Northern Oil & Gas (NOG) Update - Dec 27

[dan_s]

I am not including this in my current valuation of NOG.
----------------------------------------------------------------
Northern Oil and Gas has submitted a bid to acquire Granite Ridge Resources, a US producer with operations in basins including the Permian and Eagle Ford, reported Reuters.

The latest offer from the Minneapolis-based company represents an approximately 20% premium over Granite Ridge's share price, indicating a strategic push to expand its non-operational production (non-op) footprint.

Granite Ridge's management has rejected Northern Oil and Gas' offers so far, but sources suggest the company remains interested and may raise its offer next year.

As the news broke, Granite Ridge's shares surged over 10%, boasting its market value to approximately $809m.

At the end of September, Granite Ridge reported a net debt of around $136m, based on LSEG data.

Meanwhile, Northern Oil and Gas, which has a market capitalisation of approximately $3.6bn, experienced a 1.2% decline in its share price after reversing earlier marginal gains.

Northern Oil and Gas said in a statement: “The company frequently sends expressions of interest to acquire assets or businesses.”

Granite Ridge is predominantly owned by Grey Rock Investment Partners, led by co-chairmen Matt Miller and Griffin Perry. Kirk Lazarine, another co-founder, also holds a board position.

The company's public trading commenced in 2022 following a merger with a special purpose acquisition company (SPAC) associated with former US House Speaker Paul Ryan. Since its listing, Granite Ridge's share value has diminished by more than 40%.

Both Northern Oil and Gas and Granite Ridge specialise in non-operated production, a model where they share drilling costs and other expenses to earn a portion of the revenue from hydrocarbon sales.

Both companies operate across multiple shale basins, including the Permian Basin in Texas and New Mexico and the Williston Basin in North Dakota.

Northern Oil and Gas has expanded in recent years through smaller acquisitions, partnerships, and joint ventures. Securing a deal for Granite Ridge would represent Northern's largest acquisition to date.

Acquiring Granite Ridge would also extend Northern's footprint into the Eagle Ford, Haynesville, and Denver-Julesburg basins.

"Northern Oil and Gas pursues acquisition of Granite Ridge Resources" was originally created and published by Offshore Technology, a GlobalData owned brand.

[dan_s]

This morning, I updated my forecast/valuation model for NOG.

At the time of this post NOG was trading for $36.36.
> First Call's Price Target is $48.79
> TipRanks price target is based on more recent analysts' updates: "In the last 3 months, 9 ranked analysts set 12-month price targets for NOG. The average price target among the analysts is $45.44. The nine price targets range from $37 to $51. $51 is the most current price target from Neal Dingmann at Truist Financial dated 12/23/2024." < Note that all of the Wall Street Gang is using much lower natural gas prices for 2025 than the current strip ngas prices.

My current valuation increases by $2.50 to $60/share.

NOG recently closed two large acquisitions in joint bids with SM Energy and Vital Energy, which should increase NOG's production by ~17,000 Boepd to over 135,000 Boepd in 2025. Production mix is approximately 70% oil and 30% natural gas and NGLs, which NOG reports on a joint basis.

NOG has yet to provide guidance for 2025, so I have lowered my valuation multiple from 4.0 to 3.75 X annualized operating CFPS for 2024-2026.

NOG's current share price is just 2.4 X TipRanks' consensus CFPS forecast of $15.04 for 2025. My CFPS forecast for 2025 is $15.51. My CFPS forecast for 2026 is $18.09.

[dan_s]

Harry van Neck reviewed my NOG and he sent me some very helpful information. I have made some adjustments to my forecast model, but my valuation stays the same at $60/share.

Harry has over 40 years of oil & gas industry experience and he is a BIG help to me. If you want a lot of details about the companies, you should subscribe to his weekly reports, cost is just $250/year. Last week he put out a list of his Top Picks for 2025. Harry covers more than 80 companies, which includes a lot of companies that I do not follow. He ranks them based on his estimated net present value per share. 7 of his Top 10 picks for 2025 are in our three model portfolios.

NOG recently closed two large transactions that are going to have a significant impact on their Q4 results and production volumes going forward.

NOG current share price is ~2.5 X my Operating Cash Flow per share forecast of $14.37 for 2025. This morning TipRanks' consensus CFPS forecast for 2025 is $15.04, probably because my production forecast of 135,000 Boepd in 2025 is too conservative.