUSED WILLISTON BASIN CORE FOOTPRINT NYSE American: NOG Portfolio of high-quality acreage in the heart of the basin with interests in over 5,000 gross Bakken/Three Forks oil wells NET ACREAGE SUMMARY 10% 9% 8% 160,000 NET ACRES 90% 91% 92% North Dakota Montana HBP 1 % Non-HBP ND % HBP 1 ND % Non
Slide 16: ...With Leading, Technically Strong Operators...
…WITH LEADING, TECHNICALLY STRONG OPERATORS… NYSE American: NOG Deep operating partner relationships facilitate both organic and acquisition-based production growth opportunities % NET PRODUCING WELLS BY OPERATOR OTHERS (<3%) DEEP, LASTING RELATIONSHIPS 17% 16% ACROSS THE BASIN… 3% …WITH THE HIGHE
Slide 17: ...Participating in the Highest-Quality Wells
…PARTICIPATING IN THE HIGHEST-QUALITY WELLS NYSE American: NOG No requirement for contiguous acreage allows Northern to participate in prime drilling opportunities across the region Periot 44-20HU Kaitlin Federal 5693 41-28B Moen 41-2-5H SC-5WX-152-99-0310H-2 Missouri 152-103-4-2-3H 1 Whiting (IP:
Slide 18: Better Capital Allocation
NYSE American: NOG NYSE American: NOG BETTER CAPITAL ALLOCATION
Slide 19: 2019 Capital Allocation Strategy
2019 CAPITAL ALLOCATION STRATEGY NYSE American: NOG 2019 capital allocation hierarchy ensures strategic management of balance sheet through disciplined approach FREE CASH FLOW STREAM REINVEST CAPITAL Allocation in 2019 will be value-centric, focused on the sustainability of Northern’s business, an
Slide 20: Enhanced Returns with Disciplined Capital Allocation
ENHANCED RETURNS WITH DISCIPLINED CAPITAL ALLOCATION NYSE American: NOG Participation in the highest quality wells with stable AFE costs generates consistent production growth & higher IRRs CONSISTENTLY FUNDING ATTRACTIVE WELLS… …GENERATES CONSISTENT PRODUCTION GROWTH Wells In Process @ Period End
Slide 21: ...Yielding YoY Improvements in Well Recovery...
…YIELDING YOY IMPROVEMENTS IN WELL RECOVERY… NYSE American: NOG Completions technology and high-grading of well locations has led to improved well recovery across the basin INCREASING WELL PRODUCTIVITY 2015 Cum (1) HIGHER RECOVERIES + STABLE COSTS = 2016 Cum (1) +82% 280,000 2017 Cum (1) IMPROVED
Slide 22: ...And Reserves That Underpin Value Proposition
…AND RESERVES THAT UNDERPIN VALUE PROPOSITION NYSE American: NOG Participation in highest-quality wells ensures optimal exposure to high-volume regional reservoirs Growing reserves across portfolio Proved reserve growth of 79% YoY Working Interest acquisitions provide incremental reserve acc
Slide 23: Better Long-Term Growth Potential
NYSE American: NOG NYSE American: NOG BETTER LONG-TERM GROWTH POTENTIAL
Slide 24: Core Growth Thesis Is Sustainable
CORE GROWTH THESIS IS SUSTAINABLE NYSE American: NOG As a non-operator, NOG can be both opportunistic and strategic in its acquisition of additional acreage BACKDROP OPPORTUNITIES FORCED AFE burdens lead to SELLERS undercapitalization 1. “Ground Game” working interest PROACTIVE Opportunistic acqui
Slide 25: Position Enhanced Through Accretive Acquisitions
POSITION ENHANCED THROUGH ACCRETIVE ACQUISITIONS NYSE American: NOG Directing cash flow to acquisitions consistently grows Northern's position while diversifying opportunities Broadening inventory position in the core of the basin: Greater inventory of projects with attractive economics Increa
Slide 26: Proactively Managed Balance Sheet
NYSE American: NOG NYSE American: NOG PROACTIVELY MANAGED BALANCE SHEET
Slide 27: Continued Balance Sheet Improvement
CONTINUED BALANCE SHEET IMPROVEMENT NYSE American: NOG Northern’s balance sheet continues to offer robust protection against market volatility As of As of As of As of (In $ millions) 6/30/18 9/30/18 12/31/18 3/31/19 DEBT: Cash position deployed towards Cash $200.9 $112.8 $2.4 $3.9 accretive M&A ac
Slide 28: Holding Leverage at 2.0x or Better
HOLDING LEVERAGE AT 2.0X OR BETTER NYSE American: NOG Actively working to further reduce debt and continue generating free cash flow Net Debt/Annualized Adjusted EBITDA LEVERAGE 4.1x EXPECT YE2019 LEVERAGE TO REMAIN <2.0X (51)% Year on Year METRIC WILL CONTINUE TO 2.3x 1.8x 2.0x FALL THROUGH 2022
Slide 29: ...Through Closely Managed Debt Maturity
…THROUGH CLOSELY MANAGED DEBT MATURITY NYSE American: NOG Enhancing cash flow to leverage liquidity position to pay down debt LIQUIDITY PROFILE1 DEBT MATURITY SCHEDULE • $282 million of liquidity as of 3/31/19(2) • Favorable schedule • Plan to live within Free Cash Flow • $695 million 8.5% Senior
Slide 30: Oil Volumes Protected for Multiple Years
OIL VOLUMES PROTECTED FOR MULTIPLE YEARS NYSE American: NOG OIL ONLY PRODUCTION PER DAY 60 ASSUMING RUNRATE UNCHANGED total Flywheel Estimates Northern 2019E Guidance % Hedged FOR 2019E STANDALONE MBPD 50 OIL ONLY PRODUCTION GUIDANCE 40 OF ~29 MBPD 30 76% 72% 20 OVER $125 MILLION OF CURRENT “IN-THE-
Slide 31: Ongoing Policy of Risk Management
ONGOING POLICY OF RISK MANAGEMENT NYSE American: NOG Northern continues to execute a strategy designed to safeguard returns during a commodity downcycle CRUDE OIL DERIVATIVE BASIS SWAPS (1) NORTHERN STANDALONE PRO FORMA WITH FLYWHEEL Weighted Average Price Weighted Average Price Contract Period Ba
Slide 32: Generating Better Performance
NYSE American: NOG NYSE American: NOG GENERATING BETTER PERFORMANCE
Slide 33: 2018 Delivered Beyond Our Plan
2018 DELIVERED BEYOND OUR PLAN NYSE American: NOG Execution of strategic priorities through 2018 and into 2019 supported by unique non-operator flexibility STRATEGY FY2018 STATUS Participated in more wells than prior year 1 CAPTURE OPPORTUNITIES Organic and acquisition growth expectations achieved
Slide 34: 1Q19 & YE 2018: Business Update
1Q19 & YE 2018: BUSINESS UPDATE NYSE American: NOG Non-operated model continues to demonstrate measured growth with improving capital discipline to drive returns mboe/d $MM GROWING PRODUCTION ENHANCING EBITDA Production ramping across Northern acreage Adjusted EBITDA growing with production1 +92%
Slide 35: Aligned with the Shareholder Like No Other E&P
ALIGNED WITH THE SHAREHOLDER LIKE NO OTHER E&P NYSE American: NOG Northern is focused on what it means to be accountable to the shareholder TYPICAL E&P PEER NORTHERN • $3.00 Cash G&A per Barrel ~$1.06 Cash G&A in 1Q2019 • Insider & Management Ownership of ~5.0% Insider and Management Ownership
Slide 36: Outperforming Guidance
OUTPERFORMING GUIDANCE NYSE American: NOG 2018 was another year executing on our disciplined plan to meet guidance 2018 GUIDANCE 2018 ACTUALS 2019 GUIDANCE RANGE PRODUCTION ACHIEVED 2018 GUIDANCE Avg. Daily Prod. (Boepd) 23,650 - 24,250 25,555 35,000 – 36,000 ACROSS KEY METRICS % Oil 84% 84% ~ 82%
Slide 37: Showing Up in Free Cash Flow Estimates
SHOWING UP IN FREE CASH FLOW ESTIMATES NYSE American: NOG FREE CASH FLOW YIELD OF 58% DEBT ADJUSTED PRODUCTION GROWTH OF 24% 37
Slide 38: Compelling Undervalued Opportunity
COMPELLING UNDERVALUED OPPORTUNITY NYSE American: NOG EBITDA ESTIMATE UP 54% PRODUCTION GROWTH UP 56% TARGET PRICE UP 150% EV/EBITDA MULTIPLE DOWN 38%, TARGET MULTIPLE DOWN 10% Source: FactSet, as of 3/20/2019. Peers, as data available, include: BSM, CLR, CRC, DNR, EOG, ERF, HES, HK, OAS, QEP, SM, W
Slide 39: Why Northern Oil & Gas?
WHY NORTHERN OIL & GAS? NYSE American: NOG NON-OPERATOR Unique model provides capital flexibility & discipline, levers FLEXIBILITY Northern’s experience and relationships in the region GROWING ORGANIC Basin and Northern acreage activity robust, growing scale ACTIVITY increases exposure to workin
Slide 40: Differentiated E&P Platform
DIFFERENTIATED E&P PLATFORM NYSE American: NOG OIL-LEVERED WILLISTON DISCIPLINED CAPITAL BASIN PRODUCER ALLOCATION & RETURNS PROACTIVELY MANAGED VISIBLE LONG-TERM BALANCE SHEET GROWTH POTENTIAL 40
Slide 41: Appendix
NYSE American: NOG NYSE American: NOG APPENDIX
Slide 42: Historical Operating & Financial Information
HISTORICAL OPERATING & FINANCIAL INFORMATION NYSE American: NOG HISTORICAL OPERATING INFORMATION YEAR ENDED DECEMBER 31, 2014 2015 2016 2017 2018 Q1 2019 PRODUCTION Oil (MBbls) 5,150.9 5,168.7 4,325.9 4,537.3 7,790.2 2,541.2 Natural Gas and NGLs (Mmcf) 3,682.8 4,651.6 4,026.9 5,187.9 9,224.8 3,435.8
Slide 43: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS NYSE American: NOG ADJUSTED EBITDA BY YEAR (IN THOUSANDS) 2014 2015 2016 2017 2018 Net Income (Loss) $ 163,746 $ (975,355) $ (293,494) $ (9,194) $ 143,689 Add: Interest Expense 42,106 58,360 64,486 70,286 86,005 Income Tax Provision (Benefit) 99,367 (202,424) (1,402) (1,570)
Slide 44: Northern Oil & Gas, Inc.
Northern Oil & Gas, Inc.
Northern Oil and Gas — 2019 Bank of America Merrill Lynch Energy Credit Conference on 6ix