Northern Oil & Gas (NOG) Valuation Update - May 6
Posted: Fri May 06, 2022 2:21 pm
At the time of this post NOG was trading at $29.01.
Before the Company's Q1 earnings release my valuation was $51. I am increasing my valuation by $9 to $60.
Why?
> NOG's Q1 results and updated guidance raised the confidence that I have in my model, which justifies a higher valuation multiple.
> TipRank's price target of $40.70 is based on 10 analysts' reports that are all dated prior to NOG's outstanding Q1 press release.
> NOG's operating cash flow (the basis for my valuation) is surging; from $6.24/share in 2021 to my forecast of $14.92/share in 2022, which is based on estimated realized oil & gas prices (net of cash settlements on their hedges) of $74.61/bbl and $7.03/mcf. < NOG reports dry gas and NGLs on a combined basis, which explains the high gas price.
NOG has announced a plan to increase their dividends each quarter thru at least 2023. They are already ahead of schedule.
Add NOG now before a lot of other analysts increase their price targets next week.
My updated forecast/valuation model will be posted to the EPG website this afternoon.
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Note from Capital One Securities
NOG 1Q Quick Take: Strong 1Q FCF + Mild Increase to '22 Volumes Despite Weather
$27.29, Overweight, $57.00 Target, Johnston
Positive. Very strong 1Q results, including a large FCF beat, and NOG raised '22 oil & boe production guidance by 1% on an unchanged '22 capital budget.
The small increase to production guidance is notable given the well-known weather-related challenges in the Bakken so far this quarter (Bakken still makes up ~60% of NOG's volumes) and the fact that NOG has underperformed in the last few months (similar to Bakken peers OAS, WLL, and ERF).
1Q FCF was >$50MM higher than expected given beats on volumes, oil & gas price realizations (especially gas), and CAPEX.
Before the Company's Q1 earnings release my valuation was $51. I am increasing my valuation by $9 to $60.
Why?
> NOG's Q1 results and updated guidance raised the confidence that I have in my model, which justifies a higher valuation multiple.
> TipRank's price target of $40.70 is based on 10 analysts' reports that are all dated prior to NOG's outstanding Q1 press release.
> NOG's operating cash flow (the basis for my valuation) is surging; from $6.24/share in 2021 to my forecast of $14.92/share in 2022, which is based on estimated realized oil & gas prices (net of cash settlements on their hedges) of $74.61/bbl and $7.03/mcf. < NOG reports dry gas and NGLs on a combined basis, which explains the high gas price.
NOG has announced a plan to increase their dividends each quarter thru at least 2023. They are already ahead of schedule.
Add NOG now before a lot of other analysts increase their price targets next week.
My updated forecast/valuation model will be posted to the EPG website this afternoon.
--------------------------------
Note from Capital One Securities
NOG 1Q Quick Take: Strong 1Q FCF + Mild Increase to '22 Volumes Despite Weather
$27.29, Overweight, $57.00 Target, Johnston
Positive. Very strong 1Q results, including a large FCF beat, and NOG raised '22 oil & boe production guidance by 1% on an unchanged '22 capital budget.
The small increase to production guidance is notable given the well-known weather-related challenges in the Bakken so far this quarter (Bakken still makes up ~60% of NOG's volumes) and the fact that NOG has underperformed in the last few months (similar to Bakken peers OAS, WLL, and ERF).
1Q FCF was >$50MM higher than expected given beats on volumes, oil & gas price realizations (especially gas), and CAPEX.