November 24, 2020

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Northern Oil and Gas, Inc. Announces First Quarter 2020 Results

HIGHLIGHTS First quarter production increased 28% over the prior year, averaging 43,735 barrels of oil equivalent (“Boe”) per day Cash flow from operations, excluding $7.1 million from changes in working capital, totaled $93.6 million, which was a 7% increase over the prior year and exceeded first quarter capital expenditures of $86.7 million Senior Secured Notes reduced by $90.2 million in the first quarter; signed agreements to retire an additional $6.1 million subsequent to quarter-end Over 27,000 barrels per day of remaining 2020 oil production hedged at over $58 per barrel (“Bbl”) average prices Approximately 20,000 barrels per day of 2021 oil production hedged at over $55 per Bbl average prices 2020 total capital expenditures now anticipated between $175 - $200 million, down 56% at the midpoint vs. 2019 D&C and ground game capital expenditures MINNEAPOLIS--(BUSINESS WIRE)--Northern Oil and Gas, Inc. (NYSE American: NOG) (“Northern”) today announced the company’s first quarter results and provided 2020 guidance. MANAGEMENT COMMENTS “Many companies are reacting quickly to the COVID-19 pandemic and the unprecedented fall in commodity prices,” commented Nick O’Grady, Northern’s Chief Executive Officer. “Northern is different. Instead of reacting to this calamity, we actually prepared in advance for it. The steps we have taken to improve our balance sheet over the past several years, our vastly superior multi-year risk management, and our strict capital allocation standards put us in a position of strength despite the current outlook. Over the next two years, we project generating free cash flows that approximate our entire current equity market capitalization. We will continue to ratchet down our debt levels, take advantage of market dislocations, and seek out distressed acquisitions that provide strong upside convexity.” FIRST QUARTER FINANCIAL RESULTS First quarter net income was $368.3 million or $0.74 per diluted share, driven in large part by a $345.1 million mark-to-market gain on unsettled commodity derivatives. First quarter Adjusted Net Income was $21.7 million or $0.04 per diluted share, down from $27.8 million or $0.07 per diluted share in the first quarter of 2019. Cash flow from operations, excluding $7.1 million from changes in working capital, was $93.6 million in the first quarter compared to $87.5 million in the prior year. Adjusted EBITDA in the first quarter was $108.0 million compared to $104.8 million in the prior year. (See “Non-GAAP Financial Measures” below.) PRODUCTION First quarter production increased 28% from the prior year and inline with the prior quarter to 4.0 million Boe or 43,735 Boe per day. Oil production represented 79% of total production at 34,488 Bbls per day. Production remained resilient in the first quarter despite only 7.3 net wells turned online during the quarter, which was 50% lower than the 14.6 net wells turned online in the fourth quarter of 2019. Additionally, material curtailments began in March within the basin, yet first quarter results remained roughly inline. Gas capture continues to improve in the Williston as infrastructure improvements have come online, which has helped improve overall gas sales volumes. PRICING During the first quarter, NYMEX West Texas Intermediate (“WTI”) crude oil averaged $45.57 per Bbl, and NYMEX natural gas at Henry Hub averaged $1.91 per million cubic feet (“Mcf”). Northern’s unhedged net realized oil price in the first quarter was $37.07, representing a $8.50 differential to WTI prices. Northern’s first quarter unhedged net realized gas price was $2.75 per Mcf, representing approximately 144% realizations compared with Henry Hub pricing. OPERATING AND G&A COSTS Unit LOE costs increased to $9.38 per Boe in the first quarter compared to $8.84 per Boe in the fourth quarter of 2019 driven by increased processing costs and to a lesser extent higher workover expense. The increase in processing costs did have a positive impact on gas realizations in the quarter, which as noted in the pricing section above, rose notably sequentially. First quarter general and administrative (“G&A”) costs totaled $4.9 million, including stock-based compensation. Cash G&A expense totaled $3.8 million or $0.95 per Boe in the first quarter. CAPITAL EXPENDITURES Capital spending for the first quarter was $86.7 million, made up of $64.9 million of organic D&C capital and $21.8 million of total acquisition spending and other, inclusive of ground game D&C spending. As mentioned above, Northern added 7.3 net wells to production in the first quarter, and wells in process increased modestly to 27.2 net wells versus 25.8 net wells at the end of the prior quarter. On the ground game acquisition front, Northern closed on 12 transactions during the first quarter, the majority of which stemmed from commitments made, but not closed, in the fourth quarter. These transactions yielded 3.6 net wells, 965 net mineral acres and 61 net royalty acres (standardized to a 1/8 royalty interest). LIQUIDITY AND CAPITAL RESOURCES As of March 31, 2020, Northern had $8.5 million in cash and $590.0 million outstanding on its revolving credit facility. Northern had total liquidity of $218.5 million as of March 31, 2020, consisting of cash and borrowing availability under the revolving credit facility. As of March 31, 2020, Northern had additional debt outstanding consisting of a $130.0 million 6% Senior Unsecured Note and $327.5 million of 8.5% Senior Secured Notes. During the first quarter, Northern strengthened its balance sheet through several negotiated agreements and open market purchases aimed at reducing the principal amount of the 8.5% Senior Secured Notes. In the aggregate, the company retired $90.2 million in principal amount of these notes during the first quarter. Furthermore, and as noted in a Form 8-K filed on May 8th, Northern has continued to execute on the reduction of its secured debt in the second quarter and has entered into agreements to retire an additional $6.1 million of 8.5% Senior Secured Notes. Upon closing of these transactions, the outstanding principal amount on the 8.5% Senior Secured Notes will be reduced to $321.4 million. 2020 GUIDANCE COMMENTARY Given the rapid deterioration in oil prices during the COVID-19 pandemic, Northern’s operators continue to curtail and shut-in production in response to low wellhead prices. These plans are fluctuating and the timeframe for them is fluid. However, given Northern’s strong oil hedge position, regardless of current production volatility and the overall cumulative volumes for 2020, Northern anticipates $350 to $410 million in Adjusted EBITDA(1) for 2020. Factors that will drive this range are primarily overall levels of production, in-basin pricing differentials, lease operating expenses for curtailed production, and derivative gains or losses based on the average WTI prices over these periods. Northern expects $55 to $60 million of total book interest expense for 2020. In addition, Northern anticipates approximately $175 to $200 million in total capital expenditures for 2020, 43-49% of which in this range has already been accounted for in the first quarter. Northern will additionally earmark, in the event of a substantial rise in commodity prices north of $40 WTI, approximately $50 million of “reserve capital” for completions of its drilled but uncompleted inventory. Based on the current forward strip, Northern does not anticipate the reserve capital being accessed at this time. In the interests of accelerating debt repayment, Northern’s Board of Directors has elected to defer payment of the dividends on its Perpetual Preferred Stock and any potential common stock dividends until oil returns to economic levels. This should save the Company approximately $15 million for 2020. Northern continues to anticipate that it will generate significant free cash flow in 2020 and 2021. _____________ (1) Adjusted EBITDA is a non-GAAP financial measure. Northern’s 2020 Adjusted EBITDA guidance range was estimated using (i) actual results for the first quarter of 2020 and (ii) strip prices for oil and natural gas as of May 8, 2020, which represents an average WTI oil price of approximately $26.90 per barrel and an average Henry Hub natural gas price of $2.34 per Mcf, for April through December 2020. See “Non-GAAP Financial Measures” below. FIRST QUARTER 2020 RESULTS The following tables set forth selected operating and financial data for the periods indicated. Three Months Ended March 31, 2020 2019 % Change Net Production: Oil (Bbl) 3,138,380 2,541,232 24 % Natural Gas and NGLs (Mcf) 5,049,120 3,435,784 47 % Total (Boe) 3,979,900 3,113,863 28 % Average Daily Production: Oil (Bbl) 34,488 28,236 22 % Natural Gas and NGLs (Mcf) 55,485 38,175 45 % Total (Boe) 43,735 34,598 26 % Average Sales Prices: Oil (per Bbl) $ 37.07 $ 48.64 (24 )% Effect of Gain (Loss) on Settled Derivatives on Average Price (per Bbl) 10.04 4.94 103 % Oil Net of Settled Derivatives (per Bbl) 47.11 53.58 (12 )% Natural Gas and NGLs (per Mcf) 2.75 2.64 4 % Realized Price on a Boe Basis Including all Realized Derivative Settlements 40.63 46.64 (13 )% Costs and Expenses (per Boe): Production Expenses $ 9.38 $ 7.92 18 % Production Taxes 2.99 4.02 (26 )% General and Administrative Expense 1.22 1.94 (37 )% Depletion, Depreciation, Amortization and Accretion 15.53 14.49 7 % Net Producing Wells at Period End 464.8 332.5 40 % HEDGING Northern hedges portions of its expected production volumes to increase the predictability of its cash flow and to help maintain a strong financial position. The following table summarizes Northern’s open crude oil commodity derivative contracts scheduled to settle after March 31, 2020. Crude Oil Commodity Derivative Swaps(1) Contract Period Volume (Bbls) Volume (Bbls/Day) Weighted Average Price (per Bbl) 2020: 2Q 2,568,278 28,223 $57.67 3Q 2,501,348 27,189 $58.47 4Q 2,372,362 25,787 $58.03 2021: 1Q 2,066,250 22,958 $56.18 2Q 1,860,958 20,450 $56.64 3Q 1,671,410 18,168 $54.12 4Q 1,662,506 18,071 $54.14 _____________ (1) This table does not reflect additional potential hedged volumes under “swaption” contracts, which are crude oil derivative contracts entered into by Northern that give counterparties the option to extend certain current derivative contracts for additional periods. Based on current pricing, none of these swaptions would be expected to be exercised. CAPITAL EXPENDITURES & DRILLING ACTIVITY (In millions, except for net well data) Three Months Ended March 31, 2020 Capital Expenditures Incurred: Organic Drilling and Development Capital Expenditures $ 64.9 Ground Game Drilling and Development Capital Expenditures $ 14.0 Ground Game Acquisition Capital Expenditures $ 7.1 Other $ 0.7 Net Organic Wells Added to Production 7.3 Net Producing Wells (Period-End) 464.8 Net Wells in Process (Period-End) 27.2 Increase in Wells in Process over Prior Period 1.4 Weighted Average AFE for Wells Elected to During the First Quarter $ 7.6 Capitalized costs are a function of the number of net well additions during the period, and changes in wells in process from the prior year-end. Capital expenditures attributable to the 1.4 well increase in net wells in process during the three months ended March 31, 2020 are reflected in the amounts incurred year-to-date for drilling and development capital expenditures. ACREAGE As of March 31, 2020, Northern controlled leasehold of approximately 183,245 net acres targeting the Bakken and Three Forks formations of the Williston Basin, and approximately 90% of this total acreage position was developed, held by production, or held by operations. FIRST QUARTER 2020 EARNINGS RELEASE CONFERENCE CALL In conjunction with Northern’s release of its financial and operating results, investors, analysts and other interested parties are invited to listen to a conference call with management on Monday, May 11, 2020 at 10:00 a.m. Central Time. Those wishing to listen to the conference call may do so via the company’s website, www.northernoil.com, or by phone as follows: Website: https://78449.themediaframe.com/dataconf/productusers/nog/mediaframe/37907/indexl.htmlDial-In Number: (866) 373-3407 (US/Canada) and (412) 902-1037 (International) Conference ID: 13703183 - Northern Oil and Gas, Inc. First Quarter 2020 Earnings Call Replay Dial-In Number: (877) 660-6853 (US/Canada) and (201) 612-7415 (International) Replay Access Code: 13703183 - Replay will be available through May 18, 2020 UPCOMING CONFERENCE SCHEDULE UBS Global Oil and Gas Conference (Virtual) May 18-20, 2020 RBC Global Energy and Power Executive Conference (Virtual) June 2-3, 2020 ABOUT NORTHERN OIL AND GAS Northern Oil and Gas, Inc. is an exploration and production company with a core area of focus in the Williston Basin Bakken and Three Forks play in North Dakota and Montana. More information about Northern Oil and Gas, Inc. can be found at www.northernoil.com. SAFE HARBOR This press release contains forward-looking statements regarding future events and future results that are subject to the safe harbors created under the Securities Act of 1933 (the “Securities Act”) and the Securities Exchange Act of 1934 (the “Exchange Act”). All statements other than statements of historical facts included in this release regarding Northern’s financial position, operating and financial performance, business strategy, plans and objectives of management for future operations, industry conditions, and indebtedness covenant compliance are forward-looking statements. When used in this release, forward-looking statements are generally accompanied by terms or phrases such as “estimate,” “project,” “predict,” “believe,” “expect,” “continue,” “anticipate,” “target,” “could,” “plan,” “intend,” “seek,” “goal,” “will,” “should,” “may” or other words and similar expressions that convey the uncertainty of future events or outcomes. Items contemplating or making assumptions about actual or potential future sales, market size, collaborations, and trends or operating results also constitute such forward-looking statements. Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond our company’s control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following: the effects of the COVID-19 pandemic and related economic slowdown, changes in crude oil and natural gas prices, the pace of drilling and completions activity on Northern’s current properties, infrastructure constraints and related factors affecting Northern’s properties, Northern’s ability to acquire additional development opportunities, changes in Northern’s reserves estimates or the value thereof, general economic or industry conditions, nationally and/or in the communities in which Northern conducts business, changes in the interest rate environment, legislation or regulatory requirements, conditions of the securities markets, Northern’s ability to raise or access capital, changes in accounting principles, policies or guidelines, financial or political instability, health-related epidemics, acts of war or terrorism, and other economic, competitive, governmental, regulatory and technical factors affecting Northern’s operations, products and prices. Northern has based these forward-looking statements on its current expectations and assumptions about future events. While management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond Northern’s control. Northern does not undertake any duty to update or revise any forward-looking statements, except as may be required by the federal securities laws. CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months EndedMarch 31, (In thousands, except share and per share data) 2020 2019 REVENUES Oil and Gas Sales $ 130,196 $ 132,684 Gain (Loss) on Commodity Derivatives, Net 376,581 (139,623 ) Other Revenue 8 5 Total Revenues 506,785 (6,934 ) OPERATING EXPENSES Production Expenses 37,335 24,666 Production Taxes 11,896 12,520 General and Administrative Expenses 4,871 6,051 Depletion, Depreciation, Amortization and Accretion 61,809 45,134 Total Operating Expenses 115,911 88,371 INCOME (LOSS) FROM OPERATIONS 390,875 (95,305 ) OTHER INCOME (EXPENSE) Interest Expense, Net of Capitalization (16,551 ) (19,548 ) Gain (Loss) on Unsettled Interest Rate Derivatives, Net (677 ) — Loss on Extinguishment of Debt (5,527 ) — Debt Exchange Derivative Gain — 6,287 Contingent Consideration Gain — 1,392 Other Income — 12 Total Other Income (Expense) (22,755 ) (11,857 ) INCOME (LOSS) BEFORE INCOME TAXES 368,120 (107,162 ) INCOME TAX PROVISION (BENEFIT) (166 ) — NET INCOME (LOSS) $ 368,286 $ (107,162 ) Net Income (Loss) Per Common Share – Basic $ 0.90 $ (0.29 ) Net Income (Loss) Per Common Share – Diluted $ 0.74 $ (0.29 ) Weighted Average Shares Outstanding – Basic 403,662,541 371,448,566 Weighted Average Shares Outstanding – Diluted 497,212,614 371,448,566 CONDENSED BALANCE SHEETS (In thousands, except par value and share data) March 31, 2020 December 31, 2019 ASSETS (Unaudited) Current Assets: Cash and Cash Equivalents $ 8,512 $ 16,068 Accounts Receivable, Net 97,580 108,274 Advances to Operators 567 893 Prepaid Expenses and Other 2,216 1,964 Derivative Instruments 245,552 5,628 Income Tax Receivable 420 210 Total Current Assets 354,847 133,037 Property and Equipment: Oil and Natural Gas Properties, Full Cost Method of Accounting Proved 4,265,534 4,178,605 Unproved 10,846 11,047 Other Property and Equipment 2,156 2,157 Total Property and Equipment 4,278,536 4,191,809 Less – Accumulated Depreciation, Depletion and Impairment (2,504,735 ) (2,443,216 ) Total Property and Equipment, Net 1,773,801 1,748,593 Derivative Instruments 94,329 8,554 Deferred Income Taxes — 210 Other Noncurrent Assets, Net 14,409 15,071 Total Assets $ 2,237,386 $ 1,905,465 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts Payable $ 58,447 $ 69,395 Accrued Liabilities 101,302 110,374 Accrued Interest 9,308 11,615 Derivative Instruments 130 11,298 Current Portion of Long-term Debt 65,000 — Other Current Liabilities 673 795 Total Current Liabilities 234,860 203,477 Long-term Debt 975,282 1,118,161 Derivative Instruments 547 8,079 Asset Retirement Obligations 17,416 16,759 Other Noncurrent Liabilities 273 345 TOTAL LIABILITIES $ 1,228,379 $ 1,346,822 COMMITMENTS AND CONTINGENCIES (NOTE 8) STOCKHOLDERS’ EQUITY Preferred Stock, Par Value $.001; 5,000,000 Shares Authorized; 2,294,702 Series A Shares Outstanding at 3/31/2020 1,500,000 Series A Shares Outstanding at 12/31/2019 2 2 Common Stock, Par Value $.001; 675,000,000 Shares Authorized; 405,803,181 Shares Outstanding at 3/31/2020 406,085,183 Shares Outstanding at 12/31/2019 406 406 Additional Paid-In Capital 1,513,516 1,431,438 Retained Deficit (504,917 ) (873,203 ) Total Stockholders’ Equity 1,009,007 558,643 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 2,237,386 $ 1,905,465 Non-GAAP Financial Measures Adjusted Net Income and Adjusted EBITDA are non-GAAP measures. Northern defines Adjusted Net Income (Loss) as net income (loss) excluding (i) (gain) loss on unsettled commodity derivatives, net of tax, (ii) loss on extinguishment of debt, net of tax, (iii) debt exchange derivative gain, net of tax, and (iv) contingent consideration gain, net of tax. Northern defines Adjusted EBITDA as net income (loss) before (i) interest expense, (ii) income taxes, (iii) depreciation, depletion, amortization and accretion, (iv) non-cash stock-based compensation expense, (v) loss on extinguishment of debt, (vi) debt exchange derivative gain, (vii) contingent consideration gain, and (viii) (gain) loss on the unsettled commodity derivatives. A reconciliation of each of these measures to the most directly comparable GAAP measure is included below. Where references are pro forma, forward-looking or prospective in nature, and not based on historical fact, the table does not provide a reconciliation. Northern could not provide such reconciliation without undue hardship because such Adjusted EBITDA numbers are estimations, approximations and/or ranges. In addition, it would be difficult for Northern to present a detailed reconciliation on account of many unknown variables for the reconciling items, including without limitation future income taxes, full-cost ceiling impairments, and unrealized gains or losses on commodity derivatives. For the same reasons, Northern is unable to address the probable significance of the unavailable information, which could be material to future results. Management believes the use of these non-GAAP financial measures provides useful information to investors to gain an overall understanding of current financial performance. Specifically, management believes the non-GAAP financial measures included herein provide useful information to both management and investors by excluding certain expenses and unrealized commodity gains and losses that management believes are not indicative of Northern’s core operating results. In addition, these non-GAAP financial measures are used by management for budgeting and forecasting as well as subsequently measuring Northern’s performance, and management believes it is providing investors with financial measures that most closely align to its internal measurement processes. Reconciliation of Adjusted Net Income Three Months Ended March 31, (In thousands, except share and per share data) 2020 2019 Net Income (Loss) $ 368,286 $ (107,162 ) Add: Impact of Selected Items: (Gain) Loss on Unsettled Commodity Derivatives (345,075 ) 152,169 Loss on Extinguishment of Debt 5,527 — Debt Exchange Derivative Gain — (6,287 ) Contingent Consideration Gain — (1,392 ) Selected Items, Before Income Taxes (339,548 ) 144,490 Income Tax of Selected Items(1) (7,042 ) (9,506 ) Selected Items, Net of Income Taxes $ (346,590 ) $ 134,984 Adjusted Net Income $ 21,696 $ 27,822 Weighted Average Shares Outstanding – Basic 403,662,541 371,448,566 Weighted Average Shares Outstanding – Diluted 497,212,614 372,715,932 Net Income (Loss) Per Common Share – Basic $ 0.90 $ (0.29 ) Add: Impact of Selected Items, Net of Income Taxes (0.85 ) 0.36 Adjusted Net Income Per Common Share – Basic $ 0.05 $ 0.07 Net Income (Loss) Per Common Share – Diluted $ 0.74 $ (0.29 ) Add: Impact of Selected Items, Net of Income Taxes (0.70 ) 0.36 Adjusted Net Income Per Common Share – Diluted $ 0.04 $ 0.07 _____________ (1) For the three months ended March 31, 2020, this represents a tax impact using an estimated tax rate of 24.5%, which includes an adjustment of $90.2 million, for a change in valuation allowance. For the three months ended March 31, 2019, this represents a tax impact using an estimated tax rate of 24.5%, which includes an adjustment of $25.9 million, for a reduction in valuation allowance. Contacts Mike Kelly, CFA EVP Finance 952-476-9800 [email protected] Read full story here

HIGHLIGHTS

  • First quarter production increased 28% over the prior year, averaging 43,735 barrels of oil equivalent (“Boe”) per day
  • Cash flow from operations, excluding $7.1 million from changes in working capital, totaled $93.6 million, which was a 7% increase over the prior year and exceeded first quarter capital expenditures of $86.7 million
  • Senior Secured Notes reduced by $90.2 million in the first quarter; signed agreements to retire an additional $6.1 million subsequent to quarter-end
  • Over 27,000 barrels per day of remaining 2020 oil production hedged at over $58 per barrel (“Bbl”) average prices
  • Approximately 20,000 barrels per day of 2021 oil production hedged at over $55 per Bbl average prices
  • 2020 total capital expenditures now anticipated between $175 – $200 million, down 56% at the midpoint vs. 2019 D&C and ground game capital expenditures

MINNEAPOLIS–(BUSINESS WIRE)–Northern Oil and Gas, Inc. (NYSE American: NOG) (“Northern”) today announced the company’s first quarter results and provided 2020 guidance.

MANAGEMENT COMMENTS

“Many companies are reacting quickly to the COVID-19 pandemic and the unprecedented fall in commodity prices,” commented Nick O’Grady, Northern’s Chief Executive Officer. “Northern is different. Instead of reacting to this calamity, we actually prepared in advance for it. The steps we have taken to improve our balance sheet over the past several years, our vastly superior multi-year risk management, and our strict capital allocation standards put us in a position of strength despite the current outlook. Over the next two years, we project generating free cash flows that approximate our entire current equity market capitalization. We will continue to ratchet down our debt levels, take advantage of market dislocations, and seek out distressed acquisitions that provide strong upside convexity.”

FIRST QUARTER FINANCIAL RESULTS

First quarter net income was $368.3 million or $0.74 per diluted share, driven in large part by a $345.1 million mark-to-market gain on unsettled commodity derivatives. First quarter Adjusted Net Income was $21.7 million or $0.04 per diluted share, down from $27.8 million or $0.07 per diluted share in the first quarter of 2019. Cash flow from operations, excluding $7.1 million from changes in working capital, was $93.6 million in the first quarter compared to $87.5 million in the prior year. Adjusted EBITDA in the first quarter was $108.0 million compared to $104.8 million in the prior year. (See “Non-GAAP Financial Measures” below.)

PRODUCTION

First quarter production increased 28% from the prior year and inline with the prior quarter to 4.0 million Boe or 43,735 Boe per day. Oil production represented 79% of total production at 34,488 Bbls per day. Production remained resilient in the first quarter despite only 7.3 net wells turned online during the quarter, which was 50% lower than the 14.6 net wells turned online in the fourth quarter of 2019. Additionally, material curtailments began in March within the basin, yet first quarter results remained roughly inline. Gas capture continues to improve in the Williston as infrastructure improvements have come online, which has helped improve overall gas sales volumes.

PRICING

During the first quarter, NYMEX West Texas Intermediate (“WTI”) crude oil averaged $45.57 per Bbl, and NYMEX natural gas at Henry Hub averaged $1.91 per million cubic feet (“Mcf”). Northern’s unhedged net realized oil price in the first quarter was $37.07, representing a $8.50 differential to WTI prices. Northern’s first quarter unhedged net realized gas price was $2.75 per Mcf, representing approximately 144% realizations compared with Henry Hub pricing.

OPERATING AND G&A COSTS

Unit LOE costs increased to $9.38 per Boe in the first quarter compared to $8.84 per Boe in the fourth quarter of 2019 driven by increased processing costs and to a lesser extent higher workover expense. The increase in processing costs did have a positive impact on gas realizations in the quarter, which as noted in the pricing section above, rose notably sequentially. First quarter general and administrative (“G&A”) costs totaled $4.9 million, including stock-based compensation. Cash G&A expense totaled $3.8 million or $0.95 per Boe in the first quarter.

CAPITAL EXPENDITURES

Capital spending for the first quarter was $86.7 million, made up of $64.9 million of organic D&C capital and $21.8 million of total acquisition spending and other, inclusive of ground game D&C spending. As mentioned above, Northern added 7.3 net wells to production in the first quarter, and wells in process increased modestly to 27.2 net wells versus 25.8 net wells at the end of the prior quarter. On the ground game acquisition front, Northern closed on 12 transactions during the first quarter, the majority of which stemmed from commitments made, but not closed, in the fourth quarter. These transactions yielded 3.6 net wells, 965 net mineral acres and 61 net royalty acres (standardized to a 1/8 royalty interest).

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2020, Northern had $8.5 million in cash and $590.0 million outstanding on its revolving credit facility. Northern had total liquidity of $218.5 million as of March 31, 2020, consisting of cash and borrowing availability under the revolving credit facility.

As of March 31, 2020, Northern had additional debt outstanding consisting of a $130.0 million 6% Senior Unsecured Note and $327.5 million of 8.5% Senior Secured Notes. During the first quarter, Northern strengthened its balance sheet through several negotiated agreements and open market purchases aimed at reducing the principal amount of the 8.5% Senior Secured Notes. In the aggregate, the company retired $90.2 million in principal amount of these notes during the first quarter. Furthermore, and as noted in a Form 8-K filed on May 8th, Northern has continued to execute on the reduction of its secured debt in the second quarter and has entered into agreements to retire an additional $6.1 million of 8.5% Senior Secured Notes. Upon closing of these transactions, the outstanding principal amount on the 8.5% Senior Secured Notes will be reduced to $321.4 million.

2020 GUIDANCE COMMENTARY

Given the rapid deterioration in oil prices during the COVID-19 pandemic, Northern’s operators continue to curtail and shut-in production in response to low wellhead prices. These plans are fluctuating and the timeframe for them is fluid. However, given Northern’s strong oil hedge position, regardless of current production volatility and the overall cumulative volumes for 2020, Northern anticipates $350 to $410 million in Adjusted EBITDA(1) for 2020. Factors that will drive this range are primarily overall levels of production, in-basin pricing differentials, lease operating expenses for curtailed production, and derivative gains or losses based on the average WTI prices over these periods. Northern expects $55 to $60 million of total book interest expense for 2020. In addition, Northern anticipates approximately $175 to $200 million in total capital expenditures for 2020, 43-49% of which in this range has already been accounted for in the first quarter. Northern will additionally earmark, in the event of a substantial rise in commodity prices north of $40 WTI, approximately $50 million of “reserve capital” for completions of its drilled but uncompleted inventory. Based on the current forward strip, Northern does not anticipate the reserve capital being accessed at this time. In the interests of accelerating debt repayment, Northern’s Board of Directors has elected to defer payment of the dividends on its Perpetual Preferred Stock and any potential common stock dividends until oil returns to economic levels. This should save the Company approximately $15 million for 2020. Northern continues to anticipate that it will generate significant free cash flow in 2020 and 2021.

_____________

(1)

Adjusted EBITDA is a non-GAAP financial measure. Northern’s 2020 Adjusted EBITDA guidance range was estimated using (i) actual results for the first quarter of 2020 and (ii) strip prices for oil and natural gas as of May 8, 2020, which represents an average WTI oil price of approximately $26.90 per barrel and an average Henry Hub natural gas price of $2.34 per Mcf, for April through December 2020. See “Non-GAAP Financial Measures” below.

FIRST QUARTER 2020 RESULTS

The following tables set forth selected operating and financial data for the periods indicated.

Three Months Ended March 31,

2020

2019

% Change

Net Production:

Oil (Bbl)

3,138,380

2,541,232

24

%

Natural Gas and NGLs (Mcf)

5,049,120

3,435,784

47

%

Total (Boe)

3,979,900

3,113,863

28

%

Average Daily Production:

Oil (Bbl)

34,488

28,236

22

%

Natural Gas and NGLs (Mcf)

55,485

38,175

45

%

Total (Boe)

43,735

34,598

26

%

Average Sales Prices:

Oil (per Bbl)

$

37.07

$

48.64

(24

)%

Effect of Gain (Loss) on Settled Derivatives on Average Price (per Bbl)

10.04

4.94

103

%

Oil Net of Settled Derivatives (per Bbl)

47.11

53.58

(12

)%

Natural Gas and NGLs (per Mcf)

2.75

2.64

4

%

Realized Price on a Boe Basis Including all Realized Derivative Settlements

40.63

46.64

(13

)%

Costs and Expenses (per Boe):

Production Expenses

$

9.38

$

7.92

18

%

Production Taxes

2.99

4.02

(26

)%

General and Administrative Expense

1.22

1.94

(37

)%

Depletion, Depreciation, Amortization and Accretion

15.53

14.49

7

%

Net Producing Wells at Period End

464.8

332.5

40

%

HEDGING

Northern hedges portions of its expected production volumes to increase the predictability of its cash flow and to help maintain a strong financial position. The following table summarizes Northern’s open crude oil commodity derivative contracts scheduled to settle after March 31, 2020.

Crude Oil Commodity Derivative Swaps(1)

Contract Period

Volume (Bbls)

Volume (Bbls/Day)

Weighted Average Price

(per Bbl)

2020:

2Q

2,568,278

28,223

$57.67

3Q

2,501,348

27,189

$58.47

4Q

2,372,362

25,787

$58.03

2021:

1Q

2,066,250

22,958

$56.18

2Q

1,860,958

20,450

$56.64

3Q

1,671,410

18,168

$54.12

4Q

1,662,506

18,071

$54.14

_____________

(1)

This table does not reflect additional potential hedged volumes under “swaption” contracts, which are crude oil derivative contracts entered into by Northern that give counterparties the option to extend certain current derivative contracts for additional periods. Based on current pricing, none of these swaptions would be expected to be exercised.

CAPITAL EXPENDITURES & DRILLING ACTIVITY

(In millions, except for net well data)

Three Months Ended

March 31, 2020

Capital Expenditures Incurred:

Organic Drilling and Development Capital Expenditures

$

64.9

Ground Game Drilling and Development Capital Expenditures

$

14.0

Ground Game Acquisition Capital Expenditures

$

7.1

Other

$

0.7

Net Organic Wells Added to Production

7.3

Net Producing Wells (Period-End)

464.8

Net Wells in Process (Period-End)

27.2

Increase in Wells in Process over Prior Period

1.4

Weighted Average AFE for Wells Elected to During the First Quarter

$

7.6

Capitalized costs are a function of the number of net well additions during the period, and changes in wells in process from the prior year-end. Capital expenditures attributable to the 1.4 well increase in net wells in process during the three months ended March 31, 2020 are reflected in the amounts incurred year-to-date for drilling and development capital expenditures.

ACREAGE

As of March 31, 2020, Northern controlled leasehold of approximately 183,245 net acres targeting the Bakken and Three Forks formations of the Williston Basin, and approximately 90% of this total acreage position was developed, held by production, or held by operations.

FIRST QUARTER 2020 EARNINGS RELEASE CONFERENCE CALL

In conjunction with Northern’s release of its financial and operating results, investors, analysts and other interested parties are invited to listen to a conference call with management on Monday, May 11, 2020 at 10:00 a.m. Central Time.

Those wishing to listen to the conference call may do so via the company’s website, www.northernoil.com, or by phone as follows:

Website: https://78449.themediaframe.com/dataconf/productusers/nog/mediaframe/37907/indexl.html
Dial-In Number: (866) 373-3407 (US/Canada) and (412) 902-1037 (International)

Conference ID: 13703183 – Northern Oil and Gas, Inc. First Quarter 2020 Earnings Call

Replay Dial-In Number: (877) 660-6853 (US/Canada) and (201) 612-7415 (International)

Replay Access Code: 13703183 – Replay will be available through May 18, 2020

UPCOMING CONFERENCE SCHEDULE

UBS Global Oil and Gas Conference (Virtual)

May 18-20, 2020

RBC Global Energy and Power Executive Conference (Virtual)

June 2-3, 2020

ABOUT NORTHERN OIL AND GAS

Northern Oil and Gas, Inc. is an exploration and production company with a core area of focus in the Williston Basin Bakken and Three Forks play in North Dakota and Montana. More information about Northern Oil and Gas, Inc. can be found at www.northernoil.com.

SAFE HARBOR

This press release contains forward-looking statements regarding future events and future results that are subject to the safe harbors created under the Securities Act of 1933 (the “Securities Act”) and the Securities Exchange Act of 1934 (the “Exchange Act”). All statements other than statements of historical facts included in this release regarding Northern’s financial position, operating and financial performance, business strategy, plans and objectives of management for future operations, industry conditions, and indebtedness covenant compliance are forward-looking statements. When used in this release, forward-looking statements are generally accompanied by terms or phrases such as “estimate,” “project,” “predict,” “believe,” “expect,” “continue,” “anticipate,” “target,” “could,” “plan,” “intend,” “seek,” “goal,” “will,” “should,” “may” or other words and similar expressions that convey the uncertainty of future events or outcomes. Items contemplating or making assumptions about actual or potential future sales, market size, collaborations, and trends or operating results also constitute such forward-looking statements.

Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond our company’s control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following: the effects of the COVID-19 pandemic and related economic slowdown, changes in crude oil and natural gas prices, the pace of drilling and completions activity on Northern’s current properties, infrastructure constraints and related factors affecting Northern’s properties, Northern’s ability to acquire additional development opportunities, changes in Northern’s reserves estimates or the value thereof, general economic or industry conditions, nationally and/or in the communities in which Northern conducts business, changes in the interest rate environment, legislation or regulatory requirements, conditions of the securities markets, Northern’s ability to raise or access capital, changes in accounting principles, policies or guidelines, financial or political instability, health-related epidemics, acts of war or terrorism, and other economic, competitive, governmental, regulatory and technical factors affecting Northern’s operations, products and prices.

Northern has based these forward-looking statements on its current expectations and assumptions about future events. While management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond Northern’s control. Northern does not undertake any duty to update or revise any forward-looking statements, except as may be required by the federal securities laws.

CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)

Three Months Ended
March 31,

(In thousands, except share and per share data)

2020

2019

REVENUES

Oil and Gas Sales

$

130,196

$

132,684

Gain (Loss) on Commodity Derivatives, Net

376,581

(139,623

)

Other Revenue

8

5

Total Revenues

506,785

(6,934

)

OPERATING EXPENSES

Production Expenses

37,335

24,666

Production Taxes

11,896

12,520

General and Administrative Expenses

4,871

6,051

Depletion, Depreciation, Amortization and Accretion

61,809

45,134

Total Operating Expenses

115,911

88,371

INCOME (LOSS) FROM OPERATIONS

390,875

(95,305

)

OTHER INCOME (EXPENSE)

Interest Expense, Net of Capitalization

(16,551

)

(19,548

)

Gain (Loss) on Unsettled Interest Rate Derivatives, Net

(677

)

Loss on Extinguishment of Debt

(5,527

)

Debt Exchange Derivative Gain

6,287

Contingent Consideration Gain

1,392

Other Income

12

Total Other Income (Expense)

(22,755

)

(11,857

)

INCOME (LOSS) BEFORE INCOME TAXES

368,120

(107,162

)

INCOME TAX PROVISION (BENEFIT)

(166

)

NET INCOME (LOSS)

$

368,286

$

(107,162

)

Net Income (Loss) Per Common Share – Basic

$

0.90

$

(0.29

)

Net Income (Loss) Per Common Share – Diluted

$

0.74

$

(0.29

)

Weighted Average Shares Outstanding – Basic

403,662,541

371,448,566

Weighted Average Shares Outstanding – Diluted

497,212,614

371,448,566

CONDENSED BALANCE SHEETS

(In thousands, except par value and share data)

March 31, 2020

December 31, 2019

ASSETS

(Unaudited)

Current Assets:

Cash and Cash Equivalents

$

8,512

$

16,068

Accounts Receivable, Net

97,580

108,274

Advances to Operators

567

893

Prepaid Expenses and Other

2,216

1,964

Derivative Instruments

245,552

5,628

Income Tax Receivable

420

210

Total Current Assets

354,847

133,037

Property and Equipment:

Oil and Natural Gas Properties, Full Cost Method of Accounting

Proved

4,265,534

4,178,605

Unproved

10,846

11,047

Other Property and Equipment

2,156

2,157

Total Property and Equipment

4,278,536

4,191,809

Less – Accumulated Depreciation, Depletion and Impairment

(2,504,735

)

(2,443,216

)

Total Property and Equipment, Net

1,773,801

1,748,593

Derivative Instruments

94,329

8,554

Deferred Income Taxes

210

Other Noncurrent Assets, Net

14,409

15,071

Total Assets

$

2,237,386

$

1,905,465

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:

Accounts Payable

$

58,447

$

69,395

Accrued Liabilities

101,302

110,374

Accrued Interest

9,308

11,615

Derivative Instruments

130

11,298

Current Portion of Long-term Debt

65,000

Other Current Liabilities

673

795

Total Current Liabilities

234,860

203,477

Long-term Debt

975,282

1,118,161

Derivative Instruments

547

8,079

Asset Retirement Obligations

17,416

16,759

Other Noncurrent Liabilities

273

345

TOTAL LIABILITIES

$

1,228,379

$

1,346,822

COMMITMENTS AND CONTINGENCIES (NOTE 8)

STOCKHOLDERS’ EQUITY

Preferred Stock, Par Value $.001; 5,000,000 Shares Authorized;

2,294,702 Series A Shares Outstanding at 3/31/2020

1,500,000 Series A Shares Outstanding at 12/31/2019

2

2

Common Stock, Par Value $.001; 675,000,000 Shares Authorized;

405,803,181 Shares Outstanding at 3/31/2020

406,085,183 Shares Outstanding at 12/31/2019

406

406

Additional Paid-In Capital

1,513,516

1,431,438

Retained Deficit

(504,917

)

(873,203

)

Total Stockholders’ Equity

1,009,007

558,643

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

2,237,386

$

1,905,465

Non-GAAP Financial Measures

Adjusted Net Income and Adjusted EBITDA are non-GAAP measures. Northern defines Adjusted Net Income (Loss) as net income (loss) excluding (i) (gain) loss on unsettled commodity derivatives, net of tax, (ii) loss on extinguishment of debt, net of tax, (iii) debt exchange derivative gain, net of tax, and (iv) contingent consideration gain, net of tax. Northern defines Adjusted EBITDA as net income (loss) before (i) interest expense, (ii) income taxes, (iii) depreciation, depletion, amortization and accretion, (iv) non-cash stock-based compensation expense, (v) loss on extinguishment of debt, (vi) debt exchange derivative gain, (vii) contingent consideration gain, and (viii) (gain) loss on the unsettled commodity derivatives. A reconciliation of each of these measures to the most directly comparable GAAP measure is included below. Where references are pro forma, forward-looking or prospective in nature, and not based on historical fact, the table does not provide a reconciliation. Northern could not provide such reconciliation without undue hardship because such Adjusted EBITDA numbers are estimations, approximations and/or ranges. In addition, it would be difficult for Northern to present a detailed reconciliation on account of many unknown variables for the reconciling items, including without limitation future income taxes, full-cost ceiling impairments, and unrealized gains or losses on commodity derivatives. For the same reasons, Northern is unable to address the probable significance of the unavailable information, which could be material to future results.

Management believes the use of these non-GAAP financial measures provides useful information to investors to gain an overall understanding of current financial performance. Specifically, management believes the non-GAAP financial measures included herein provide useful information to both management and investors by excluding certain expenses and unrealized commodity gains and losses that management believes are not indicative of Northern’s core operating results. In addition, these non-GAAP financial measures are used by management for budgeting and forecasting as well as subsequently measuring Northern’s performance, and management believes it is providing investors with financial measures that most closely align to its internal measurement processes.

Reconciliation of Adjusted Net Income

Three Months Ended March 31,

(In thousands, except share and per share data)

2020

2019

Net Income (Loss)

$

368,286

$

(107,162

)

Add:

Impact of Selected Items:

(Gain) Loss on Unsettled Commodity Derivatives

(345,075

)

152,169

Loss on Extinguishment of Debt

5,527

Debt Exchange Derivative Gain

(6,287

)

Contingent Consideration Gain

(1,392

)

Selected Items, Before Income Taxes

(339,548

)

144,490

Income Tax of Selected Items(1)

(7,042

)

(9,506

)

Selected Items, Net of Income Taxes

$

(346,590

)

$

134,984

Adjusted Net Income

$

21,696

$

27,822

Weighted Average Shares Outstanding – Basic

403,662,541

371,448,566

Weighted Average Shares Outstanding – Diluted

497,212,614

372,715,932

Net Income (Loss) Per Common Share – Basic

$

0.90

$

(0.29

)

Add:

Impact of Selected Items, Net of Income Taxes

(0.85

)

0.36

Adjusted Net Income Per Common Share – Basic

$

0.05

$

0.07

Net Income (Loss) Per Common Share – Diluted

$

0.74

$

(0.29

)

Add:

Impact of Selected Items, Net of Income Taxes

(0.70

)

0.36

Adjusted Net Income Per Common Share – Diluted

$

0.04

$

0.07

_____________

(1)

For the three months ended March 31, 2020, this represents a tax impact using an estimated tax rate of 24.5%, which includes an adjustment of $90.2 million, for a change in valuation allowance. For the three months ended March 31, 2019, this represents a tax impact using an estimated tax rate of 24.5%, which includes an adjustment of $25.9 million, for a reduction in valuation allowance.

Contacts

Mike Kelly, CFA

EVP Finance

952-476-9800

[email protected]

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