Northern Oil and Gas(NOG) - 2023 Q1 - Quarterly Report

Production and Operations - As of March 31, 2023, the company participated in 8,863 gross (827.8 net) producing wells and leased approximately 259,890 net acres, with 88% developed[203] - Average daily production in Q1 2023 was approximately 87,385 Boe per day, a 23% increase compared to Q1 2022, primarily due to recent acquisitions and new wells[205] - The percentage of production volumes by basin for Q1 2023 was 73% oil from Williston, 69% oil from Permian, and 100% natural gas from Appalachian[206] - In Q1 2023, net production increased by 23% to 7,864,649 Boe compared to 6,412,962 Boe in Q1 2022, driven by a 27% increase in oil production and a 17% increase in natural gas and NGLs[220] - In Q1 2023, the company reported net production of 4,847,773 barrels of oil, a 27% increase from 3,824,022 barrels in Q1 2022[220] - Natural gas and NGL production reached 18,101,255 Mcf, up 17% from 15,533,638 Mcf in the same period last year[220] - The company has diversified its operations beyond the Williston Basin through acquisitions in the Appalachian and Permian Basins since 2020[204] Financial Performance - Total revenues for Q1 2023 were $582.2 million, a significant increase from a loss of $32.9 million in Q1 2022, primarily due to a gain of $153.7 million on commodity derivatives compared to a loss of $489.4 million in the same period last year[223] - The average realized price per Boe, including settled commodity derivatives, was $55.94 in Q1 2023, up 2% from $54.78 in Q1 2022, while the realized price excluding settled derivatives decreased by 24% to $54.20[224] - The average realized price for oil in Q1 2023 was $73.31 per barrel, down 20% from $91.19 per barrel in Q1 2022[220] - The company realized a gain on settled commodity derivatives of $13.7 million in Q1 2023, compared to a loss of $105.2 million in Q1 2022[224] - Unsettled commodity derivative gains were $140.0 million in Q1 2023, compared to a loss of $384.2 million in Q1 2022[225] Costs and Expenses - Production expenses rose by 43% to $78.1 million in Q1 2023, with per Boe costs increasing from $8.50 to $9.93, attributed to higher service and maintenance costs[226] - Depletion, depreciation, amortization, and accretion (DD&A) expenses increased by 78% to $94.6 million in Q1 2023, with depletion expense per Boe rising by 45% to $11.92[229] - Interest expense increased to $30.1 million in Q1 2023, up from $18.0 million in Q1 2022, due to higher debt levels and interest rates[230] - General and administrative expenses decreased to $13.0 million in Q1 2023 from $13.8 million in Q1 2022, primarily due to a $3.4 million reduction in acquisition-related costs[228] Liquidity and Capital Expenditures - As of March 31, 2023, total liquidity was $437.1 million, consisting of $431.0 million in committed borrowing availability and $6.1 million in cash[235] - The company completed the MPDC Acquisition for $319.9 million in January 2023, contributing to the increase in production levels[234] - Cash flows used in investing activities increased to $461.2 million for the three months ended March 31, 2023, compared to $417.6 million in the same period of 2022, primarily due to increased development and acquisition spending[243] - The company incurred capitalized costs of $526.8 million for oil and natural gas properties during the three months ended March 31, 2023, while actual cash spending was $461.0 million[244] - Net cash provided by operating activities for the three months ended March 31, 2023, was $269.3 million, up from $154.0 million in the same period of the prior year, driven by higher production volumes and commodity prices[242] Debt and Financing - As of March 31, 2023, the company reported a working capital surplus of $50.6 million, a significant improvement from a deficit of $24.5 million at December 31, 2022[240] - The company reported a total of $705.1 million in outstanding Senior Notes and $500.0 million in outstanding Convertible Notes as of March 31, 2023[248][249] - As of March 31, 2023, the company had a borrowing base of $1.6 billion under its Revolving Credit Facility, with $569.0 million in borrowings outstanding, leaving $431.0 million in available committed borrowing capacity[247] Hedging and Commodity Prices - The company utilizes derivative instruments to hedge future sales prices on a substantial portion of its oil and natural gas production, aiming for predictable cash flows[207] - The company hedged approximately 42% of its crude oil production and 40% of its natural gas and NGL production to mitigate commodity price volatility[236] - The company has entered into derivative contracts to hedge against commodity price volatility, with significant volumes of crude oil and natural gas contracts outlined for 2023 and 2024[258][262] - The company’s crude oil derivative contracts for Q2 2023 include 2,161,250 Bbls at an average price of $75.85/Bbl[258] - The company’s natural gas derivative contracts for Q2 2023 include 5,232,000 MMBTU at an average price of $4.483/MMBTU[262] Regulatory and Compliance - The company maintains effective disclosure controls and procedures as of March 31, 2023, ensuring timely reporting of required disclosures[267] - There were no changes in the company’s internal control over financial reporting that materially affected its operations during the quarter ended March 31, 2023[268] - The company continues to face litigation claims and regulatory proceedings in the ordinary course of business[270] Market Conditions - The oil price differential to the NYMEX benchmark price in Q1 2023 was $2.67 per barrel, down from $3.98 per barrel in Q1 2022[212] - The net realized gas price in Q1 2023 was $3.91 per Mcf, representing 142% realization relative to average Henry Hub pricing, compared to $6.94 per Mcf in Q1 2022[213] - The company’s revenues are significantly impacted by market supply and demand, with oil revenues being more sensitive to price changes than natural gas revenues[215] - The company’s revenue is heavily influenced by oil and natural gas prices, which are subject to significant volatility due to supply and demand factors[255] - The company is budgeting for a 5-10% increase in drilling and completion costs in 2023 compared to 2022 due to inflationary pressures in the oil and natural gas industry[250]