Wunderlich Sees Better Days For Northern Oil & Gas: 'Good Liquidity, Solid Hedges Keep Financials Ready'

Wunderlich Securities has raised the price target of Northern Oil & Gas, Inc.

to $ 5 from $4, saying that "good liquidity and solid hedges keep the financials ready for better days." Analyst Jason Wangler noted that the company navigated the downturn by cutting costs, more efficient well participations and trimming debt with cash flow, thereby strengthening its balance sheet and liquidity. These steps also allowed the firm to keep production at levels that generates ample revenue and cash flow. "With oil prices and differentials improving of late, NOG has seen additional cash flows and the shut-in production from 1Q16 could be coming back on throughout the year. Additionally, the company's inventory of wells in process may provide ability to ramp production if prices cooperate," Wangler wrote in a note. "With 79% of its wells using high intensity completions, which is over double the38% figure in 4Q14, we believe NOG's added wells should be more productive going forward and help mitigate the activity slowdown somewhat with added productivity," Wangler added. On the liquidity front, NOG's bank line still has over $200 million of cash on it and Wangler expects that to increase as the company uses cash flow from hedges to reduce the current outstanding balance of $117 million. "This should allow the company to enter 2017 in a better position from a debt perspective and have the liquidity needed to continue moving through the cycle — or ramp if prices and activity cooperate," the analyst highlighted. The analyst also raised the estimates on expectation of production resiliency and lower costs as "NOG remains an efficient company in the Williston given its low-cost, non-operated strategy." The analyst, who has a Hold rating on the stock, raised his 2016 EPS estimate to ($0.05) from ($0.11). At the time of writing, shares of NOG rose 1.78 percent to $4.57.