Northern Oil And Gas, Inc. · NYSE:NOG
Northern Oil And Gas — Q2 2023 Earnings Presentation
33 slides from Northern Oil And Gas's earnings presentation, Aug 3, 2023
Slide 1: Q2 2023 Earnings Presentation
Q2 2023 Earnings Presentation August 2, 2023 Q2 2023 Earnings Presentation | 1
Slide 2: Contents
Contents I. Q2 2023 Highlights II. Operations & Investment Activity Updates III. Guidance IV. Value Proposition V. Appendix Q2 2023 Earnings Presentation | 2
Slide 3: Q2-23 Financial & Operating Highlights
Q2-23 Financial & Operating Highlights Q2 Free Cash Flow(1) Dividend Growth Strong results despite lower commodity prices and TIL deferrals • Adjusted EBITDA $315.5MM in Q2, +16% YoY, -3% QoQ ~$47.6MM +95% • Q2 net production +25% YoY, +4% QoQ • Recycle ratio of 3.0x and adjusted ROCE(1) of 22.9% im
Slide 4: Q2 2023 Production by Basin
Q2 2023 Production by Basin NOG’s production mix continues to be diversified and balanced. Williston production surged in 2Q despite some delays. • Record Williston production, even with 3.8 net TIL 12% deferments, gained portfolio share for first time in two years • Permian production was slightly
Slide 5: Q2 2023 Production by Commodity and Basin (% Boe)
Q2 2023 Production by Commodity and Basin (% Boe) Oil cut for the quarter was lower than full year expectations at 60% due to Q2 gas production outperformance and deferrals from the Williston. NOG expects oil to trend higher to a range of 62% to 63% for full year 2023. Williston 30% Marcellus 70% 40
Slide 6: Q2 2023 Cap Ex by Basin
Q2 2023 Cap Ex by Basin Capital expenditures were weighted toward the Permian Basin in Q2. 3% • TILs +37% v Q2 22, while D&C list sits +19% vs Q2 22 and has held at an elevated average level of completion 39% • TIL activity expected to ramp materially in Q3 and remain elevated in Q4 • Low Marcellus
Slide 7: Q2 Operations Highlights
Q2 23 Operations Highlights Organic activity up 35% year over year. Wells-in-process at record highs. Scale driving organic growth. AFEs Wells in Process Well Completions • $1.4B (gross) in AFEs • Drilling & Completions list • Net Turn in Lines were up grew nearly 15% 5% sequentially and >35% • 90%
Slide 8: D&C List Surging – Momentum Building for 2H and 2024
D&C List Surging – Momentum Building for 2H and 2024 NOG’s oil-weighted wells-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 in the coming quarters. Diversity of regions remains important. Q2 2023 Earnings Prese
Slide 9: Q2 2023 Investment Activity Update
Q2 2023 Investment Activity Update Bolt-On Current M&A bolt-on opportunities variable in quality. Signature Ground Game opportunities abundant, trending larger in scale vs historical Ground Game acquisitions. Opportunity Set Ground Game Bolt-On • Current M&A opportunities • Competitive landscape • C
Slide 10: MPDC Mascot Update
MPDC Mascot Update Performance snapshot through 7/1/2023 Drilling plan revised to enhance efficiencies and long-term project returns Plan revision moving some Q2/Q3 TILs to Q1 24 Offset shut-in period in-between pads • 59% of the total project wells completed and producing • Wells outperforming inte
Slide 11: Forge Closed – High Quality Acreage in the Permian Basin
Forge Closed – High Quality Acreage in the Permian Basin DELAWARE ASSET LOCATOR MAP KEY STATISTICS • Purchased 30.0% undivided interest in Forge assets for $167.9 million • Acreage: ~10,200 net acres primarily located in Ward and Reeves Counties, TX • PDP Wells (Net): 30.5 • Future Locations (Net):
Slide 12: Novo Adds Scale, High Quality, Low Breakeven Acreage
Novo Adds Scale, High Quality, Low Breakeven Acreage KEY STATISTICS • Agreement to purchase 33.33% undivided stake in Novo Assets for $500MM • Gross NRI: ~77% (~78% Eddy, ~75% Culberson), net WI: ~29% • Effective date May 1, 2023, expected to close August 15, 2023 subject to satisfaction of closing
Slide 13: Asset Sales Cycle Driving Growth
Asset Sales Cycle Driving Growth Private equity players are in a divesting cycle, providing episodic access to high quality, low break-even growth assets. NOG has been selectively participating in this cycle by "flexing leverage" in the short term while working toward its stated leverage target over
Slide 14: 2023 Year-to-Date Cap Ex
2023 Year-to-Date Cap Ex Ground Game highly active in Q2 with 13 acquisitions. Cap ex for 2H-23 should be equally weighted by quarter. $764 - $800 $800 $600 Approximately 60% of total initial budget $445 $400 $212 $233 $200 $0 Q1-23A Q2 - 23A Q3 - 23E Q4 - 23E YTD Actual Revised Total Cap Ex Guidanc
Slide 15: Track Record of Dividend Growth
Track Record of Dividend Growth NOG has established a conservative through-cycle dividend level with potential upside. The current dividend run rate will be evaluated annually during the first fiscal quarter and potentially adjusted to reflect 1-year forward expectations. ACTUAL DIVIDENDS COMPARED W
Slide 16: Enhanced Liquidity Position
Enhanced Liquidity Position NOG has methodically managed its debt structure and maturity wall. High quality asset base has driven increases to credit facility as well as attracting new members to the syndicate. • Issued $500MM of 8.75% Senior Notes due 2031 in May 2023 to term out borrowings on its
Slide 17: 2023 Guidance and Capital Budget
2023 Guidance and Capital Budget The Company’s production continues to increase, with reductions to unit costs driven by benefits of scale and quality from acquired assets. 2023 Guidance(1) Prior Current UNDERLYING ASSUMPTIONS Annual Production (2-stream, Boe/day) 91,000 - 96,000 96,000 -100,000 • I
Slide 18: NOG Value Proposition
PART 2 NOG Value Proposition Q2 2023 Earnings Presentation | 18
Slide 19: The NOG Investment Proposition
The NOG Investment Proposition 1 2 3 4 5 National Non-Op Franchise – offering scale and diversification by Stable, Cash-Generating Assets + Growth: Assets continue to generate Return of Capital Commitment: Growing Shareholder Return Strong Balance Sheet with Organic De-Levering to Target of 1.0x Net
Slide 20: Benefits of NOG's Non-Operated Model
Benefits of NOG’s Non-Operated Model Efficient Operations Enhance Return Profile Leveraging Data and Experience • Peer leading cost structure & Corporate ROCE • Proprietary database, built from participation in over 9,400 wells • Unit G&A costs are 50% less than • Enables well-informed and experienc
Slide 21: Leading Non-Op E&P Franchise
Leading Non-Op E&P Franchise • NOG’s acquisitions have created a high return, national Q2-23 PRODUCTION BY REGION (BOE) non-op franchise that is benefitting from economies of scale; ~12,800 net acres were added to Permian footprint in Q1-23 & Q2-23 Marcellus 12% Region • NOG is positioned to continu
Slide 22: And Focus on the Highest-Quality Areas
And Focus on the Highest-Quality Areas No requirement for contiguous acreage allows NOG to participate in prime drilling opportunities across basins or regions Williston Basin: ~180,400 Net Acres Permian Basin: ~30,400 Net Acres Marcellus Acres: ~57,500 Net Acres NOG NOG NOG Wells in Progress Wells
Slide 23: A Differentiated E&P Growth Platform
A Differentiated E&P Growth Platform NOG continues to build scale as the largest dedicated public non-operated working interest company PRODUCTION CONTINUES TO RAMP… WHILE MAINTAINING PEER-LEADING LOW CASH G&A(1) Material increases driven by organic Reducing overhead unit cash G&A costs, growth + ac
Slide 24: Appendix: Supplemental Info
PART 3 Appendix: Supplemental Info Q2 2023 Earnings Presentation | 24
Slide 25: Historical Operating & Financial Information
Historical Operating Information Historical Operating & Production 2020 2021 2022 2Q22 2Q23 Financial Information Oil (MBbls) 9,361.1 12,288.4 16,090.1 3,801.7 4,981.2 Natural Gas and NGLs (Mmcf) 16,473.3 44,073.9 68,829.1 16,878.5 19,732.2 Total Production (Mboe) 12,106.7 19,634.1 27,561.6 6,614.7
Slide 26: NON-GAAP Reconciliations: Adjusted EBITDA
Adjusted EBITDA by Year (in thousands) NON-GAAP 2020 2021 2022 Net Income (Loss) $ (906,041) $ 6,361 $ 773,237 Add: Reconciliations: Interest Expense 58,503 59,020 80,331 Income Tax Provision (Benefit) (166) 233 3,101 Depreciation, Depletion, Amortization and Accretion 162,120 140,828 251,272 Adjust
Slide 27: NON-GAAP Reconciliations: ROCE & Recycle Ratio
NON-GAAP Reconciliations: ROCE & Recycle Ratio Q2-23 Return on Capital Employed (ROCE) • EBIT: $836.5MM (Q2 23 annualized) • + Adj. EBITDA: $315.5MM • - DD&A: $106.4MM Capital EBIT ÷ Employed = 34.5% • Capital Employed: $2,421.2MM (Avg. of Q2 22/23) • + Total Assets: $2,928.5MM (Avg. of Q2 22/23) •
Slide 28: Hedge Profile—SWAPS
Hedge Profile—SWAPS NOG continues to execute a strategy built around the safeguard of returns during a commodity down-cycle, while retaining flexibility to capture the opportunistic upside CRUDE OIL DERIVATIVE SWAPS NATURAL GAS DERIVATIVE SWAPS Contract Barrels per Day Total Hedged Weighted Average
Slide 29: Hedge Profile—COLLARS
Hedge Profile—COLLARS NOG continues to execute a strategy built around the safeguard of returns during a commodity down-cycle, while retaining flexibility to capture the opportunistic upside CRUDE OIL DERIVATIVE COLLARS NATURAL GAS DERIVATIVE COLLARS Total Ceiling Ceiling Million Total Floor Million
Slide 30: Hedge Profile—BASIS SWAPS
Hedge Profile—BASIS SWAPS NOG continues to execute a strategy built around the safeguard of returns during a commodity down-cycle, while retaining flexibility to capture the opportunistic upside MIDLAND-CUSHING BASIS SWAP WAHA BASIS SWAP Barrels per Day Total Hedged Volumes Weighted Average Price Mi
Slide 31: NON-GAAP Reconciliations: Free Cash Flow
NON-GAAP Reconciliations: Free Cash Flow FREE CASH-FLOW (FCF) (in thousands) 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 Net Cash Provided by Operating Activities $ 154,034 $ 210,239 $ 276,766 $ 287,379 $ 269,308 $ 307,786 Exclude: Changes in Working Capital and Other Items 80,985 41,948 (7,505) (53,029) 26,864 (
Slide 32: Important Disclosures
Important Disclosures Forward Looking Statements 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, as amended (the “Securities Act”) and the Securities Exchange Act of 1934,
Slide 33: Important Disclosures
Important Disclosures Industry and Marketing Data Although all information and opinions expressed in this presentation, including market data and other statistical information (including estimates and projections relating to addressable markets), were obtained from sources believed to be reliable an