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Northern Oil and Gas, Inc. Announces Third Quarter 2018 Results, Increases Fourth Quarter 2018 Guidance and Reactivates Stock Repurchase Program

November 8, 2018

MINNEAPOLIS--(BUSINESS WIRE)--Nov 8, 2018--Northern Oil and Gas, Inc. (NYSE American: NOG) today announced that third quarter 2018 production averaged 26,708 barrels of oil equivalent (“Boe”) per day, totaling 2,457,119 Boe, comprised of 84% crude oil. Third quarter 2018 net income increased to $19.0 million, or $0.06 per diluted share, compared to a loss of $16.1 million, or ($0.26) per diluted share in the third quarter of 2017. Third quarter 2018 adjusted net income increased to $34.5 million, or $0.11 per diluted share, from $2.2 million or $0.04 per diluted share in the third quarter of 2017. Adjusted EBITDA increased to $97.9 million, compared to $35.7 million in the third quarter of 2017. (See “Non-GAAP Financial Measures” below for additional information.)

Northern’s third quarter 2018 crude oil differential was $4.16 per barrel below the NYMEX daily average for the period, compared to $6.22 in the third quarter 2017, an improvement of $2.06 per barrel. Lease operating expense (“LOE”) of $7.39 per Boe for the quarter declined 17% year-over-year and 3% sequentially, bringing year-to-date LOE at the low end of the company’s 2018 guidance. General and administrative (“G&A”) expense of $1.90 per barrel increased 12% sequentially due primarily to costs associated with recent significant transactions.

As detailed later in the press release, Northern has entered into crude oil derivative basis swaps for 2019 covering 10,000 barrels of oil per day at a weighted average differential price of $2.41 per barrel. In addition the company now has 20,166 barrels of oil per day hedged in the fourth quarter of 2018 at an average price of $63.66 per barrel and 18,769 barrels of oil per day hedged for 2019 at an average price of $63.32 per barrel.

MANAGEMENT COMMENT

“The third quarter was another outstanding quarter for Northern as we reduced unit costs, increased margins and generated significant debt adjusted growth for our shareholders,” commented Northern’s Chief Executive Officer, Brandon Elliott. “Our success year-to-date has put us in an incredible position to continue to execute on our strategy; to take advantage of dislocations in the markets, including the pursuit of bolt-on acquisitions, or the opportunity to repurchase our stock at a significant discount to its intrinsic value. We look forward to closing out 2018 in a very strong financial position.”

GUIDANCE

Northern is raising its fourth quarter 2018 production guidance to 35,000 - 36,000 Boe per day as a result of increased activity on our legacy and newly acquired acreage and better than expected production results. The company now expects to add approximately 7 net organic wells to production during the fourth quarter, bringing total organic net well additions for 2018 to between 28 - 31. This is an increase of 3 - 4 additional net wells for the year, with a drilling and completion (“D&C”) budget of between $230 and $250 million.

Increased production and activity exiting 2018 would allow Northern to maintain fourth quarter 2018 average daily production volumes flat for 2019 with a drilling and completion budget of approximately $245 million, assuming the addition of between 29 and 31 net wells to production during the year. Utilizing 2018 cost assumptions for 2019, at the current commodity strips, the company would generate between $145 - $200 million of operating cash flow net of all D&C capital expenditures, representing a free cash flow yield of up to 17% based on current market capitalization. Additional information regarding Northern’s current expectations are included in the tables below.

THIRD QUARTER 2018 RESULTS

The following tables set forth selected operating and financial data for the periods indicated.

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ACQUISITIONS & ACREAGE

On September 17, 2018, Northern closed on its previously announced Pivotal acquisition for 25.75 million shares of common stock and $60.6 million in cash, at closing. In addition, in the third quarter, Northern spent approximately $18.0 million for 2,727 net acres, 4.7 net producing wells and 4.6 net wells in process.

On October 1, 2018, Northern closed on its previously announced W Energy acquisition for 51.46 million shares of common stock and $114.8 million in cash, at closing. In the fourth quarter to-date, Northern has executed agreements on an additional 3,958 net acres, 0.9 net producing wells, and 1.3 net wells in process for an additional $9.1 million.

As of September 30, 2018, pro forma to include the W Energy acquisition, Northern controlled leasehold of approximately 151,978 net acres targeting the Williston Basin Bakken and Three Forks formations, and approximately 97% of the company’s North Dakota acreage position, and approximately 95% of its total acreage position, was developed, held by production or held by operations.

LIQUIDITY AND CAPITAL MARKETS UPDATE

In early October 2018, Northern closed on a $350.0 million tack-on issuance of additional 2023 Senior Secured Notes as well as a new 5-year Revolving Credit Facility (“RBL”) with an initial borrowing base of $425.0 million. Northern used the proceeds to retire its $360.0 million First Lien Term Loan and the remainder of its 2020 Senior Unsecured Notes.

As of November 5, 2018, Northern had $16.8 million in cash, $175.0 million outstanding on its new RBL and $695.1 million in 2023 Senior Secured Notes. Northern had total liquidity of $266.8 million as of November 5, 2018, consisting of cash and borrowing availability under the new RBL.

HEDGING

Northern hedges portions of its expected production volumes to increase the predictability of its cash flow and to help maintain a strong financial position. The following tables summarize Northern’s open crude oil derivative and basis swap contracts scheduled to settle after September 30, 2018.

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(1) Basis swaps are settled using the TMX UHC 1a index, as published by NGX.

THIRD QUARTER 2018 EARNINGS RELEASE CONFERENCE CALL

In conjunction with Northern’s release of its financial and operating results, investors, analysts and other interested parties are invited to listen to a conference call with management on Friday, November 9, 2018 at 9:00 a.m. Central Time.

Those wishing to listen to the conference call may do so via the company’s website, www.northernoil.com, or by phone as follows:

Dial-In Number: (855) 638-5677 (US/Canada) and (262) 912-4762 (International) Conference ID: 9159627 - Northern Oil and Gas, Inc. Third Quarter 2018 Conference Call Replay Dial-In Number: (855) 859-2056 (US/Canada) and (404) 537-3406 (International) Replay Access Code: 9159627 - Replay will be available through November 16, 2018

UPCOMING CONFERENCE SCHEDULE

ABOUT NORTHERN OIL AND GAS

Northern Oil and Gas, Inc. is an exploration and production company with a core area of focus in the Williston Basin Bakken and Three Forks play in North Dakota and Montana. More information about Northern Oil and Gas, Inc. can be found at www.NorthernOil.com.

SAFE HARBOR

This press release contains forward-looking statements regarding future events and future results that are subject to the safe harbors created under the Securities Act of 1933 (the “Securities Act”) and the Securities Exchange Act of 1934 (the “Exchange Act”). All statements other than statements of historical facts included in this release regarding Northern’s financial position, business strategy, plans and objectives of management for future operations, industry conditions, and indebtedness covenant compliance are forward-looking statements. When used in this release, forward-looking statements are generally accompanied by terms or phrases such as “estimate,” “project,” “predict,” “believe,” “expect,” “continue,” “anticipate,” “target,” “could,” “plan,” “intend,” “seek,” “goal,” “will,” “should,” “may” or other words and similar expressions that convey the uncertainty of future events or outcomes. Items contemplating or making assumptions about actual or potential future sales, market size, collaborations, and trends or operating results also constitute such forward-looking statements.

Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond our company’s control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following: changes in crude oil and natural gas prices, the pace of drilling and completions activity on Northern’s current properties and properties pending acquisition, Northern’s ability to acquire additional development opportunities, changes in Northern’s reserves estimates or the value thereof, general economic or industry conditions, nationally and/or in the communities in which Northern conducts business, changes in the interest rate environment, legislation or regulatory requirements, conditions of the securities markets, Northern’s ability to consummate any pending acquisition transactions, other risks and uncertainties related to the closing of pending acquisition transactions, Northern’s ability to raise or access capital, changes in accounting principles, policies or guidelines, financial or political instability, acts of war or terrorism, and other economic, competitive, governmental, regulatory and technical factors affecting our company’s operations, products and prices.

Northern has based these forward-looking statements on its current expectations and assumptions about future events. While management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond Northern’s control. Northern does not undertake any duty to update or revise any forward-looking statements, except as may be required by the federal securities laws.

Non-GAAP Financial Measures

Adjusted Net Income and Adjusted EBITDA are non-GAAP measures. Northern defines Adjusted Net Income as net income (loss) excluding (i) (gain) loss on the mark-to-market of derivative instruments, net of tax, (ii) write-off of debt issuance costs, net of tax, (iii) loss on the extinguishment of debt, net of tax, (iv) debt exchange derivative gain, net of tax, and (v) certain legal settlements, net of tax. Northern defines Adjusted EBITDA as net income (loss) before (i) interest expense, (ii) income taxes, (iii) depreciation, depletion, amortization and accretion, (iv) (gain) loss on the mark-to-market of derivative instruments, (v) non-cash share based compensation expense, (vi) write-off of debt issuance costs, (vii) loss on the extinguishment of debt, and (viii) debt exchange derivative gain. A reconciliation of each of these measures to the most directly comparable GAAP measure is included below. Management believes the use of these non-GAAP financial measures provides useful information to investors to gain an overall understanding of current financial performance. Specifically, management believes the non-GAAP financial measures included herein provide useful information to both management and investors by excluding certain expenses and unrealized commodity gains and losses that management believes are not indicative of Northern’s core operating results. In addition, these non-GAAP financial measures are used by management for budgeting and forecasting as well as subsequently measuring Northern’s performance, and management believes it is providing investors with financial measures that most closely align to its internal measurement processes.

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View source version on businesswire.com:https://www.businesswire.com/news/home/20181108005908/en/

CONTACT: Northern Oil and Gas, Inc.

Nicholas O’Grady, 952-476-9800

Chief Financial Officer

ir@northernoil.com

KEYWORD: UNITED STATES NORTH AMERICA MINNESOTA

INDUSTRY KEYWORD: ENERGY OIL/GAS

SOURCE: Northern Oil and Gas, Inc.

Copyright Business Wire 2018.

PUB: 11/08/2018 04:15 PM/DISC: 11/08/2018 04:15 PM

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