Company Sees 20% Year over Year Growth in
Production
Northern Oil and Gas, Inc. (NYSE: NOG) (the “Company” or “NOG”)
today announced a fourth quarter 2023 operations update, also
highlighting elective Ground Game acquisitions, and preliminary
2024 guidance.
HIGHLIGHTS
- Fourth quarter 2023 production estimated to be 114.4 Mboe per
day, resulting in annual production toward the high end of NOG’s
guidance range
- Executed on $25 million of opportunistic Ground Game
acquisitions in the fourth quarter
- Initiating preliminary 2024 production and capital spending
guidance
- 2024 production guidance implies ~20% year over year growth on
a flat capital budget at the midpoint of guidance ranges versus
preliminary 2023 actuals (excluding non-budgeted acquisitions)
FOURTH QUARTER OPERATIONAL UPDATE
Production volumes in the fourth quarter of 2023 are estimated
to have averaged 114.4 Mboe per day. Production increased 12%
compared to the third quarter, driven by a full quarter
contribution from the Novo acquisition (which closed mid-Q3) and
increased Williston Basin production. The increase was tempered in
part by planned shut-ins (~2,000 boe per day, 80% oil) due to
offset unit development in the Mascot Project. Oil production is
estimated at ~60.2% of total volumes for the fourth quarter.
Natural gas volumes materially exceeded internal forecasts. With
these results, the Company expects total 2023 annual production
toward the high end of its guidance range, or approximately 98.8
Mboe per day.
Mark-to-market gains on derivatives for the fourth quarter were
an estimated $235.6 million and realized hedge gains were an
estimated $11.8 million. Realized prices for natural gas are
estimated to be 96% - 97% of average NYMEX Henry Hub prices for the
fourth quarter, slightly better than internal expectations driven
by improved winter propane prices and tighter seasonal Appalachian
differentials. Realized prices for oil are estimated to be at a
discount of $4.02 - $4.05 of average NYMEX WTI benchmark prices for
the fourth quarter, reflecting markedly wider Williston Basin
differentials and modestly weaker Midland-Cushing pricing than the
prior quarters in 2023.
Lease operating costs in the fourth quarter were an estimated
$9.70 - $9.75 per boe. The Company saw more normalized levels of
expensed workover activity in the fourth quarter compared to lower
levels in the third quarter. Fourth quarter operating expenses 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 natural gas prices, is expected to be lower
on a quarterly basis thereafter. NOG expects the firm transport
charges to sunset by mid-2025.
MASCOT UPDATE
The Company continues to experience strong well performance at
its Mascot Project and continues to work with MPDC to optimize
future development, which over time could add additional zones and
future inventory. Currently, the project has planned shut-in
activity as it completes its first large batch well development and
begins bringing curtailed wells back to production in stages
throughout the first quarter. The Company expects 17 gross wells to
be turned to sales early in the second quarter of 2024, followed by
another 12 gross wells in the third quarter before commencing
completion operations on another large pad. Based on recent
discussions with MPDC, NOG anticipates a ~10% reduction in average
well costs on current and future wells versus 2023; however, NOG
continues to budget based on original well cost expectations.
FOURTH QUARTER CAPITAL EXPENDITURES AND ELECTIVE GROUND GAME
ACQUISITIONS
The Company experienced a significant acceleration in drilling
activity in the fourth quarter, resulting in a material
pull-forward of capital expenditures. Although the overall pace of
turn-in-lines (TILs) remained consistent with previous
expectations, the development cadence of NOG's wells-in-process
advanced ahead of schedule. Consequently, NOG incurred
approximately $50 million of capital in the fourth quarter that was
previously planned for 2024. In line with this acceleration, NOG
has observed a meaningful reduction in development timelines for
recent wells-in-process.
During the fourth quarter, the Company turned-in-line an
estimated 27.6 net wells, representing a 20% increase from the
third quarter. Furthermore, the Company added 20.8 net wells to the
drilling and completing (D&C) list, concluding the quarter at
approximately 66.5 net wells-in-process, a 20% increase
year-over-year. The combined strong activity levels contributed
significantly to the increased capital expenditures in the fourth
quarter.
Additionally, NOG seized on market opportunities created by
significant dislocations from commodity price volatility in the
fourth quarter as budget constraints developed across the space.
This facilitated NOG’s completion of multiple Ground Game
transactions, spending approximately $25 million of total elective
acquisition and development capital in the fourth quarter. These
transactions included 4.6 net wells-in-process and future drilling
locations and approximately 663 net acres. Approximately half of
the acquired 4.6 net wells turned in line at the end of the fourth
quarter, incurring substantially all of their capital in 2023, with
production contributions expected in the first quarter of 2024. The
transactions are expected to generate strong returns on capital
employed, with cash flow contributions primarily in 2024 and
beyond.
Given the acceleration of 2024 development capital and the
additional elective Ground Game capital, total fourth quarter
capital expenditures were approximately $260 million, excluding
non-budgeted acquisitions and other items.
FIRST QUARTER UPDATE
Extreme regional freezing conditions experienced in January had
a slight impact on overall production levels. These weather-related
disruptions led to modest curtailments in the Williston Basin as
well as minor effects on certain areas of the Permian Basin. NOG
estimates a 2.0% reduction to overall production levels in the
first quarter from the freeze-off conditions.
NOG expects first quarter 2024 production volumes to be slightly
lower than the fourth quarter of 2023. The Company expects first
quarter production to be affected by a modestly reduced completions
count sequentially driven by a typical seasonal slowdown in the
Williston Basin, the aforementioned weather disruptions early in
the first quarter, and planned curtailments at the Mascot Project
prior to its second quarter ramp. Offsetting these factors are the
expected contributions from the recently closed Delaware and Utica
acquisitions. Overall, the Company expects 5 – 7 fewer net
turn-in-lines in the first quarter of 2024 compared to the fourth
quarter of 2023, though overall development activity will continue
to build momentum. With a strong backlog of wells-in-process, the
Company expects re-acceleration of turn-in-line activity as the
year progresses.
PRELIMINARY 2024 PRODUCTION AND CAPITAL EXPENDITURE
GUIDANCE
The Company will provide detailed line-item 2024 guidance with
year-end 2023 results but is providing preliminary production and
spending guidance for 2024 as follows:
- Full year 2024 production expected between 115,000 – 120,000
boe per day, with oil production estimated at 70,000 – 73,000 bbl
per day
- Quarterly production expected to decline slightly in the first
quarter, and increase modestly thereafter on a sequential quarterly
basis throughout 2024
- Budgeting approximately 90 net turn-in-lines (TILs) and over 70
net well spuds for 2024
- Total 2024 capital expenditure budget of $825 – $900 million,
inclusive of drilling and completion, Ground Game acquisitions and
workover expenses
Approximately 58% – 60% of the capital budget is expected to be
incurred in the first half of 2024, driven primarily by activity
ramps on NOG’s Mascot and Novo properties. Development plans for
2024 also reflect steady activity in the Williston and other assets
throughout the year. The Company forecasts modestly reduced
Appalachian natural gas activity from prior plans due to lower
strip prices, which has a small impact on total volumes and minimal
effect on cash flows. In total, the Company expects to turn in line
approximately 3.1 net Appalachian wells in 2024, however the
majority of the associated capital was incurred in 2023.
NOG’s preliminary capital expenditure budget anticipates 50%
allocated to the Permian Basin, 35% to the Williston Basin and 1%
to the Appalachian Basin. The remainder of the budget is for Ground
Game capital and increased workover and other items. Given elevated
levels of development since 2021, NOG has experienced increased
workover activity and is budgeting for this to continue in
2024.
The Company’s capital budget does not forecast any significant
change in well drilling and completion costs, although NOG has
recently seen anecdotal evidence of cost reductions, particularly
on the Mascot project and its Novo and Forge properties.
MANAGEMENT COMMENTS
“NOG enters 2024 guiding toward 20% year over year production
growth on a flat budget, something few companies can offer in our
space,” commented Nick O’Grady, NOG’s Chief Executive Officer. “Our
balance sheet is stronger than ever, our cash flow is hedged and
protected, and we will allocate our capital dynamically to seek the
best possible total return for our investors. The opportunity set
in front of us in 2024 is as strong as it has ever been during my
tenure at the Company.”
“The fourth quarter was a testament to our ability to be
creative, nimble and opportunistic on the deal front,” commented
Adam Dirlam, NOG’s President. “Deal by deal, we continue to add
value setting the stage for growth in 2024 and beyond. We remain
pleased with the performance of our larger projects, assets and
operating partners, a testament to our underwriting process here at
NOG.”
ABOUT NOG
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.
PRELIMINARY INFORMATION
The preliminary unaudited fourth quarter and full year 2023
financial and operating information and estimates included in this
press release (including with respect to production, hedge gains,
realized prices, lease operating costs, capital expenditures and
other matters) are based on estimates and subject to completion of
NOG’s financial closing procedures and audit processes. Such
information has been prepared by management solely based on
currently available information. The preliminary information does
not represent and is not a substitute for a comprehensive statement
of financial and operating results, and NOG’s actual results may
differ materially from these estimates because of final
adjustments, the completion of NOG’s financial closing and audit
procedures, and other developments after the date of this
release.
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, as amended (the
“Securities Act”), and the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). All statements other than statements
of historical facts included or referenced in this press release
regarding NOG’s dividend plans and practices (including timing,
amounts and relative performance), financial position, business
strategy, plans and objectives for future operations, industry
conditions, cash flow, and borrowings are forward-looking
statements. When used in this presentation, 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
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 NOG’s capitalization, changes in crude
oil and natural gas prices; the pace of drilling and completions
activity on NOG’s properties and properties pending acquisition;
NOG’s ability to acquire additional development opportunities; 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; general economic or industry conditions, nationally and/or
in the communities in which NOG conducts business; changes in the
interest rate environment or market dividend practices, legislation
or regulatory requirements; conditions of the securities markets;
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;
changes in accounting principles, policies or guidelines; and
financial or political instability, acts of war or terrorism, and
other economic, competitive, governmental, regulatory and technical
factors affecting NOG’s operations, products, services and prices.
Additional information concerning potential factors that could
affect future plans and results is included in the section entitled
“Item 1A. Risk Factors” and other sections of NOG’s most recent
Annual Report on Form 10-K and subsequent Quarterly Reports 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. You are urged not to place undue
reliance on these forward-looking statements, which speak only as
of the date they are made. Except as may be required by applicable
law or regulation, NOG does not undertake, and specifically
disclaims, any obligation to update any forward-looking statements
to reflect events or circumstances occurring after the date of such
statements.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240215714731/en/
Evelyn Leon Infurna Vice President of Investor Relations (952)
476-9800 ir@northernoil.com
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