Northern Oil & Gas (NOG) Update - Feb 9

[dan_s]

NOG has been on my Watch List for several years. I'm not a big fan of upstream companies that don't operate most of their assets because they don't have control of their expenditures. However, NOG is going to generate a lot of free cash flow in 2021. The Appalachian Basin acquisition announced last week gives then more production balance and a deep inventory of low risk development drilling locations. EQT Corp. (EQT) operates ~95% of the acquired assets, which is a big plus.

If their 2021 guidance confirms my forecast model assumptions, I will be adding it to our Small-Cap Growth Portfolio in my February newsletter.

The company has confirmed that they will be reporting a ~23% increase in production from Q3 to Q4. They also said more shut in wells will be coming back online in Q1 that should push production up another 1,500 to 2,000 Boe per day.

NOG is currently trading at $11.94
Recent analysts price target updates:
RBC Cap 2/9/21 $15.00
Wells Fargo 2/8/21 $16.00
Truist Fin 2/8/21 $14.00
Stifel 1/26/21 $15.00
The Wall Street Gang is extremely cautious with price targets on companies that have made a significant acquisition like the one NOG announced on Feb 3rd.

Based on my forecast/valuation model, NOG is a potential double for us if WTI moves over $60/bbl in 2H 2021 and HH gas stays over $2.50.. Operating cash flow per share s/b over $6.50 in 2021. First Call's operating CFPS forecast for 2021 is $6.36 today. 4X CFPS is a reasonable valuation.
My forecast/valuation model has been posted to the EPG website.