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Northern Oil and Gas, Inc. Announces Fourth Quarter and Full Year 2020 Results

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Northern Oil and Gas, Inc. (NYSE American: NOG) (“Northern”) today announced the company’s fourth quarter and full year 2020 results.

MANAGEMENT COMMENTS

“Northern enters 2021 in an enviable position,” commented Nick O’Grady, Northern’s Chief Executive Officer. “The fourth quarter showed the durability of our strategy, the cash generating power of our asset base, and our commitment to focusing on return on capital employed. The flexibility and dynamic nature of our non-operated business model have never been so clear. We enter 2021 as a multi-basin company, dedicated to the allocation of capital into the highest return projects, with a reinvigorated capital structure that should provide for growth opportunities and a clear path to our ultimate goal: to responsibly return capital to shareholders.”

FINANCIAL RESULTS

Fourth quarter Adjusted Net Income was $35.7 million or $0.64 per diluted share, up from $21.5 million or $0.50 per diluted share in the prior year. Fourth quarter GAAP net loss was $146.2 million or $3.21 per diluted share. Adjusted EBITDA in the fourth quarter was $94.3 million.

Full year 2020 Adjusted Net Income was $96.0 million or $1.82 per diluted share. Full year 2020 GAAP net loss was $921.3 million or $21.55 per diluted share. Full year 2020 Adjusted EBITDA was $351.8 million. (See “Non-GAAP Financial Measures” below.)

PRODUCTION

Fourth quarter production was 35,738 Boe per day, a 23% increase from the third quarter. Oil represented 76% of production in the fourth quarter. Northern estimates that curtailments and shut-ins reduced the Company’s average daily production by approximately 4,200 Boe per day in the fourth quarter. Northern had 5.9 net wells turned online during the fourth quarter, compared to 3.4 net wells turned online in the third quarter of 2020. Full year 2020 production was 33,078 Boe per day.

PRICING

During the fourth quarter, NYMEX West Texas Intermediate (“WTI”) crude oil averaged $42.63 per Bbl, and NYMEX natural gas at Henry Hub averaged $2.48 per Mcf. Northern’s unhedged net realized oil price in the fourth quarter was $35.69 per Bbl, representing a $6.94 differential to WTI prices. Northern’s fourth quarter unhedged net realized gas price was $2.13 per Mcf, representing approximately 86% realizations compared with Henry Hub pricing.

For full year 2020, Northern’s realized oil differential was $6.63 per Bbl. Northern’s full year unhedged net realized gas price was $1.14 per Mcf, representing approximately 57% realizations compared with Henry Hub pricing.

OPERATING COSTS

Lease operating costs were $28.2 million in the fourth quarter of 2020, or $8.58 per Boe, down 5% on a per unit basis compared to the third quarter. Fourth quarter general and administrative (“G&A”) costs totaled $4.4 million, which includes non-cash stock-based compensation. Cash G&A costs totaled $3.4 million or $1.04 per Boe in the fourth quarter, down 25% on a per unit basis compared to the third quarter.

CAPITAL EXPENDITURES AND ACQUISITIONS

Capital spending for the fourth quarter was $48.9 million, made up of $17.9 million of organic drilling and completion (“D&C”) capital and $31.0 million of total acquisition spending and other items, inclusive of ground game D&C spending. Northern had 5.9 net wells turned online in the fourth quarter. Wells in process totaled 28.1 net wells as of December 31, 2020. On the ground game acquisition front, Northern closed on 11 transactions during the fourth quarter totaling 4.6 net wells, 663 net mineral acres and 373 net royalty acres (standardized to a 1/8 royalty interest).

RELIANCE ACQUISITION UPDATE

On February 3, 2021, Northern announced a definitive agreement to acquire assets from Reliance Marcellus, LLC, a subsidiary of Reliance Industries, Ltd., for $175.0 million in cash plus 3.25 million common stock warrants. The acquisition has an effective date of July 1, 2020 and is expected to close in April 2021. EQT Corporation, the operator of substantially all of the assets, has elected to exercise its preferential purchase right on a portion of the assets, which (together with the exercise of other preferential purchase rights) will reduce the cash purchase price, net to Northern, by approximately $48.6 million, or 28%. Northern estimates it retains approximately 99% of the net drilling inventory on the assets, compared to prior estimates. Due to the largely developed nature of the properties subject to the preferential right, over a five-year period, Northern expects they would have only contributed 10-15% of the long term cash flows from the acquired properties. Additionally, Northern estimates an 18% reduction in capital spending on the acquired assets in 2021, compared to prior estimates. Northern has released detailed updated guidance for the acquired assets in the guidance section below.

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2020, Northern had $1.8 million in cash and $532.0 million of borrowings outstanding on its revolving credit facility. Northern had total liquidity of $129.8 million as of December 31, 2020, consisting of cash and borrowing availability under the revolving credit facility.

On January 4, 2021, Northern retired $65 million, or 50% of its VEN Bakken Note. In February 2021, Northern strengthened its balance sheet through common equity and debt transactions. Northern issued 14.4 million shares of common equity for gross proceeds of $140.2 million. Northern also issued $550 million of 8.125% Senior Unsecured Notes due 2028. With the net proceeds from these transactions, Northern retired the remaining $65 million of its VEN Bakken Note and retired $272.1 million, or 95% of its remaining Senior Secured Notes due 2023 on February 18, 2021. Northern intends to call or purchase the remaining 2023 Notes on or before May 15, 2021. Northern used the remainder of the proceeds to retire debt under its revolving credit facility and for cash on hand.

As of March 11, 2021, Northern had $287.0 million of borrowings outstanding on its revolving credit facility, leaving $373.0 million of borrowing availability. Northern additionally has $15.7 million Senior Secured Notes due 2023 that remain outstanding, and $550 million of newly issued Senior Unsecured Notes due 2028.

In April 2021, upon closing of the Reliance acquisition, Northern will fund the unadjusted cash purchase price of $126.4 million, less the $17.5 million deposit previously paid. The cash purchase price will be subject to typical closing adjustments, including an expected reduction for the net cash flows already received by Reliance from the properties since the effective date.

2021 ESTIMATED GUIDANCE — EXISTING WILLISTON AND PERMIAN PROPERTIES

2021 Guidance Ranges:

 

Annual Production (Boe per day)

37,750 - 42,750

Net Wells Added to Production

32 - 34

Total Capital Expenditures ($ in millions)

$180 - $225

 

 

Operating Expenses Guidance:

 

Production Expenses (per Boe)

$8.75 - $9.75

Production Taxes

10% of Net Oil Revenues, $0.06 per Mcf for Natural Gas

Oil as a Percentage of Production Volumes

78 - 80%

Average Differential to NYMEX WTI

$6.50 - $8.50

2021 ESTIMATED GUIDANCE — RELIANCE ASSETS (PENDING ACQUISITION) — FULL YEAR

2021 Guidance Ranges:

 

Annual Production (Mmcf per day)

75 - 85

Net Wells Added to Production

3.5 - 3.8

Total Capital Expenditures ($ in millions)

$20 - $25

 

 

Operating Expenses Guidance:

 

Production, Asset G&A and Marketing Expenses (per Mcf)

$0.85 - $0.95

Average Differential to NYMEX Henry Hub (per Mcf)

$0.55 - $0.65

2021 ESTIMATED GUIDANCE — CORPORATE

 

Q1 Pre-Reliance
Closing

 

Q2-Q4 Post-Reliance
Closing

General and Administrative Expense (per Boe):

 

 

 

Cash (excluding any one-time transaction costs)

$1.10 - $1.20

 

$0.75 - $0.85

Non-Cash

$0.30

 

$0.20

FOURTH QUARTER 2020 RESULTS

The following table sets forth selected operating and financial data for the periods indicated.

 

Three Months Ended
December 31,

 

2020

 

2019

 

% Change

Net Production:

 

 

 

 

 

Oil (Bbl)

2,508,618

 

 

3,218,885

 

 

(22)

%

Natural Gas and NGLs (Mcf)

4,675,896

 

 

4,942,194

 

 

(5)

%

Total (Boe)

3,287,934

 

 

4,042,584

 

 

(19)

%

 

 

 

 

 

 

Average Daily Production:

 

 

 

 

 

Oil (Bbl)

27,268

 

 

34,988

 

 

(22)

%

Natural Gas and NGL (Mcf)

50,825

 

 

53,720

 

 

(5)

%

Total (Boe)

35,738

 

 

43,941

 

 

(19)

%

 

 

 

 

 

 

Average Sales Prices:

 

 

 

 

 

Oil (per Bbl)

$

35.69

 

 

$

49.20

 

 

(27)

%

Effect of Gain on Settled Derivatives on Average Price (per Bbl)

14.51

 

 

2.71

 

 

 

Oil Net of Settled Derivatives (per Bbl)

50.20

 

 

51.91

 

 

(3)

%

 

 

 

 

 

 

Natural Gas and NGLs (per Mcf)

2.13

 

 

0.47

 

 

353

%

Effect of Gain (Loss) on Settled Derivatives on Average Price (per Mcf)

(0.20)

 

 

—

 

 

 

Natural Gas Net of Settled Derivatives (per Mcf)

1.93

 

 

0.47

 

 

311

%

 

 

 

 

 

 

Realized Price on a Boe Basis Excluding Settled Commodity Derivatives

30.27

 

39.75

 

(24)

%

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Crude Petroleum and Natural Gas Extraction
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