Northern (NOG) Stock Barely Moves Since Q3 Earnings Lag


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Northern Oil and Gas NOG stock has shown no substantial movement since the third-quarter 2021 earnings announcement on Nov 5. Despite the company’s enhanced 2021 guidance, higher commodity prices and better-than-expected production, its shares failed to display an uptrend as a result of massive long-term debt, restricting its financial flexibility and limiting growth in the process. Northern’s bottom-line miss despite help from higher prices added to the investor skepticism.

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Inside Northern’s Earnings

Independent oil and gas producer Northernreported third-quarter 2021 adjusted earnings per share of 84 cents, lagging the Zacks Consensus Estimate of 91 cents, owing to increased capital expenses on organic drilling and development. However, the same significantly improved from the year-ago profit of 51 cents. The outperformance can be attributed to higher commodity prices and a better-than-expected production.

The company’s oil and gas sales of $259.67 million beat the Zacks Consensus Estimate of $215 million. The top line also skyrocketed from the year-ago figure of $74 million.

Northern, which recently instituted a 78% dividend hike, saw its adjusted EBITDA rise 65% to $136.1 million.

Production & Price Realizations

The third-quarter production (comprising 59% oil) surged 98% from the year-ago level to 57,647 barrels of oil equivalent per day (Boe/d) and surpassed the Zacks Consensus Estimate of 56,295 Boe/d. While oil volume came in at 34,035 barrels per day (up 52% year over year), natural gas totaled 141,677 thousand cubic feet per day (up 252%).

The average sales price for crude in the third quarter was $64.91 per barrel, reflecting an 89% increase from the prior-year realization of $34.36. The average realized natural gas price was $4.33 per thousand cubic feet compared with 83 cents in the year-earlier period.

Costs & Expenses

Total operating expenses in the quarter plummeted to $104.5 million from the year-ago quarter’s $266 million. This was mainly on account of the absence of massive impairment charges of $199.5 million that Northern had incurred in the third quarter of 2020. The company’s lease operating expenses also fell to $8.15 per barrel of oil equivalent (Boe) from the year-ago figure of $9.04 per Boe. Meanwhile, general and administrative expenses declined 40% year over year on a per-barrel basis.

Financial Position

Excluding working capital, cash flow from operations jumped 253% to $122.3 million, while Northern’s organic drilling and development capital expenditure totaled $53 million. The company’s free cash flow for the quarter was $55.4 million.

As of Sep 30, the owner of non-operating, minority interests in thousands of oil and gas wells had $2 million in cash and cash equivalents. The company had long-term debt of $858.4 million.

Guidance

Due to the recent ongoing acquisition of the Williston Basin, Northern’s output for 2021 is now anticipated in the 51,750 – 53,750 Boe/d range compared with 49,500 – 54,250 Boe/d mentioned earlier. The company reiterates this year’s oil mix guidance of 63-64%. However, the energy explorer lowered the bottom end of its annual capital spending guidance by $10 million to $215-$250 million.

Final Words

After suffering a frightening crash in 2020, the energy space has been moving uphill from the start of this year, courtesy of the surging demand from the economic reopening. The rally in oil and natural gas prices allowed the operators to deliver a solid financial performance. While Northern failed to beat the Zacks Consensus Estimate, most exploration and production companies have issued encouraging results.

In particular, upstream biggies like EOG Resources EOG, Diamondback Energy FANG and ConocoPhillips COP, each currently carrying a Zacks Rank #1 (Strong Buy), turned in better-than-expected earnings numbers for the third quarter.  You can see the complete list of today’s Zacks #1 Rank stocks here.

EOG Resources reported third-quarter 2021 adjusted earnings per share of $2.16, beating the Zacks Consensus Estimate of $2.01. Strong earnings were driven by increased production volumes and a higher realization of commodity prices.

EOG announced a quarterly dividend of 75 cents per share, indicating an 82% increase from the previous level. The dividend will be paid out on Jan 28, 2022, to its shareholders of record as of Jan 14, 2022. EOG also declared a special dividend of $2 per share. Its board of directors updated its share repurchase authorization to $5 billion.

Diamondback Energy reported third-quarter 2021 adjusted earnings of $2.94 per share, which surpassed the Zacks Consensus Estimate of $2.81 and the year-ago quarter’s earnings of 62 cents. FANG’s bottom line was aided by a better-than-expected production.

Diamondback’s board of directors declared a dividend of 50 cents per share for the third quarter. This signifies an 11.1% hike in its quarterly payout from the previous level of 45 cents. The amount will be paid out on Nov 18, 2021, to its shareholders of record as of Nov 11. The Zacks Rank #1 (Strong Buy) company also generated a free cash flow of $740 million in the third quarter.

ConocoPhillips reported third-quarter 2021 adjusted earnings per share of $1.77, comfortably beating the Zacks Consensus Estimate of $1.53. The outperformance is led by increased production volumes, owing to the Concho acquisition and rising realized commodity prices.

Based in Houston, TX, one of the world’s largest independent oil and gas producers’ capital expenditure and investments totaled $1.3 billion, and dividend payments grossed $579 million. ConocoPhillips’ net cash provided by operating activities was recorded at $4.8 billion, up from the year-ago figure of $868 million. COP generated a free cash flow of $2.8 billion in the third quarter.

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ConocoPhillips (COP): Free Stock Analysis Report
 
EOG Resources, Inc. (EOG): Free Stock Analysis Report
 
Diamondback Energy, Inc. (FANG): Free Stock Analysis Report
 
Northern Oil and Gas, Inc. (NOG): Free Stock Analysis Report
 
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