Northern Oil and Gas(US:NOG)2022-11-09 21:18Glossary of Terms This section provides definitions for technical terms used throughout the report, categorized into quantities of crude oil and natural gas, interests in wells and acreage, and classifications for reserves - This section provides definitions for technical terms used throughout the report, categorized into quantities of crude oil and natural gas (e.g., Bbl, Boe, Mcf), interests in wells and acreage (e.g., Gross acres, Net acres, Working interest), and classifications for reserves (e.g., Proved reserves, Probable reserves, PV-10)81838 PART I – FINANCIAL INFORMATION Item 1. Condensed Financial Statements (unaudited) This section presents the unaudited condensed financial statements for Northern Oil and Gas, Inc. as of September 30, 2022, detailing significant year-over-year growth in assets, revenues, and net income driven by acquisitions and higher commodity prices Financial Statements Condensed Balance Sheet Highlights (in thousands of US dollars) | Account | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total Assets | $2,471,476 | $1,522,866 | | Total Current Assets | $376,694 | $215,328 | | Total Property and Equipment, Net | $2,015,060 | $1,253,342 | | Total Liabilities | $1,762,379 | $1,307,731 | | Long-term Debt, Net | $1,169,220 | $803,437 | | Total Stockholders' Equity | $709,097 | $215,135 | Condensed Statement of Operations Highlights (in thousands of US dollars, except per share data) | Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Oil and Gas Sales | $534,050 | $259,670 | $1,540,151 | $642,719 | | Gain (Loss) on Commodity Derivatives, Net | $257,590 | $(128,163) | $(339,995) | $(465,010) | | Total Revenues | $791,640 | $131,507 | $1,200,156 | $177,709 | | Net Income (Loss) | $583,465 | $12,554 | $628,169 | $(168,367) | | Net Income (Loss) Per Common Share – Diluted | $6.77 | $0.13 | $6.92 | $(2.97) | Condensed Statement of Cash Flows Highlights (Nine Months Ended Sep 30, in thousands of US dollars) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $641,039 | $263,365 | | Net Cash Used for Investing Activities | $(858,542) | $(364,817) | | Net Cash Provided by Financing Activities | $217,112 | $102,029 | Notes to Condensed Financial Statements - The company completed two major acquisitions in 2022: the Incline Acquisition in the Williston Basin for $159.8 million and the Veritas Acquisition in the Permian Basin for $408.8 million, which included cash and warrants9899102 - As of September 30, 2022, total long-term debt was $1.17 billion, consisting of $441.0 million outstanding on the Revolving Credit Facility and $729.6 million in 8.125% Unsecured Notes due 2028119 - The company increased its quarterly common stock dividend to $0.25 per share in August 2022, and during the first nine months of 2022, it repurchased $81.2 million of Series A Preferred Stock and initiated a $150 million common stock repurchase program134140141 - Subsequent to the quarter end, the company issued $500.0 million of 3.625% convertible senior notes due 2029, completed the Laredo acquisition, and exercised its right to mandatorily convert all outstanding Series A Preferred Stock into common stock185195196 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses significant growth in production, revenue, and profitability for Q3 and the first nine months of 2022, driven by successful acquisitions and favorable commodity prices, while also addressing rising operating costs and liquidity Q3 2022 vs Q3 2021 Operational Highlights | Metric | Q3 2022 | Q3 2021 | % Change | | :--- | :--- | :--- | :--- | | Total Production (Boe) | 7,279,311 Boe | 5,303,557 Boe | 37% | | Oil Sales (in thousands of US dollars) | $375,732 | $203,234 | 85% | | Realized Price per Boe (incl. settled derivatives) | $56.21/Boe | $38.34/Boe | 47% | | Production Expenses per Boe | $9.41/Boe | $8.15/Boe | 15% | | DD&A per Boe | $9.06/Boe | $6.77/Boe | 34% | - The company's strategy of investing in non-operated minority interests has expanded its portfolio beyond the Williston Basin to include the Permian and Appalachian Basins, significantly diversifying its asset base and production mix202203 - As of September 30, 2022, the company had total liquidity of $418.1 million, comprising $409.0 million of availability under its Revolving Credit Facility and $9.1 million in cash, further enhanced in October 2022 by a $500.0 million convertible notes issuance259260 - Cash used for drilling, development, and acquisitions in the first nine months of 2022 totaled $825.5 million, a substantial increase from $364.5 million in the same period of 2021, reflecting the company's aggressive growth and acquisition strategy271 Item 3. Quantitative and Qualitative Disclosures about Market Risk This section outlines the company's exposure to commodity price and interest rate risks, detailing the use of derivative instruments to hedge production and mitigate interest rate fluctuations - The company utilizes derivative contracts to reduce exposure to commodity price volatility, with all derivative positions marked-to-market each period and gains and losses recorded in the statement of operations282283 Summary of Open Crude Oil Hedges for Q4 2022 | Instrument | Volume (Bbls) | Weighted Average Price ($/Bbl) | | :--- | :--- | :--- | | Swaps | 2,796,800 Bbls | $64.17/Bbl | | Collars | 92,000 Bbls | Floor: $75.00/Bbl, Ceiling: $100.00/Bbl | - The company is exposed to interest rate risk on its variable-rate debt, where a 1% increase in short-term interest rates would increase annual interest expense by approximately $2.7 million, partially mitigated by interest rate swaps on a notional amount of $100.0 million293 Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2022, with no material changes to internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2022295 - No material changes were made to the company's internal control over financial reporting during the third quarter of 2022296 PART II – OTHER INFORMATION Item 1. Legal Proceedings The company is subject to various litigation and regulatory proceedings, but management does not expect them to materially impact financial condition or results of operations - The company states that ongoing legal proceedings arising from the normal course of business are not expected to have a material impact on its financial position298 Item 1A. Risk Factors This section states that there have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021 - There have been no material changes to the risk factors disclosed in the company's 2021 Annual Report on Form 10-K299 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's common stock repurchases during Q3 2022 under its publicly announced stock repurchase program, totaling 358,868 shares Issuer Purchases of Equity Securities (Q3 2022) | Period | Total Shares Purchased | Average Price Paid Per Share | Approx. Dollar Value Remaining in Program | | :--- | :--- | :--- | :--- | | July 2022 | 309,126 | $23.26 | $130.0 million | | August 2022 | 3,600 | $30.69 | $129.9 million | | September 2022 | 46,142 | $30.11 | $128.5 million | | Total | 358,868 | $24.22 | $128.5 million | - In May 2022, the board of directors approved a stock repurchase program to acquire up to $150 million of outstanding common stock301 Item 3. Defaults Upon Senior Securities The company reports no defaults upon its senior securities - None302 Item 4. Mine Safety Disclosures This section is not applicable to the company - Not applicable303 Item 5. Other Information The company reports no other information in this section - None304 Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including key corporate documents and officer certifications - Key exhibits filed include the Third Amended and Restated Credit Agreement, the Indenture for the 3.625% Convertible Senior Notes due 2029, and officer certifications pursuant to the Sarbanes-Oxley Act305306