NOG Announces Second Quarter 2024 Results, Updates 2024 Guidance

SECOND QUARTER HIGHLIGHTS

• Record quarterly production of 123,342 Boe per day (57% oil), increases of 3% from the first quarter of 2024 and 36% from the second quarter of 2023
• GAAP net income of $138.6 million, Adjusted Net Income of $147.8 million and Adjusted EBITDA of $413.1 million. See “Non-GAAP Financial Measures” below
• Cash flow from operations of $340.5 million. Excluding changes in net working capital, cash flow from operations was $374.2 million, an increase of 33% from the second quarter of 2023
• Generated $133.7 million of Free Cash Flow. See “Non-GAAP Financial Measures” below
• Announced joint acquisition of Uinta Basin properties from XCL Resources with SM Energy Company for $510 million net to NOG
• Repurchased 895,076 shares of common stock at an average price of $38.96 per share

POST QUARTER HIGHLIGHTS

• Announced joint acquisition of Delaware Basin properties from Point Energy Partners with Vital Energy, Inc. for $220 million net to NOG
• Board of Directors approved new $150 million share repurchase authorization
• Management will recommend that the Board of Directors approve a 5% mid-year increase to NOG’s quarterly common stock dividend, to $0.42 per share, for the third quarter of 2024

Northern Oil and Gas, Inc. (NYSE: NOG) (“NOG” or “Company”) today announced the Company’s second quarter results.

MANAGEMENT COMMENTS

“NOG’s results continue to underscore its role as the definitive national working interest franchise, diversified by region and commodity mix, with low leverage, strong free cash flow, and growing cash returns,” commented Nick O’Grady, NOG’s Chief Executive Officer. “Our cash flow and production are at record levels, and we have increased our shareholder returns. At the same time, we continue to find both organic and inorganic paths to growth for our investors positioning NOG as a superior investment alternative for the long term. As we reinforce through our financial results and through our corporate actions, we are unrivaled in our niche and continue to press our advantage. We remain highly aligned with and motivated to continue to deliver for our investors in the future.”

SECOND QUARTER FINANCIAL RESULTS

Oil and natural gas sales for the second quarter were $561.0 million. Second quarter GAAP net income was $138.6 million or $1.36 per diluted share. Second quarter Adjusted Net Income was $147.8 million or $1.46 per adjusted diluted share. Adjusted EBITDA in the second quarter was $413.1 million, a 31% increase from the second quarter of 2023. See “Non-GAAP Financial Measures” below.

PRODUCTION

Second quarter production was 123,342 Boe per day, an increase of 3% from the first quarter of 2024 and an increase of 36% from the second quarter of 2023. Oil represented 57% of total production in the second quarter with 69,645 Bbls per day, a decrease of 1% from the first quarter of 2024 and an increase of 27% from the second quarter of 2023. NOG had 30.1 net wells turned in-line during the second quarter, compared to 25.3 net wells turned in-line in the first quarter of 2024. Production increased by 3% on a sequential quarter basis and represented record total quarterly volumes in the Permian and Appalachian Basins.

PRICING

During the second quarter, NYMEX West Texas Intermediate (“WTI”) crude oil averaged $80.66 per Bbl, and NYMEX natural gas at Henry Hub averaged $2.32 per Mcf. NOG’s unhedged net realized oil price in the second quarter was $77.11, representing a $3.55 differential to WTI prices. NOG’s unhedged net realized gas price in the second quarter was $2.47 per Mcf, representing 106% realization compared with Henry Hub pricing. Oil differentials were modestly improved versus the first quarter of 2024, with in-basin prices in the Permian and Williston Basins improving versus the prior quarter. Natural gas realizations were significantly better than forecast, despite weak Waha hub differentials in the Permian, driven by higher than expected NGL prices and higher absolute prices of natural gas during the period.

OPERATING COSTS

Lease operating costs were $100.9 million in the second quarter of 2024, or $8.99 per Boe, 7% lower on a per unit basis compared to the first quarter of 2024. LOE costs were aided by lower firm transport costs and the lack of weather-related shut-ins experienced in the prior period. Second quarter general and administrative (“G&A”) costs totaled $13.5 million or $1.21 per Boe. This includes $2.1 million of legal and transaction expenses in connection with bolt-on acquisitions and $3.0 million of non-cash stock-based compensation. NOG’s cash G&A costs excluding these amounts totaled $8.4 million or $0.75 per Boe in the second quarter, down $0.02 per Boe compared to the first quarter of 2024. Despite including costs associated with several unsuccessful transactions, this represented the low end of the previous per Boe guidance range.

CAPITAL EXPENDITURES AND ACQUISITIONS

Capital expenditures for the second quarter were $237.4 million (excluding non-budgeted acquisitions and other). This was comprised of $226.4 million of total drilling and completion (“D&C”) capital on organic and Ground Game assets, and $10.9 million of Ground Game activity. D&C spending did see further acceleration of development activity, with additional turn-in-lines in late June 2024, however the effect on the overall budgeted capital was relatively minimal. NOG’s weighted average gross authorization for expenditure (or AFE) elected to in the second quarter was $9.5 million, which was flat with the first quarter of 2024, which is in line with expectations.

NOG’s Permian Basin spending was 59% of the capital expenditures for the second quarter, the Williston was 37%, and the Appalachian was 4%. On the Ground Game acquisition front, NOG closed on 11 transactions through various structures during the second quarter totaling 6.1 net current and future development wells and 1,772 net acres.

LIQUIDITY AND CAPITAL RESOURCES

NOG had total liquidity in excess of $1.3 billion as of June 30, 2024, consisting of $1.3 billion of committed borrowing availability under the Revolving Credit Facility and $7.8 million of cash. Additionally, the Company had $25.5 million in the form of a restricted cash deposit for the pending XCL acquisition.

SHAREHOLDER RETURNS

In the second quarter of 2024, the Company repurchased 895,076 shares of common stock at an average price, inclusive of commissions, of $38.96 per share in the open market. Year-to-date, the Company has repurchased 1,444,432 shares at an average price, inclusive of commissions, of $37.99. In July 2024, the Company’s board of directors terminated the prior stock repurchase program, which was substantially depleted, and approved a new stock repurchase program to acquire up to $150.0 million of the Company’s outstanding common stock.

In May 2024, NOG’s Board of Directors declared a regular quarterly cash dividend for NOG’s common stock of $0.40 per share for stockholders of record as of June 27, 2024, to be paid on July 31, 2024.

On July 29, 2024, NOG’s Management announced that it intends to recommend that the Board of Directors approve a 5%, or $0.02 increase to the quarterly dividend to $0.42 per share, for the third quarter of 2024.

2024 ANNUAL GUIDANCE⁽¹⁾⁽²⁾

NOG is providing preliminary updated annual guidance, as shown in the table below, with the assumption that the pending XCL and Point acquisitions close on October 1, 2024.

Overall, the impact of the acquisitions serves to increase annual production and to reduce per unit operating expenses, production tax rates and per unit cash G&A costs. Additionally, capital expenditures are being adjusted to account for additional capital expected to be incurred on the acquired properties post-closing of the transactions. Given stronger than anticipated gas realizations year-to-date, further adjusted for the pending acquisitions, the Company is increasing guidance for gas realizations. Due to higher transportation costs expected in the Uinta Basin, slightly offset by modest improvements experienced year-to-date, the Company is widening its oil differentials for 2024 modestly. Additionally, NOG is adjusting its per unit DD&A rate guidance for the estimated impact of the pending acquisitions.

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SECOND QUARTER 2024 RESULTS

The following tables set forth selected operating and financial data for the periods indicated.

HEDGING

NOG hedges portions of its expected production volumes to increase the predictability of its cash flow and to help maintain a strong financial position. The following table summarizes NOG’s open crude oil commodity derivative swap contracts scheduled to settle after June 30, 2024.

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The following table summarizes NOG’s open natural gas commodity derivative swap contracts scheduled to settle after June 30, 2024.

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The following table presents NOG’s settlements on commodity derivative instruments and unsettled gains and losses on open commodity derivative instruments for the periods presented, which is included in the revenue section of NOG’s statement of operations:

CAPITAL EXPENDITURES & DRILLING ACTIVITY

SECOND QUARTER 2024 EARNINGS RELEASE CONFERENCE CALL

In conjunction with NOG’s release of its financial and operating results, investors, analysts and other interested parties are invited to listen to a conference call with management on Wednesday, July 31, 2024 at 8:00 a.m. Central Time.

Those wishing to listen to the conference call may do so via webcast or phone as follows:

Webcast: https://events.q4inc.com/attendee/514541633

Dial-In Number: (888) 596-4144 (US/Canada) and (646) 968-2525 (International)

Conference ID: 4503139 - NOG Second Quarter 2024 Earnings Conference Call

Replay Dial-In Number: (800) 770-2030 (US/Canada) and (609) 800-9909 (International)

Replay Access Code: 4503139 - Replay will be available through August 14, 2024

ABOUT NOG

NOG is a real asset company with a primary strategy of acquiring and investing in non-operated minority working and mineral interests in the premier hydrocarbon producing basins within the contiguous United States. More information about NOG can be found at www.noginc.com.

SAFE HARBOR

This press release contains forward-looking statements regarding future events and NOG’s future results that are subject to the safe harbors created under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included in this release regarding NOG’s financial position, operating and financial performance, business strategy, dividend plans and practices, plans and objectives of management for future operations, industry conditions, and indebtedness covenant compliance are forward-looking statements. When used in this release, forward-looking statements are generally accompanied by terms or phrases such as “estimate,” “project,” “predict,” “believe,” “expect,” “continue,” “anticipate,” “target,” “could,” “plan,” “intend,” “seek,” “goal,” “will,” “should,” “may” or other words and similar expressions that convey the uncertainty of future events or outcomes. Items contemplating or making assumptions about actual or potential future production and sales, market size, collaborations, and trends or operating results also constitute such forward-looking statements.

Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond NOG’s control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following: changes in crude oil and natural gas prices, the pace of drilling and completions activity on NOG’s current properties and properties pending acquisition; infrastructure constraints and related factors affecting NOG’s properties; cost inflation or supply chain disruptions; ongoing legal disputes over, and potential shutdown of, the Dakota Access Pipeline; NOG’s ability to acquire additional development opportunities, potential or pending acquisition transactions, the projected capital efficiency savings and other operating efficiencies and synergies resulting from NOG’s acquisition transactions, integration and benefits of property acquisitions, or the effects of such acquisitions on NOG’s cash position and levels of indebtedness; changes in NOG’s reserves estimates or the value thereof; disruption to NOG’s business due to acquisitions and other significant transactions; general economic or industry conditions, nationally and/or in the communities in which NOG conducts business; changes in the interest rate environment, legislation or regulatory requirements, conditions of the securities markets; risks associated with NOG’s 3.625% convertible senior notes due 2029 (the “Convertible Notes”), including the potential impact that the Convertible Notes may have on NOG’s financial position and liquidity, potential dilution, and that provisions of the Convertible Notes could delay or prevent a beneficial takeover of NOG; the potential impact of the capped call transaction undertaken in tandem with the Convertible Notes issuance, including counterparty risk; increasing attention to environmental, social and governance matters; NOG’s ability to consummate any pending acquisition transactions; other risks and uncertainties related to the closing of pending acquisition transactions; NOG’s ability to raise or access capital; cyber-incidents could have a material adverse effect on NOG’s business, financial condition or results of operations; changes in accounting principles, policies or guidelines; events beyond NOG’s control, including a global or domestic health crisis, acts of terrorism, political or economic instability or armed conflict in oil and gas producing regions; and other economic, competitive, governmental, regulatory and technical factors affecting NOG’s operations, products and prices. Additional information concerning potential factors that could affect future results is included in the section entitled “Item 1A. Risk Factors” and other sections of NOG’s most recent Annual Report on Form 10-K for the year ended December 31, 2023, and Quarterly Report on Form 10-Q, as updated from time to time in amendments and subsequent reports filed with the SEC, which describe factors that could cause NOG’s actual results to differ from those set forth in the forward-looking statements.

NOG has based these forward-looking statements on its current expectations and assumptions about future events. While management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond NOG’s control. Accordingly, results actually achieved may differ materially from expected results described in these statements. NOG does not undertake any duty to update or revise any forward-looking statements, except as may be required by the federal securities laws.

Non-GAAP Financial Measures

Adjusted Net Income, Adjusted EBITDA and Free Cash Flow are non-GAAP measures. NOG defines Adjusted Net Income (Loss) as income (loss) before income taxes, excluding (i) (gain) loss on unsettled commodity derivatives, net of tax, (ii) (gain) loss on extinguishment of debt, net of tax, (iii) contingent consideration (gain) loss, net of tax, (iv) acquisition transaction costs, net of tax, and (v) (gain) loss on unsettled interest rate derivatives, net of tax. NOG defines Adjusted EBITDA as net income (loss) before (i) interest expense, (ii) income taxes, (iii) depreciation, depletion, amortization and accretion, (iv) non-cash stock-based compensation expense, (v) (gain) loss on extinguishment of debt, (vi) contingent consideration (gain) loss (vii) acquisition transaction costs, (viii) (gain) loss on unsettled interest rate derivatives, and (ix) (gain) loss on unsettled commodity derivatives. NOG defines Free Cash Flow as cash flows from operations before changes in working capital and other items, less (i) capital expenditures, excluding non-budgeted acquisitions and changes in accrued capital expenditures and other items. A reconciliation of each of these measures to the most directly comparable GAAP measure is included below.

Management believes the use of these non-GAAP financial measures provides useful information to investors to gain an overall understanding of current financial performance. Management believes Adjusted Net Income and Adjusted EBITDA provide useful information to both management and investors by excluding certain expenses and unrealized commodity gains and losses that management believes are not indicative of NOG’s core operating results. Management believes that Free Cash Flow is useful to investors as a measure of a company’s ability to internally fund its budgeted capital expenditures, to service or incur additional debt, and to measure success in creating stockholder value. In addition, these non-GAAP financial measures are used by management for budgeting and forecasting as well as subsequently measuring NOG’s performance, and management believes it is providing investors with financial measures that most closely align to its internal measurement processes. The non-GAAP financial measures included herein may be defined differently than similar measures used by other companies and should not be considered an alternative to, or more meaningful than, the comparable GAAP measures. From time to time NOG provides forward-looking Free Cash Flow estimates or targets; however, NOG is unable to provide a quantitative reconciliation of the forward looking non-GAAP measure to its most directly comparable forward looking GAAP measure because management cannot reliably quantify certain of the necessary components of such forward looking GAAP measure. The reconciling items in future periods could be significant.

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Reconciliation of Free Cash Flow

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