Northern Oil & Gas (NOG) Valuation Update - May 5

[dan_s]

NOG is the only "Non-Op" company in the Sweet 16, which just means that they don't operate any of their upstream assets.

NOG was in a Delaware Basin joint venture with Earthstone Energy, which recently merged with Permian Resources (PR). PR is an aggressive growth company, so I believe that NOG's actual results will continue to exceed their production guidance.

I have updated my forecast/valuation model for NOG, but my valuation stays at $66/share. < Just 4.5 X annualized operating CFPS.
> Q1 production was 119,436 Boepd (exceeding guidance by over 9,000 Boepd), which is near the top of their 2024 full-year guidance range of 115,000 to 120,000 Boepd.
> My 2024 forecast is based on the high end of their production guidance.
> Free cash flow should more than double from Q1 to Q2 because 1H 2024 capex was front end loaded.
> Free cash flow for the year should exceed $500 million.
> ON 2-5-2024 NOG closed acquisitions in the Delaware Basin and in the Utica Basin, adding ~6,500 Boepd (~26% oil).
> PR is ramping up production in the Delaware Basin.
> There is a good chance that NOG's 2024 exit rate will exceed 125,000 Boepd. < 60% crude oil.
> More than 60% of their Q2 thru Q4 natural gas is hedged at an average price over $3.25/mcf.

Four highly rated energy sector analysts have submitted new price targets to TipRanks since NOG announced Q1 results. They all rate it a BUY with price targets of $50, $56, $46 and $53. < Most analysts do not like the Non-Op model, but it is working for NOG.

NOG closed on Friday at $40.25.

NOG pays a decent dividend of $0.40/Qtr for ~4% annualized yield.