Market Overview

Northern Oil and Gas, Inc. Announces 2018 Second Quarter Results and Increases 2018 Production Guidance

Share:

Northern Oil and Gas, Inc. (NYSE:NOG) today announced 2018
second quarter results and increased the company's full-year 2018
production guidance.

HIGHLIGHTS

  • Raising full year 2018 production guidance; expect average daily
    production to increase by 60 - 64% over 2017.
  • Second quarter production exceeded expectations, increasing 53%
    year-over-year and 17% sequentially to average 21,046 barrels of oil
    equivalent ("Boe") per day.
  • Exited the second quarter with 16.4 net wells in process after adding
    8.1 organic net wells to production.
  • Announced $500 million in signed acquisitions year-to-date using a
    combination of cash and equity, which Northern expects to fold into
    its existing asset base without the addition of new employees.

MANAGEMENT COMMENT

"We are only half way through 2018; however, production has materially
exceeded our expectations, cash costs are lower and our success
executing on acquisitions has surpassed even our lofty internal goals,"
commented Northern's Chief Executive Officer, Brandon Elliott. "We plan
to close our Pivotal Petroleum and W Energy acquisitions at the end of
the third quarter, upon which Northern will have reached our goals of
substantially growing EBITDA and improving our debt metrics,
significantly ahead of plan. We are still not satisfied and continue to
aggressively look at all avenues to drive increased growth and returns
to our shareholders."

GUIDANCE

Northern is raising its 2018 production guidance as a result of
increased activity as well as the recently announced Pivotal Petroleum
and W Energy acquisitions that are expected to close at the end of the
third quarter. Northern expects to add approximately 25 - 27 organic net
wells to production for the year with a drilling and completion budget
of between $200 and $216 million, resulting in a total capital
expenditure budget, including acreage, workover and other capitalized
costs but excluding announced acquisitions, of between $215 and $230
million. Additional information regarding Northern's current
expectations are included in the tables below.

       
2018 Production: Boe Per Day

Year/Year
Increase

1st Quarter - Actual 17,995 35%
2nd Quarter - Actual 21,046 53%
3rd Quarter - Estimate

(Organic + Salt Creek)(1)

23,000 - 24,000
4th Quarter - Estimate

(Organic + Salt Creek + Pivotal + W Energy)(2)

32,500 - 34,000  
Annual - Estimate (average Boe per day)(2) 23,670 - 24,300 60% - 64%

__________

(1)

  The Salt Creek acquisition closed on June 4, 2018.

(2)

Assumes closing of pending Pivotal Petroleum and W Energy
acquisitions at the end of the third quarter of 2018.
   
Operating Expenses Guidance: 2018
Production Expenses (per Boe) $7.50 - $8.50
Production Taxes (% of Oil & Gas Sales) ~ 9.2%
General and Administrative Expense (per Boe):
Cash $1.25 - $1.50
Non-Cash $0.25 - $0.50
 
Average Differential to NYMEX WTI $4.75 - $5.75
 

SECOND QUARTER 2018 RESULTS

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

   
Three Months Ended June 30,
2018     2017     % Change
Net Production:
Oil (Bbl) 1,625,788 1,054,263 54 %
Natural Gas and NGLs (Mcf) 1,736,651 1,206,103 44 %
Total (Boe) 1,915,230 1,255,280 53 %
 
Average Daily Production:
Oil (Bbl) 17,866 11,585 54 %
Natural Gas and NGLs (Mcf) 19,084 13,254 44 %
Total (Boe) 21,046 13,794 53 %
 
   
Three Months Ended
June 30,
2018   2017
Net Sales:
Oil Sales $ 101,036,507 $ 43,531,170
Natural Gas and NGL Sales 8,010,371 4,849,836
Gain (Loss) on Settled Derivatives   (12,266,857 )   2,341,030  
Total Oil, Natural Gas and NGL Sales Including all Derivative
Settlements
96,780,021 50,722,036
 
Average Sales Prices:
Average NYMEX Price (per Bbl)(1) $ 67.97 $ 48.15
Oil Differential (per Bbl)(2)   (5.77 )   (6.86 )
Oil (per Bbl) 62.20 41.29
Effect of Gain (Loss) on Settled Derivatives on Average Price (per
Bbl)
  (7.55 )   2.22  
Oil Net of Settled Derivatives (per Bbl) 54.65 43.51
Natural Gas and NGLs (per Mcf) 4.61 4.02
 
Realized Price on a Boe Basis Including all Realized Derivative
Settlements
50.58 40.41
 
Operating Expenses:
Production Expenses $ 14,548,922 $ 12,137,540
Production Taxes 10,131,843 4,439,774
General and Administrative Expense 3,251,239 4,317,139
Depletion, Depreciation, Amortization and Accretion 22,596,028 13,682,452
 
Costs and Expenses (per Boe):
Production Expenses $ 7.60 $ 9.67
Production Taxes 5.29 3.54
General and Administrative Expense 1.70 3.44
Depletion, Depreciation, Amortization and Accretion 11.80 10.90
 
Net Income (Loss) $ (96,546,698 ) $ 13,801,859
Net Income (Loss) Per Common Share – Diluted $ (0.49 ) $ 0.22
 
Adjusted Net Income (Loss)(3) $ 18,041,826 $ (175,490 )
Adjusted Net Income (Loss) Per Common Share – Diluted(3) $ 0.09 $
 
Adjusted EBITDA(3) $ 70,545,647 $ 30,746,345

__________

(1)   Based on average NYMEX WTI closing prices.
(2) Average oil price differential to the NYMEX WTI.
(3) Please see "Non-GAAP Financial Measures" below for additional
information and a reconciliation to the most directly comparable
GAAP Measure.
 

CAPITAL EXPENDITURES & DRILLING ACTIVITY

 
Three Months Ended
June 30, 2018
Capital Expenditures Incurred:
Drilling and Development Capital Expenditures $52.3 million
Acquisition of Oil and Natural Gas Properties $59.8 million
Other $0.7 million
 
Net Wells Added to Production (Includes 5.5 Net Salt Creek
Additions)
13.6
Net Producing Wells (Period-End) 248.3
 
Net Wells in Process (Period-End) 16.4
 
Weighted Average AFE for In-Process Wells (Period-End) $8.0 million
 

ACREAGE

As of June 30, 2018, Northern controlled leasehold of approximately
142,248 net acres targeting the Williston Basin Bakken and Three Forks
formations. As of June 30, 2018, approximately 93% of the company's
North Dakota acreage position, and approximately 92% of its total
acreage position, was developed, held by production or held by
operations.

LIQUIDITY

At June 30, 2018, Northern had available liquidity of approximately
$240.9 million, comprised of $200.9 million in cash on hand and $40.0
million of capacity on its first lien term loan facility.

HEDGING

Northern 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 tables summarize Northern's open crude
oil derivative and basis swap contracts scheduled to settle after
June 30, 2018.

 
Crude Oil Derivative Swaps
Contract Period     Volume (Bbls)    

Weighted Average Price (per Bbl)

2018:
3Q 1,477,460 $60.62
4Q 1,381,300 $60.44
2019:
1Q 1,240,200 $58.83
2Q 1,137,500 $58.03
3Q 863,600 $56.72
4Q 717,600 $55.70
2020:
1Q 682,500 $54.79
2Q 646,100 $55.29
3Q 349,600 $51.73
4Q 334,880 $51.23
2021:
1Q 322,200 $53.35
2Q 309,400 $58.09
 
Crude Oil Derivative Basis Swaps(1)
Contract Period Total Volumes (Bbls)

Weighted Average Differential ($/Bbl)

2019 1,642,500 ($1.78)

__________

(1)

  Basis swaps are settled using the TMX UHC 1a index, as published by
NGX.
 

SECOND QUARTER 2018 EARNINGS RELEASE CONFERENCE CALL

In conjunction with Northern'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 Thursday, August 9, 2018
at 11:00 a.m. Central Time.

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

Dial-In Number: (855) 638-5677 (US/Canada)
and (262) 912-4762 (International)

Conference ID: 7896327 - Northern Oil and
Gas, Inc. Second Quarter 2018 Conference Call

Replay Dial-In Number: (855) 859-2056
(US/Canada) and (404) 537-3406 (International)

Replay Access Code: 7896327 - Replay will
be available through August 16, 2018

UPCOMING CONFERENCE SCHEDULE

7th Annual Intellisight Conference
August 15, 2018, Minneapolis, MN

EnerCom's The Oil & Gas Conference
August 19 - 22, 2018,
Denver, CO

Seaport Global Securities Energy & Industrials Conference
August
28 - 29, 2018, Chicago, IL

Johnson Rice & Company 2018 Energy Conference
September 24 -
26, 2018, New Orleans, LA

Seaport Global Securities Energy Day
November 11, 2018, San
Francisco, CA

ABOUT NORTHERN OIL AND GAS

Northern Oil and Gas, Inc. is an exploration and production company with
a core area of focus in the Williston Basin Bakken and Three Forks play
in North Dakota and Montana. More information about Northern Oil and
Gas, Inc. can be found at www.NorthernOil.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 Northern's financial position, business strategy, 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 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 our company'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 Northern's current properties and properties pending
acquisition, Northern's ability to acquire additional development
opportunities, changes in Northern's reserves estimates or the value
thereof, general economic or industry conditions, nationally and/or in
the communities in which Northern conducts business, changes in the
interest rate environment, legislation or regulatory requirements,
conditions of the securities markets, Northern's ability to consummate
any pending acquisition transactions, other risks and uncertainties
related to the closing of pending acquisition transactions, Northern's
ability to raise or access capital, changes in accounting principles,
policies or guidelines, financial or political instability, acts of war
or terrorism, and other economic, competitive, governmental, regulatory
and technical factors affecting our company's operations, products and
prices.

Northern 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 Northern's
control. Northern does not undertake any duty to update or revise any
forward-looking statements, except as may be required by the federal
securities laws.

 
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2018 AND 2017
(UNAUDITED)
 
    Three Months Ended     Six Months Ended
June 30, June 30,
2018     2017 2018     2017
REVENUES
Oil, Natural Gas, and NGL Sales $ 109,046,878 $ 48,381,006 $ 195,927,692 $ 97,229,228
Gain (Loss) on Derivative Instruments, Net (42,202,788 ) 16,513,032 (62,474,239 ) 33,473,915
Other Revenue   1,809     7,844     5,909     15,590  
Total Revenues   66,845,899     64,901,882     133,459,362     130,718,733  
 
OPERATING EXPENSES
Production Expenses 14,548,922 12,137,540 27,037,344 23,811,889
Production Taxes 10,131,843 4,439,774 18,054,157 8,901,040
General and Administrative Expenses 3,251,239 4,317,139 4,918,114 7,926,083
Depletion, Depreciation, Amortization and Accretion   22,596,028     13,682,452     41,226,657     26,510,595  
Total Operating Expenses   50,528,032     34,576,905     91,236,272     67,149,607  
 
INCOME FROM OPERATIONS   16,317,867     30,324,977     42,223,090     63,569,126  
 
OTHER INCOME (EXPENSE)
Interest Expense, Net of Capitalization (22,403,373 ) (16,428,164 ) (45,510,134 ) (32,731,970 )
Write-off of Debt Issuance Costs (95,135 ) (95,135 )
Loss on the Extinguishment of Debt (90,832,975 ) (90,832,975 )
Other Income   371,783     181     538,418     361  
Total Other Income (Expense)   (112,864,565 )   (16,523,118 )   (135,804,691 )   (32,826,744 )
 
INCOME (LOSS) BEFORE INCOME TAXES (96,546,698 ) 13,801,859 (93,581,601 ) 30,742,382
 
INCOME TAX PROVISION (BENEFIT)                
 
NET INCOME (LOSS) $ (96,546,698 ) $ 13,801,859   $ (93,581,601 ) $ 30,742,382  
 
Net Income (Loss) Per Common Share – Basic $ (0.49 ) $ 0.22   $ (0.71 ) $ 0.50  
Net Income (Loss) Per Common Share – Diluted $ (0.49 ) $ 0.22   $ (0.71 ) $ 0.50  
Weighted Average Shares Outstanding – Basic   196,140,610     61,643,862     131,039,552     61,545,555  
Weighted Average Shares Outstanding – Diluted   196,140,610     61,885,952     131,039,552     61,928,799  
 
 
CONDENSED BALANCE SHEETS
JUNE 30, 2018 AND DECEMBER 31, 2017
(UNAUDITED)
       
June 30, 2018 December 31, 2017
ASSETS
Current Assets:
Cash and Cash Equivalents $ 200,924,143 $ 102,183,191
Accounts Receivable, Net 68,273,411 46,851,682
Advances to Operators 416,002 604,977
Prepaid and Other Expenses 5,584,787 2,333,288
Income Tax Receivable   785,016     785,016  
Total Current Assets   275,983,359     152,758,154  
 
Property and Equipment:
Oil and Natural Gas Properties, Full Cost Method of Accounting
Proved 2,754,032,103 2,585,490,133
Unproved 1,829,834 1,699,344
Other Property and Equipment   963,364     981,303  
Total Property and Equipment 2,756,825,301 2,588,170,780
Less – Accumulated Depreciation, Depletion and Impairment   (2,155,812,722 )   (2,114,951,189 )
Total Property and Equipment, Net 601,012,579 473,219,591
 
Deferred Income Taxes (Note 9) 785,000 785,000
Other Noncurrent Assets, Net   5,301,565     5,490,934  
 
Total Assets $ 883,082,503   $ 632,253,679  
 
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts Payable $ 92,176,052 $ 93,152,297
Accrued Expenses 5,916,909 6,339,425
Accrued Interest 4,859,913 4,836,112
Debt Exchange Derivative 10,923,000
Derivative Instruments 43,644,644 18,681,891
Asset Retirement Obligations   483,365     565,521  
Total Current Liabilities   158,003,883     123,575,246  
 
Long-term Debt, Net 834,767,656 979,324,222
Derivative Instruments 28,611,421 11,496,929
Asset Retirement Obligations 9,399,503 8,562,607
Other Noncurrent Liabilities   120,298     135,225  
 
Total Liabilities $ 1,030,902,761   $ 1,123,094,229  
 
Commitments and Contingencies (Note 8)
 
STOCKHOLDERS' DEFICIT
Preferred Stock, Par Value $.001; 5,000,000 Authorized, No Shares
Outstanding
Common Stock, Par Value $.001; 450,000,000 Authorized (6/30/2018 –
293,600,269
Shares Outstanding and 12/31/2017 – 66,791,633
Shares Outstanding)
293,600 66,792
Additional Paid-In Capital 886,041,475 449,666,390
Retained Deficit   (1,034,155,333 )   (940,573,732 )
Total Stockholders' Deficit   (147,820,258 )   (490,840,550 )
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 883,082,503   $ 632,253,679  
 

Non-GAAP Financial Measures

Adjusted Net Income and Adjusted EBITDA are non-GAAP measures. Northern
defines Adjusted Net Income as net income (loss) excluding (i) (gain)
loss on the mark-to-market of derivative instruments, net of tax, (ii)
write-off of debt issuance costs, net of tax, and (iii) loss on the
extinguishment of debt, net of tax. Northern defines Adjusted EBITDA as
net income (loss) before (i) interest expense, (ii) income taxes, (iii)
depreciation, depletion, amortization and accretion, (iv) (gain) loss on
the mark-to-market of derivative instruments, (v) non-cash share based
compensation expense, (vi) write-off of debt issuance costs, and (vii)
loss on the extinguishment of debt. 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 results included herein provide useful information
to both management and investors by excluding certain expenses and
unrealized derivatives gains and losses that management believes are not
indicative of Northern's core operating results. In addition, these
non-GAAP financial measures are used by management for budgeting and
forecasting as well as subsequently measuring Northern's performance,
and management believes it is providing investors with financial
measures that most closely align to its internal measurement processes.

 

Reconciliation of Adjusted Net Income

       
Three Months Ended June 30, Six Months Ended June 30,
2018     2017 2018     2017
Net Income (Loss) $ (96,546,698 ) $ 13,801,859 $ (93,581,601 ) $ 30,742,382
Add:
Impact of Selected Items:
(Gain) Loss on the Mark-to-Market of Derivative Instruments 29,935,931 (14,172,002 ) 42,077,245 (31,228,544 )
Write-off of Debt Issuance Costs 95,135 95,135
Loss on the Extinguishment of Debt   90,832,975         90,832,975      
Selected Items, Before Income Taxes 120,768,906 (14,076,867 ) 132,910,220 (31,133,409 )
Income Tax of Selected Items(1)   (6,180,382 )   99,518     (9,912,004 )   159,429  
Selected Items, Net of Income Taxes   114,588,524       (13,977,349 )     122,998,216       (30,973,980 )
Adjusted Net Income (Loss) $ 18,041,826   $ (175,490 ) $ 29,416,615   $ (231,598 )
       
Weighted Average Shares Outstanding – Basic   196,140,610     61,643,862     131,039,552     61,545,555  
Weighted Average Shares Outstanding – Diluted   196,413,013     61,885,952     131,248,726     61,928,799  
 
Net Income (Loss) Per Common Share – Basic $ (0.49 ) $ 0.22 $ (0.71 ) $ 0.50
Add:
Impact of Selected Items, Net of Income Taxes   0.58     (0.22 )   0.93     (0.50 )
Adjusted Net Income (Loss) Per Common Share – Basic $ 0.09   $   $ 0.22   $  
 
Net Income (Loss) Per Common Share – Diluted $ (0.49 ) $ 0.22 $ (0.71 ) $ 0.50
Add:
Impact of Selected Items, Net of Income Taxes   0.58     (0.22 )   0.93     (0.50 )
Adjusted Net Income (Loss) Per Common Share – Diluted $ 0.09   $   $ 0.22   $  

__________

(1)

  For the 2018 columns, this represents a tax impact using an
estimated tax rate of 24.5% for the three and six months ended June
30, 2018, which includes a $23.4 million and $22.7 million
adjustment for an increase in the valuation allowance for the three
and six months ended June 30, 2018, respectively. For the 2017
columns, this represents a tax impact using an estimated tax rate of
37.1% and 37.8% for the three and six months ended June 30, 2017,
respectively, which includes a $5.1 million and $11.6 million
adjustment for a change in valuation allowance for the three and six
months ended June 30, 2017, respectively.
 

Reconciliation of Adjusted EBITDA

       
Three Months Ended June 30, Six Months Ended June 30,
2018     2017 2018     2017
Net Income (Loss) $ (96,546,698 ) $ 13,801,859 $ (93,581,601 ) $ 30,742,382
Add:
Interest Expense 22,403,373 16,428,164 45,510,134 32,731,970
Income Tax Benefit
Depreciation, Depletion, Amortization and Accretion 22,596,028 13,682,452 41,226,657 26,510,595
Non-Cash Share Based Compensation 1,324,038 910,737 438,193 1,533,359
Write-off of Debt Issuance Costs 95,135 95,135
Loss on the Extinguishment of Debt 90,832,975 90,832,975
(Gain) Loss on the Mark-to-Market of Derivative Instruments   29,935,931     (14,172,002 )   42,077,245     (31,228,544 )
Adjusted EBITDA $ 70,545,647   $ 30,746,345   $ 126,503,603   $ 60,384,897  
 

Click
here to subscribe to Mobile Alerts for Northern Oil and Gas.

View Comments and Join the Discussion!