NOG Announces Record First Quarter 2022 Results and Updates Guidance

QUARTERLY HIGHLIGHTS

• Record first quarter production of 71,255 Boe per day (60% oil), up 85% from the first quarter of 2021
• First quarter GAAP cash flow from operations of $154.0 million. Excluding changes in net working capital, cash flow from operations was $235.0 million, up 49% sequentially from the fourth quarter of 2021
• Total capital expenditures of $85.6 million during the first quarter, excluding closing of previously-announced Veritas acquisition on January 27, 2022
• Record Free Cash Flow of $146.0 million during the first quarter, up 106% sequentially from the fourth quarter of 2021. See “Non-GAAP Financial Measures” below
• Updated 2022 guidance includes increased annual production and improved oil pricing differentials

SHAREHOLDER RETURN HIGHLIGHTS

• Board of Directors has increased authorizations for Preferred and Common Stock repurchases and additionally authorized new Senior Notes repurchase program
• Retired $36.3 million of Preferred Stock during the first quarter, and an additional $3.7 million in April 2022, for a total of $40.0 million year-to-date
• Declared $0.19 per share dividend for the second quarter of 2022, up 36% sequentially from the first quarter
• Management plans to recommend to Board of Directors a $0.25 per share dividend for the third quarter of 2022, 14% higher than previous target and up 32% sequentially

Northern Oil and Gas, Inc. (NYSE: NOG) (“NOG”) today announced the company’s first quarter results and provided updated 2022 guidance.

MANAGEMENT COMMENTS

“Our accretive acquisitions of high quality properties over the last year are translating into record results,” commented Nick O’Grady, NOG’s Chief Executive Officer. “Record Adjusted EBITDA, Free Cash Flow and production were all achieved in the first quarter as our new properties have been integrated and are performing well. Our execution continues to prove the superiority of our low leverage, diversified working interest model. We also continue to de-risk the enterprise, allowing us to grow shareholder returns at an increasing pace.”

FIRST QUARTER FINANCIAL RESULTS

Oil and natural gas sales for the first quarter were $456.5 million, up 37% over the fourth quarter of 2021. First quarter GAAP net loss, inclusive of a $384.2 million non-cash mark-to-market loss on derivatives, was $206.6 million or $2.69 per diluted share. First quarter Adjusted Net Income was $138.9 million or $1.58 per diluted share, up 49% from the fourth quarter of 2021. Adjusted EBITDA in the first quarter was $256.6 million, up 46% from the fourth quarter of 2021. See “Non-GAAP Financial Measures” below.

PRODUCTION

First quarter production was 71,255 Boe per day, an 11% increase from the fourth quarter of 2021 and an 85% increase from the first quarter of 2021. Oil represented 60% of total production in the first quarter. Oil production was 42,489 Bbl per day, a 12% increase over the fourth quarter of 2021 and a 45% increase over the first quarter of 2021. NOG had 10.6 net wells turned in-line during the first quarter, compared to 6.7 net wells turned in-line in the first quarter of 2021. Production continues to benefit from increased AFE activity across our 252,345 net acre position, with net AFE activity having increased 62% sequentially in the fourth quarter of 2021 and now 40% in the first quarter of 2022. NOG’s Permian production made up approximately 20% of volumes in the first quarter, reflecting a partial quarter impact from the Veritas acquisition, and is expected to continue to increase throughout 2022.

PRICING

During the first quarter, NYMEX West Texas Intermediate (“WTI”) crude oil averaged $95.17 per Bbl, and NYMEX natural gas at Henry Hub averaged $4.63 per million cubic feet (“Mcf”). NOG’s unhedged net realized oil price in the first quarter was $91.19, representing a $3.98 differential to WTI prices. NOG’s unhedged net realized gas price in the first quarter was $6.94 per Mcf, representing approximately 150% realizations compared with Henry Hub pricing.

OPERATING COSTS

Lease operating costs were $54.5 million in the first quarter of 2022, or $8.50 per Boe, down slightly on a per unit basis compared to the fourth quarter of 2021 and at the low end of guidance. The decrease in unit costs was driven primarily by increased lower-cost Permian production, modestly offset by processing costs associated with strong NGL prices. First quarter general and administrative (“G&A”) costs totaled $13.8 million or $2.15 per Boe. This includes $6.8 million of legal and transaction expenses primarily in connection with the closing of the Veritas acquisition and $1.4 million of non-cash stock-based compensation. NOG’s cash G&A costs excluding these amounts totaled $5.5 million or $0.86 per Boe in the first quarter, down substantially from $1.20 per Boe in the prior quarter.

CAPITAL EXPENDITURES AND ACQUISITIONS

Capital spending for the first quarter, excluding the Veritas acquisition, was $85.6 million. Spending was made up of $76.2 million of total drilling and completion (“D&C”) capital on organic and ground game assets, and $9.4 million of ground game acquisition spending and other items. NOG spending was in line with internal expectations, despite some pull-forward of activity in March.

NOG’s Williston Basin spending made up 60% of the total capital expenditures for the quarter, the Permian made up 35%, the Marcellus made up 4% and other items made up 1%. On the ground game acquisition front, NOG closed on 10 transactions during the first quarter totaling 1.3 net wells, 326 net mineral acres, and 73 net royalty acres (standardized to a 1/8 royalty interest).

VERITAS ACQUISITION CLOSING

NOG closed the Veritas acquisition on January 27, 2022, with a combination of cash and equity warrants. Total estimated consideration included $390.9 million in cash (which included a $40.7 million deposit paid at signing in November 2021), and approximately 1.94 million common stock warrants with a $28.30 per share exercise price. The closing consideration is net of preliminary and customary purchase price adjustments and remains subject to final post-closing settlement between NOG and Veritas.

LIQUIDITY AND CAPITAL RESOURCES

NOG had total liquidity of $382.3 million as of March 31, 2022, consisting of cash of $3.3 million, and $379.0 million of committed borrowing availability under the revolving credit facility.

As of March 31, 2022, NOG’s total debt was $1.1 billion, up $316 million since December 31, 2021. The change in debt was driven by the cash outlay for the Veritas closing, offset by substantial repayments on NOG’s revolving credit facility driven by internal free cash flow.

STOCKHOLDER RETURNS

On January 31, 2022, NOG’s Board of Directors declared a regular quarterly cash dividend for NOG’s common stock of $0.14 per share for stockholders of record as of March 30, 2022, which was paid on April 29, 2022. This represented a 75% increase from the prior quarter.

On May 3, 2022, NOG’s Board of Directors declared a regular quarterly cash dividend for NOG’s common stock of $0.19 per share for stockholders of record as of June 29, 2022, which will be paid on July 29, 2022. This represents a 36% increase from the prior quarter. Additionally, NOG’s Board increased authorized repurchase programs for both Preferred and Common Stock. The common stock repurchase authorization has increased to $150.0 million, from $68.1 million previously. The Board also authorized a Senior Unsecured Notes repurchase program.

In the first quarter of 2022, NOG repurchased $36.3 million of liquidation preference value of its 6.500% Series A Perpetual Cumulative Convertible Preferred Stock from holders. In April 2022, NOG repurchased an additional $3.7 million, for a total year-to-date of $40.0 million liquidation preference value. The current total remaining outstanding face value of Preferred Stock is $181.9 million, down from $221.9 million at December 31, 2021. These repurchases are expected to reduce NOG’s annual preferred dividend payments by $2.6 million and additionally reduce NOG’s diluted common stock share count by approximately 1.8 million shares, based on the current conversion ratio.

2022 FULL YEAR GUIDANCE

(all forecasts are provided on a 2-stream production basis)

FIRST QUARTER 2022 RESULTS

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

HEDGING

NOG 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 table summarizes NOG’s open crude oil commodity derivative swap contracts scheduled to settle after March 31, 2022.

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The following table summarizes NOG’s open natural gas commodity derivative swap contracts scheduled to settle after March 31, 2022.

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The following table presents NOG’s settlements on commodity derivative instruments and unsettled gains and losses on open commodity derivative instruments for the periods presented, which is included in the revenue section of NOG’s statement of operations:

CAPITAL EXPENDITURES & DRILLING ACTIVITY

FIRST QUARTER 2022 EARNINGS RELEASE CONFERENCE CALL

In conjunction with NOG’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, May 6, 2022 at 10:00 a.m. Central Time.

Those wishing to listen to the conference call may do so via webcast or phone as follows:

Webcast: https://themediaframe.com/mediaframe/webcast.html?webcastid=9YUHLv41

Dial-In Number: (866) 373-3407 (US/Canada) and (412) 902-1037 (International)

Conference ID: 13729487 - Northern Oil and Gas, Inc. First Quarter 2022 Earnings Call

Replay Dial-In Number: (877) 660-6853 (US/Canada) and (201) 612-7415 (International)

Replay Access Code: 13729487 - Replay will be available through May 13, 2022

UPCOMING CONFERENCE SCHEDULE

• Wells Fargo Energy Conference - Dallas - June 1-2, 2022
• RBC Equity Conference - NYC - June 8, 2022

ABOUT NORTHERN OIL AND GAS

NOG is a company with a primary strategy of investing in non-operated minority working and mineral interests in oil & gas properties, with a core area of focus in the premier basins within the United States. More information about NOG 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 NOG’s dividend plans and practices, financial position, operating and financial performance, 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 production and 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 NOG’s control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following: changes in NOG’s capitalization, changes in crude oil and natural gas prices; the pace of drilling and completions activity on NOG’s properties and properties pending acquisition; NOG’s ability to acquire additional development opportunities; potential or pending acquisition transactions; NOG’s ability to consummate pending acquisitions, and the anticipated timing of such consummation; the projected capital efficiency savings and other operating efficiencies and synergies resulting from NOG’s acquisition transactions; integration and benefits of property acquisitions, or the effects of such acquisitions on NOG’s cash position and levels of indebtedness; changes in NOG’s reserves estimates or the value thereof; disruptions to NOG’s business due to acquisitions and other significant transactions; infrastructure constraints and related factors affecting NOG’s properties; ongoing legal disputes over and potential shutdown of the Dakota Access Pipeline; the COVID-19 pandemic and its related economic repercussions and effect on the oil and natural gas industry; general economic or industry conditions, nationally and/or in the communities in which NOG conducts business; changes in the interest rate environment, legislation or regulatory requirements; conditions of the securities markets; NOG’s ability to raise or access capital; changes in accounting principles, policies or guidelines; and financial or political instability, health-related epidemics, acts of war or terrorism, and other economic, competitive, governmental, regulatory and technical factors affecting NOG’s operations, products and prices.

NOG 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 NOG’s control. NOG 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, Adjusted EBITDA and Free Cash Flow are non-GAAP measures. NOG defines Adjusted Net Income (Loss) as net income (loss) excluding (i) (gain) loss on unsettled commodity derivatives, net of tax, (ii) (gain) loss on extinguishment of debt, net of tax, (iii) contingent consideration (gain) loss, net of tax, (iv) acquisition transaction costs, net of tax, and (v) (gain) loss on unsettled interest rate derivatives, net of tax. NOG defines Adjusted EBITDA as net income (loss) before (i) interest expense, (ii) income taxes, (iii) depreciation, depletion, amortization and accretion, (iv) non-cash stock-based compensation expense, (v) (gain) loss on extinguishment of debt, (vi) contingent consideration (gain) loss, (vii) acquisition transaction costs, (viii) gain (loss) on unsettled interest rate derivatives, and (ix) (gain) loss on unsettled commodity derivatives. NOG defines Free Cash Flow as cash flows from operations before changes in working capital and other items, less (i) capital expenditures, excluding non-budgeted acquisitions and (ii) preferred stock dividends. 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. Management believes Adjusted Net Income and Adjusted EBITDA 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 NOG’s core operating results. Management believes that Free Cash Flow is useful to investors as a measure of a company’s ability to internally fund its budgeted capital expenditures, to service or incur additional debt, and to measure success in creating stockholder value. In addition, these non-GAAP financial measures are used by management for budgeting and forecasting as well as subsequently measuring NOG’s performance, and management believes it is providing investors with financial measures that most closely align to its internal measurement processes. The non-GAAP financial measures included herein may be defined differently than similar measures used by other companies and should not be considered an alternative to, or more meaningful than, the comparable GAAP measures. From time to time NOG provides forward-looking Free Cash Flow estimates or targets; however, NOG is unable to provide a quantitative reconciliation of the forward looking non-GAAP measure to its most directly comparable forward looking GAAP measure because management cannot reliably quantify certain of the necessary components of such forward looking GAAP measure. The reconciling items in future periods could be significant.

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