NOG Reports 31% Year-Over-Year Increase in Adjusted EBITDA

Northern Oil and Gas, Inc. achieved impressive financial results during its second quarter 2024 earnings call, reporting a 31% year-over-year increase in adjusted EBITDA and a 52% rise compared to two years prior. The company also experienced a 33% growth in cash flow from operations and a 25% return on capital, surpassing the performance of peers in the industry. Highlighting its most significant acquisition to date, the joint purchase of SCO Resources’ assets in the Uinta Basin, NOG is well-positioned for substantial long-term dividends. The company remains committed to delivering value and profit for its investors, with expectations of per-share growth extending through 2025 and plans for a midyear dividend increase. Production rates surged to over 123,000 barrels of oil equivalent (BOE) per day, driven by activities in key regions and strategic acquisitions, indicating a steady production outlook and heightened free cash flow for the balance of the year.

Key Takeaways:

• Adjusted EBITDA rose by 31% year-over-year, and 52% compared to two years ago.
• Cash flow from operations increased by 33% over the previous year.
• NOG achieved a return on capital of approximately 25%, outpacing industry rivals.
• A midyear dividend increase is planned, along with a renewed share repurchase initiative.
• The joint acquisition of SCO Resources Uinta Basin assets represents NOG’s largest transaction to date.
• Production levels rose to over 123,000 BOE per day, with expectations of stability throughout 2024.
• NOG increased its total production guidance for the year by 4%.

Company Outlook:

• NOG projects continued growth, forecasting per-share growth through 2024 and 2025.
• The company plans further capital allocation for share repurchases.
• NOG aims to maximize value and returns for investors while focusing on long-term asset ownership.

Challenges:

• A decline in natural gas production is anticipated for the remainder of the year.
• The net debt to last quarter annualized EBITDA ratio stands at 1.1 times, expected to increase modestly following recent acquisitions.

Positive Developments:

• Record average daily production and strong free cash flow were reported.
• Production costs are trending down, with an expectation of lower lease operating expenses (LOE) per BOE.
• The company is actively pursuing joint ventures and acquisitions to enhance its asset portfolio.

Misses:

• No specific financial misses were reported during the earnings call.

Q&A Highlights:

• The cleanup process for Mascot wells is expected to conclude by the end of Q3.
• NOG is prepared for future mergers and acquisitions, targeting a leverage ratio of 1.5 times.
• The company is exploring refracturing opportunities and expansion in the Delaware Basin.
• Capital expenditures for the next year are expected to remain consistent with this year’s levels.

In summary, NOG’s second-quarter performance illustrates a robust financial standing, highlighted by significant production growth and profitability. The company’s strategy of expanding its asset base through targeted acquisitions, coupled with a commitment to shareholder returns via dividends and share buybacks, reflects confidence in sustained growth and profitability for the future.