A month has gone by since the last earnings report for Northern Oil and Gas (NOG). Shares have added about 1.6% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Northern Oil and Gas due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Northern Q3 Earnings Ahead of Estimates
Northern Oil and Gas reported third-quarter 2024 adjusted earnings per share of $1.40, which beat the Zacks Consensus Estimate of $1.26. The outperformance indicates strong production. However, the bottom line declined from the year-ago reported figure of $1.73 due to weaker realized prices from crude oil and natural gas and a 17.5% increase in operating expenses.
Oil and natural gas sales of $514 million missed the Zacks Consensus Estimate of $535 million. The top line increased from the year-ago figure of $512 million.
NOG’s adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA) was $412.4 million compared with $385.5 million in the year-ago period. Additionally, the figure beat our estimate of $376.8 million.
The oil and gas exploration and production company repurchased 397,301 shares of common stock at an average price of $36.38 per share, including commissions, in the open market in this quarter. Year to date, NOG has repurchased a total of 1,841,733 shares at an average price of $37.64, including commissions.
In July 2024, the company’s board of directors concluded the previous stock repurchase program, which had been nearly exhausted, and authorized a new program to repurchase up to $150 million of its outstanding common stock.
In August 2024, NOG's board of directors declared a quarterly cash dividend of 42 cents per share on its common stock, indicating a 5% increase from the previous rate. The dividend was payable to its stockholders of record as of Sept. 27, 2024, and was paid on Oct. 31.
Production Details
The third-quarter production increased 19% year over year to 121,815 Boe/d. Additionally, the figure beat our estimate of 121,700 Boe/d.
While oil volume totaled 70,913 Boe/d (up 12% year over year), natural gas (and natural gas liquids) amounted to 305,413 thousand cubic feet per day (up 31%). Our model estimate for oil volume and natural gas production was pegged at 70,800 Boe/d and 305,100 thousand cubic feet per day, respectively.
The average sales price for crude was $71.82 per barrel, indicating a 10% decrease from the prior-year quarter’s level of $79.48. However, the figure missed our expectation of $74.55 per barrel.
The average realized natural gas price was $1.60 per thousand cubic feet compared with $2.19 in the year-earlier period. Our model estimate for the same was pinned at $1.58 per thousand cubic feet.
Costs & Expenses
Total operating expenses in the quarter rose to $319.7 million from $271.5 million in the year-ago period.This was mainly on account of a surge in production expenses, depletion, depreciation, amortization and accretion (DD&A) and other expenses.
In particular, the company’s lease operating expenses increased to $9.54 per Boe from the year-ago figure of $8.76. Meanwhile, depreciation outlay increased 17% year over year on a per-barrel basis. However, the figure missed our projection of $359.4 million.
Capital Expenditures
During the third quarter, the company reported capital expenditures (CapEx) of $198 million (excluding non-budgeted acquisitions and other costs). This total included $187 million for drilling and completion (D&C) activities on organic and Ground Game assets, as well as $11.1 million for Ground Game-related activities, including pre-closing development costs. D&C spending aligned closely with expectations, caused by significant spud activity and healthy growth in the list, despite a lower number of turn-in lines. The company's weighted average gross authorization for expenditure in the third quarter was $9.1 million, slightly lower than the $9.4 million recorded in second-quarter 2024.
Of the total CapEx, 56% was allocated to the Permian Basin, 41% to the Williston Basin and 3% to the Appalachian Basin. On the Ground Game acquisition front, NOG completed six transactions during the quarter, acquiring a total of 1,259 net acres and 0.1 net current and future development wells through various deal structures.
Financial Position
Cash flow from operations totaled $385.8 million. Excluding changes in net working capital, cash flow from operations amounted to $377.1 million, up 9% from that recorded a year ago. The company’s free cash flow for the quarter totaled $177.1 million. As of Sept. 30, Northern had $34.4 million in cash and cash equivalents. The company had a long-term debt of $2 billion, with a debt-to-capitalization of 45.8%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -9.82% due to these changes.
VGM Scores
At this time, Northern Oil and Gas has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Northern Oil and Gas has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Northern Oil and Gas is part of the Zacks Oil and Gas - Exploration and Production - United States industry. Over the past month, Matador Resources (MTDR), a stock from the same industry, has gained 0.3%. The company reported its results for the quarter ended September 2024 more than a month ago.
Matador reported revenues of $899.78 million in the last reported quarter, representing a year-over-year change of +16.5%. EPS of $1.89 for the same period compares with $1.86 a year ago.
Matador is expected to post earnings of $1.86 per share for the current quarter, representing a year-over-year change of -6.5%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.5%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Matador. Also, the stock has a VGM Score of B.
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Northern Oil and Gas, Inc. (NOG) : Free Stock Analysis Report
Matador Resources Company (MTDR) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
