Northern Oil And Gas, Inc. · NYSE:NOG
Northern Oil And Gas — Q1 2020 Earnings Presentation
34 slides from Northern Oil And Gas's earnings presentation, May 11, 2020
Slide 1: Q1:20 Earnings Presentation
NYSE American: NOG Q1:20 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: Agenda
NYSE American: NOG I. Q1 TAKEAWAYS AND VALUE PROPOSITION II. COMPANY OVERVIEW III. BALANCE SHEET & HEDGES IV. ASSET & ENGINEERING REVIEW V. GROWTH STRATEGY- ORGANIC & M&A VI. APPENDIX: SUPPLEMENTAL INFO
Slide 4: Q1'20 Financial & Operating Highlights
Q1’20 FINANCIAL & OPERATING HIGHLIGHTS NYSE American: NOG Q1’20 Highlights ROCE(1) Recycle Ratio(1) • Strong Margins and Returns(1): NOG’s recycle ratio and ROCE remain amongst the best in the industry 11.7% 1.8X in Q1 Top-Tier Across Industry Cash Margin DD&A • Cash Flow > CAPEX: Cash flow before c
Slide 5: The NOG Value Proposition
THE NOG VALUE PROPOSITION NYSE American: NOG ➢ Northern has prepared to face the environment seen today • Best in Class ROCE(1) in E&P space: 11.7% in Q1’20 1 SUPERIOR RETURNS & FCF • >$125MM of Free Cash Flow(2) expected in FY20 • >Majority hedged in 2020, >$58/bbl 2 SIGNIFICANTLY HEDGED • >Majorit
Slide 6: Agenda: Company Overview
NYSE American: NOG I. Q1 TAKEAWAYS AND VALUE PROPOSITION II. COMPANY OVERVIEW III. BALANCE SHEET & HEDGES IV. ASSET & ENGINEERING REVIEW V. GROWTH STRATEGY- ORGANIC & M&A VI. APPENDIX: SUPPLEMENTAL INFO
Slide 7: Current NOG Asset Snapshot
CURRENT NOG ASSET 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% 183,245 NET ACRES 91% 90% 92% North Dakota Montana HBP 1 % Non-HBP ND % HBP 1 ND % Non-HBP 90% HEL
Slide 8: 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 Wells In Process @ Period End Organic N
Slide 9: The Recent Evolution of Northern Oil & Gas
THE RECENT EVOLUTION OF NORTHERN OIL & GAS NYSE American: NOG ➢ Entry into new RBL facility and ➢ Northern enters into ➢ Northern has 16.8mBoe/d successful existing Secured Notes COVID/OPEC driven Oil of production, $145mm consent solicitation / upsize for price collapse with of EBITDA and 6.2x Net
Slide 10: 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 11: Management Aligned with Stakeholders Like No Other E&P
MGMT. ALIGNED WITH STAKEHOLDERS LIKE NO OTHER E&P NYSE American: NOG ➢ Northern is focused on what it means to be accountable TYPICAL E&P PEER NORTHERN • $3.00 Cash G&A per Barrel ✓ ~$0.95 per boe Cash G&A in Q1 ’20 • Insider & Management Ownership of ~5.0% ✓ Insider and Management Ownership of ~30%
Slide 12: Benefits of Northern's Non-Operator Model
BENEFITS OF NORTHERN’S NON-OPERATOR MODEL NYSE American: NOG LEVERAGING EXPERIENCE Proprietary Northern database, built from participation in over 6,500 wells, 40%+ of all Bakken and Three Forks wells drilled play to data CAPEX CONTROL Ability to increase and CAPITAL FLEXIBILITY decrease capital qui
Slide 13: The Non-Operator Model
THE NON-OPERATOR MODEL NYSE American: NOG CAPITAL BENEFITS COST BENEFITS Ability to increase and decrease capital quickly Only 23 full-time employees ✓ No rig or drilling contracts, no embedded personnel at the field level ✓ Virtually unchanged despite doubling of ✓ Non-consent process allows us to
Slide 14: Agenda: NOG Value Proposition
NYSE American: NOG I. Q1 TAKEAWAYS AND VALUE PROPOSITION II. NOG VALUE PROPOSITION III. BALANCE SHEET & HEDGES IV. ASSET & ENGINEERING REVIEW V. GROWTH STRATEGY- ORGANIC & M&A VI. APPENDIX: SUPPLEMENTAL INFO
Slide 15: Q4/Q1 Balance Sheet Moves: Reduced Debt & Interest Cost
Q4/Q1 BALANCE SHEET MOVES: REDUCED DEBT & INT. COST NYSE American: NOG Balance Sheet Improvement Maturity Schedule ($MM) Key Takeaways: 9/30/19 3/31/20 $1,200 ✓ 50%+ reduction of highest cost, most Total Debt Total Debt restrictive debt; covenants relaxed $210 ($97MM) $1,144MM $1,047MM $1,000 ✓ 88%
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: Agenda: Balance Sheet & Hedges
NYSE American: NOG I. Q1 TAKEAWAYS AND VALUE PROPOSITION II. COMPANY OVERVIEW III. BALANCE SHEET & HEDGES IV. ASSET & ENGINEERING REVIEW V. GROWTH STRATEGY- ORGANIC & M&A VI. APPENDIX: SUPPLEMENTAL INFO
Slide 18: 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% ✓ Q1:20 production of 43,735 boepd is 23% comprised of 40+ different operators ✓ 52% of Q1
Slide 19: 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 20: Our Well Performance Remains Consistently Strong
OUR WELL PERFORMANCE REMAINS CONSISTENTLY STRONG 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 CAPI
Slide 21: 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 22: Agenda: Asset & Engineering Review
NYSE American: NOG I. Q1 TAKEAWAYS AND VALUE PROPOSITION II. COMPANY OVERVIEW III. BALANCE SHEET & HEDGES IV. ASSET & ENGINEERING REVIEW V. GROWTH STRATEGY- ORGANIC & M&A VI. APPENDIX: SUPPLEMENTAL INFO
Slide 23: Northern's Core Growth Thesis Is Sustainable
NORTHERN’S CORE GROWTH THESIS IS SUSTAINABLE NYSE American: NOG Northern’s goal is to leverage its strong financial position to counter-cyclically invest in acreage and drilling opportunities across the Williston Basin during volatile pricing periods ▪ Northern’s unique non-op model affords us the f
Slide 24: Organic Growth Drives Opportunity Set
ORGANIC GROWTH DRIVES OPPORTUNITY SET… NYSE American: NOG ORGANIC GROWTH GROUND GAME WORKING INTEREST ADDITIONS GROWTH IN EXISTING POSITIONS… UPSTREAM BACKDROP PROVIDES STRATEGIC OPPORTUNITIES ▪ Flow of inbound AFEs ▪ Incremental opportunities to proactively ✓ Forced Sellers: AFE burdens lead to sou
Slide 25: While Acquisitions Build Scale
…WHILE ACQUISITIONS BUILD SCALE NYSE American: NOG ACQUISITIONS …ACQUISITIONS LEVER STRONG PARTNERSHIPS ▪ Non-operator is natural consolidator ▪ Not bound to contiguous or concentrated acreage ▪ Proprietary database facilitates well analysis ▪ >$850mm+ of corporate M&A since 2018 ▪ Broader Williston
Slide 26: 2020 A&D Opportunity Set Growing
2020 A&D OPPORTUNITY SET GROWING NYSE American: NOG The landscape for both ground-game acquisitions and corporate transactions has been consistently growing with asset quality increasing Unprecedented ability to partner, provide capital and source core opportunities: ➢ Working Interest carve-out wit
Slide 27: Appendix
NYSE American: NOG VI: APPENDIX
Slide 28: 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 March 31, 2019 March 31, 2020 PRODUCTION Oil (MBbls) 5,150.9 5,168.7 4,325.9 4,537.3 7,790.2 11,325.4 2,541.2 3,138 4 Natural Gas
Slide 29: Non-GAAP Reconciliations: EBITDA & Other
NON-GAAP RECONCILIATIONS: EBITDA & OTHER NYSE American: NOG ADJUSTED EBITDA BY YEAR (IN THOUSANDS) 2015 2016 2017 2018 2019 Net Income (Loss) $ (975,355) $ (293,494) $ (9,194) $ 143,689 $ (76,318) Add: Interest Expense 58,360 64,486 70,286 86,005 79,229 Income Tax Provision (Benefit) (202,424) (1,40
Slide 30: Non-GAAP Reconciliations: ROCE & Recycle Ratio
NON-GAAP RECONCILIATIONS: ROCE & RECYCLE RATIO NYSE American: NOG Q1’20 Return on Capital Employed (ROCE) • EBIT: $185MM (Q1’20 annualized) • + Adj. EBITDA: $432MM Capital • - DD&A: $247MM EBIT ÷ Employed = 11.7% • Capital Employed: $1,586 MM (Avg. of Q1’19/20) • + Total Assets: $1,817MM (Avg.) • -
Slide 31: Salt Creek & Pivotal Acquisitions
SALT CREEK & PIVOTAL ACQUISITIONS NYSE American: NOG Salt Creek Oil & Gas Acquisition Overview Pivotal Petroleum Acquisition Overview ▪ 6MM shares issued at closing ▪ 25.75MM shares issued at closing Acquisition Price: Acquisition Price: ▪ $44.7MM cash ▪ $68.4MM Cash ▪ Effective January 1, 2018 ▪ Ef
Slide 32: Flywheel Energy: Acquisition Summary
FLYWHEEL ENERGY: ACQUISITION SUMMARY NYSE American: NOG Flywheel Energy Acquisition Overview ▪ Northern to acquire Williston Basin properties of VEN Bakken, LLC (“Seller”), a wholly-owned subsidiary of Flywheel Bakken, LLC (formerly Valorem Energy), (“Flywheel”) ▪ 6,600+ Boe/d (2-Stream) estimated p
Slide 33: W Energy Partners Acquisition
W ENERGY PARTNERS ACQUISITION NYSE American: NOG Acquisition Overview First 12-Month Cumulative Oil Production(1) ▪ 51.4 MM shares Acquisition Price: ▪ $117.1 MM Cash ▪ Effective July 1, 2018 Timeline: ▪ Closed October 1, 2018 Acreage: ▪ 10,600 net acres (3.0% average WI) ▪ 27 net (910gross) PDP wel
Slide 34: 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 volumes that give counterparties the option to extend such derivative contracts for additional six-month and twelve-month