On Wednesday, Northern Oil & Gas (NYSE:NOG) discussed first-quarter financial results during its earnings call. The full transcript is provided below.

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Summary

Northern Oil & Gas reported stable business activity with a significant first quarter performance, completing 41 deals while controlling overall capital.

The company highlighted the impact of geopolitical events on oil differentials, with benefits seen in the Williston Basin and challenges in natural gas takeaway capacity in the Permian.

Future activity may increase depending on long-term pricing trends, with potential M&A opportunities evaluated at around $10 billion.

The first quarter saw record production levels, with total average daily production exceeding 148,000 BOE per day.

Financial results included a non-cash mark-to-market loss on derivatives and a non-cash impairment charge, but the company remains well-insulated with significant hedging.

Capital expenditures were balanced across regions, and the company expects to maintain a 60:40 CAPEX split between the first and second halves of the year.

Northern Oil & Gas maintains a strong balance sheet with over $1.2 billion of liquidity and no updates to 2026 guidance at this time, anticipating narrowing ranges by the second quarter call.

Full Transcript

Evelyn Inverno

Good morning. Welcome to Northern Oil & Gas' first quarter 2026 earnings conference call. Yesterday after the close we released our financial results. You can access our earnings release and presentation in the Investor Relations section of our [email protected] we will be filing our March 31, 2026 10-Q with the SEC within the next few days. I'm joined this morning by our Chief Executive Officer Nick O'Grady, our President Adam Durham, our Chief Financial Officer Chad Allen and our Chief Technical Officer Jim Evans. Our agenda for today's call is as follows. Nick will provide introductory remarks followed by Adam who will share an overview of Northern Oil & Gas' operations and business development activities and Chad will review our financial results. After our prepared remarks, the team will be available to answer any questions. Before we begin, let me remind you of our safe harbor language. Please be advised that our remarks today, including the answers to your questions, may include forward looking statements within the meaning of the Private Litigation Reform Act. These forward looking statements are subject to risks and uncertainties that could cause actual results to be materially different from the expectations contemplated by our forward looking statements. Those risks include, among others, matters that we have described in our earnings release as well as in our filings with the SEC, including our annual report on Form 10-K and our quarterly reports on Form 10-Q. We disclaim any obligation to update these forward looking statements. During today's call we may discuss certain non GAAP financial measures including adjusted ebitda, adjusted Net Income and free cash flow. Reconciliations of these measures to the closest GAAP measures can be found in our earnings release. With that, I'll turn the call over to Nick.

Nick O'Grady

Thank you Evelyn. Welcome and good morning everyone and thank you for your interest in our company. I'll be very brief this quarter by highlighting nine key points. Number one, business activity remains stable with few observable changes since we last reported. Number two, potential changes to activity in 2026 remain a to be determined for us as the effect of the Iran war is only now going to be potentially seen in AFE (Authorization for Expenditure) activity. We will update our investors accordingly throughout the year. Number three, the higher long dated pricing stays, the more likely we see a sustained change in activity, especially as we head into 2027. Number four, in the meantime, we've seen a reversal of curtailments in the Williston and this will drive better capital efficiency throughout 2026. Number five, it was a banner first quarter for our ground game with an incredible 41 deals done while overall capital remains controlled. Number six, the current geopolitical storm is showing some key benefits and a few negatives to the business. We are seeing wide swings in oil differentials which are likely benefiting our realizations materially, particularly in the Williston, and some in the Permian, but particularly in the Williston. On the gas front, Permian production remains hamstrung by limited takeaway for the time being, but we remain financially well insulated with significant basis hedges at less than $1 off Henry Hub. Number seven, our leasing program remains materially underappreciated as through this effort We've added over 70 net locations in the last year. Free cash flow yields aren't free when comparing us to peers that are just depleting away their inventory. Number eight, while all eyes are on Iran and the wide swings in spots prices, it is the longer-dated strip that matters. The improvement in the 2027 and 2028 strip are what drive growth in undeveloped activity and in asset prices. And these improvements should help stabilize activity going forward, lubricate the M&A market, reduce bid ask spreads and drive up our competitiveness. We have several exciting large size package prospects in evaluation and more coming as the M&A market heats up. The backlog has improved in both size and quality, which is highly encouraging for our business model. Number nine, regardless of what happens in Iran, we believe things have been set in motion that will materially improve the long term strip's outlook. Absent significant economic turmoil that bodes well for activity acquisitions and for our investors given our hefty free cash flow generation. Despite adding inventory, our improved balance sheet and our reputation in the marketplace, there is a huge opportunity for our business to find meaningful growth paths. Again, thank you for your interest in our company. We remain focused on growing our enterprise the right way and as always, our company run by investors for investors.

Adam Durham (President)

With that, I'll turn it over to Adam. Thank you Nick. As a whole, Q1 activity was in line with expectations. Production was strong, particularly in Appalachia where we continued to see promising results from our growing asset base. And with our Q1 program right on plan showing strong IPs, the Williston also outperformed as multiple operators contributed meaningful return to sales volumes from prior curtailments along with performance gains from recent IPs. Uinta and Permian rounded out the quarter with performance in line with expectations. We ended the quarter with 43.7 net wells in process and 9.2 net AFEs, with the Permian representing roughly a third of our wells in process and approximately 60% of AFE inventory. Well proposals have held steady at 216 consents, squarely in the 200 to 230 range we saw throughout 2025, and based on our conversations with operators, our forward activity view is unchanged from what we laid out on the fourth quarter call. However, the next few months will be instructive for activity changes as it pertains to the expectations for the remainder of the year and 2027. On the ground game, we set a new quarterly record with 41 transactions in Q1, adding over 5,100 net acres and 6 net wells. Our Appalachian leasing program continues to perform well, but we were also able to close deals across all of our respective basins. Most transactions occurred early in the quarter ahead of rising commodity prices and our pipeline continues to deliver as we diligently evaluate opportunities. Our ground game will stay central as we leverage NOG's proprietary infrastructure to grow our portfolio through smaller acquisitions and evaluate further joint development opportunities. Larger M&A opportunities have also picked up and we are evaluating over $10 billion in assets across eight transactions that are currently in the market. As expected, in this environment there's a fair amount of variability in asset quality, but it has been encouraging to see higher quality assets coming to the forefront given the consistent number of opportunities afforded to us. We remain discerning and as always will prioritize packages that are resilient in any commodity environment and those that create long term value. With that, I'll turn it over to Chad. Thanks Adam.

Chad Allen (Chief Financial Officer)

In the interest of time and to avoid repeating standard financial metrics available in our release and presentation, I will focus my comments on the overall performance drivers and outliers encountered in the quarter. Our first quarter financial results and production cadence were largely in line with internal expectations with no major disruptions and despite the persistent macro volatility faced by the industry, Northern Oil & Gas's diversified and scaled platform continue to deliver outperforming internal estimates on production and EBITDA for the quarter. First quarter total average daily production was over 148,000 BOE per day, up 6% sequentially, a record for our company. Our oil to gas ratio was an even 5050 split as our Appalachian JV reached its peak in terms of well deliveries gap, that income was impacted by two non cash items. The first was a non cash mark to market loss on derivatives of approximately 521 million which was the result of a huge run up in oil prices during the quarter due to the war in Iran. Hedges settled in the quarter was only $17.6 million loss comprised of an $11 million gain in natural gas hedges offset by a $28 million loss on our oil hedges. The second item impacting net income was a non cash impairment charge of 268 million. As we have discussed on prior calls, NAG accounts for its assets under the full cost method as opposed to the successful efforts method which does not perform historical price based asset tests. We are one of the only companies among our peers that utilize the full cost method. I should mention given the recent change in oil prices, if they stay at current levels, this should be the last impairment charge for the year. We also continue to evaluate a potential shift to successful efforts longer term to avoid such optics. Moving on to pricing Natural gas realizations have continued to be weak in the first quarter, coming in at 72% of benchmark prices, flooding ongoing Waha market weakness due to constraints in the Permian. We expect gas realizations specifically in the Permian to remain weak for at least the next couple of quarters until planned infrastructure projects come online in the back half of 2026. I do want to point out that inclusive of our Waha basis hedges, our gas realizations in The Permian were 53% or $1.86 per MCF versus the negative 1% or negative $0.02 per MCF that are included in our corporate gas realizations. So we're well insulated from a risk management perspective for the rest of the year. Capex in the quarter, excluding non budget acquisitions and other 270 million which includes the success we had in our ground game, the 270 million of capital was very balanced with 31% to the Permian, 27% to Appalachia, 24% to the Williston and 17% in the Uinta Basin. Approximately 227 million of the total spend in the quarter was allocated to organic development capital. We still expect CAPEX Cadence to track an approximately 60:40 split between the first half and the second half of the year, subject to change with activity behavior from our operating partners. After closing our joint Utica acquisition during the quarter, we exited the quarter with debt well within our comfort zone and our balance sheet remains in a healthy Spot. Our leverage and liquidity were further enhanced by the nearly $230 million equity offering we completed late in the first quarter. We currently have over $1.2 billion of liquidity available to us with an additional 175 million of untapped liquidity. Given all the work we've done on the maturity wall last year, we have plenty of Runway to execute for years to come. With respect to our 2026 guidance, we have not made any updates. Given the significant level of volatility in commodity prices, our industry and in the macro generally, directionally, we are currently trending towards the higher end of the low activity scenario we laid out last quarter, but we still got a wide range of potential outcomes for the year. I'd anticipate that we'll be able to start tightening those ranges and narrowing our 2026 guidance by our second quarter. Call that concludes our prepared remarks. Operator, please open up the line for Q and A.

OPERATOR

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press a star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, please press the star one again and your first question comes from the lineup. Neil Dingman with William Blair, please go ahead.

Neil Dingman (Equity Analyst)

Morning guys. For all the details. Nick, my first question is just on incremental activity. Specifically you all mentioned in your prepared remarks and release that you suggested operated activities remain flat. But I'm just wondering based on your recent conversations and what you've seen sort of happen historically both in this career and up prior, what in addition to the 12 month now surpassing $80 do you think has to happen in order to see what I'd call more sustainable change in activity? And you know, if it went and if this happens, do you believe it occurs sort of equally in your Bakken and Permian and you into place?

Nick O'Grady

Yeah. Thanks, Neil. Good morning. I'd say this one, you know, when you think about our original guidance, you know, it didn't contemplate a war, right? And so it really, it comes into the fact that we're seeing obviously a huge surge in short term prices, a decent surge in the long term strip, but because it's being driven by geopolitical things, I think you're seeing a little bit more caution than you normally would from operators.

Neil Dingman (Equity Analyst)

One of the reasons we haven't made any substantive changes to guidance just yet is just that there is a lag factor, which is that I do think, and as I mentioned in my prepared comments, it's likely that we will see an increase in activity over time and that's really going to be driven by the long term strip. You know, the average spud to sale time is it can be faster, but you know, on average it's sometimes around 150, 160 days. And so when you're making that decision today to pick up a rig to drill an additional pad, you're not capturing $100 spot oil. Right. You have to make those decisions based on the future. And I think nobody from our operators, they don't want to have egg on their face and commit to a bunch of new activity, sign up a bunch of stuff and then have some resolution in the Gulf and sudden like they're falling on their face. That being said, as we continue to draw oil out of storage, I think what's inevitable is that the long term strip is going to have to reflect that. Right. And so, you know, it's around $70 on a two year basis today. I think the reality is that's probably enough in order to certainly incentivize activity, M and A, all those sort of things. But I think you may see it creep higher just to really give people a buffer to ensure they can feel good about making those investments because that's really what drives that, you know, for us. I think frankly, just right now, you know, what happened in early March really only starts to affect us right now. We really just asking for some grace to really see over the next several months of how this plays out. I do, but I do think, you know, look, I think we've talked about this from a guidance perspective. I think we're certainly confident in the high end of the low end. And I think from there, you know, I think we just want a little bit more time in order to narrow that band. But I think we'll certainly get it done by call it the second quarter. That's more than fair. And then my second question just on typical on capital allocation specifically, I know talking to some of the operators, they seem to simply look at a lot, oftentimes just sort of mid cycle pricing assumptions as what I'd call a primary driver between deciding if they're just leaning into share buybacks or more, I guess, ground game and M and A. But again, you all seem unique because you seem to have more ground game opportunities than most. So again, I'm just thinking when it comes to capital allocation, you know, is it simply looking at a mid cycle price and how cheap your shares are or you know, versus the Ground game return or what's involved in that?

Nick O'Grady

Yeah, that's right. I mean, I think what I tell you is that, you know, we, when we have to, we have to manage a bunch of things, right? Which is that like at the end of the day a share buyback is a high return proposition, especially when prices were low. And we did do some buybacks at the end of last year. But I'd also tell you that one of our goals as a company, one of the long term goals is you really have to, you have to grow your business over time. And it's not what a share buyback does. Right. You just now own more of the same thing. And so ultimately the opportunity, when prices are low, countercyclically, to acquire assets, which is why we were really so busy in January and February, ultimately can provide some of the best long term value. When you talk about that mid cycle, you know, I mean, I think oil was $57 in January or February. Right. That's certainly below what we would view as a mid cycle oil price. And so anything you're acquiring during that period of time is likely to deliver a really high return, as do buybacks. And I think it can all be part of the mix, but it's really about that balance.

Neil Dingman (Equity Analyst)

You got it. Thanks, Nick. Pretty much, you bet.

OPERATOR

And the next question comes from the line of Jan Davenport with Johnson Rice. Please go ahead.

Jan Davenport (Equity Analyst)

Hey, good morning and thanks for taking my question. So from the previous quarter, you guys kind of beat on natural gas pricing, specifically in Appalachia. I was just curious if that's going to be an ongoing trend both for next quarter and the second half of the year. I know the strip for natural gas hasn't looked all too strong in the past couple months, so just curious what your thoughts are on that. Yeah, well, as a two stream reporter, it's a little bit different. Right. Because our NGL yields in there. So what I would tell you is that as it pertains specifically to Appalachia, certainly, and some of our Appalachian gas is getting kind of on water NGL prices. Right. So we're certainly getting a huge benefit there. Appalachian, different differentials. The bulk of our prices at M2 and M2 has certainly been better. I mean, where it's one of the few basis areas where we're actually losing money on our hedges. And so M2 has been sort of tighter and it appears even, you know, it obviously tends to dip seasonally, but it's certainly, it's certainly been better than what the averages have been for the last Several years. And so we're definitely seeing an improvement there in terms of our overall differentials. You know, I think Chad talked a little bit about this in guidance but I would tell you that we're seeing likely significantly better than expected oil differentials which is really the biggest driver to our revenue given it's about 80% of our revenue. And then we're seeing in aggregate worse gas differentials and that's 100% driven by WAHA pricing at the financial level it's not having as much of an effect at the bottom line because of our hedge position. But at the end of the day at the actual spot realizations I think there's probably downward pressure in the short term. Obviously I'm not, you know, I think there's something like 4 BCF a day of expansions going on in the Permian. So you know, I think it certainly will improve from some of the doldrums we've seen in April, but that's going to take some time this year. Okay. Yeah, perfect. And I was also curious you mentioned you are evaluating call it $10 billion in potential large M and A transactions. Curious where you know what the locations of those might be along with. You know, just give us some characteristics that you guys are looking for on those. On those opportunities off of the table. I'll let Adam finish it but I'd say this one, it's been consistent with the last several years. It's definitely more diversified. There's stuff all over the place and as our capabilities have expanded, obviously we see more than we ever have from, you know, call it Canada to every single sub basin in the US What I would tell you is that we are seeing typically people are willing to sell PDP laden properties even in low price environments, especially in the days of ABS and things like that where they view they're getting relatively good prices for them. When the long dated strip was $57 coming into this year people that if you think about a DCF exercise that's what drives the value of undeveloped inventory. And so assets would strong undeveloped inventory which are the characteristics we're looking for. Really we're starting to dry up on the oil side. That is obviously inverted completely. We're seeing higher quality Permian assets in particular coming to market. And so I think for us you are right now at a little bit of a. It might seem counterintuitive given how high spot prices are but with the strip closer to what we would view as a mid cycle price today, it really does help the long dated and so My point would be if oil prices went from $100 to 75 in the spot market today, it's not going to have as much of an impact on the value of those assets versus that long dated stripping stickier. Adam, I don't know if you want to add to that. That's right. I mean, I think the biggest difference ever see in between kind of 2025 and where we stand today has been kind of a pivot from, you know, the gas weighted quality assets that we were looking at last year to more of the oil weighted, which is obviously expected. I think you've got a number of operators post consolidation now starting to kind of socialize their assets. You've got private equity groups that are obviously taking a look at the strip and coming to market. And so, you know, based on my prepared remarks, you're certainly seeing a fair amount of variability, but the quality is starting to improve, especially on the oil side. All right, excellent. Thank you guys for taking my question. That's all for me,

OPERATOR

thank you. And the next question comes from the line of Paul diamond with Citi. Please go ahead.

Paul Diamond (Equity Analyst)

Thank you. Good morning all. Thanks for taking the call. I just wanted to quickly touch on you guys hedge book. Looking forward to the curve and the big, I guess, big glug of swap in GI's hold. How should we think about any strategic shifts for the rest of the year given the volatility and as you said before the war that no one expected? Yeah, I don't think that you'll see much in terms of fireworks in terms of the swaptions. We don't really have that many swaptions remaining this year, to be candid. And what few ones we have will either, you know, be exercised or rolled forward. But I wouldn't expect any major shifts to our hedge book specifically for this year and then for next year. You know, we've started hedging Paul, but not in a significant fashion at this point. And I think it's just, we're just trying to be patient as we go through the, you know, we really want to see the conclusion of what happens in the Middle east before we really make a call in 2027. Got it. Makes perfect sense. And then as you guys talked about the net wells in process, the current split is like a third Permian, third well eston and then square feet than we have otherwise. Any reason to think with what you see in the down range right now that that shifts or is that kind of, should we think about that as more locked in for the next year or so? I mean, I suppose. Yeah. I mean, I guess what I would be looking towards is probably more like the election activity. Right. And so if you look at that, you're seeing about two thirds, you know, related to the Permian and you're starting to see, you know, fair amount of Williston acceleration as well. And so I would expect, you know, kind of the Permian and the Williston to be the front runners. Obviously, we've got a fair amount of activity in Appalachia and that'll also be dependent on, you know, obviously the transaction that we just closed as well as, you know, the ground game leasing program that we've got in place. And then the Uinta is really just kind of steady as it goes. So Permian in Williston is probably where I'd be looking to. Yeah. And I'd say, I think my guess would be just given the gas situation in the Permian right now, that the acceleration you see there really is probably later in the year just as you get closer to a resolution there and on the Uinta, I think there are some options for some accelerations, but we'll have to see. Got it. Appreciate the time over there.

OPERATOR

Thank you. And the next question comes from the line of Noel Parks with Tuohy Brothers. Please go ahead.

Noel Parks (Equity Analyst)

Hi, good morning. You know, I was wondering, and it's definitely interesting to hear about the different parties, the private side coming to the table and so forth and sorry, one moment. But I was wondering for operators, where do you think things stand now around sort of basin rationalization, you know, in the wake of some of the big transactions of the last year or so now being fully digested. And I guess I'm just curious if you, if you think overall across your basins you're seeing operators more inclined to sort of expand their footprints or sort of, you know, core up and narrow them down right now.

Nick O'Grady

Yeah, no, I don't know if I want to speak for them completely. I would say this, that, you know, we had Adam had talked extensively last year about that. He thought that post a lot of this consolidation we would see rationalization. We are starting to see that. So we're seeing several large companies put packages of non core assets sometimes in good basins to sell. And so I do think we're seeing some rationalization. We're seeing that in the Permian, the Eagle Ford. I'm trying to think of where else I think there's a large Williston package coming at some point this year.

Adam Durham (President)

And so we're definitely seeing that to some degree. I think, look, consolidation is a Trend that I think continues, it both benefits and hurts us sometimes. Obviously it tends to hurt us in the sense that you probably have less aggregate activity, but it helps us from a cost efficiency and from a returns perspective. And so I don't know if you want to add to that. Yeah, I mean, going back to your initial question, I would just say that two things can be true at the same time and ultimately it's going to be dependent on the philosophical approach from the operator. Right. And who did they consolidate with? Where are those positions? And then ultimately what is that integration difficulty look like? Because, you know, from our experience and talking with our operator operating partners who have, you know, gone through this, some can go very smoothly and others cannot. And so I think you're going to see, you know, some large asset packages, but then you're also going to see, you know, other operators that might take small pieces, you know, non op and kind of, you know, just kind of layer that out into the market kind of as they go. So I think you're going to see a little bit of everything.

Noel Parks (Equity Analyst)

Got it. And I'm just wondering, are you seeing anything happening kind of in the sort of off the beaten path gas plays? I'm thinking a little bit about midcon Rockies, just as people look ahead to longer term supply. I'm sort of thinking about, you know, underutilized infrastructure and so forth and maybe some capital finding its way there.

Nick O'Grady

Yeah, I mean there have been some major consolidations on the private side in like Rockies Gas and some of the legacy assets and there have been some companies that have put together some really good assets. And you know, in some cases some of the wild swings and differentials out there over the last couple of years have made those really, really sound investments. I'm not sure that's necessarily something for us per se. And I say I'm not sure. We really haven't evaluated a ton of it. So we don't, you know, things like the San Juan Basin or the Pince, we just, we've never really evaluated them at any extent, so I can't really speak to them. I'd say this in general though, if you think about the life cycle of shale, and this is consistent with my public comments everywhere, in general, there is more life in the core basins of gas in the US Than there is in the core basins in oil. And so I think the necessity to really step out isn't quite there. You know, we have decades of gas inventory internally here alone. We don't really. Right. In our, in our core basins. I don't know if you'd want to add to that. No, I think the only other thing I would add to me, obviously see in kind of the ABS market come into play with maybe some more PDP heavy type assets, you know, midcon, Eagle, Ford, like that. And typically not the sandbox that we play in, but we're always having conversations about how we could potentially be helpful there. So I think continue to explore it. So yeah, I mean we've done a number, as you know, we don't have any assets in the mid con. We've done dozens of evaluations at this point and it's a, it's just a more complex area. It's not really, it's not really. It's uniform and so it doesn't mean it's bad. But I think we'd have to be really highly selective if we ever entered that basin, just given. And most likely we would do it with an operating partner.

Noel Parks (Equity Analyst)

And then what are we looking at relative to what's in our own backyard? Correct. And so far it is sort of lost in the tug of war from a return on capital perspective. That doesn't mean it will forever. Just we have yet to find an asset that really, you know, competed. That's right. Terrific. Thanks a lot.

OPERATOR

You bet. No.

Phillips Johnston (Equity Analyst)

And the next question comes from the line of Phillips Johnston with Capital One. Please go ahead. Hey, thanks for the time. Just wanted to follow up on the earlier question about the oil swaptions and just ask about some of the accounting nuances for those swaptions. I think most of us understand that the vast majority of those swaptions that expire at the end of this year are required to be listed for 2026, even though the majority of them would actually turn into swaps for 27 or even beyond, rather than this year if they're ultimately exercised. So I guess I understand that nuance, but I just kind of wanted to square that with the makeup of the hedge reliability on the balance sheet where it looks like close to 65% of the hedge liability is classified as current.

Nick O'Grady

Yeah, that's because of the, that's because of the expiry. Right, Just as you. Just as you stated, Phillips. Right. We have to. Because of when that expiry is being. In some instances or most instances, 1231, 2026.

Phillips Johnston (Equity Analyst)

It's got to sit into the current, the current, the current bucket there. Okay, yeah. Okay, so that makes sense. It's basically the same again. Yeah, yeah. For accounting purposes, it's got to be treated on. As for the, the bank's counterparty election date. It's not really how it works. That's not how it works, no. And what you'll see in our, you'll see in our 10k or 10q sorry, some, some updated disclosures with respect to kind of how, how the swaps roll out. But again, like what we've mentioned before, Phillips, we, we certainly, that's, we actively manage this portfolio. Yeah, it's a nothing burger. Yeah. To be candid, it is. Okay, cool. Just checking on that. Thanks very much, guys. Yep, makes sense.

Nick O'Grady

And I'm showing no further questions at this time. I would like to turn it back to Mr. Nick O'Grady for closing remarks.

OPERATOR

Thanks very much for your time this morning. We look forward to talking to you in the coming weeks. Appreciate it. Thank you. And ladies and gentlemen, this concludes today's call.

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