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Sep 30, 2020
Northern Oil and Gas Q3 2020 Earnings Report
Announced third quarter results with increased production and reduced costs.
Key Takeaways
Northern Oil and Gas announced strong third-quarter results, marked by a 22% increase in production from the second quarter and a 9% decrease in operating expenses. The company strategically reduced debt by $6.5 million during the quarter and an additional $21.0 million after the quarter ended, while generating significant free cash flow and capitalizing on high-return asset opportunities.
Third quarter production reached 29,051 Boe per day, exceeding guidance and up 22% from the second quarter.
Cash flow from operations was $69.0 million, excluding $12.6 million spent on net working capital reduction, a 30% increase from the second quarter.
Capital expenditures totaled $43.8 million in the third quarter.
Total debt was reduced by $6.5 million in the third quarter, with an additional $21.0 million reduction after the quarter, totaling $160.0 million year-to-date.
Forward Guidance
Northern is providing WTI price based capital spending and production guidance for 2021. In the base case with $40+ average WTI oil price for 2021, Northern expects total capital expenditures of $190 – $240 million and production of 37,500 – 42,500 Boe per day for 2021.
Positive Outlook
- Total capital expenditures of $190 - $240 million
- Production of 37,500 – 42,500 Boe per day for 2021
- Bulk of wells will be turned to sales in the second quarter through the fourth quarter in 2021.
- Significant portion of capital allocated would be for wells in process that would turn to sales in 2022 and beyond.
- Expects to enter 2021 with nearly 9.0 net wells drilled and completed but delayed from being turned to sales.
Challenges Ahead
- Assumes approximately 2,500-5,000 Boe per day of production is shut-in or curtailed for low prices if oil prices are greater than $35 but less than $40.
- Anticipates additional curtailments if WTI prices average less than $35.
Historical Earnings Impact
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