Northern Oil & Gas (NOG) PT Update - Aug 18
Posted: Thu Aug 18, 2022 12:25 pm
Note below is from the team at Raymond James
Northern Oil & Gas Inc.
Howard County Purchase Impresses, Reiterate Strong Buy with an updated price target of $55.00
We're updating estimates post 2Q results and yesterday’s Permian acquisition. As a
reminder, NOG posted a solid quarter, beating on EBITDA and EPS by 8% and 6%,
respectively, vs. the Street while posting an in-line production figure despite significant
downtime in the Williston Basin. NOG also increased its base dividend by 32% to $0.25/
share. Moving to M&A, we like NOG’s Howard County purchase. The area is oil-heavy (86%)
and was purchased at 2.3x cash flow, a solid price for the Permian. We view the deal as
immediately accretive, with our pro-forma model seeing a 2% increase to NOG’s 2023 FCF
yield to a massive 37%. Despite the $110M cash purchase price (revolver + cash on hand),
we still have NOG finishing 2022 at ~1x leverage. NOG’s unique non-op strategy allows it to
avoid traditional small-cap project execution worries. Not to mention, it remains the only
public non-op company, so deal flow remains robust. We reiterate our Strong Buy rating
and raise target price to $55/share
Northern Oil & Gas Inc.
Howard County Purchase Impresses, Reiterate Strong Buy with an updated price target of $55.00
We're updating estimates post 2Q results and yesterday’s Permian acquisition. As a
reminder, NOG posted a solid quarter, beating on EBITDA and EPS by 8% and 6%,
respectively, vs. the Street while posting an in-line production figure despite significant
downtime in the Williston Basin. NOG also increased its base dividend by 32% to $0.25/
share. Moving to M&A, we like NOG’s Howard County purchase. The area is oil-heavy (86%)
and was purchased at 2.3x cash flow, a solid price for the Permian. We view the deal as
immediately accretive, with our pro-forma model seeing a 2% increase to NOG’s 2023 FCF
yield to a massive 37%. Despite the $110M cash purchase price (revolver + cash on hand),
we still have NOG finishing 2022 at ~1x leverage. NOG’s unique non-op strategy allows it to
avoid traditional small-cap project execution worries. Not to mention, it remains the only
public non-op company, so deal flow remains robust. We reiterate our Strong Buy rating
and raise target price to $55/share