Northern Oil and Gas(NOG) - 2023 Q2 - Quarterly Report

Production and Operations - As of June 30, 2023, the company participated in 9,131 gross (872.8 net) producing wells and leased approximately 268,480 net acres, with 89% developed[216] - Average daily production in Q2 2023 was approximately 90,878 Boe per day, a 25% increase compared to Q2 2022, primarily due to recent acquisitions and new wells[218] - The percentage of production volumes by basin for Q2 2023 was 64% from Williston, 36% from Permian, and 0% from Appalachian for oil, while for natural gas, it was 41% from Williston, 28% from Permian, and 31% from Appalachian[219] - Net production for Q2 2023 increased by 25% to 8,269,869 Boe compared to 6,614,743 Boe in Q2 2022, driven by a 31% increase in oil production and a 17% increase in natural gas and NGLs[233] - Net production for the first six months of 2023 reached 16,134,518 Boe, a 24% increase from 13,027,705 Boe in the same period of 2022[247] Financial Performance - Total revenues for Q2 2023 were $476.6 million, an 8% increase from $441.4 million in Q2 2022, despite a 39% decrease in realized prices excluding settled commodity derivatives[234] - Total revenues for the first half of 2023 were $1,058.8 million, a significant increase of 159% compared to $408.5 million in the first half of 2022[247] - Oil sales decreased by 6% to $709.2 million, while natural gas and NGL sales dropped by 47% to $133.5 million in the first six months of 2023[247] - The average realized price for oil was $72.16 per Bbl, down 27% from $98.71 per Bbl in the first half of 2022[247] - The average realized price on a Boe basis, including settled commodity derivatives, decreased by 8% to $53.66 in Q2 2023 from $58.55 in Q2 2022[237] Expenses and Costs - Production expenses rose by 30% to $84.4 million in Q2 2023, with per Boe costs increasing to $10.20 from $9.77 in Q2 2022[239] - General and administrative expenses increased by 54% to $12.4 million in Q2 2023, primarily due to acquisition-related costs[241] - Depletion, depreciation, amortization, and accretion (DD&A) expenses increased by 55% to $106.4 million in Q2 2023, with depletion expense per Boe rising to $12.76 from $8.17 in Q2 2022[242] - Interest expense for Q2 2023 was $32.0 million, up from $18.4 million in Q2 2022, attributed to higher debt levels[243] - Production expenses increased by 36% to $162.4 million, with per Boe costs rising to $10.07 from $9.15[253] - Depletion, depreciation, amortization, and accretion (DD&A) expenses totaled $201.0 million, an 86% increase from $108.0 million in the first half of 2022[257] - Interest expense rose to $62.1 million, compared to $36.4 million in the first six months of 2022, primarily due to higher debt levels[258] Debt and Liquidity - As of June 30, 2023, total outstanding debt was $1,705.1 million, with no borrowings under the Revolving Credit Facility[266] - The company had a borrowing base of $1.60 billion under its Revolving Credit Facility as of June 30, 2023, with $1.00 billion in available committed borrowing capacity[280] - As of June 30, 2023, total liquidity of $1.01 billion, including $1.00 billion in committed borrowing availability and $14.8 million in cash on hand[267] - The working capital surplus was $7.0 million at June 30, 2023, compared to a deficit of $24.5 million at December 31, 2022, with current assets increasing by $65.3 million[273] Acquisitions and Growth - The company has diversified its operations beyond the Williston Basin through acquisitions in the Appalachian and Permian Basins since 2020[217] - The company completed two significant acquisitions in 2023, totaling $487.8 million, to enhance production capabilities[262][264] - The company expects a 5-10% increase in drilling and completion costs in 2023 compared to 2022 due to inflationary pressures[285] Commodity Derivatives and Hedging - The company expects its derivative activities to help achieve more predictable cash flows and reduce exposure to downward price fluctuations[220] - The company hedged approximately 43% of its crude oil production and 34% of its natural gas and NGL production for the six months ended June 30, 2023[268] - The company reported a gain on settled commodity derivatives of $27.3 million in Q2 2023, compared to a loss of $162.3 million in Q2 2022[237] - The company recorded a gain on settled commodity derivatives of $40.9 million, a significant improvement from a loss of $267.5 million in the same period of 2022[251] Taxation - The effective tax rate for Q2 2023 was 18.9%, significantly higher than 0.4% in Q2 2022, due to the release of a valuation allowance[244] - The effective tax rate for the first half of 2023 was 7.2%, up from 3.9% in the same period of 2022, due to the release of a valuation allowance[259]