Northern Oil And Gas, Inc. · NYSE:NOG
Northern Oil And Gas — Raymond James 44th Annual Institutional Investor Conference (March 2023)
43 slides from Northern Oil And Gas's conference presentation, March 2023
Slide 1: Investor Presentation March 2023
Investor Presentation March 2023 Investor Presentation March 2023 | 1
Slide 2: Contents
Contents I. Investment Highlights II. Recent Financial Results III. Appendix Investor Presentation March 2023 | 2
Slide 3: Investment Highlights
Investment Highlights 1 2 3 4 5 National non-op franchise offering scale and Track record of executing on highly accretive investments with Disciplined capital allocator with a return of capital commitment. Strong balance sheet with a long-term target of <1.0x Net Debt to Dominant data and technical
Slide 4: NOG At-a-Glance
NOG At-a-Glance1,2 Disciplined aggregator of accretive, high-quality minority interests, aligned with the best operators. 8,700/800 259k 95 79.0k GROSS/NET WELLS NET ACRES OPERATORS Q4 22 PRODUCTION BOE/DAY Marcellus 15% Permian 29% Bakken 56% 59%/41% 24.5% 1.4x 2-STREAM OIL/GAS SPLIT Q4 22 ADJUSTED
Slide 5: Leading Non-Op E&P Franchise
Leading Non-Op E&P Franchise • NOG’s acquisitions have created a high return, national Q4:22 PRODUCTION BY REGION (BOE) non-op franchise that is benefitting from economies of scale; ~8,000 net acres were added to Permian footprint in 4Q22 & 1Q23 Marcellus 15% Region • Going forward, NOG is positione
Slide 6: What We Do
What We Do THE NON-OPERATOR MODEL 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 fractional Ability to control capital Small company (33 operate rigs working interests in expenditures higher
Slide 7: How We Do It
How We Do It OUR INVESTMENT APPROACH We apply modern portfolio theory in our investment approach to pursue optimal risk adjusted returns. Diversification across geography, commodity, operators and deal structure or concentration provides us with a degree of optionality unavailable to most E&P compan
Slide 8: 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 8,700 wells • Unit G&A costs are 50% less than operating peers • Scalable Model: NOG
Slide 9: We Partner with Leading, Technically Strong Operators
We Partner with Leading, Technically Strong Operators… Deep operating partner relationships facilitate both organic and acquisition-based production growth opportunities Deep, lasting relationships across core basins with the highest-efficiency operating partners and exposure to incremental working
Slide 10: 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: ~182,000 Net Acres Permian Basin1: ~19,000 Net Acres Marcellus Acres: ~61,000 Net Acres Armstrong Gaines Lea Indiana Allegh
Slide 11: Track Record of Executing on Large-Scale Accretive Investments
Track Record of Executing on Large-Scale Accretive Investments NOG has been an active participant in M&A. Since 2018, the Company has completed over $2.5 billion of accretive acquisitions.1 2018 2019 2021 2022 2023 • Salt Creek $60MM • VEN Bakken $316MM • Reliance Marcellus • Veritas $409MM • MPDC M
Slide 12: Record Investment Activity in 2022
Record Investment Activity in 2022 Completed or entered into numerous large acquisitions totaling over $1.0b in 2022. M&A substantially increased scale and positions the Company for accelerating near and long-term growth. Williston Midland Acquisition Core Permian Permian Permian (Veritas) MPDC Masc
Slide 13: Ground Game – High Return Opportunities, Supplementing Bolt-on Acquisitions
Ground Game – High Return Opportunities, Supplementing Bolt-on Acquisitions 2022 was Another Year of Highly Accretive Full Cycle Return Opportunities • 250+ ground game deals executed 2022 GROUND GAME WELLS since 2018 2022 2023 2024 2025 2026-32 IN PROCESS ACQUISITIONS Net Wells Turned-in-Line 5.8 2
Slide 14: Ground Game – High Return Opportunities, Supplementing Bolt-on Acquisitions
Ground Game – High Return Opportunities, Supplementing Bolt-on Acquisitions 2022’s Ground Game Was Highly Accretive and will Contribute to NOG’s Full Cycle Returns ILLUSTRATION OF $80 FREE CASH FLOW $60 DERIVATION ($MM)1 OF 2022 GROUND $40 $57.3 $66.2 GAME $20 $36.3 $40.1 $23.8 $0 ($20) ($28.3) ($40
Slide 15: Increase in Total Proven Reserves Should Drive TSR
Increase in Total Proven Reserves Should Drive TSR NOG’s expanded platform features significant additions to reserves. Acquisitions expected to enhance FCF generation fueling growth in revenues, Adjusted EBITDA and returns to shareholders over the short and long-term. 5.3 330.81 YE 22 PRO FORMA TOTA
Slide 16: 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&A1 Material increases driven by organic Reducing overhead unit cash G&A costs, growth + acc
Slide 17: Balanced Approach to Capital Allocation
Balanced Approach to Capital Allocation FREE CASH-FLOW ALLOCATION Shareholder Returns Focus Reinvestment For Growth Capital • Regular Dividend • Organic Acreage • Debt Repayment • Stock Buybacks • Ground Game • Liquidity Enhancement • Special Dividends • Bolt-on Acquisitions Investor Presentation Ma
Slide 18: Disciplined Capital Allocator
Disciplined Capital Allocator Capital allocation governed by what is best for the long-term strength of our business … and for our shareholders. CAPITAL ALLOCATION CONSIDERATIONS Additions to net wells & production Organic Growth Activity from current holdings Reinvest Capital Ground Game Incrementa
Slide 19: Strong Organizational Infrastructure Supports Investment Decisions
Strong Organizational Infrastructure Supports Investment Decisions Deep presence in three core basins, relationships with a wide breadth of operators and minority interests in thousands of wells gives NOG an informational advantage in determining where to invest free cash flow INVESTMENT EVALUATION
Slide 20: FCF Generation and Shareholder Return Focused
FCF Generation and Shareholder Return Focused NOG continues a balanced approach to shareholder returns including buybacks of common stock and highest cost of capital securities, the reduction of outstanding revolving credit facility debt and a ramping dividend yield1 2022 FREE CASH FLOW • ~$250 mill
Slide 21: A Track Record of Dividend Growth
A Track Record of Dividend Growth NOG has consistently exceeded and accelerated its dividend growth ACTUAL DIVIDENDS COMPARED WITH 2021 DIVIDEND PLAN RECOMMENDATIONS* Proposed 2Q 23* $0.40 $0.37 $0.35 $0.34 $0.30 Dividend Per Common Share $0.30 $0.27 $0.25 $0.25 $0.24 $0.21 $0.20 $0.19 $0.18 $0.15 $
Slide 22: Balance Sheet & Liquidity Enhancement Support Growth Plan
Balance Sheet & Liquidity Enhancement Support Growth Plan COMPANY CONTINUES TO GENERATE SUBSTANTIAL FREE CASH FLOW • Borrowing Base Expanded in November 22: NOG’s borrowing base has grown substantially from standalone and acquired assets year-to-date - Borrowing base of $1.6 billion (up from $1.3 bi
Slide 23: Introducing the Drakkar System, NOG's Industry Leading Database
Introducing the Drakkar System, NOG's Industry Leading Database Drakkar is an internal, proprietary data science system developed in partnership with technology industry leaders. The system enables us to optimize daily operations and informs our investment management decisions. Inputs Outputs Land
Slide 24: Sustainability Framework
Sustainability Framework NOG instituted explicit board-level oversight of ESG and is working toward expanding and improving disclosures related to ESG ENVIRONMENTAL SOCIAL GOVERNANCE • Operators are screened for • NOG employees provided free • Separate CEO and Chairman roles environmental and safety
Slide 25: Alignment with Operators who are ESG Leaders
Alignment with Operators who are ESG Leaders NOG’s Current Top Ten Public Operators Represent a “Who’s Who” of ESG Stewardship EQT CLR OVV CHRD COP EOG HES DVN ERF XOM Dedicated ESG Section of Website Board-Level Oversight of ESG Formal ESG Policy Provides ESG Report Discloses and Tracks ESG Related
Slide 26: Investment Highlights
Investment Highlights 1 2 3 4 5 National non-op franchise offering scale and Track record of executing on highly accretive investments with Disciplined capital allocator with a return of capital commitment. Strong balance sheet with a long-term target of <1.0x Net Debt to Dominant data and technical
Slide 27: Recent Financial Results
PART 2 Recent Financial Results Investor Presentation March 2023 | 27
Slide 28: Q4 Financial & Operating Highlights
Q4 Financial & Operating Highlights Q4 Free Cash Flow1 Dividend Growth Q4 2022 EARNINGS HIGHLIGHTS • Weather-related disruption pressured Q4 results but record Q4 M&A $87.1MM +275% activity sets groundwork for strong 2023 • Completed $750MM of M&A in Q4, additional $320MM closed in January • Adjuste
Slide 29: Q4 2022 Production & Capex Breakdown
Q4 2022 Production & Capex Breakdown NOG’s Commodity, Capital Expenditures and Production Mix Continue to Become More Diversified and Balanced 15% Q4 2022 – PRODUCTION BY REGION (Boe) • Permian production was record in total and as a portion of NOG’s production mix 29% 56% • Strong Williston activit
Slide 30: Q4 2022 Production & Capex Breakdown
Q4 2022 Production & Capex Breakdown NOG’s Commodity, Capital Expenditures and Production Mix Continue to Become More Diversified and Balanced Q4 2022 – PRODUCTION BY COMMODITY (Boe)% • Williston: 72% Oil; Permian: 66% Oil; Marcellus: 100% Dry Gas 40.5% • Production continues to be balanced from a m
Slide 31: Q4 2022 Production & Capex Breakdown
Q4 2022 Production & Capex Breakdown NOG’s Commodity, Capital Expenditures and Production Mix Continue to Become More Diversified and Balanced 4% Q4 2022 – CAPEX BY REGION 29% • Increased Williston Activity in Q4 and entering into 2023 • Low Marcellus Capex, activity planned for 2024 turn-in-lines 6
Slide 32: 2023 Guidance and Capital Budget
2023 Guidance and Capital Budget 2023 Budget Represents a Year of Over 23% Production Growth at the Midpoint and Significant Cash Flow Growth at the Strip 2023E 2022A Underlying Assumptions Annual Production (2-stream, Boe/day) 91,000 - 96,000 75,511 • Budgeting for moderate well cost inflation, tho
Slide 33: 2023 Capital Spending Bridge
2023 Capital Spending Bridge Cap Ex Budget reflects approximately $100MM of Ground Game opportunities $212-228 $737-778 Significant MPDC spending will not reoccur in 2024, depending on $25-50 completion timing in late $500 2023 $500.0 Base Business (excl. Permian Expected Base Business Alpha, addtl
Slide 34: Balance Sheet Simplification
Balance Sheet Simplification Q4 2021 Q4 2022 7% Capitalization Capitalization Equity Preferred 37% Equity ACTIONS Debt Debt 42% 51% 63% ~88.3MM • Repurchased common ~85.5 MM and preferred stock at Diluted Shares Outstanding1 Diluted Shares Outstanding1 lower than current price levels LQA Adj. EBITDA
Slide 35: Appendix
PART 3 Appendix Investor Presentation March 2023 | 35
Slide 36: Historical Operating & Financial Information
Historical Operating & Historical Operating Information Production 2020 2021 2022 4Q21 4Q22 Financial Information Oil (MBbls) Natural Gas and NGLs (Mmcf) Total Production (Mboe) 9,361.1 16,473.3 12,106.7 12,288.4 44,073.9 19,634.1 16,090.1 68,829.1 27,561.6 3,492.6 14,458.1 5,902.3 4,314.6 17,640.2
Slide 37: NON-GAAP Reconciliations: Adjusted EBITDA
NON-GAAP Adjusted EBITDA by Year (in thousands) 2020 2021 2022 Net Income (Loss) $ (906,041) $ 6,361 $ 773,237 Reconciliations: Add: Interest Expense 58,503 59,020 80,331 Income Tax Provision (Benefit) (166) 233 3,101 Adjusted EBITDA Depreciation, Depletion, Amortization and Accretion 162,120 140,82
Slide 38: NON-GAAP Reconciliations: ROCE & Recycle Ratio
NON-GAAP Reconciliations: ROCE & Recycle Ratio Q4-22 Return on Capital Employed (ROCE) • EBIT: $750.0MM (Q4:22 annualized) • + Adj. EBITDA: $264.8MM • - DD&A: $77.3MM Capital EBIT ÷ Employed = 40.3% • Capital Employed: $1,862.8MM (Avg. of Q4-21/22) • + Total Assets: $2,199.0MM (Avg.) • - Current Lia
Slide 39: NON-GAAP Reconciliations: Free Cash Flow
NON-GAAP Reconciliations: Free Cash Flow FREE CASH-FLOW (FCF) (in thousands) 4Q21 1Q22 2Q22 3Q22 4Q22 Net Cash Provided by Operating Activities $ 133,102 $ 154,034 $ 210,239 $ 276,766 $ 287,379 Exclude: Changes in Working Capital and Other Items 24,906 80,985 41,948 (7,505) (53,029) Less: Capital Ex
Slide 40: 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 PRICE SWAPS - NYMEX NATURAL GAS DERIVATIVE PRICE SWAPS - NYMEX Total Contract Barrels Per
Slide 41: 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 Contract Barrels Per Day Price Ceiling Price Flo
Slide 42: 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 43: 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