8-K
NORTHERN OIL & GAS, INC. (NOG)
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): November 5, 2021
NORTHERN OIL AND GAS, INC.
(Exact name of Registrant as specified in its charter)
| Delaware | 001-33999 | 95-3848122 |
|---|---|---|
| (State or other jurisdiction<br><br>of incorporation) | (Commission File Number) | (IRS Employer<br><br>Identification No.) |
| 601 Carlson Parkway, Suite 990<br><br>Minnetonka, Minnesota | 55305 | |
| --- | --- | |
| (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:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, par value $0.001 | NOG | NYSE American |
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 November 5, 2021, Northern Oil and Gas, Inc. issued a press release announcing 2021 third quarter financial and operating results. A copy of the press release is furnished as Exhibit 99.1 hereto.
Item 9.01. Financial Statements and Exhibits.
| Exhibit Number | Description |
|---|---|
| 99.1 | Press release of Northern Oil and Gas, Inc., dated November 5, 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: November 5, 2021 | NORTHERN OIL AND GAS, INC.<br><br>By /s/ Erik J. Romslo<br><br>Erik J. Romslo<br><br>Chief Legal Officer and Secretary |
|---|
Document
Exhibit 99.1
Northern Oil and Gas, Inc. Announces Third Quarter 2021 Results and Updates Guidance
HIGHLIGHTS
•Third quarter total production of 57,647 Boe per day, up 98% from the third quarter of 2020
•Oil production of 34,035 Bbl per day, up 52% from the third quarter of 2020
•Third quarter GAAP cash flow from operations of $94.4 million. Excluding changes in net working capital, cash flow from operations was $122.3 million, up 253% from the third quarter of 2020
•Total capital expenditures of $63.2 million during the third quarter, excluding the closing of our previously-announced Permian acquisition on August 2, 2021
•Free Cash Flow (non-GAAP) of $55.4 million, post-preferred stock dividends. See “Non-GAAP Financial Measures” below
•Announced $154.0 million Williston Basin acquisition in October; closed on the acquisition of Permian Basin properties on August 2, 2021
•Updated 2021 guidance includes increased annual production, reduced unit costs, reduced capital expenditures and improved pricing differentials
MINNEAPOLIS (BUSINESS WIRE) - November 5, 2021 - Northern Oil and Gas, Inc. (NYSE American: NOG) (“Northern”) today announced the company’s third quarter results and provided updated 2021 guidance.
MANAGEMENT COMMENTS
“The third quarter again demonstrated Northern’s stellar business execution,” commented Nick O’Grady, Northern’s Chief Executive Officer. “We delivered record free cash flow yet again and closed a significant Permian acquisition in the third quarter. In October, we announced the signing of another meaningfully accretive transaction, as we relentlessly seek to increase shareholder value. We see significant additional opportunities to further benefit shareholders and remain dedicated to building a diversified, low-leverage entity, with steadily increasing cash returns.”
THIRD QUARTER FINANCIAL RESULTS
Oil and natural gas sales for the third quarter were $259.7 million, up 15% over the second quarter. Third quarter GAAP net income, inclusive of a $71.8 million non-cash net mark-to-market loss on derivatives, was $12.6 million or $0.19 per diluted share. Third quarter Adjusted Net Income was $64.1 million or $0.84 per diluted share, which was reduced by $20.8 million (or $0.27 per diluted share) by the net deferred tax effect from adjustments primarily related to changes in the mark-to-market values of derivatives. Adjusted Net Income was up from $27.5 million or $0.51 per diluted share in the third quarter of 2020. Adjusted EBITDA in the third quarter was $136.1 million, up 65% from the third quarter of 2020. See “Non-GAAP Financial Measures” below.
PRODUCTION
Third quarter production was 57,647 Boe per day, a 6% increase from the second quarter of 2021 and a 98% increase from the third quarter of 2020. Oil represented 59% of total production in the third quarter. Oil production was 34,035 Bbl per day, a 2% increase over the second quarter of 2021 and a 52% increase over the third quarter of 2020. Northern had 6.5 net wells turned in-line during the third quarter, compared to 10.5 net wells turned in-line in the second quarter of 2021. Northern’s Marcellus production made up 21% of total volumes in the third quarter, and were up quarter-over-quarter with the first EQT-operated pad coming online. Northern’s Permian production made up 4% of volumes in the third quarter, reflecting a partial quarter impact from recently closed acquisitions, and are expected to ramp substantially in the fourth quarter.
PRICING
During the third quarter, NYMEX West Texas Intermediate (“WTI”) crude oil averaged $70.54 per Bbl, and NYMEX natural gas at Henry Hub averaged $4.31 per million cubic feet (“Mcf”). Northern’s unhedged net realized oil price in the third quarter was $64.91, representing a $5.63 differential to WTI prices. Northern’s unhedged net realized gas price in the third quarter was $4.33 per Mcf, representing approximately 100% realizations compared with Henry Hub pricing.
OPERATING COSTS
Lease operating costs were $43.2 million in the third quarter of 2021, or $8.15 per Boe, down over 5% on a per unit basis compared to the second quarter of 2021. The reduction in unit costs was driven by increased low-cost Marcellus and Permian production, partially offset by lower new completions and higher processing costs associated with strong NGL prices. Third quarter general and administrative (“G&A”) costs totaled $5.5 million or $1.04 per Boe. This includes $0.7 million of legal and other transaction expenses in connection with the Permian and Williston acquisitions and $0.7 million of non-cash stock-based compensation. Northern’s G&A costs excluding these amounts totaled $4.1 million or $0.78 per Boe in the third quarter, down 44% versus the third quarter in the prior year.
CAPITAL EXPENDITURES AND ACQUISITIONS
Capital spending for the third quarter was $63.2 million, down 8% from the second quarter of 2021. Spending was made up of $53.0 million of total drilling and completion (“D&C”) capital on organic and ground game assets, and $10.2 million of ground game acquisition spending and other items. These amounts exclude our unbudgeted acquisitions, such as the Permian acquisition that closed in August 2021. Our Williston Basin spending made up 73% of the total capital expenditures for the quarter, the Permian made up 20%, the Marcellus made up 5% and other items made up 2%. On the ground game acquisition front, Northern closed on 6 transactions during the third quarter totaling 2.2 net wells, 1,077 net mineral acres, and 182 net royalty acres (standardized to a 1/8 royalty interest).
WILLISTON BASIN ACQUISITION
On October 7, 2021, Northern announced that it entered into a definitive agreement to acquire non-operated interests across over 400 producing wellbores located primarily in Williams, McKenzie, Mountrail and Dunn Counties, ND for a purchase price of $154.0 million in cash, subject to typical closing adjustments. Northern has updated corporate guidance for the assets to be acquired in the guidance section below, which assumes a mid-to-late November closing date.
LIQUIDITY AND CAPITAL RESOURCES
Northern had total liquidity of $343.0 million as of September 30, 2021, consisting of cash of $2.0 million, and $341.0 million of committed borrowing availability under the revolving credit facility.
As of September 30, 2021, Northern’s total borrowings were $869.0 million, down $119.8 million since September 30, 2020. Total borrowings consist of $550.0 million in senior unsecured notes and $319.0 million outstanding on Northern’s revolving credit facility.
On November 3, 2021, Northern completed its regularly scheduled borrowing base redetermination, increasing both its elected commitment and borrowing base. Northern’s lending syndicate voted unanimously to increase the borrowing base to $850.0 million. Northern has chosen a $750.0 million elected commitment amount. Pro forma for this increase, as of September 30, 2021, we had $431.0 of committed borrowing availability under the revolving credit facility. The new borrowing base does not include any reserve value for Northern’s pending Williston Basin acquisition.
STOCKHOLDER RETURNS
On August 3, 2021, Northern’s Board of Directors declared a regular quarterly cash dividend for Northern’s common stock of $0.045 per share for stockholders of record as of September 30, 2021, which was paid on October 29, 2021. This represented a 50% increase from the prior quarter.
On October 7, 2021, Northern Management announced its plan to submit a request to Northern’s Board of Directors for a 33.3% increase to the quarterly common stock dividend to $0.06 per share upon closing of the Williston Basin acquisition that is expected to close in mid-November 2021.
On October 15, 2021, Northern’s Board of Directors declared all current and accrued cash dividends for Northern’s Series A Preferred Stock, to be paid on November 15, 2021, in the total amount of $7.2 million.
2021 FULL YEAR GUIDANCE
(all forecasts are provided on a 2-stream production basis)
| Prior | Current | |
|---|---|---|
| Annual Production (Boe per day) | 49,500 - 54,250 | 51,750 - 53,750(1) |
| Oil as a Percentage of Sales Volumes | 63% - 64% | 63% - 64% |
| Net Wells Added to Production | 38 - 40 | 38 - 40 |
| Total Capital Expenditures (in millions) (2) | $215 - $260 | $215 - $250 |
(1) Includes approximately 500 - 560 Boe per day, annualized, from the pending Williston Basin acquisition, expected to close in mid to late November 2021.
(2) Excludes non-budgeted acquisitions of Marcellus, Williston and Permian properties, but includes post-closing capital expenditures.
| Operating Expenses and Differentials: | Prior | Current |
|---|---|---|
| Production Expenses (per Boe) | $8.60 - $8.90 | $8.60 - $8.80 |
| Production Taxes | 9% - 10% of <br>Oil & Gas Sales | 9% - 10% of <br>Oil & Gas Sales |
| Average Differential to NYMEX WTI (per Bbl) | $6.25 - $7.25 | $5.75 - $6.25 |
| Average Realization as a Percentage of NYMEX Henry Hub (per Mcf) | 80% - 100% | 90% - 100% |
| Prior | Current | |
| --- | --- | --- |
| General and Administrative Expense (per Boe): | ||
| Cash (excluding Marcellus, Williston and Permian transaction costs) | $0.80 - $0.85 | $0.80 - $0.85 |
| Non-Cash | $0.18 | $0.18 |
THIRD QUARTER 2021 RESULTS
The following tables set forth selected operating and financial data for the periods indicated.
| Three Months Ended September 30, | ||||||
|---|---|---|---|---|---|---|
| 2021 | 2020 | % Change | ||||
| Net Production: | ||||||
| Oil (Bbl) | 3,131,182 | 2,054,847 | 52 | % | ||
| Natural Gas and NGLs (Mcf) | 13,034,251 | 3,706,853 | 252 | % | ||
| Total (Boe) | 5,303,557 | 2,672,656 | 98 | % | ||
| Average Daily Production: | ||||||
| Oil (Bbl) | 34,035 | 22,335 | 52 | % | ||
| Natural Gas and NGLs (Mcf) | 141,677 | 40,292 | 252 | % | ||
| Total (Boe) | 57,647 | 29,051 | 98 | % | ||
| Average Sales Prices: | ||||||
| Oil (per Bbl) | $ | 64.91 | $ | 34.36 | 89 | % |
| Effect of Gain (Loss) on Settled Oil Derivatives on Average Price (per Bbl) | (12.52) | 21.11 | ||||
| Oil Net of Settled Oil Derivatives (per Bbl) | 52.39 | 55.47 | (6) | % | ||
| Natural Gas and NGLs (per Mcf) | 4.33 | 0.83 | ||||
| Effect of Gain (Loss) on Settled Natural Gas Derivatives on Average Price (per Mcf) | (1.31) | 0.13 | ||||
| Natural Gas and NGLs Net of Settled Natural Gas Derivatives (per Mcf) | 3.02 | 0.96 | ||||
| Realized Price on a Boe Basis Excluding Settled Commodity Derivatives | 48.96 | 27.57 | 78 | % | ||
| Effect of Gain (Loss) on Settled Commodity Derivatives on Average Price (per Boe) | (10.62) | 16.40 | ||||
| Realized Price on a Boe Basis Including Settled Commodity Derivatives | 38.34 | 43.97 | (13) | % | ||
| Costs and Expenses (per Boe): | ||||||
| Production Expenses | $ | 8.15 | $ | 9.04 | (10) | % |
| Production Taxes | 3.76 | 2.60 | 45 | % | ||
| General and Administrative Expenses | 1.04 | 1.72 | (40) | % | ||
| Depletion, Depreciation, Amortization and Accretion | 6.77 | 11.52 | (41) | % | ||
| Net Producing Wells at Period End | 601.8 | 468.8 | 28 | % |
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 swap contracts scheduled to settle after September 30, 2021.
| Crude Oil Commodity Derivative Swaps(1) | |||
|---|---|---|---|
| Contract Period | Volume (Bbls) | Volume (Bbls/Day) | Weighted Average Price (per Bbl) |
| 2021: | |||
| Q4 | 2,326,956 | 25,293 | $55.27 |
| 2022: | |||
| Q1 | 2,137,480 | 23,750 | $57.01 |
| Q2 | 2,047,500 | 22,500 | $57.55 |
| Q3 | 2,058,500 | 22,375 | $57.14 |
| Q4 | 1,943,500 | 21,125 | $56.96 |
| 2023: | |||
| Q1 | 596,250 | 6,625 | $59.30 |
| Q2 | 420,875 | 4,625 | $61.72 |
| Q3 | 115,000 | 1,250 | $64.93 |
| Q4 | 115,000 | 1,250 | $64.93 |
_____________
(1)This table does not include volumes subject to swaptions and call options, which could increase the amount of volumes hedged at the option of Northern’s counterparties. This table also does not include basis swaps. For additional information, see Note 11 to our financial statements included in our Form 10-Q filed with the SEC for the quarter ended September 30, 2021.
The following table summarizes Northern’s open natural gas commodity derivative swap contracts scheduled to settle after September 30, 2021.
| Natural Gas Commodity Derivative Swaps | |||
|---|---|---|---|
| Contract Period | Gas (MMBTU) | Volume (MMBTU/Day) | Weighted Average Price (per Mcf) |
| 2021: | |||
| Q4 | 8,784,210 | 95,481 | $2.82 |
| 2022: | |||
| Q1 | 6,257,291 | 69,525 | $3.07 |
| Q2 | 5,460,000 | 60,000 | $2.95 |
| Q3 | 5,520,000 | 60,000 | $2.95 |
| Q4 | 4,300,000 | 46,739 | $2.94 |
_____________
(1)This table does not include volumes subject to collars. This table also does not include basis swaps. For additional information, see Note 11 to our financial statements included in our Form 10-Q filed with the SEC for the quarter ended September 30, 2021.
The following table presents Northern’s settlements on commodity derivative instruments and unsettled gains and losses on open commodity derivative instruments for the periods presented, which is included in the revenue section of Northern’s statement of operations:
| Three Months Ended<br>September 30, | Nine Months Ended<br>September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| (In thousands) | 2021 | 2020 | 2021 | 2020 | ||||
| Cash Received (Paid) on Derivatives: | $ | (56,318) | $ | 43,837 | $ | (91,470) | $ | 152,782 |
| Non-Cash Gain (Loss) on Derivatives: | (71,845) | (70,198) | (373,540) | 124,800 | ||||
| Gain (Loss) on Derivative Instruments, Net | $ | (128,163) | $ | (26,361) | $ | (465,010) | $ | 277,582 |
CAPITAL EXPENDITURES & DRILLING ACTIVITY
| (In millions, except for net well data) | Three Months Ended September 30, 2021 |
|---|---|
| Capital Expenditures Incurred: | |
| Organic Drilling and Development Capital Expenditures | |
| Ground Game Drilling and Development Capital Expenditures | |
| Ground Game Acquisition Capital Expenditures | |
| Other | |
| Non-Budgeted Acquisitions | |
| Net Wells Added to Production | 6.5 |
| Net Producing Wells (Period-End) | 601.8 |
| Net Wells in Process (Period-End) | 43.1 |
| Decrease in Wells in Process over Prior Period | (0.6) |
| Weighted Average Gross AFE for Wells Elected to | 6.9 million |
All values are in US Dollars.
THIRD QUARTER 2021 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, November 5, 2021 at 10:00 a.m. Central Time.
Those wishing to listen to the conference call may do so via webcast or phone as follows:
Webcast: https://78449.themediaframe.com/dataconf/productusers/nog/mediaframe/46821/indexl.html
Dial-In Number: (866) 373-3407 (US/Canada) and (412) 902-1037 (International)
Conference ID: 13723773 - Northern Oil and Gas, Inc. Third Quarter 2021 Earnings Call
Replay Dial-In Number: (877) 660-6853 (US/Canada) and (201) 612-7415 (International)
Replay Access Code: 13723773 - Replay will be available through November 12, 2021
UPCOMING CONFERENCE SCHEDULE
Bank of America Global Energy Conference
November 17-18, 2021
Piper Sandler Energy & Power Symposium
December 1-2, 2021
Capital One 16th Annual Energy Conference
December 6-8, 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; Northern’s ability to consummate pending acquisitions, 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, 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.
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
mkelly@northernoil.com
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
| Three Months Ended<br>September 30, | Nine Months Ended<br>September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| (In thousands, except share and per share data) | 2021 | 2020 | 2021 | 2020 | ||||
| Revenues | ||||||||
| Oil and Gas Sales | $ | 259,669 | $ | 73,680 | $ | 642,717 | $ | 224,541 |
| Gain (Loss) on Commodity Derivatives, Net | (128,163) | (26,361) | (465,010) | 277,582 | ||||
| Other Revenue | 1 | 3 | 2 | 12 | ||||
| Total Revenues | 131,507 | 47,321 | 177,709 | 502,135 | ||||
| Operating Expenses | ||||||||
| Production Expenses | 43,236 | 24,159 | 120,246 | 88,132 | ||||
| Production Taxes | 19,932 | 6,936 | 51,899 | 20,750 | ||||
| General and Administrative Expense | 5,490 | 4,605 | 19,878 | 14,185 | ||||
| Depletion, Depreciation, Amortization and Accretion | 35,885 | 30,786 | 98,013 | 129,350 | ||||
| Impairment Expense | — | 199,489 | — | 962,205 | ||||
| Total Operating Expenses | 104,543 | 265,975 | 290,036 | 1,214,622 | ||||
| Income (Loss) From Operations | 26,964 | (218,653) | (112,327) | (712,487) | ||||
| Other Income (Expense) | ||||||||
| Interest Expense, Net of Capitalization | (14,586) | (14,637) | (43,120) | (45,145) | ||||
| Write-off of Debt Issuance Costs | — | (1,543) | — | (1,543) | ||||
| Gain (Loss) on Unsettled Interest Rate Derivatives, Net | 92 | 224 | 454 | (1,205) | ||||
| Gain (Loss) on Extinguishment of Debt, Net | — | 1,592 | (13,087) | (3,718) | ||||
| Contingent Consideration Gain (Loss) | 82 | — | (292) | — | ||||
| Other Income (Expense) | 2 | 13 | 5 | 14 | ||||
| Total Other Income (Expense) | (14,410) | (14,351) | (56,040) | (51,597) | ||||
| Income (Loss) Before Income Taxes | 12,554 | (233,004) | (168,367) | (764,084) | ||||
| Income Tax Provision (Benefit) | — | — | — | (166) | ||||
| Net Income (Loss) | $ | 12,554 | $ | (233,004) | $ | (168,367) | $ | (763,918) |
| Cumulative Preferred Stock Dividend | (3,605) | (3,718) | (11,154) | (10,986) | ||||
| Net Income (Loss) Attributable to Common Stockholders | $ | 8,949 | $ | (236,722) | $ | (179,521) | $ | (774,904) |
| Net Income (Loss) Per Common Share – Basic | $ | 0.14 | $ | (5.44) | $ | (2.97) | $ | (18.53) |
| Net Income (Loss) Per Common Share – Diluted | $ | 0.13 | $ | (5.44) | $ | (2.97) | $ | (18.53) |
| Weighted Average Common Shares Outstanding – Basic | 65,856,479 | 43,517,074 | 60,404,584 | 41,812,553 | ||||
| Weighted Average Common Shares Outstanding – Diluted | 66,629,566 | 43,517,074 | 60,404,584 | 41,812,553 |
CONDENSED BALANCE SHEETS
| (In thousands, except par value and share data) | September 30, 2021 | December 31, 2020 | ||
|---|---|---|---|---|
| Assets | (Unaudited) | |||
| Current Assets: | ||||
| Cash and Cash Equivalents | $ | 2,006 | $ | 1,428 |
| Accounts Receivable, Net | 158,047 | 71,015 | ||
| Advances to Operators | 5,137 | 476 | ||
| Prepaid Expenses and Other | 2,393 | 1,420 | ||
| Derivative Instruments | — | 51,290 | ||
| Total Current Assets | 167,583 | 125,629 | ||
| Property and Equipment: | ||||
| Oil and Natural Gas Properties, Full Cost Method of Accounting | ||||
| Proved | 4,804,687 | 4,393,533 | ||
| Unproved | 24,656 | 10,031 | ||
| Other Property and Equipment | 2,779 | 2,451 | ||
| Total Property and Equipment | 4,832,122 | 4,406,015 | ||
| Less – Accumulated Depreciation, Depletion and Impairment | (3,767,613) | (3,670,811) | ||
| Total Property and Equipment, Net | 1,064,509 | 735,204 | ||
| Derivative Instruments | — | 111 | ||
| Other Noncurrent Assets, Net | 11,970 | 11,145 | ||
| Total Assets | $ | 1,244,062 | $ | 872,089 |
| Liabilities and Stockholders' Equity (Deficit) | ||||
| Current Liabilities: | ||||
| Accounts Payable | $ | 65,912 | $ | 35,803 |
| Accrued Liabilities | 100,443 | 68,673 | ||
| Accrued Interest | 4,248 | 8,341 | ||
| Derivative Instruments | 182,692 | 3,078 | ||
| Contingent Consideration | 242 | 493 | ||
| Current Portion of Long-term Debt | — | 65,000 | ||
| Other Current Liabilities | 1,635 | 1,087 | ||
| Total Current Liabilities | 355,172 | 182,475 | ||
| Long-term Debt | 858,415 | 879,843 | ||
| Derivative Instruments | 156,731 | 14,659 | ||
| Asset Retirement Obligations | 27,106 | 18,366 | ||
| Other Noncurrent Liabilities | 4,349 | 50 | ||
| Total Liabilities | $ | 1,401,773 | $ | 1,095,393 |
| Commitments and Contingencies (Note 8) | ||||
| Stockholders’ Equity (Deficit) | ||||
| Preferred Stock, Par Value $.001; 5,000,000 Shares Authorized;<br><br>2,218,732 Series A Shares Outstanding at 6/30/2021<br><br>2,218,732 Series A Shares Outstanding at 12/31/2020 | 2 | 2 | ||
| Common Stock, Par Value $.001; 135,000,000 Shares Authorized;<br><br>66,178,148 Shares Outstanding at 9/30/2021<br><br>45,908,779 Shares Outstanding at 12/31/2020 | 468 | 448 | ||
| --- | --- | --- | --- | --- |
| Additional Paid-In Capital | 1,790,542 | 1,556,602 | ||
| Retained Deficit | (1,948,723) | (1,780,356) | ||
| Total Stockholders’ Equity (Deficit) | (157,710) | (223,304) | ||
| Total Liabilities and Stockholders’ Equity (Deficit) | $ | 1,244,062 | $ | 872,089 |
Non-GAAP Financial Measures
Adjusted Net Income, Adjusted EBITDA and Free Cash Flow are non-GAAP measures. Northern defines Adjusted Net Income (Loss) as net income (loss) excluding (i) (gain) loss on unsettled commodity derivatives, net of tax, (ii) write-off of debt issuance costs, net of tax, (iii) (gain) loss on extinguishment of debt, net of tax, (iv) contingent consideration (gain) loss, net of tax, (v) acquisition transaction costs, net of tax, (vi) (gain) loss on unsettled interest rate derivatives, net of tax and (vii) impairment expense. Northern defines Adjusted EBITDA as net income (loss) before (i) interest expense, (ii) income taxes, (iii) depreciation, depletion, amortization and accretion, (iv) non-cash stock-based compensation expense, (v) severance-cash, (vi) write-off of debt issuance costs, (vii) (gain) loss on extinguishment of debt, (viii) contingent consideration (gain) loss, (ix) acquisition transaction costs, (x) gain (loss) on unsettled interest rate derivatives (xi) (gain) loss on unsettled commodity derivatives, and (xii) impairment expense. Northern defines Free Cash Flow as cash flows from operations before changes in working capital and other items, less (i) capital expenditures, excluding non-budgeted acquisitions and (ii) preferred stock dividends. 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. Management believes Adjusted Net Income and Adjusted EBITDA provide useful information to both management and investors by excluding certain expenses and unrealized commodity gains and losses that management believes are not indicative of Northern’s core operating results. Management believes that Free Cash Flow is useful to investors as a measure of a company’s ability to internally fund its budgeted capital expenditures, to service or incur additional debt, and to measure success in creating stockholder value. 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. The non-GAAP financial measures included herein may be defined differently than similar measures used by other companies and should not be considered an alternative to, or more meaningful than, the comparable GAAP measures. From time to time Northern provides forward-looking Free Cash Flow estimates or targets; however, Northern is unable to provide a quantitative reconciliation of the forward looking non-GAAP measure to its most directly comparable forward looking GAAP measure because management cannot reliably quantify certain of the necessary components of such forward looking GAAP measure. The reconciling items in future periods could be significant.
Reconciliation of Adjusted Net Income
| Three Months Ended<br>September 30, | Nine Months Ended<br>September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| (In thousands, except share and per share data) | 2021 | 2020 | 2021 | 2020 | ||||
| Net Income (Loss) | $ | 12,554 | $ | (233,004) | $ | (168,367) | $ | (763,918) |
| Add: | ||||||||
| Impact of Selected Items: | ||||||||
| (Gain) Loss on Unsettled Commodity Derivatives | 71,845 | 70,198 | 373,540 | (124,800) | ||||
| Write-off of Debt Issuance Costs | — | 1,543 | — | 1,543 | ||||
| (Gain) Loss on Extinguishment of Debt | — | (1,592) | 13,087 | 3,718 | ||||
| Contingent Consideration (Gain) Loss | (82) | — | 292 | — | ||||
| Acquisition Transaction Costs | 677 | — | 6,204 | — | ||||
| (Gain) Loss on Unsettled Interest Rate Derivatives | (92) | (224) | (454) | 1,205 | ||||
| Impairment Expense | — | 199,489 | — | 962,205 | ||||
| Selected Items, Before Income Taxes | 72,347 | 269,415 | 392,670 | 843,871 | ||||
| Income Tax of Selected Items(1) | (20,801) | (8,921) | (54,954) | (19,588) | ||||
| Selected Items, Net of Income Taxes | 51,547 | 260,495 | 337,716 | 824,283 | ||||
| Adjusted Net Income | $ | 64,100 | $ | 27,490 | $ | 169,349 | $ | 60,365 |
| Weighted Average Shares Outstanding – Basic | 65,856,479 | 43,517,074 | 60,404,584 | 41,812,553 | ||||
| Weighted Average Shares Outstanding – Diluted | 76,348,278 | 53,582,333 | 70,888,853 | 51,707,412 | ||||
| Net Income (Loss) Per Common Share – Basic | $ | 0.19 | $ | (5.35) | $ | (2.79) | $ | (18.27) |
| Add: | ||||||||
| Impact of Selected Items Before Income Tax | 1.10 | 6.18 | 6.50 | 20.18 | ||||
| Impact of Income Tax on Selected Items | (0.32) | (0.20) | (0.91) | (0.47) | ||||
| Adjusted Net Income Per Common Share – Basic | $ | 0.97 | $ | 0.63 | $ | 2.80 | $ | 1.44 |
| Net Income (Loss) Per Common Share – Diluted | $ | 0.16 | $ | (4.35) | $ | (2.38) | $ | (14.77) |
| Add: | ||||||||
| Impact of Selected Items Before Income Tax | 0.95 | 5.03 | 5.55 | 16.32 | ||||
| Impact of Income Tax on Selected Items | (0.27) | (0.17) | (0.78) | (0.38) | ||||
| Adjusted Net Income Per Common Share – Diluted | $ | 0.84 | $ | 0.51 | $ | 2.39 | $ | 1.17 |
______________
(1)For the three and nine months ended September 30, 2021, this represents a tax impact using an estimated tax rate of 24.5%, which includes an adjustment of $3.1 million and $41.2 million, respectively, for a change in valuation allowance. For the three and nine months ended September 30, 2020, this represents a tax impact using an estimated tax rate of 24.5%, which includes an adjustment of $57.1 million and $187.2 million, respectively, for a change in valuation allowance.
Reconciliation of Adjusted EBITDA
| Three Months Ended<br>September 30, | Nine Months Ended<br>September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| (In thousands) | 2021 | 2020 | 2021 | 2020 | ||||
| Net Income (Loss) | $ | 12,554 | $ | (233,004) | $ | (168,367) | $ | (763,918) |
| Add: | ||||||||
| Interest Expense | 14,586 | 14,637 | 43,120 | 45,145 | ||||
| Income Tax Provision (Benefit) | — | — | — | (166) | ||||
| Depreciation, Depletion, Amortization and Accretion | 35,885 | 30,786 | 98,013 | 129,350 | ||||
| Impairment of Other Current Assets | — | — | — | — | ||||
| Non-Cash Stock-Based Compensation | 699 | 889 | — | 3,182 | ||||
| Severance-Cash | — | — | — | 759 | ||||
| Write-off of Debt Issuance Costs | — | 1,543 | — | 1,543 | ||||
| (Gain) Loss on Extinguishment of Debt | — | (1,592) | 13,087 | 3,718 | ||||
| Contingent Consideration (Gain) Loss | (82) | — | 292 | — | ||||
| Acquisition Transaction Costs | 677 | — | 6,204 | — | ||||
| (Gain) Loss on Unsettled Interest Rate Derivatives | (92) | (224) | (454) | 1,205 | ||||
| (Gain) Loss on Unsettled Commodity Derivatives | 71,845 | 70,198 | 373,540 | (124,800) | ||||
| Impairment Expense | — | 199,489 | — | 962,205 | ||||
| Adjusted EBITDA | $ | 136,071 | $ | 82,723 | $ | 367,685 | $ | 258,224 |
Reconciliation of Free Cash Flow
| Three Months Ended<br>September 30, | ||
|---|---|---|
| (In thousands) | 2021 | |
| Net Cash Provided by Operating Activities | $ | 94,413 |
| Exclude: Changes in Working Capital and Other Items | 27,888 | |
| Less: Capital Expenditures (1) | (63,278) | |
| Less: Series A Preferred Dividends | (3,605) | |
| Free Cash Flow | $ | 55,418 |
_______________
(1) Capital expenditures are calculated as follows:
| Three Months Ended<br>September 30, | ||
|---|---|---|
| (In thousands) | 2021 | |
| Cash Paid for Capital Expenditures | $ | 163,120 |
| Less: Non-Budgeted Acquisitions | (106,197) | |
| Plus: Change in Accrued Capital Expenditures and Other | 6,355 | |
| Capital Expenditures | $ | 63,278 |