NOG

Business Context and Reporting Period

Company: Northern Oil & Gas, Inc. (NOG)
Filing Type: Form 10-Q (Unaudited)
Reporting Period: Quarter ended March 31, 2026
Business Overview: NOG is an independent energy company focused on non-operated minority working and mineral interests in the Williston, Permian, Appalachian, and Uinta Basins. As of March 31, 2026, the company operated 1,303.9 net producing wells and held approximately 335,050 net leased acres.

Key Financial Metrics

Note: Total Revenues for Q1 2026 were significantly reduced by a $539.1 million net loss on commodity derivatives.

Material Changes vs. Prior Period

• Derivative Losses: The company recorded a net loss on commodity derivatives of $539.1 million in Q1 2026, compared to a gain of $21.8 million in Q1 2025. This was driven by a $521.4 million non-cash mark-to-market loss on unsettled contracts due to rising forward commodity prices relative to hedged prices.
• Impairment Charge: A non-cash ceiling test impairment of $268.3 million was recorded in Q1 2026 due to declining average commodity prices used in the calculation. No impairment was recorded in Q1 2025.
• Production Growth: Net production increased 10% to 13,347 MBoe (148,303 Boe/day average), driven by the Utica Acquisition and new wells, despite a 6% decrease in oil volumes.
• Acquisitions: Capital expenditures surged to $634.7 million, primarily due to the $464.6 million Utica Acquisition (40% working interest in Ohio assets from Antero Resources) and other smaller transactions.
• Debt Restructuring: The company redeemed all remaining Senior Notes due 2028 ($20.2 million principal) in March 2026. The Revolving Credit Facility borrowing base was increased to $1.975 billion.

Outlook, Risks, and Management Commentary

• Liquidity: Total liquidity stands at approximately $1.2 billion, comprising $37.0 million in cash and $1.1 billion in committed borrowing availability. Management believes this is sufficient to fund operations and capital expenditures for the next 12 months.
• Capital Raise: In March 2026, the company issued 8.3 million shares of common stock for approximately $227.9 million to support liquidity and acquisitions.
• Market Risks: The company faces significant exposure to commodity price volatility. While hedging covers approximately 65% of crude oil and 62% of natural gas production, mark-to-market accounting creates earnings volatility. Geopolitical tensions (e.g., Middle East conflicts) and inflationary pressures remain key risks.
• Dividends: A cash dividend of $0.45 per share was declared in February 2026, payable April 30, 2026.
• Guidance: The filing does not provide specific numerical guidance for the full year 2026, noting that results are subject to commodity price fluctuations and operational success of third-party operators.

Investor Verification Checklist

• Derivative Exposure: Verify the impact of the $539 million derivative loss on future cash flows as contracts settle, noting that the loss is largely non-cash mark-to-market.
• Impairment Sustainability: Assess the risk of future ceiling test impairments if commodity prices remain volatile or decline further.
• Debt Covenants: Confirm continued compliance with the Revolving Credit Facility covenants (Net Leverage Ratio ≤ 3.50:1.00 and Current Ratio ≥ 1.00:1.00), especially given the current working capital deficit.
• Acquisition Integration: Monitor the production ramp-up and cost integration of the Utica Acquisition assets.
• Operator Dependency: Review the performance of the top six third-party operators, which accounted for 46% of total sales in Q1 2026.