NORTHERN OIL & GAS, INC. Q1 FY2025 earnings call

Nick O’Grady highlighted 6 key points on NOG’s adaptability: being in a strong position with a flexible model, strong financial results in Q1 with $136 million free cash flow, opportunity in uncertainty, understanding commodity cycles, outlook and strategy, and focus on capital allocation for returns. Adam Dirlam discussed operational highlights including 27.3 net wells added to production, Permian leading activity, 23% increase in lateral lengths leading to 10% decrease in normalized well costs, elected 96% of well proposals with expected returns above hurdle rate, and over 100 transactions evaluated in Q2 with 4 closed. Chad Allen reviewed financial results showing adjusted EBITDA ~$435 million, free cash flow ~$136 million (21st consecutive quarter of positive free cash flow), commodity realizations, cash operating costs improvement, CapEx allocation, and liquidity with over $900 million liquidity.

In the first quarter, NOG's total average daily production was approximately 135,000 BOE per day, up 2.5% versus Q4. Oil production was flat at ~79,000 barrels per day compared to Q4. Year-over-year total production increased by 13%, with oil production up 12% and gas production up 6.5% sequentially and 14% year-over-year, contributing 42% to the production mix. CapEx allocation in the quarter was 57% to the Permian, 20% to the Williston, 15% to the Uinta, and 8% to the Appalachian Basin.

NOG is maintaining the guidance issued on the last call. They are flexible to adjust guidance if there's a material change in activity levels. Production levels are not anticipated to change materially in 2025 absent significant curtailments or shut-ins, while CapEx spend could contract significantly.

Risks include commodity price volatility which could impact activity levels and spending, and potential material changes in market conditions affecting capital allocation and returns.

Q: In a scenario where you take CapEx to the low end of the range for this year, what do you think maintenance CapEx would be for oil for 2026 and 2027?

A: Nick O’Grady said it would be about $850 million roughly at today’s drilling cost, caveating it assumes no change in cost.

Q: Were the changes in production taxes and gas prices relative to full year guidance expected to trend back into range?

A: Chad Allen said yes, production tax is a function of production mix, and as Permian grows, it will move back into guided range.