Northern Oil and Gas(NOG) - 2021 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company's production averaged 38,417 barrels of oil equivalent per day, representing an 8% increase over the previous quarter [28] - Adjusted EBITDA for the quarter was $98.8 million, with free cash flow of $41.7 million, reflecting increases of 5% and 43% respectively compared to the fourth quarter [29] - Oil differentials improved to $6.56, a 5% increase over the fourth quarter and a 38% increase from pandemic lows [30] - Lease operating expenses were $34.3 million or $9.92 per BOE, slightly above the full-year guidance range [31] - Capital spending for the quarter was $38.1 million, a 22% reduction compared to the fourth quarter [33] Business Line Data and Key Metrics Changes - The Bakken assets continued to show strong oil output and increased gas capture, contributing to exceeding internal revenue estimates [12] - Approximately 40 new well proposals were received, with about half elected, averaging around $7 million in well costs [24] - The company executed six transactions during the quarter, focusing on both Bakken and Permian drilling opportunities [25] Market Data and Key Metrics Changes - The company noted a decline in curtailments, with a reduction of 2,000 barrels a day, indicating improved market conditions [23] - The overall market for acquisitions remains robust, with the company evaluating 15 different package opportunities, primarily in the Williston, Permian, and Eagle Ford regions [16] Company Strategy and Development Direction - The company aims to improve its balance sheet and reduce operating leverage, with plans to end the year with a leverage ratio of less than 2 times [13] - A focus on acquisitions is evident, with a backlog of opportunities and a disciplined approach to evaluating potential deals [16][26] - The company announced its first-ever quarterly dividend of $0.03 per share, with future increases tied to leverage reduction [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the outlook, noting that the opportunity set continues to grow and that they are well ahead of their 2021 plan [12][21] - The management team emphasized a conservative approach to capital spending and production forecasts, with potential upward adjustments in future calls [37] - The management highlighted the importance of maintaining discipline in capital allocation, especially in a rising commodity price environment [74][96] Other Important Information - The company has strengthened its liquidity profile through debt and equity offerings, with gross proceeds of approximately $690 million [34] - The company expects to end the year with over $400 million of available liquidity, not including potential increases to revolver capacity [14] Q&A Session Summary Question: How do you think about managing the growth of the dividend going forward? - Management indicated a goal of returning about one-third of distributable cash flow to shareholders, with potential increases as leverage targets are met [45] Question: How do you think about doing that through a base dividend versus other mechanisms? - Management sees value in a solid base dividend while also considering special dividends to navigate commodity price volatility [52][53] Question: Can you clarify the $10 billion opportunities mentioned? - The opportunities are primarily non-operated properties, with sizes ranging from $10 million to over $500 million, with a sweet spot around $100 million to $200 million [56][58] Question: What is the outlook for E&P spending in 2022? - Management believes that capital discipline will be tested if oil prices rise significantly, and the ability to maintain inventory and capital efficiency will be challenging [96][98]