Northern Oil & Gas (NOG) Price Target Update - Aug 9

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Notes below from RBC Capital Their updated price target is $40.00
August 9, 2022

Northern Oil and Gas, Inc.: Spreading the Wealth

Our view: Diversification and increased scale provide a balance that
is delivering a predictable FCF profile. This enabled management to
accelerate its shareholder returns proposition, which is robust compared
to SMid peers. There continues to be a fairly robust acquisition pipeline,
but the company is showing good discipline given NOG share buybacks can
compete for FCF. Therefore, we think buybacks likely take a growing role
in the near-term return strategy given equity price dislocations. Our model
update following 2Q22 earnings resulted in a slight EPS/CFPS estimates
reduction related to share count assumptions and higher OPEX.

Key points:
The company's opportunistic shareholder returns is consistent with
management's goal to run NOG for investors. The strategy has been
spread between fixed dividends, preferred share retirement, debt
reduction, and recently common stock buybacks. NOG's continued track
record should provide investor confidence in the strategy. We think
common stock buybacks and retiring the preferred liquidation balance
take more of the near term focus with incremental FCF. Having a growing,
sustainable fixed dividend remains center to the longer term return
strategy, though we think this could take a bit of a pause after increasing
the fixed dividend by over 7x in the last year. In total, we think dividends can
generate a 3.8% yield over the 12-months, with buybacks adding another
6% to the direct returns.

Seeing the benefits of diversification. The diverse asset portfolio today
operating across three core areas helps insulate NOG to specific in-basin
events like the extreme winter weather that occurred in the Bakken in
early April. Bakken volumes were down sequentially related to the weather,
though stronger production out of the Permian and Appalachia more than
compensated for lost downtime with total company production up 2%
sequentially. The diverse portfolio also helps mitigate NOG from supply
chain issues that a single operator could face. In addition, NOG continues to
actively manage its well portfolio opting to consent mainly to projects with
the largest, most efficient operators helping to deliver stronger returns and
mitigate inflationary cost pressures better relative to SMid-cap peers.

Staying disciplined with M&A. The M&A market remains healthy with
over $2 billion worth of assets under consideration spread across 13
potential transactions. First and foremost NOG is committed to staying
capital disciplined as higher commodity prices are bringing a wide range
of assets to market and some sellers having unrealistic expectations. The
company continues to see minimal competition on larger deal sizes with
NOG's scale, strong balance sheet, and robust FCF generation capable of
absorbing larger transactions internally without having to access capital
markets. The company is also seeing an increasing amount of bolt-on
opportunities, like the one announced in July, coming to market in addition
to accelerating levels of organic activity on its assets already.

We will be publishing an updated profile on NOG this week.