NOG Announces Fourth Quarter and Full Year 2023 Results; Provides Detailed 2024 Guidance

FOURTH QUARTER HIGHLIGHTS

• Production of 114,363 Boe per day (60.2% oil), a 45% increase from the fourth quarter of the prior year
• GAAP cash flow from operations of $342.4 million. Excluding changes in net working capital, cash flow from operations was $365.9 million, an increase of 56% from the fourth quarter of the prior year
• Capital expenditures of $260.0 million, excluding previously-announced non-budgeted acquisitions and other items
• Increased Free Cash Flow (non-GAAP) by 19% to $103.6 million from the fourth quarter of the prior year. See “Non-GAAP Financial Measures” below
• Announced and subsequently closed Utica and Northern Delaware acquisitions
• Raised $290.6 million in net proceeds from a Common Stock offering in October 2023
• Declared $0.40 per share common dividend for the first quarter of 2024, an increase of 18% from the first quarter of 2023
• Providing detailed 2024 production, capital spending and line-item cost guidance

Northern Oil and Gas, Inc. (NYSE: NOG) (“NOG”) today announced the company’s fourth quarter and full year 2023 results and provided 2024 guidance.

MANAGEMENT COMMENTS

“NOG closed out 2023 in record fashion,” commented Nick O’Grady, NOG’s Chief Executive Officer. “Our oil and total volumes grew to all-time highs and we generated record cash flow from operations, while we saw our leverage levels decline meaningfully year over year, even in a year of lower commodity prices.”

Mr. O’Grady continued, “As we look out to 2024, our plan delivers standout 20% production growth and significant cash generation that will provide flexibility to further enhance returns. We have great options to deliver additional shareholder returns, growth and other value enhancing measures, all with the goal of delivering another year of superior relative and absolute return. ”

FINANCIAL RESULTS

Oil and natural gas sales for the fourth quarter were $543.4 million, an increase of 22% over the prior year period. Fourth quarter GAAP net income was $388.9 million or $3.90 per diluted share. Fourth quarter Adjusted Net Income was $160.7 million or $1.61 per adjusted diluted share, an increase of $38.2 million or $0.18 per adjusted diluted share over the prior year period. Adjusted EBITDA in the fourth quarter was $401.7 million, an increase of 52% over the prior year period. (See “Non-GAAP Financial Measures” below.)

Oil and natural gas sales for full year 2023 were $1.9 billion. Full year 2023 GAAP net income was $923.0 million or $10.03 per diluted share. Full year 2023 Adjusted Net Income was $604.7 million or $6.58 per adjusted diluted share. Full year 2023 Adjusted EBITDA was $1.4 billion, an increase of 31% over the prior year. (See “Non-GAAP Financial Measures” below.)

PRODUCTION

Fourth quarter production was 114,363 Boe per day, a 45% increase from the prior year period. Oil production grew over 5,300 Bbl per day, or 8% sequentially and represented 60.2% of production in the fourth quarter. NOG had 27.6 net wells turned in line during the fourth quarter, compared to 22.6 net wells turned in line in the third quarter of 2023. NOG’s fourth quarter benefited from a full contribution of the Novo acquisition and an increase in turn-in-line activity, offset by planned shut-ins at the Mascot Project from offset frac operations. Full year 2023 production was 98,822 Boe per day, a 31% increase from the prior year.

PRICING

During the fourth quarter, NYMEX West Texas Intermediate (“WTI”) crude oil averaged $78.53 per Bbl, and NYMEX natural gas at Henry Hub averaged $2.92 per Mcf. NOG’s unhedged net realized oil price in the fourth quarter was $74.51 per Bbl, representing a $4.02 differential to WTI prices. NOG’s fourth quarter unhedged net realized gas price was $2.84 per Mcf, representing approximately 97% realizations compared with Henry Hub pricing. In the fourth quarter, Williston Basin oil differentials widened significantly, and the Company saw modest widening of oil differentials in the Permian as well. Natural gas realizations benefited from a slight quarter over quarter improvement in pricing and a seasonal uplift in NGL prices due to winter demand. The Company also benefited from seasonally stronger natural gas differentials in Appalachia.

For full year 2023, NOG’s realized oil price differential was $2.83 per Bbl. NOG’s full year unhedged net realized gas price was $2.98 per Mcf, representing approximately 112% realizations compared with Henry Hub pricing.

OPERATING COSTS

Lease operating costs were $102.1 million in the fourth quarter of 2023, or $9.70 per Boe, an increase of 10.7% on a per unit basis compared to the third quarter. The increase in unit costs was primarily driven by a return to more normalized levels of expensed workover activity versus the third quarter as well as some fixed cost absorption from shut-ins at the Mascot project. Fourth quarter operating costs also included approximately $4.0 million in firm transport charges for the Appalachian properties, reflecting a refinement in NOG’s quarterly accrual process as compared to its prior practice. The first quarter accrual is expected to be approximately $2.3 million and, based on current gas prices, lower on a quarterly basis thereafter. The Company expects the firm transport charges to sunset by mid-2025.

Fourth quarter general and administrative (“G&A”) costs totaled $9.6 million, which includes non-cash stock-based compensation. Cash G&A costs totaled $8.4 million or $0.80 per Boe in the fourth quarter. Excluding approximately $0.8 million of transaction costs, remaining cash G&A was $7.6 million, or $0.72 per Boe, a decline of 29% or $0.29 per Boe compared to the fourth quarter of 2022.

CAPITAL EXPENDITURES

Capital spending for the fourth quarter, excluding non-budgeted acquisitions and other items, was $260.0 million. This was comprised of $154.1 million of organic drilling and completion (“D&C”) capital and $105.9 million of total acquisition spending, inclusive of ground game D&C spending. NOG had 27.6 net wells turned in line in the fourth quarter. Wells in process totaled 66.5 net wells as of December 31, 2023. Total 2023 capital expenditures, excluding non-budgeted acquisitions were $917.1 million, above expectations driven by significant ground game opportunities executed and an acceleration of completion activity in the third and fourth quarters.

LIQUIDITY, CAPITAL RESOURCES AND RECENT ACQUISITIONS

As of December 31, 2023, NOG had $8.2 million in cash and $161.0 million of borrowings outstanding on its revolving credit facility. NOG had total liquidity of $1,097.2 million as of December 31, 2023, consisting of cash and committed borrowing availability under the revolving credit facility. Additionally, NOG had a $17.1 million acquisition deposit in an escrow account as of December 31, 2023, for an acquisition that closed during the first quarter of 2024.

In October 2023, NOG completed an underwritten public offering of 7,475,000 shares of its common stock resulting in proceeds of $290.6 million, before offering expenses. Proceeds from the offering were used to reduce the outstanding balance on the Company’s Revolving Credit Facility and for general corporate purposes.

On February 1, 2024, NOG announced the closings of its November 2023 acquisitions of non-operated assets in the Utica and Northern Delaware Basins. At closing, NOG acquired approximately 3,000 net acres in the Delaware Basin as well as producing and in-process properties in both the Delaware and Utica Basins. The initial closing settlements totaled $162.2 million in cash plus a $17.1 million deposit paid at signing in November 2023.

SHAREHOLDER RETURNS

In February 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 March 28, 2024, which will be paid on April 30, 2024. This represented a 18% increase from the first quarter of 2023.

In October 2023, 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 December 28, 2023, which was paid on January 31, 2024. This represented a 33% increase from the fourth quarter of 2022.

2024 ANNUAL GUIDANCE

NOG anticipates approximately 115,000 - 120,000 Boe per day of production in 2024, an increase of approximately 20% at the midpoint from 2023 levels. NOG currently expects total capital spending in the range of $825 - $900 million for 2024 with approximately 50% of its 2024 budget to be spent on the Permian, 35% on the Williston, and 1% on the Appalachian. The remainder of the budget is for Ground Game capital and increased workover and other items.

PROVED RESERVES AS OF DECEMBER 31, 2023

Total proved reserves at December 31, 2023, increased 3% from year-end 2022 to 339.7 million barrels of oil equivalent (69% proved developed) with an associated pre-tax PV-10 value of $5.0 billion (80% proved developed) at SEC Pricing. The reserves are calculated under SEC guidelines relating to both commodity price assumptions and a maximum five year drill schedule. See “Non-GAAP Financial Measures” below regarding PV-10 value.

Capitalized costs are a function of the number of net well additions during the period, and changes in wells in process from the prior year-end. Capital expenditures attributable to the increase of 11.1 in net wells in process during the year ended December 31, 2023 are reflected in the annual amounts incurred for drilling and development capital expenditures.

ACREAGE

As of December 31, 2023, NOG controlled leasehold of approximately 272,251 net acres in the Williston, Permian and Appalachian Basins in the United States, and approximately 91% of this total acreage position was developed, held by production, or held by operations.

FOURTH QUARTER 2023 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 Friday, February 23, 2024 at 8:00 a.m. Central Time.

Those wishing to listen to the conference call may do so via the company’s website, www.noginc.com, or by phone as follows:

Webcast: https://events.q4inc.com/attendee/329042393

Dial-In Number: (888) 340-5044 (US/Canada) and (646) 960-0363 (International)

Conference ID: 9661789 - Fourth Quarter and Year-End 2023 Earnings Conference Call

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

Replay Access Code: 9661789 - Replay will be available through March 8, 2024

ABOUT NORTHERN OIL AND GAS

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 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 Act”). 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 Convertible Notes, including the potential impact that the Convertible Notes may have 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 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 more recent Annual Report on Form 10-K 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. 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. Net income (loss) is the most directly comparable GAAP measure for both Adjusted Net Income and Adjusted EBITDA. Cash flows from operations is the most directly comparable GAAP measure for Free Cash Flow. NOG defines Adjusted Net Income (Loss) as net income (loss) excluding (i) (gain) loss on unsettled commodity derivatives, net of tax, (ii) (gain) loss on the extinguishment of debt, net of tax, (iii) (gain) loss on unsettled interest rate derivatives, net of tax, (iv) contingent consideration (gain) loss, net of tax, and (v) acquisition transaction costs, 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 the extinguishment of debt, (vi) contingent consideration (gain) loss, (vii) acquisition transaction expense, (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 (ii) preferred stock dividends. A reconciliation of each of these measures to the most directly comparable GAAP measure is included below.

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. Specifically, management believes the non-GAAP financial measures included herein provide useful information to both management and investors by excluding certain items that management believes are not indicative of NOG’s core operating results. 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.

Pre-tax PV10%, or PV-10, may be considered a non-GAAP financial measure as defined by the SEC and is derived from the standardized measure of discounted future net cash flows, which is the most directly comparable GAAP measure for proved reserves calculated using SEC pricing. PV-10 is a computation of the Standardized Measure of discounted future net cash flows on a pre-tax basis. PV-10 is equal to the Standardized Measure of discounted future net cash flows at the applicable date, before deducting future income taxes, discounted at 10 percent. Management believes that the presentation of PV-10 is relevant and useful to investors because it presents the discounted future net cash flows attributable to NOG’s estimated net proved reserves prior to taking into account future corporate income taxes, and it is a useful measure for evaluating the relative monetary significance of NOG’s oil and natural gas properties. Further, investors may utilize the measure as a basis for comparison of the relative size and value of NOG’s reserves to other companies. Management uses this measure when assessing the potential return on investment related to NOG’s oil and natural gas properties. PV-10, however, is not a substitute for the Standardized Measure of discounted future net cash flows. A reconciliation of PV-10 to the Standardized Measure is included below.

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