Northern Oil & Gas (NOG) Update - Nov 13

Northern Oil & Gas (NOG) Update - Nov 13

Postby dan_s » Sat Nov 13, 2021 12:30 pm

I have updated my forecast/valuation model for NOG for Q3 results and their updated guidance for Q4.

NOG closed at $23.86 on November 12. < NOG does pay an $0.08/quarter dividend for annualized yield of 1.34%
First Call's price target is $31.08
The three most recent analysts reports show price targets of $32, $38 and $40 < Raymond James
My price target of $38 is unchanged since my last newsletter.

NOG is an "Aggressive Growth" company that has been very active in the acquisitions market this year. All of their wells are operated by high-quality upstream companies, many of which are in our Sweet 16.
> They are on pace for 60% year-over-year production growth in 2021 and based on my SWAG, production will be up another 26.6% in 2022 to 67,000 Boepd.
> My valuation is just 4.5 X annualized cash flow from operations per share ($6.78 in 2021 and $10.11 in 2022).
> I believe my low valuation multiple is justified by their business model of holding only outside operating properties. This gives them less control over capex spending and more uncertainty over production forecasts. That said, their production guidance has been accurate since I started following the company.

Although their hedging program does reduce exposure to what could be much higher oil & gas prices in 2022, it does reduce the risk of my model being based on commodity prices being too high. They do report natural gas and NGLs on a combined basis and none of their NGLs are hedged.

They are in the process of closing a large acquisition in North Dakota from Comstock Resources (CRK).
Dan Steffens
Energy Prospectus Group
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