Q1 Hedging Gains

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dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Q1 Hedging Gains

Post by dan_s »

Just remember that the mark-to-market gains and losses have no impact on my valuations AND they need to be ignored when comparing actual net income to my forecasts or to First Call's forecasts. GAAP/SEC accounting rules for hedges are EXTREMELY MISLEADING AND CONFUSING for investors that don't understand the rules.

All of our model portfolio companies that have a lot of production hedged should report large MTM gains for Q1.


NOG Provides Update on First Quarter Hedging Results and Capital Allocation
April 19, 2023 6:30am EDT
MINNEAPOLIS--(BUSINESS WIRE)-- Northern Oil and Gas, Inc. (NYSE: NOG) (“NOG” or the “Company”) today provided an update regarding first quarter hedging results and capital allocation matters.

HEDGING UPDATE

The Company periodically enters into derivative agreements to hedge a portion of its commodity pricing exposure. For the first quarter of 2023, unrealized mark-to-market gains on derivatives are estimated to be approximately $140.0 million and realized derivative hedge gains are estimated to be approximately $13.6 million.

CAPITAL ALLOCATION UPDATE; BOARD INCREASES NOTES REPURCHASE AUTHORIZATION

The Company allocated approximately $26.4 million of capital in the first quarter of 2023 to securities repurchases, including both NOG common stock and senior unsecured notes due 2028.

During the first quarter of 2023, the Company repurchased 287,751 shares of common stock at a weighted average price of $27.82 per share, repurchased prior to the most recent dividend record date. The first quarter of 2023 average closing and quarter end prices, as adjusted for the first quarter dividend payment, were $30.81 and $30.35, respectively. The Company had $87.5 million of availability remaining on its existing common stock repurchase authorization at the end of the first quarter of 2023.

During the first quarter of 2023, the Company repurchased and retired $19.1 million of its 8.125% Senior Unsecured Notes due 2028 (the “Notes”) at an average of 96.4% of par value. The Notes currently trade at higher levels. There were $705.1 million par value of Notes outstanding at quarter-end. On March 16, 2023, NOG’s Board of Directors increased the notes repurchase authorization by $100.0 million, augmenting the total availability under the program to $105.1 million, as of the end of the first quarter of 2023.

MANAGEMENT COMMENTS

“The volatility experienced in the capital and commodity markets in the first quarter provided significant opportunities for the Company and its investors,” commented Nick O’Grady, NOG’s Chief Executive Officer. “The Company continues to repurchase shares and retire debt during periods of market dislocations. Consistent with our objectives, we are pursuing a measured approach in 2023, balancing growth, increased cash returns, leverage levels and tactical securities repurchases to deliver a superior total return for our investors.”

Chad Allen, NOG’s Chief Financial Officer, added, “We executed Notes repurchases at a discount to par value, capturing an additional $0.7 million of principal and reducing interest expense going forward by $1.5 million on an annualized basis. We also repurchased shares at a 10% discount to the average closing price during the quarter, and an even greater discount to current trading levels.”

ABOUT NOG

NOG is a company with a primary strategy of investing in non-operated minority working and mineral interests in oil & gas properties, with focus on the premier hydrocarbon producing basins within the contiguous United States. More information about NOG can be found at www.northernoil.com.
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My current valuation of NOG is $52.50. Based on my forecast, they should generate over $1.2 billion of operating cash flow this year ($14.85/share).
Dan Steffens
Energy Prospectus Group
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