Northern Oil & Gas, Inc 8-K, filed Mar 12, 2021
Northern Oil & Gas, Inc. (NOG)
8-K
2021-03-12
For: 2021-03-12
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Added on
April 12, 2026
About this 8-K
Northern Oil & Gas, Inc filed this 8-K on March 12, 2021.
Items reported
- Item 2.02: Financial results
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 12, 2021
(Exact name of Registrant as specified in its charter)
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||||||
(Address of principal executive offices) | (Zip Code) | ||||
Registrant’s telephone number, including area code (952 ) 476-9800
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On March 12, 2021, Northern Oil and Gas, Inc. issued a press release announcing 2020 fourth quarter and full year financial and operating results. A copy of the press release is furnished as Exhibit 99.1 hereto.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit Number | Description | |||||||
Press release of Northern Oil and Gas, Inc., dated March 12, 2021 | ||||||||
| 104 | The cover page from this Current Report on Form 8-K, formatted in inline XBRL | |||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: March 12, 2021 | NORTHERN OIL AND GAS, INC. By /s/ Erik J. Romslo Erik J. Romslo Chief Legal Officer and Secretary | ||||
Exhibit 99.1
Northern Oil and Gas, Inc. Announces Fourth Quarter and Full Year 2020 Results
HIGHLIGHTS
•Fourth quarter production of 35,738 Boe per day, up 23% from the third quarter
•Fourth quarter cash flow from operations of $81.8 million, excluding $8.8 million spent to reduce net working capital, up 19% from the third quarter
•Total debt balance reduced by $39.0 million in the fourth quarter and $178.0 million in total during 2020
•Completed $140.2 million common stock offering and $550.0 million senior notes offering in February 2021. Borrowing capacity of $373.0 million under revolving credit facility as of March 11, 2021
•Announced entrance into the Marcellus Shale with the pending acquisition from Reliance Marcellus, LLC
•Signed and closed seventh Permian acquisition since entry into the basin in September 2020
MINNEAPOLIS (BUSINESS WIRE) - March 12, 2021 - Northern Oil and Gas, Inc. (NYSE American: NOG) (“Northern”) today announced the company’s fourth quarter and full year 2020 results.
MANAGEMENT COMMENTS
“Northern enters 2021 in an enviable position,” commented Nick O’Grady, Northern’s Chief Executive Officer. “The fourth quarter showed the durability of our strategy, the cash generating power of our asset base, and our commitment to focusing on return on capital employed. The flexibility and dynamic nature of our non-operated business model have never been so clear. We enter 2021 as a multi-basin company, dedicated to the allocation of capital into the highest return projects, with a reinvigorated capital structure that should provide for growth opportunities and a clear path to our ultimate goal: to responsibly return capital to shareholders.”
FINANCIAL RESULTS
Fourth quarter Adjusted Net Income was $35.7 million or $0.64 per diluted share, up from $21.5 million or $0.50 per diluted share in the prior year. Fourth quarter GAAP net loss was $146.2 million or $3.21 per diluted share. Adjusted EBITDA in the fourth quarter was $94.3 million.
Full year 2020 Adjusted Net Income was $96.0 million or $1.82 per diluted share. Full year 2020 GAAP net loss was $921.3 million or $21.55 per diluted share. Full year 2020 Adjusted EBITDA was $351.8 million. (See “Non-GAAP Financial Measures” below.)
PRODUCTION
Fourth quarter production was 35,738 Boe per day, a 23% increase from the third quarter. Oil represented 76% of production in the fourth quarter. Northern estimates that curtailments and shut-ins reduced the Company’s average daily production by approximately 4,200 Boe per day in the fourth quarter. Northern had 5.9 net wells turned online during the fourth quarter, compared to 3.4 net wells turned online in the third quarter of 2020. Full year 2020 production was 33,078 Boe per day.
PRICING
During the fourth quarter, NYMEX West Texas Intermediate (“WTI”) crude oil averaged $42.63 per Bbl, and NYMEX natural gas at Henry Hub averaged $2.48 per Mcf. Northern’s unhedged net realized oil price in the fourth quarter was $35.69 per Bbl, representing a $6.94 differential to WTI prices. Northern’s fourth quarter unhedged net realized gas price was $2.13 per Mcf, representing approximately 86% realizations compared with Henry Hub pricing.
For full year 2020, Northern’s realized oil differential was $6.63 per Bbl. Northern’s full year unhedged net realized gas price was $1.14 per Mcf, representing approximately 57% realizations compared with Henry Hub pricing.
OPERATING COSTS
Lease operating costs were $28.2 million in the fourth quarter of 2020, or $8.58 per Boe, down 5% on a per unit basis compared to the third quarter. Fourth quarter general and administrative (“G&A”) costs totaled $4.4 million, which includes non-cash stock-based compensation. Cash G&A costs totaled $3.4 million or $1.04 per Boe in the fourth quarter, down 25% on a per unit basis compared to the third quarter.
CAPITAL EXPENDITURES AND ACQUISITIONS
Capital spending for the fourth quarter was $48.9 million, made up of $17.9 million of organic drilling and completion (“D&C”) capital and $31.0 million of total acquisition spending and other items, inclusive of ground game D&C spending. Northern had 5.9 net wells turned online in the fourth quarter. Wells in process totaled 28.1 net wells as of December 31, 2020. On the ground game acquisition front, Northern closed on 11 transactions during the fourth quarter totaling 4.6 net wells, 663 net mineral acres and 373 net royalty acres (standardized to a 1/8 royalty interest).
RELIANCE ACQUISITION UPDATE
On February 3, 2021, Northern announced a definitive agreement to acquire assets from Reliance Marcellus, LLC, a subsidiary of Reliance Industries, Ltd., for $175.0 million in cash plus 3.25 million common stock warrants. The acquisition has an effective date of July 1, 2020 and is expected to close in April 2021. EQT Corporation, the operator of substantially all of the assets, has elected to exercise its preferential purchase right on a portion of the assets, which (together with the exercise of other preferential purchase rights) will reduce the cash purchase price, net to Northern, by approximately $48.6 million, or 28%. Northern estimates it retains approximately 99% of the net drilling inventory on the assets, compared to prior estimates. Due to the largely developed nature of the properties subject to the preferential right, over a five-year period, Northern expects they would have only contributed 10-15% of the long term cash flows from the acquired properties. Additionally, Northern estimates an 18% reduction in capital spending on the acquired assets in 2021, compared to prior estimates. Northern has released detailed updated guidance for the acquired assets in the guidance section below.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2020, Northern had $1.8 million in cash and $532.0 million of borrowings outstanding on its revolving credit facility. Northern had total liquidity of $129.8 million as of December 31, 2020, consisting of cash and borrowing availability under the revolving credit facility.
On January 4, 2021, Northern retired $65 million, or 50% of its VEN Bakken Note. In February 2021, Northern strengthened its balance sheet through common equity and debt transactions. Northern issued 14.4 million shares of common equity for gross proceeds of $140.2 million. Northern also issued $550 million of 8.125% Senior Unsecured Notes due 2028. With the net proceeds from these transactions, Northern retired the remaining $65 million of its VEN Bakken Note and retired $272.1 million, or 95% of its remaining Senior Secured Notes due 2023 on February 18, 2021. Northern intends to call or purchase the remaining 2023 Notes on or before May 15, 2021. Northern used the remainder of the proceeds to retire debt under its revolving credit facility and for cash on hand.
As of March 11, 2021, Northern had $287.0 million of borrowings outstanding on its revolving credit facility, leaving $373.0 million of borrowing availability. Northern additionally has $15.7 million Senior Secured Notes due 2023 that remain outstanding, and $550 million of newly issued Senior Unsecured Notes due 2028.
In April 2021, upon closing of the Reliance acquisition, Northern will fund the unadjusted cash purchase price of $126.4 million, less the $17.5 million deposit previously paid. The cash purchase price will be subject to typical closing adjustments, including an expected reduction for the net cash flows already received by Reliance from the properties since the effective date.
2021 ESTIMATED GUIDANCE — EXISTING WILLISTON AND PERMIAN PROPERTIES
| 2021 Guidance Ranges: | |||||||||||
Annual Production (Boe per day) | 37,750 - 42,750 | ||||||||||
| Net Wells Added to Production | 32 - 34 | ||||||||||
Total Capital Expenditures ($ in millions) | $180 - $225 | ||||||||||
| Operating Expenses Guidance: | |||||||||||
Production Expenses (per Boe) | $8.75 - $9.75 | ||||||||||
| Production Taxes | 10% of Net Oil Revenues, $0.06 per Mcf for Natural Gas | ||||||||||
| Oil as a Percentage of Production Volumes | 78 - 80% | ||||||||||
| Average Differential to NYMEX WTI | $6.50 - $8.50 | ||||||||||
2021 ESTIMATED GUIDANCE — RELIANCE ASSETS (PENDING ACQUISITION) — FULL YEAR
| 2021 Guidance Ranges: | |||||||||||
Annual Production (Mmcf per day) | 75 - 85 | ||||||||||
| Net Wells Added to Production | 3.5 - 3.8 | ||||||||||
Total Capital Expenditures ($ in millions) | $20 - $25 | ||||||||||
| Operating Expenses Guidance: | |||||||||||
Production, Asset G&A and Marketing Expenses (per Mcf) | $0.85 - $0.95 | ||||||||||
Average Differential to NYMEX Henry Hub (per Mcf) | $0.55 - $0.65 | ||||||||||
2021 ESTIMATED GUIDANCE — CORPORATE
| Q1 Pre-Reliance Closing | Q2-Q4 Post-Reliance Closing | ||||||||||
General and Administrative Expense (per Boe): | |||||||||||
Cash (excluding any one-time transaction costs) | $1.10 - $1.20 | $0.75 - $0.85 | |||||||||
| Non-Cash | $0.30 | $0.20 | |||||||||
FOURTH QUARTER 2020 RESULTS
The following table sets forth selected operating and financial data for the periods indicated.
| Three Months Ended December 31, | |||||||||||||||||
| 2020 | 2019 | % Change | |||||||||||||||
| Net Production: | |||||||||||||||||
| Oil (Bbl) | 2,508,618 | 3,218,885 | (22) | % | |||||||||||||
| Natural Gas and NGLs (Mcf) | 4,675,896 | 4,942,194 | (5) | % | |||||||||||||
| Total (Boe) | 3,287,934 | 4,042,584 | (19) | % | |||||||||||||
| Average Daily Production: | |||||||||||||||||
| Oil (Bbl) | 27,268 | 34,988 | (22) | % | |||||||||||||
| Natural Gas and NGL (Mcf) | 50,825 | 53,720 | (5) | % | |||||||||||||
| Total (Boe) | 35,738 | 43,941 | (19) | % | |||||||||||||
| Average Sales Prices: | |||||||||||||||||
| Oil (per Bbl) | $ | 35.69 | $ | 49.20 | (27) | % | |||||||||||
| Effect of Gain on Settled Derivatives on Average Price (per Bbl) | 14.51 | 2.71 | |||||||||||||||
| Oil Net of Settled Derivatives (per Bbl) | 50.20 | 51.91 | (3) | % | |||||||||||||
| Natural Gas and NGLs (per Mcf) | 2.13 | 0.47 | 353 | % | |||||||||||||
| Effect of Gain (Loss) on Settled Derivatives on Average Price (per Mcf) | (0.20) | — | |||||||||||||||
| Natural Gas Net of Settled Derivatives (per Mcf) | 1.93 | 0.47 | 311 | % | |||||||||||||
| Realized Price on a Boe Basis Excluding Settled Commodity Derivatives | 30.27 | 39.75 | (24) | % | |||||||||||||
| Effect of Gain (Loss) on Settled Commodity Derivatives on Average Price (per Boe) | 10.79 | 2.15 | |||||||||||||||
| Realized Price on a Boe Basis Including Settled Commodity Derivatives | 41.06 | 41.91 | (2) | % | |||||||||||||
| Costs and Expenses (per Boe): | |||||||||||||||||
| Production Expenses | $ | 8.58 | $ | 8.84 | (3) | % | |||||||||||
| Production Taxes | 2.75 | 3.92 | (30) | % | |||||||||||||
| General and Administrative Expense | 1.33 | 2.01 | (34) | % | |||||||||||||
| Depletion, Depreciation, Amortization and Accretion | 9.97 | 15.69 | (36) | % | |||||||||||||
| Net Producing Wells at Period End | 475.1 | 458.7 | 4 | % | |||||||||||||
FULL YEAR 2020 RESULTS
The following table sets forth selected operating and financial data for the periods indicated.
| Years Ended December 31, | |||||||||||||||||
| 2020 | 2019 | % Change | |||||||||||||||
| Net Production: | |||||||||||||||||
| Oil (Bbl) | 9,361,138 | 11,325,418 | (17) | % | |||||||||||||
| Natural Gas and NGLs (Mcf) | 16,473,287 | 16,590,774 | (1) | % | |||||||||||||
| Total (Boe) | 12,106,686 | 14,090,547 | (14) | % | |||||||||||||
| Average Daily Production: | |||||||||||||||||
| Oil (Bbl) | 25,577 | 31,029 | (18) | % | |||||||||||||
| Natural Gas and NGL (Mcf) | 45,009 | 45,454 | (1) | % | |||||||||||||
| Total (Boe) | 33,078 | 38,604 | (14) | % | |||||||||||||
| Average Sales Prices: | |||||||||||||||||
| Oil (per Bbl) | $ | 32.61 | $ | 50.74 | (36) | % | |||||||||||
| Effect of Gain (Loss) on Settled Oil Derivatives on Average Price (per Bbl) | 20.08 | 3.92 | |||||||||||||||
| Oil Net of Settled Oil Derivatives (per Bbl) | 52.69 | 54.66 | (4) | % | |||||||||||||
| Natural Gas and NGLs (per Mcf) | 1.14 | 1.60 | (29) | % | |||||||||||||
| Effect of Gain (Loss) on Settled Natural Gas Derivatives on Average Price (per Mcf) | 0.02 | — | |||||||||||||||
| Natural Gas and NGLs Net of Settled Natural Gas Derivatives (per Mcf) | 1.16 | 1.60 | (28) | % | |||||||||||||
| Realized Price on a Boe Basis Excluding Settled Commodity Derivatives | 26.77 | 42.67 | (37) | % | |||||||||||||
| Effect of Gain (Loss) on Settled Commodity Derivatives on Average Price (per Boe) | 15.55 | 3.15 | |||||||||||||||
| Realized Price on a Boe Basis Including Settled Commodity Derivatives | 42.32 | 45.82 | (9) | % | |||||||||||||
| Costs and Expenses (per Boe): | |||||||||||||||||
| Production Expenses | $ | 9.61 | $ | 8.44 | 14 | % | |||||||||||
| Production Taxes | 2.46 | 4.10 | (40) | % | |||||||||||||
| General and Administrative Expenses | 1.53 | 1.68 | (9) | % | |||||||||||||
| Depletion, Depreciation, Amortization and Accretion | 13.39 | 14.92 | (10) | % | |||||||||||||
| Net Producing Wells at Period-End | 475.1 | 458.7 | 4 | % | |||||||||||||
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 table summarizes Northern’s open crude oil commodity derivative contracts scheduled to settle after December 31, 2020 (excluding basis swaps).
| Crude Oil Derivative Price Swaps | ||||||||||||||||||||
| Contract Period | Volume (Bbls) | Volume (Bbls/Day) | Weighted Average Price (per Bbl) | |||||||||||||||||
| 2021: | ||||||||||||||||||||
| Q1 | 2,190,000 | 24,333 | $55.66 | |||||||||||||||||
| Q2 | 2,202,208 | 24,200 | $56.37 | |||||||||||||||||
| Q3 | 2,131,410 | 23,168 | $54.13 | |||||||||||||||||
| Q4 | 2,122,506 | 23,071 | $53.76 | |||||||||||||||||
2022(1): | ||||||||||||||||||||
| Q1 | 1,080,000 | 12,000 | $51.29 | |||||||||||||||||
| Q2 | 932,750 | 10,250 | $51.20 | |||||||||||||||||
| Q3 | 989,000 | 10,750 | $51.49 | |||||||||||||||||
| Q4 | 989,000 | 10,750 | $51.49 | |||||||||||||||||
2023(2): | ||||||||||||||||||||
| Q1 | 112,500 | 1,250 | $51.65 | |||||||||||||||||
_____________
(1) We have entered into crude oil derivative contracts that give counterparties the option to extend certain current derivative contracts for additional periods. Options covering a notional volume of 3.1 million barrels for 2022 are exercisable on or about December 31, 2021. If the counterparties exercise all such options, the notional volume of our existing crude oil derivative contracts will increase as follows for 2022: (i) for the first quarter of 2022, by 1,010,250 barrels at a weighted average price of $53.18 per barrel, (ii) for the second quarter of 2022, by 1,021,475 barrels at a weighted average price of $53.18 per barrel, (iii) for the third quarter of 2022, by 549,700 barrels at a weighted average price of $51.67 per barrel, and (iv) for the fourth quarter of 2022, by 549,700 barrels at a weighted average price of $51.67 per barrel.
(2) We have entered into crude oil derivative contracts that give counterparties the option to extend certain current derivative contracts for additional periods. Options covering a notional volume of 3.6 million barrels for 2023 are exercisable on or about December 31, 2022. If the counterparties exercise all such options, the notional volume of our existing crude oil derivative contracts will increase as follows for 2023: (i) for the first quarter of 2023, by 1,147,500 barrels at a weighted average price of $50.48 per barrel, (ii) for the second quarter of 2023, by 796,250 barrels at a weighted average price of $49.69 per barrel, (iii) for the third quarter of 2023, by 851,000 barrels at a weighted average price of $50.22 per barrel, and (iv) for the fourth quarter of 2023, by 851,000 barrels at a weighted average price of $50.22 per barrel.
The following table summarizes Northern’s open natural gas commodity derivative contracts scheduled to settle after December 31, 2020.
| Natural Gas Commodity Derivative Swaps | ||||||||||||||||||||
| Contract Period | Gas (MMBTU) | Volume (MMBTU/Day) | Weighted Average Price (per Mcf) | |||||||||||||||||
| 2021: | ||||||||||||||||||||
| Q1 | 3,375,000 | 37,500 | $2.47 | |||||||||||||||||
| Q2 | 5,924,507 | 65,104 | $2.74 | |||||||||||||||||
| Q3 | 8,979,028 | 97,598 | $2.82 | |||||||||||||||||
| Q4 | 8,784,210 | 95,481 | $2.82 | |||||||||||||||||
| 2022: | ||||||||||||||||||||
| Q1 | 2,700,000 | 30,000 | $2.98 | |||||||||||||||||
| Q2 | 910,000 | 10,000 | $2.61 | |||||||||||||||||
| Q3 | 920,000 | 10,000 | $2.61 | |||||||||||||||||
| Q4 | 920,000 | 10,000 | $2.61 | |||||||||||||||||
CAPITAL EXPENDITURES & DRILLING ACTIVITY
| (In millions, except for net well data) | Three Months Ended December 31, 2020 | Year Ended December 31, 2020 | ||||||||||||
| Capital Expenditures Incurred: | ||||||||||||||
| Organic Drilling and Development Capital Expenditures | $17.9 | $143.1 | ||||||||||||
| Ground Game Drilling and Development Capital Expenditures | $21.7 | $46.1 | ||||||||||||
| Ground Game Acquisition Capital Expenditures | $8.7 | $21.6 | ||||||||||||
| Other | $0.6 | $3.1 | ||||||||||||
| Net Wells Turned Online | 5.9 | 17.8 | ||||||||||||
| Net Producing Wells (Period-End) | 475.1 | |||||||||||||
| Net Wells in Process (Period-End) | 28.1 | |||||||||||||
| Change in Wells in Process over Prior Period | -0.3 | 2.3 | ||||||||||||
| Weighted Average AFE for Wells Elected to | $7.2 million | $7.5 million | ||||||||||||
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 2.3 in net wells in process during the year ended December 31, 2020 are reflected in the annual amounts incurred for drilling and development capital expenditures.
ACREAGE
As of December 31, 2020, Northern controlled leasehold of approximately 183,527 net acres primarily targeting the Bakken and Three Forks formations of the Williston Basin, and approximately 90% of this total acreage position was developed, held by production, or held by operations.
FOURTH QUARTER 2020 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 Friday, March 12, 2021 at 10:00 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:
Website: https://78449.themediaframe.com/dataconf/productusers/nog/mediaframe/43930/indexl.html
Dial-In Number: (866) 373-3407 (US/Canada) and (412) 902-1037 (International)
Conference ID: 13717215 - Northern Oil and Gas, Inc. Fourth Quarter and Year-End 2020 Earnings Call
Replay Dial-In Number: (877) 660-6853 (US/Canada) and (201) 612-7415 (International)
Replay Access Code: 13717215 - Replay will be available through March 19, 2021
UPCOMING CONFERENCE SCHEDULE
33rd Annual Roth Conference
March 15, 2021
SPE A&D Symposium
Houston, TX
May 13, 2021
UBS Global Oil and Gas Conference
May 25, 2021
Wells Fargo Energy Conference
June 2-3, 2021
Stifel Cross Sector Insight Conference
June 8-10, 2021
RBC Energy Conference
June 8-9, 2021
ABOUT NORTHERN OIL AND GAS
Northern Oil and Gas, Inc. is a company with a primary strategy of investing in non-operated minority working and mineral interests in oil & gas properties, with a core area of focus in the premier basins within the United States. 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, operating and financial performance, 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 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 Northern’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 properties and properties pending acquisition; Northern’s ability to acquire additional development opportunities; potential or pending acquisition transactions, including the Reliance acquisition; Northern’s ability to consummate pending acquisitions, including the Reliance acquisition, and the anticipated timing of such consummation; the projected capital efficiency savings and other operating efficiencies and synergies resulting from Northern’s acquisition transactions; integration and benefits of
property acquisitions, including the Reliance acquisition, or the effects of such acquisitions on Northern’s cash position and levels of indebtedness; changes in Northern’s reserves estimates or the value thereof; disruptions to Northern’s business due to acquisitions and other significant transactions; infrastructure constraints and related factors affecting Northern’s properties; ongoing legal disputes over and potential shutdown of the Dakota Access Pipeline; the COVID-19 pandemic and its related economic repercussions and effect on the oil and natural gas industry; 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 raise or access capital; changes in accounting principles, policies or guidelines; and financial or political instability, health-related epidemics, acts of war or terrorism, and other economic, competitive, governmental, regulatory and technical factors affecting Northern’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 Northern’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 Northern’s actual results to differ from those set forth in the forward looking statements.
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.
CONTACT:
Mike Kelly, CFA
Chief Strategy Officer
952-476-9800
ir@northernoil.com
NORTHERN OIL AND GAS, INC.
STATEMENTS OF OPERATIONS
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||
| (In thousands, except share and per share data) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
| Revenues | |||||||||||||||||||||||
| Oil and Gas Sales | $ | 99,511 | $ | 160,698 | $ | 324,052 | $ | 601,218 | |||||||||||||||
| Gain (Loss) on Derivative Instruments, Net | (49,441) | (101,697) | 228,141 | (128,837) | |||||||||||||||||||
| Other Revenue | 4 | 11 | 17 | 21 | |||||||||||||||||||
| Total Revenues | 50,074 | 59,013 | 552,210 | 472,402 | |||||||||||||||||||
| Operating Expenses | |||||||||||||||||||||||
| Production Expenses | 28,204 | 35,754 | 116,336 | 118,899 | |||||||||||||||||||
| Production Taxes | 9,034 | 15,827 | 29,783 | 57,771 | |||||||||||||||||||
| General and Administrative Expenses | 4,361 | 8,118 | 18,546 | 23,624 | |||||||||||||||||||
| Depletion, Depreciation, Amortization and Accretion | 32,769 | 63,411 | 162,120 | 210,201 | |||||||||||||||||||
| Impairment of Other Current Assets | — | (1,571) | — | 6,398 | |||||||||||||||||||
| Impairment Expense | 104,463 | — | 1,066,668 | — | |||||||||||||||||||
| Total Operating Expenses | 178,831 | 121,539 | 1,393,453 | 416,893 | |||||||||||||||||||
| Income (Loss) From Operations | (128,757) | (62,527) | (841,243) | 55,509 | |||||||||||||||||||
| Other Income (Expense) | |||||||||||||||||||||||
| Interest Expense, Net of Capitalization | (13,358) | (20,393) | (58,503) | (79,229) | |||||||||||||||||||
| Write-off of Debt Issuance Costs | — | — | (1,543) | — | |||||||||||||||||||
| Gain (Loss) on Unsettled Interest Rate Derivatives | 186 | — | (1,019) | — | |||||||||||||||||||
| Loss on the Extinguishment of Debt | — | (22,762) | (3,718) | (23,187) | |||||||||||||||||||
| Debt Exchange Derivative Gain | — | — | — | 1,390 | |||||||||||||||||||
| Contingent Consideration Loss | (169) | (879) | (169) | (29,512) | |||||||||||||||||||
| Financing Expense | — | (1,447) | — | (1,447) | |||||||||||||||||||
| Other Income (Expense) | (25) | 69 | (12) | 158 | |||||||||||||||||||
| Total Other Income (Expense) | (13,366) | (45,412) | (64,964) | (131,827) | |||||||||||||||||||
| Loss Before Income Taxes | (142,123) | (107,939) | (906,207) | (76,318) | |||||||||||||||||||
| Income Tax Benefit | — | — | (166) | — | |||||||||||||||||||
| Net Loss | (142,123) | (107,939) | (906,041) | $ | (76,318) | ||||||||||||||||||
| Cumulative Preferred Stock Dividend | (4,031) | (1,029) | (15,266) | (1,029) | |||||||||||||||||||
| Net Loss Attributable to Common Shareholders | $ | (146,154) | $ | (108,966) | $ | (921,307) | $ | (77,347) | |||||||||||||||
| Net Loss Per Common Share – Basic* | $ | (3.21) | $ | (2.71) | $ | (21.55) | $ | (2.00) | |||||||||||||||
| Net Loss Per Common Share – Diluted* | $ | (3.21) | $ | (2.71) | $ | (21.55) | $ | (2.00) | |||||||||||||||
| Weighted Average Shares Outstanding – Basic* | 45,520,634 | 40,204,194 | 42,744,639 | 38,708,460 | |||||||||||||||||||
| Weighted Average Shares Outstanding – Diluted* | 45,520,634 | 40,204,194 | 42,744,639 | 38,708,460 | |||||||||||||||||||
_________
*Adjusted for the 1-for-10 reverse stock split effected on September 18, 2020.
The accompanying notes are an integral part of these financial statements.
NORTHERN OIL AND GAS, INC.
BALANCE SHEETS
| (In thousands, except par value and share data) | December 31, 2020 | December 31, 2019 | |||||||||
| Assets | |||||||||||
| Current Assets: | |||||||||||
| Cash and Cash Equivalents | $ | 1,428 | $ | 16,068 | |||||||
| Accounts Receivable, Net | 71,015 | 108,274 | |||||||||
| Advances to Operators | 476 | 893 | |||||||||
| Prepaid Expenses and Other | 1,420 | 1,964 | |||||||||
| Derivative Instruments | 51,290 | 5,628 | |||||||||
| Income Tax Receivable | — | 210 | |||||||||
| Total Current Assets | 125,629 | 133,037 | |||||||||
| Property and Equipment: | |||||||||||
| Oil and Natural Gas Properties, Full Cost Method of Accounting | |||||||||||
| Proved | 4,393,533 | 4,178,605 | |||||||||
| Unproved | 10,031 | 11,047 | |||||||||
| Other Property and Equipment | 2,451 | 2,157 | |||||||||
| Total Property and Equipment | 4,406,015 | 4,191,809 | |||||||||
| Less – Accumulated Depreciation, Depletion and Impairment | (3,670,811) | (2,443,216) | |||||||||
| Total Property and Equipment, Net | 735,204 | 1,748,593 | |||||||||
| Derivative Instruments | 111 | 8,554 | |||||||||
| Deferred Income Taxes | — | 210 | |||||||||
| Other Noncurrent Assets, Net | 11,145 | 15,071 | |||||||||
| Total Assets | $ | 872,089 | $ | 1,905,465 | |||||||
| Liabilities and Stockholders' Equity (Deficit) | |||||||||||
| Current Liabilities: | |||||||||||
| Accounts Payable | $ | 35,803 | $ | 69,395 | |||||||
| Accrued Liabilities | 68,673 | 110,374 | |||||||||
| Accrued Interest | 8,341 | 11,615 | |||||||||
| Derivative Instruments | 3,078 | 11,298 | |||||||||
| Contingent Consideration | 493 | — | |||||||||
| Other Current Liabilities | 1,087 | 795 | |||||||||
| Current Portion of Long-term Debt | 65,000 | — | |||||||||
| Total Current Liabilities | 182,475 | 203,477 | |||||||||
| Long-term Debt, Net | 879,843 | 1,118,161 | |||||||||
| Derivative Instruments | 14,659 | 8,079 | |||||||||
| Asset Retirement Obligations | 18,366 | 16,759 | |||||||||
| Other Noncurrent Liabilities | 50 | 345 | |||||||||
| Total Liabilities | 1,095,393 | $ | 1,346,822 | ||||||||
| Commitments and Contingencies | |||||||||||
| Stockholders' Equity (Deficit) | |||||||||||
Preferred Stock, Par Value $0.001 ; 5,000,000 Authorized 2,218,732 Shares Outstanding at 12/31/2020 1,500,000 Shares Outstanding at 12/31/2019 | 2 | 2 | |||||||||
Common Stock, Par Value $0.001; 135,000,000* Authorized; 45,908,779 Shares Outstanding at 12/31/2020 40,608,518* Shares Outstanding at 12/31/2019 | 448 | 406 | |||||||||
| Additional Paid-In Capital | 1,556,602 | 1,431,438 | |||||||||
| Retained Deficit | (1,780,356) | (873,203) | |||||||||
| Total Stockholders’ Equity (Deficit) | (223,304) | 558,643 | |||||||||
| Total Liabilities and Stockholders' Equity (Deficit) | $ | 872,089 | $ | 1,905,465 | |||||||
___________
*Adjusted for the 1-for-10 reverse stock split effected on September 18, 2020.
The accompanying notes are an integral part of these financial statements.
Non-GAAP Financial Measures
Adjusted Net Income and Adjusted EBITDA are non-GAAP measures. Net income (loss) is the most directly comparable GAAP measure for both Adjusted Net Income and Adjusted EBITDA, and tabular reconciliations for these measures are included below. Northern defines Adjusted Net Income (Loss) as net income (loss) excluding (i) unrealized (gain) loss on unsettled commodity derivatives, net of tax, (ii) financing expense, net of tax, (iii) impairment of other current assets, net of tax, (iv) write-off of debt issuance costs, net of tax, (v) loss on the extinguishment of debt, net of tax, (vi) debt exchange derivative (gain) loss, net of tax, (vii) contingent consideration loss, net of tax, (viii) acquisition transaction costs, net of tax, (ix) impairment expense, net of tax, and (x) gain (loss) on unsettled interest rate derivatives, 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 unsettled commodity derivatives, (v) non-cash stock based compensation expense, (vi) write-off of debt issuance costs, (vii) loss on the extinguishment of debt, (viii) impairment of other current assets, (ix) debt exchange derivative (gain) loss, (x) contingent consideration loss, (xi) financing expense, (xii) impairment expense, (xiii) (gain) loss on unsettled interest rate derivatives, and (xiv) cash severance expense. 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 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.
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 Northern’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 Northern’s oil and natural gas properties. Further, investors may utilize the measure as a basis for comparison of the relative size and value of Northern’s reserves to other companies. Management uses this measure when assessing the potential return on investment related to Northern’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.
Reconciliation of Adjusted Net Income
| Three Months Ended December 31, | Years Ended December 31, | ||||||||||||||||||||||
| (In thousands, except share and per share data) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
| Net Income (Loss) | $ | (142,123) | $ | (107,937) | $ | (906,041) | $ | (76,318) | |||||||||||||||
| Add: | |||||||||||||||||||||||
| Impact of Selected Items: | |||||||||||||||||||||||
| (Gain) Loss on Unsettled Commodity Derivatives | 84,923 | 110,408 | (39,878) | 173,214 | |||||||||||||||||||
| Impairment Expense | 104,463 | — | 1,066,668 | — | |||||||||||||||||||
| Financing Expense | — | 1,447 | — | 1,447 | |||||||||||||||||||
| Impairment of Other Current Assets | — | (1,571) | — | 6,398 | |||||||||||||||||||
| Write-off of Debt Issuance Costs | — | — | 1,543 | — | |||||||||||||||||||
| Loss on the Extinguishment of Debt | — | 22,762 | 3,718 | 23,187 | |||||||||||||||||||
| Debt Exchange Derivative (Gain) Loss | — | — | — | (1,390) | |||||||||||||||||||
| (Gain) Loss on Unsettled Interest Rate Derivatives | (186) | — | 1,019 | — | |||||||||||||||||||
| Contingent Consideration Loss | 169 | 879 | 169 | 29,512 | |||||||||||||||||||
| Acquisition Transaction Costs | — | — | — | 1,763 | |||||||||||||||||||
| Selected Items, Before Income Taxes | 189,368 | 133,925 | 1,033,240 | 234,130 | |||||||||||||||||||
Income Tax of Selected Items(1) | (11,575) | (4,497) | (31,164) | (36,898) | |||||||||||||||||||
| Selected Items, Net of Income Taxes | 177,793 | 129,429 | 1,002,076 | 197,232 | |||||||||||||||||||
| Adjusted Net Income | $ | 35,670 | $ | 21,492 | $ | 96,035 | $ | 120,914 | |||||||||||||||
| Weighted Average Shares Outstanding – Basic | 45,520,634 | 40,204,204 | 42,744,639 | 38,708,460 | |||||||||||||||||||
| Weighted Average Shares Outstanding – Diluted | 55,381,388 | 43,056,527 | 52,659,217 | 39,482,135 | |||||||||||||||||||
| Net Income (Loss) Per Common Share – Basic | (3.12) | $ | (2.68) | $ | (21.20) | $ | (1.97) | ||||||||||||||||
| Add: | |||||||||||||||||||||||
| Impact of Selected Items, Net of Income Taxes | 3.91 | 3.21 | 23.45 | 5.09 | |||||||||||||||||||
| Adjusted Net Income Per Common Share – Basic | $ | 0.79 | $ | 0.53 | $ | 2.25 | $ | 3.12 | |||||||||||||||
| Net Income (Loss) Per Common Share – Diluted | (2.57) | $ | (2.51) | $ | (17.21) | $ | (1.93) | ||||||||||||||||
| Add: | |||||||||||||||||||||||
| Impact of Selected Items, Net of Income Taxes | 3.21 | 3.01 | 19.03 | 4.99 | |||||||||||||||||||
| Adjusted Net Income Per Common Share – Diluted | $ | 0.64 | $ | 0.50 | $ | 1.82 | $ | 3.06 | |||||||||||||||
_______________
(1)For the 2020 columns, this represents a tax impact using an estimated tax rate of 24.5% for the three and twelve months ended December 31, 2020, and includes an adjustment of $34.8 million and $222.0 million, respectively, for changes in our valuation allowance. For the 2019 columns, this represents a tax impact using an estimated tax rate of 24.5% for the three and twelve months ended December 31, 2019, and includes an adjustment of $28.3 million and $20.5 million, respectively, for changes in our valuation allowance.
Reconciliation of Adjusted EBITDA
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||
| (In thousands) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
| Net Income (Loss) | $ | (142,123) | $ | (107,937) | $ | (906,041) | $ | (76,318) | |||||||||||||||
| Add: | |||||||||||||||||||||||
| Interest Expense | 13,358 | 20,393 | 58,503 | 79,229 | |||||||||||||||||||
| Income Tax Provision (Benefit) | — | — | (166) | — | |||||||||||||||||||
| Depreciation, Depletion, Amortization and Accretion | 32,769 | 63,411 | 162,120 | 210,201 | |||||||||||||||||||
| Impairment of Other Current Assets | — | (1,571) | — | 6,398 | |||||||||||||||||||
| Non-Cash Stock-Based Compensation | 936 | 3,674 | 4,119 | 7,955 | |||||||||||||||||||
| Write-off of Debt Issuance Costs | — | — | 1,543 | — | |||||||||||||||||||
| Loss on the Extinguishment of Debt | — | 22,762 | 3,718 | 23,187 | |||||||||||||||||||
| Debt Exchange Derivative (Gain) Loss | — | — | — | (1,390) | |||||||||||||||||||
| Contingent Consideration Loss | 169 | 879 | 169 | 29,512 | |||||||||||||||||||
| Financing Expense | — | 1,447 | — | 1,447 | |||||||||||||||||||
| Cash Severance Expense | — | 759 | — | 759 | |||||||||||||||||||
| (Gain) Loss on Unsettled Interest Rate Derivatives | (186) | — | 1,019 | — | |||||||||||||||||||
| (Gain) Loss on Unsettled Commodity Derivatives | 84,923 | — | (39,878) | 173,214 | |||||||||||||||||||
| Impairment Expense | 104,463 | — | 1,066,668 | — | |||||||||||||||||||
| Adjusted EBITDA | $ | 94,309 | $ | 114,225 | $ | 351,774 | $ | 454,193 | |||||||||||||||