Northern Oil And Gas, Inc. · NYSE:NOG
Northern Oil And Gas — Q3 2020 Earnings Presentation
31 slides from Northern Oil And Gas's earnings presentation, Nov 6, 2020
Slide 1: Q3:20 Earnings Presentation
NYSE American: NOG Q3:20 EARNINGS PRESENTATION 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: Q3 Takeaways and Key Points; Company Overview; Appendix
NYSE American: NOG I. Q3 TAKEAWAYS AND KEY POINTS II. COMPANY OVERVIEW III. APPENDIX: SUPPLEMENTAL INFO Northern Oil & Gas, Inc. - November 2020 3
Slide 4: Q3:20 Financial & Operating Highlights
Q3:20 FINANCIAL & OPERATING HIGHLIGHTS NYSE American: NOG Q3:20 Highlights Q3 CFFO(1) Q3 Recycle Ratio(2) • CFFO(1) increased 30% from Q2 and above CAPEX: $69.0 million vs. capital expenditures of $69.0MM 2.69X $43.8 million Cash Margin DD&A • Hedge Gains Delivered: $43.8 million in Q3 cash > Q3 Cap
Slide 5: 2020 and 2021: Protected with Hedges and Cash Flow
2020 AND 2021: PROTECTED WITH HEDGES AND CASH FLOW NYSE American: NOG Amply free cash flow through 2021 earmarked toward debt paydown ✓ Hedge book gross in-the-money value of >$145MM @ 11/4/20 Strip ✓ Q4:20: 25.8 Mbo/d hedged at $58.03/bbl (~100% of expected oil prod) Superior Hedge Book ✓ 2021: 19.
Slide 6: Beyond 2021: A Constructive Macro Picture Forms
BEYOND 2021: A CONSTRUCTIVE MACRO PICTURE FORMS NYSE American: NOG Stifel Global Oil Supply & Demand (Assuming 75% reinvestment Rate for US Onshore Production at Strip) "After updating our global supply estimates, we estimate markets are currently 2.2 mmbpd oversupplied in 2020 and will be 1.9 mmbpd
Slide 7: "Shale 3.0" Paradigm Ideal for Active Non-Op Model
“SHALE 3.0” PARADIGM IDEAL FOR ACTIVE NON-OP MODEL NYSE American: NOG Capital Constrained E&P’s reassessing their Non-Op Positions SHALE 3.0 Operators commit to CAPEX levels no more than 70-80% of cash flow. A growth-driven shale strategy simply hasn’t worked. US production BUT, WHY? skyrocketed, bu
Slide 8: 2020 Ground Game Advantage – Active & Profitable
2020 GROUND GAME ADVANTAGE – ACTIVE & PROFITABLE NYSE American: NOG Highly Accretive Full Cycle Return Opportunities 2020 Ground Game Wells in Process Acquisitions 2020 2021 2022 2023 200+ ground game deals Net Wells Turned-in-Line 0.7 8.9 0.3 0.5 executed since 2018 Forecasted Production (boe/d) 10
Slide 9: Permian Entry: Exciting Optionality and Growth
PERMIAN ENTRY: EXCITING OPTIONALITY AND GROWTH NYSE American: NOG Entry into the Delaware with a top operator in the top county On 9/10 Northern announced its entry into the core of the Delaware Basin through a Ground Game deal in Lea Co, NM on acreage actively being developed by EOG Resources The t
Slide 10: 2020 Well Performance Setting Records
2020 WELL PERFORMANCE SETTING RECORDS… NYSE American: NOG ➢ Completion technology and high-grading of well locations has led to improved well recovery across the basin NOG’s INCREASING WELL PRODUCTIVITY 2015 Cum (1) HIGHER RECOVERIES + STABLE COSTS = 280,000 2016 Cum (1) +80% IMPROVED CAPITAL EFFICI
Slide 11: …and Exceeds Reserve Auditor Expectations
…AND EXCEEDS RESERVE AUDITOR EXPECTATIONS NYSE American: NOG 220 220 2019 Internal Type Curve New wells exceeding 200 200 type curve by 30% 180 180 160 160 Cumulative Oil Production (mbbls) Daily Production 140 140 Well Count 120 120 100 Audited Type Curve 100 80 80 2019 Internal Type Curve 60 Daily
Slide 12: Q3 Takeaways and Key Points; Company Overview; Appendix
NYSE American: NOG I. Q3 TAKEAWAYS AND KEY POINTS II. COMPANY OVERVIEW III. APPENDIX: SUPPLEMENTAL INFO Northern Oil & Gas, Inc. - November 2020 12
Slide 13: The NOG Investment Proposition
THE NOG INVESTMENT PROPOSITION NYSE American: NOG ➢ Northern has prepared to face the environment seen today • Best in Class ROCE in E&P space: 16.4% in 2019 1 SUPERIOR RETURNS & FCF • Industry Leading Free Cash Flow Yield • NOG has participated in >40% Bakken wells (>6.7K gross) 2 SUPERIOR DATA SET
Slide 14: Northern 1-Pager
NORTHERN 1-PAGER NYSE American: NOG Non-Operator Model — Benefits Williston Basin Core—183,155 net acres ✓ A superior return on capital (16.4% ROCE (1) in 2019) ✓ A Lean structure—only 24 full-time employees ✓ Capital allocation flexibility—46 partners across 761K gross acres—easy to say “no thanks”
Slide 15: Returns Metrics Continue to Lead the Pack
RETURNS METRICS CONTINUE TO LEAD THE PACK NYSE American: NOG High Return Business Driven by Low G&A Burden Peer-Leading ROCE (2019)… 18% 16% 14% 12% Non-operator model allows us to 10% run a lean cost structure and cash 8% 6% efficient business, generating 4% industry-leading ROCE 2% 0% ….and low G&
Slide 16: Majority of Production Hedged Through 2021
MAJORITY OF PRODUCTION HEDGED THROUGH 2021 NYSE American: NOG ➢ Northern 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 PRICE SWAPS NATURAL GAS DERIVATIVE PRICE
Slide 17: Positive 2020 Balance Sheet Moves
POSITIVE 2020 BALANCE SHEET MOVES NYSE American: NOG Balance Sheet Improvement Maturity Schedule ($MM) 12/31/19 9/30/20 $1,200 Key Takeaways: $91 Total Debt Total Debt $1,000 ✓ $138MM of debt retired YTD as of 9/30 ($138MM) $1,127MM $989MM ✓ Interest expense down 32% YoY $571 $800 ✓ $90.8 MM current
Slide 18: Current Bakken Snapshot
CURRENT BAKKEN SNAPSHOT NYSE American: NOG ➢ Portfolio of high-quality acreage in the heart of the basin with interests in over 6,500 gross Bakken/Three Forks oil wells NET ACREAGE SUMMARY 9% 10% 8% 183,155 NET ACRES 91% 90% 92% North Dakota Montana HBP 1 % Non-HBP ND % HBP 1 ND % Non-HBP 90% HELD B
Slide 19: Fixing the Balance Sheet & Achieving Scale
FIXING THE BALANCE SHEET & ACHIEVING SCALE 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 Organic Net Wells added to Production P
Slide 20: 2020 Wells in Process Are in Strong Areas
2020 WELLS IN PROCESS ARE IN STRONG AREAS NYSE American: NOG ➢ The 2020 program is defined and focused in core areas Williston Basin Core NOG’S DATA ADVANTAGE NORTHERN HAS 40% PARTICIPATED IN ~40% OF WELLS EVER DRILLED IN THE WILLISTON BASIN HIGHLIGHTS ✓ Positive reserve performance adjustments in 4
Slide 21: Diversified Base & Partnered with Basin Leaders
DIVERSIFIED BASE & PARTNERED WITH BASIN LEADERS NYSE American: NOG ➢ Leverage to some of the best performing operators in the Williston Basin % OF NET PRODUCING WELLS BY OPERATOR OTHERS (<3%) Key Takeaways 14% ✓ Q3:20 production of 29,051 boepd is 23% comprised of 40+ different operators ✓ 60% of Q3
Slide 22: Strong Undeveloped Inventory Drives NAV Upside
STRONG UNDEVELOPED INVENTORY DRIVES NAV UPSIDE NYSE American: NOG Undeveloped Locations By Operator Undeveloped Locations By Reservoir TF3 OTHERS 114.5 41.7 155.5 TF2 115.1 26.4 88.0 BKKN 28.1 329.0 32.2 83.3 TF1 47.1 285.6 60.7 74.1 61.5 Undeveloped Locations By County Key Takeaways ✓ Over 60% of 7
Slide 23: The Non-Operator Model
THE NON-OPERATOR MODEL NYSE American: NOG CAPITAL BENEFITS COST BENEFITS Ability to increase and decrease capital quickly Only 24 full-time employees ✓ No rig or drilling contracts, no embedded personnel at the field level ✓ Virtually unchanged despite doubling of ✓ Non-consent process allows us to
Slide 24: Benefits of Northern's Non-Operator Model
BENEFITS OF NORTHERN’S NON-OPERATOR MODEL NYSE American: NOG LEVERAGING EXPERIENCE Proprietary Northern database, built from participation in over 6,700 wells, 40%+ of all Bakken and Three Forks wells drilled play to date CAPEX CONTROL Ability to increase and CAPITAL FLEXIBILITY decrease capital qui
Slide 25: Northern's Senior Management Team
NORTHERN’S SENIOR MANAGEMENT TEAM NYSE American: NOG Nicholas O’Grady: Chief Executive Officer ➢ Nicholas O’Grady has served as Chief Executive Officer since January 2020, following ~18 months as the Company’s Chief Financial Officer. Mr. O’Grady leads the Northern team in all respects of the busine
Slide 26: Q3 Takeaways and Key Points; Company Overview; Appendix
NYSE American: NOG I. Q3 TAKEAWAYS AND KEY POINTS II. COMPANY OVERVIEW III. APPENDIX: SUPPLEMENTAL INFO Northern Oil & Gas, Inc. - November 2020 26
Slide 27: Historical Operating & Financial Information
HISTORICAL OPERATING & FINANCIAL INFORMATION NYSE American: NOG HISTORICAL OPERATING INFORMATION YEAR ENDED DECEMBER 31, THREE MONTHS ENDED, 2014 2015 2016 2017 2018 2019 September 30, 2019 September 30, 2020 PRODUCTION Oil (MBbls) 5,150.9 5,168.7 4,325.9 4,537.3 7,790.2 11,325.4 3,002.8 2,054.9 Nat
Slide 28: Non-GAAP Reconciliations: EBITDA & Other
NON-GAAP RECONCILIATIONS: EBITDA & OTHER ADJUSTED EBITDA BY YEAR (IN THOUSANDS) Net Income (Loss) 2015 $ (975,355) 2016 $ (293,494) 2017 $ (9,194) 2018 $ 143,689 2019 $ (76,318) NYSE American: NOG Add: Interest Expense 58,360 64,486 70,286 86,005 79,229 Income Tax Provision (Benefit) (202,424) (1,40
Slide 29: Non-GAAP Reconciliations: ROCE & Recycle Ratio
NON-GAAP RECONCILIATIONS: ROCE & RECYCLE RATIO NYSE American: NOG Q3:20 Return on Capital Employed (ROCE) • EBIT: $207.6MM (Q3:20 annualized) • + Adj. EBITDA: $82.7MM Capital • - DD&A: $30.8MM EBIT ÷ Employed = 18.8% • Capital Employed: $1,099MM (Avg. of Q3:19/20) • + Total Assets: $1,286MM (Avg.) •
Slide 30: Non-GAAP Reconciliations: ROCE & Recycle Ratio
NON-GAAP RECONCILIATIONS: ROCE & RECYCLE RATIO NYSE American: NOG 2019 Return on Capital Employed (ROCE) • EBIT: $244MM • + Adj. EBITDA: $454MM Capital • - DD&A: $210MM EBIT ÷ Employed = 16.4% • Capital Employed: $1,487 MM (2018-19 Avg.) • + Total Assets: $1,705MM (Avg.) • - Current Liabilities: $21
Slide 31: Hedging Disclosures
HEDGING DISCLOSURES NYSE American: NOG Further Detail about Swap Transaction and Swaption Volumes 1. The Company has entered into certain crude oil derivative contracts for 2021, 2022, and 2023 volumes that give counterparties the option to extend such derivative contracts for additional six-month a