Northern Oil and Gas(US:NOG)2023-11-02 20:16PART I – FINANCIAL INFORMATION This section presents unaudited financial statements, management's analysis of financial condition and operations, market risk disclosures, and internal controls Condensed Financial Statements (unaudited) This section presents the unaudited condensed financial statements and notes, highlighting significant asset and liability growth due to acquisitions and a sharp decline in Q3 2023 net income Condensed Balance Sheets This section details the company's financial position, showing significant increases in total assets and liabilities primarily due to acquisitions Balance Sheet Comparison (in thousands) | Account | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Assets | $4,304,666 | $2,875,178 | | Total Current Assets | $469,626 | $320,485 | | Total Property and Equipment, Net | $3,788,636 | $2,482,926 | | Total Liabilities | $2,896,873 | $2,129,917 | | Total Current Liabilities | $602,491 | $344,972 | | Long-term Debt, Net | $2,057,359 | $1,525,413 | | Total Stockholders' Equity | $1,407,793 | $745,260 | - The significant increase in assets and liabilities is primarily attributable to acquisitions of oil and natural gas properties completed during the first nine months of 2023103273 Condensed Statements of Operations This section outlines the company's operational performance, noting a substantial decrease in Q3 2023 net income due to derivative losses Statement of Operations Highlights (in thousands) | Metric | Q3 2023 | Q3 2022 | 9 Months 2023 | 9 Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Oil and Gas Sales | $511,651 | $534,050 | $1,354,376 | $1,540,151 | | Gain (Loss) on Commodity Derivatives, Net | ($199,548) | $257,590 | $11,878 | ($339,995) | | Total Revenues | $313,973 | $791,640 | $1,372,742 | $1,200,156 | | Net Income | $26,111 | $583,465 | $534,116 | $628,169 | | Net Income Per Share – Diluted | $0.28 | $6.77 | $5.97 | $6.92 | - The substantial decrease in Q3 2023 net income compared to Q3 2022 was primarily driven by a significant loss on commodity derivatives, which swung from a $257.6 million gain to a $199.5 million loss64247 Condensed Statements of Cash Flows This section summarizes cash inflows and outflows, showing increased operating cash flow and significant investing activities for acquisitions Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Category | 2023 | 2022 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $840,959 | $641,039 | | Net Cash Used for Investing Activities | ($1,484,203) | ($858,542) | | Net Cash Provided by Financing Activities | $653,668 | $217,112 | | Net Increase (Decrease) in Cash | $10,424 | ($390) | - Cash from operations increased by 31% YoY for the nine-month period, driven by higher production. Cash used for investing activities rose significantly due to increased capital expenditures on acquisitions285286 Notes to Condensed Financial Statements This section provides detailed explanations for financial statement line items, including significant acquisitions, debt issuance, and tax asset valuation - The company completed three major bolt-on acquisitions in 2023: the MPDC Acquisition ($319.9 million), the Forge Acquisition ($167.9 million), and the Novo Acquisition ($468.4 million), significantly expanding its Permian Basin assets103106109112 - In May 2023, the company issued $500.0 million in 8.750% senior notes due 2031 to refinance existing debt and for general corporate purposes160 - The company closed an underwritten public offering of 7.65 million shares of common stock in May 2023, resulting in net proceeds of approximately $224.7 million169 - In the second quarter of 2023, management released a significant portion of its valuation allowance against deferred tax assets, concluding it is more likely than not that these assets will be realized192195 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses increased production from acquisitions, a decline in realized prices, and the company's liquidity position after funding significant capital expenditures Results of Operations This section analyzes the company's operating performance, highlighting production increases offset by lower realized commodity prices Q3 2023 vs Q3 2022 Operating Highlights | Metric | Q3 2023 | Q3 2022 | % Change | | :--- | :--- | :--- | :--- | | Total Production (Boe) | 9,414,055 | 7,279,311 | 29% | | Oil Sales (in thousands) | $464,793 | $375,732 | 24% | | Natural Gas & NGL Sales (in thousands) | $46,858 | $158,318 | (70)% | | Realized Price per Boe (ex-derivatives) | $54.35 | $73.37 | (26)% | | Production Expenses per Boe | $8.76 | $9.41 | (7)% | | DD&A per Boe | $14.21 | $9.06 | 57% | - The 29% increase in Q3 production was driven by acquisitions and new wells. However, this was offset by a 26% decrease in realized prices, led by a 74% drop in realized natural gas and NGL prices245246 - Depletion, Depreciation, Amortization and Accretion (DD&A) expense per Boe increased 57% year-over-year, primarily due to a higher depletable base from recent acquisitions253 Liquidity and Capital Resources This section details the company's financial flexibility, including available liquidity and funding sources for capital expenditures - As of September 30, 2023, the company had total liquidity of $879.0 million, comprising $866.0 million available under its Revolving Credit Facility and $13.0 million in cash277 - To fund acquisitions and strengthen the balance sheet, the company completed a $224.7 million common stock offering and issued $500.0 million in Senior Notes due 2031 during the first nine months of 2023274 Capital Expenditures for Nine Months Ended Sep 30 (in millions) | Category | 2023 | 2022 | | :--- | :--- | :--- | | Drilling and Development | $484.3 | $270.4 | | Acquisition of Oil and Natural Gas Properties | $996.6 | $551.5 | | Total | $1,483.6 | $825.5 | Quantitative and Qualitative Disclosures about Market Risk This section discusses market risks from commodity prices and interest rates, detailing hedging strategies and interest rate sensitivity - The company uses derivative contracts, such as swaps and collars, to reduce exposure to commodity price volatility and achieve more predictable cash flow300 - A 1% increase in short-term interest rates on the company's floating-rate debt outstanding at September 30, 2023, would increase annual interest expense by an estimated $3.8 million309 - Detailed tables are provided summarizing the company's open crude oil and natural gas derivative contracts by quarter through 2026, showing volumes and weighted-average prices for swaps and collars303304306 Controls and Procedures This section confirms the effectiveness of disclosure controls and procedures with no material changes to internal controls during the quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 30, 2023312 - No material changes to the company's internal control over financial reporting occurred during the third quarter of 2023313 PART II – OTHER INFORMATION This section addresses legal proceedings, risk factors, and equity security transactions, including the status of the stock repurchase program Legal Proceedings & Risk Factors This section discusses ongoing legal proceedings and confirms no material changes to previously disclosed risk factors - The company is subject to litigation from time to time in the ordinary course of business, but the outcomes are not expected to have a material impact on its financial position315 - No material changes to the risk factors disclosed in the 2022 Form 10-K have occurred, except as described in the Q2 2023 Form 10-Q316 Unregistered Sales of Equity Securities and Use of Proceeds This section reports no unregistered equity sales and details the status of the common stock repurchase program for Q3 2023 Issuer Purchases of Equity Securities (Q3 2023) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Approximate Dollar Value of Shares that May Yet be Purchased | | :--- | :--- | :--- | :--- | | July 2023 | — | — | $87.5 million | | August 2023 | — | — | $87.5 million | | September 2023 | — | — | $87.5 million | | Total | — | — | $87.5 million |