Northern Oil And Gas, Inc. · NYSE:NOG
Northern Oil And Gas — Q4 2020 Earnings Presentation
37 slides from Northern Oil And Gas's earnings presentation, Mar 12, 2021
Slide 1: Q4:20 Earnings Presentation
NYSE American: NOG Q4:20 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. LAUNCH OF A NATIONAL NON-OP FRANCHISE II. Q4 TAKEAWAYS AND 2021 GUIDANCE III. MARCELLUS TRANSACTION OVERVIEW- ADJUSTED FOR EQT’S EXERCISED PREFERENTIAL PURCHASE RIGHT IV. APPENDIX: SUPPLEMENTAL INFO Northern Oil & Gas, Inc. - November 2020 3
Slide 4: The Northern Investment Proposition
THE NORTHERN INVESTMENT PROPOSITION NYSE American: NOG National non-op franchise – principled ROCE (1) leader (>23.5% in Q4:20) diversified by commodity and geography Strong expected free cash flow(2): >$125MM in 21 (15% yld); >$450MM through 2024 (>50% yld) Attractive Marcellus entry point (PDP + W
Slide 5: New Northern: Diversified High Return Non-Op E&P Franchise
NEW NORTHERN: DIVERSIFIED HIGH RETURN NON-OP E&P FRANCHISE NYSE American: NOG Ø Northern’s pending Marcellus acquisition will create a national non-op franchise, with a significantly larger base footprint and production diversified across three leading shale plays, high return reinvestment opportuni
Slide 6: The New Northern Oil and Gas
THE NEW NORTHERN OIL AND GAS NYSE American: NOG Ø Northern is the pre-eminent E&P with focus on non-operated model offering superior returns and free cash flow generation ü Exposure to set of leading operators in Williston and Permian (~75% production) and Diversified Asset Base With Appalachia (~25
Slide 7: Benefits of Northern's Non-Operator Model
BENEFITS OF NORTHERN’S NON-OPERATOR MODEL NYSE American: NOG HIGH RETURN WAY TO PLAY E&P SPACE Peer leading cost structure & Corporate ROCE Unit G&A costs >50% less than operating peers Scalable Model: NOG has only 25 Employees SHALE 3.0 BENIFICIARY LEVERAGING EXPERIENCE Northern is capitalizing on
Slide 8: 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 (2021)… Raymond James E&P Research Coverage 35% 30% 25% Non-operator model allows us to 20% 15% run a lean cost structure and cash 10% efficient business, generating 5% indust
Slide 9: "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 10: 2020 Ground Game Advantage – Shale 3.0 Case Study
2020 GROUND GAME ADVANTAGE – SHALE 3.0 CASE STUDY NYSE American: NOG Highly Accretive Full Cycle Return Opportunities 2020 Ground Game Wells in Process Acquisitions Free Cash Flow Derivation ($MM) 2020 2021 2022 2023 100 Net Wells Turned-in-Line 3.9 6.5 1.0 0.9 80 57.9 54.4 Forecasted Production (bo
Slide 11: Major Balance Sheet Upgrade Achieved
MAJOR BALANCE SHEET UPGRADE ACHIEVED NYSE American: NOG ($ in millions) $950 million of funded debt (100% of total) due by 2024 § Weighted Avg. Maturity: 2.4 years § Liquidity: $128 million 12/31/20 $128 $532 $288 $65 $65 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Revolver (Drawn) Revolver (U
Slide 12: NOG Committed to Good Governance
NOG COMMITTED TO GOOD GOVERNANCE NYSE American: NOG ENVIRONMENTAL SOCIAL GOVERNANCE • Operators are selected for • Separate CEO and Chairman environmental and safety • NOG employees provided roles records free health care and paid family leave • Significant shareholder • North Dakota has been a repr
Slide 13: Agenda
NYSE American: NOG I. LAUNCH OF A NATIONAL NON-OP FRANCHISE II. Q4 TAKEAWAYS AND 2021 GUIDANCE III. MARCELLUS TRANSACTION OVERVIEW- ADJUSTED FOR EQT’S EXERCISED PREFERENTIAL PURCHASE RIGHT IV. APPENDIX: SUPPLEMENTAL INFO Northern Oil & Gas, Inc. - November 2020 13
Slide 14: Q4:20 Financial & Operating Highlights
Q4:20 FINANCIAL & OPERATING HIGHLIGHTS NYSE American: NOG Q4 CFFO(1) Q4 Recycle Ratio(2) Q4:20 Highlights • CFFO(1) increased 23% from Q3 and above $81.8MM 2.87X CAPEX: $81.8 million vs. capital expenditures of $48.9 million Cash Margin DD&A > Q4 Capex of $48.9mm $28.69/boe $9.97/boe • Strong margin
Slide 15: 2020 Well Performance Setting Records
2020 WELL PERFORMANCE SETTING RECORDS… NYSE American: NOG Ø 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) +90% HIGHER RECOVERIES + STABLE COSTS = 280,000 2016 Cum (1) 2017 Cum (1) IMPROVED C
Slide 16: ...And Exceeds Reserve Auditor Expectations
…AND EXCEEDS RESERVE AUDITOR EXPECTATIONS NYSE American: NOG 220 220 2019 Internal Type Curve 200 New wells exceeding 200 type curve by 20% 180 180 160 160 Cumulative Oil Production (mbbls) Daily Production 140 140 120 120 Well Count 100 Audited Type Curve 100 80 80 60 2019 Internal Type Curve 60 Da
Slide 17: 2021 Guidance
2021 GUIDANCE NYSE American: NOG 2021 Bakken/Permian Guidance 2021 Marcellus Guidance (full-year) Corporate G&A Guidance (per Boe) Q1 Pre-RIL Q2-Q4 Post- Annual Production (Boe per day) 37,750 - 42,750 Annual Production (Mmcf per day) 75 - 85 Close RIL Close Net Wells Added to Production 32 - 34 Net
Slide 18: Agenda
NYSE American: NOG I. LAUNCH OF A NATIONAL NON-OP FRANCHISE II. Q4 TAKEAWAYS AND KEY POINTS III. MARCELLUS TRANSACTION OVERVIEW- ADJUSTED FOR EQT’S EXERCISED PREFERENTIAL PURCHASE RIGHT IV. APPENDIX: SUPPLEMENTAL INFO Northern Oil & Gas, Inc. - November 2020 18
Slide 19: Reliance Appalachia Transaction Overview
RELIANCE APPALACHIA TRANSACTION OVERVIEW NYSE American: NOG § Northern agreed to acquire a non-operated interest in Appalachia natural gas assets from Reliance Marcellus, LLC Transaction (“Reliance”) for an unadjusted cash purchase price of $126.4MM plus equity warrants issued to Reliance upon closi
Slide 20: Entry into Attractive Basin with a Leading Low Cost Operator – EQT
ENTRY INTO ATTRACTIVE BASIN WITH A LEADING LOW COST OPERATOR – EQT NYSE American: NOG • Non-operated interests in the Reliance / EQT Participation and Development Agreement (“PDA”) • Average, blended working interest of ~27% • EQT announced its acquisition of Chevron’s Appalachia interests in Septem
Slide 21: PV22 Deal with Meaningful Upside
PV22 DEAL WITH MEANINGFUL UPSIDE NYSE American: NOG Ø In addition to operational improvements and capital efficiencies future performance is expected to benefit from operational expertise from EQT >$250MM in Potential Value Upside >$400MM ~$126MM Cash Purchase Price PDP + WIP PV10 G&A Savings Capex
Slide 22: Reliance Appalachia: Asset-Level Projection Detail
RELIANCE APPALACHIA: ASSET-LEVEL PROJECTION DETAIL NYSE American: NOG Ø Projections assume PDP and WIP completions and no further development of new wells (strip pricing as of 3/5/21) Production (MMcfe/d) Cash Flow From Operations ($MM) 150 $100 0 $0 2021 2022 2023 2024 2021 2022 2023 2024 ROCE(1) F
Slide 23: EQT Expected to Drive Improvements in Operational Performance
EQT EXPECTED TO DRIVE MATERIAL IMPROVEMENTS IN OPERATIONAL PERFORMANCE AND COST LEADERSHIP NYSE American: NOG Ø EQT expected to deliver better operating results with lower costs and will benefit from economies of scale and application of best practices EQT vs CVX Production Performance PA Marcellus
Slide 24: Natural Gas Diversity Welcomed
NATURAL GAS DIVERSITY WELCOMED NYSE American: NOG • Rapid decline in oil-directed activity materially reduces associated gas Rig Counts 450 supply 400 • U.S. rigs down ~51% reducing well inventory and affecting future gas supply 350 300 • Appalachia and Haynesville rig counts are well below maintena
Slide 25: Agenda
NYSE American: NOG I. LAUNCH OF A NATIONAL NON-OP FRANCHISE II. Q4 TAKEAWAYS AND KEY POINTS III. MARCELLUS TRANSACTION OVERVIEW- ADJUSTED FOR EQT’S EXERCISED PREFERENTIAL PURCHASE RIGHT IV. APPENDIX: SUPPLEMENTAL INFO Northern Oil & Gas, Inc. - November 2020 25
Slide 26: Diversified Base & Partnered with Basin Leaders
DIVERSIFIED BASE & PARTNERED WITH BASIN LEADERS NYSE American: NOG Ø Leverage to some of the best performing operators in multiple basins % OF NET PRODUCING WELLS BY OPERATOR OTHERS (<3%) Key Takeaways ü Q4:20 production of 35,738 boepd is 17% 23% comprised of 40+ different operators ü >65% of Q4 20
Slide 27: Non-Op of Scale with Improving Cost Structure
NON-OP OF SCALE WITH IMPROVING COST STRUCTURE NYSE American: NOG Ø Participation in the highest quality wells with stable AFE costs generates consistent production & higher IRRs CONSISTENTLY FUNDING ATTRACTIVE WELLS… …GENERATES CONSISTENT PRODUCTION Organic Net Wells added to Production Production (
Slide 28: Current Bakken Snapshot
CURRENT BAKKEN SNAPSHOT NYSE American: NOG Ø Portfolio of high-quality acreage in the heart of the basin with interests in over 7,000 gross Bakken/Three Forks oil wells NET ACREAGE SUMMARY 9% 9% 8% 183,242 NET ACRES 91% 91% 92% North Dakota Montana HBP 1 % Non-HBP ND % HBP1 ND % Non-HBP 91% HELD BY
Slide 29: Strong Bakken Inventory Drives NAV Upside
STRONG BAKKEN 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 ü Over 60% of 771 fu
Slide 30: 2020 Bakken Wells Were in Strong Areas
2020 BAKKEN WELLS WERE IN STRONG AREAS NYSE American: NOG Ø The 2020 program was focused in core areas Williston Basin Core NOG’S DATA ADVANTAGE NORTHERN HAS 45% PARTICIPATED IN ~45% OF WELLS EVER DRILLED IN THE WILLISTON BASIN HIGHLIGHTS ü Positive reserve performance adjustments in 4 of last 6 yea
Slide 31: Hedge Profile
HEDGE PROFILE NYSE American: NOG Ø 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 SWAPS Total Hedged Contract T
Slide 32: Well Positioned to Weather Regulatory Headwinds
WELL POSITIONED TO WEATHER REGULATORY HEADWINDS NYSE American: NOG Federal Land Policy Risk Ø Northern has minimal exposure to federal lands with ~8% of total leasehold position subject to the federal regulation Ø Across the ~14,500 net acres on federal land there is currently a backlog of 220 feder
Slide 33: Northern's Senior Management Team
NORTHERN’S SENIOR MANAGEMENT TEAM NYSE American: NOG Nicholas O’Grady: Chief Executive Officer Ø 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 34: Historical Operating & Financial Information
HISTORICAL OPERATING & FINANCIAL INFORMATION NYSE American: NOG HISTORICAL OPERATING INFORMATION YEAR ENDED DECEMBER 31, THREE MONTHS ENDED, 2015 2016 2017 2018 2019 2020 December 31, 2019 December 31, 2020 PRODUCTION Oil (MBbls) 5,168.7 4,325.9 4,537.3 7,790.2 11,325.4 9,361.1 3,218.9 2,508.6 Natur
Slide 35: Non-GAAP Reconciliations: EBITDA & Other
NON-GAAP RECONCILIATIONS: EBITDA & OTHER NYSE American: NOG Adjusted EBITDA by Year (in thousands) 2015 2016 2017 2018 2019 2020 Net Income (Loss) $ (975,355) $ (293,494) $ (9,194) $ 143,689 $ (76,318) $ (906,041) Add: Interest Expense 58,360 64,486 70,286 86,005 79,229 58,503 Income Tax Provision (
Slide 36: Non-GAAP Reconciliations: ROCE & Recycle Ratio
NON-GAAP RECONCILIATIONS: ROCE & RECYCLE RATIO NYSE American: NOG Q4:20 Return on Capital Employed (ROCE) • EBIT: $246.2MM (Q4:20 annualized) • + Adj. EBITDA: $94.3MM Capital EBIT ÷ Employed = 23.5% • - DD&A: $32.76MM • Capital Employed: $1,049MM (Avg. of Q4:19/20) • + Total Assets: $1,242MM (Avg.)
Slide 37: 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 2022 and 2023 volumes that give counterparties the option to extend such derivative contracts for additional three month, six-m