Northern Oil and Gas Up 83% YTD: What's Fueling the Stock?
Northern Oil and Gas, Inc. NOG has had an impressive run on the bourses, both in absolute and relative terms. Shares of Northern Oil and Gas have gained 83% on a year-to-date basis, handily outperforming the stocks in the industry’s collective growth of just 0.9%.
Let’s take a look at some of the factors that have been aiding this Zacks Rank #2 (Buy) company’s growth and helping it to sustain as a lucrative bet. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Positive Earnings Surprise History
Wayzata, MN-based Northern Oil and Gas is an independent energy company involved in the acquisition, exploration, development, and production of oil and natural gas properties.
Northern Oil and Gas has an impressive earnings surprise history. The bottom line surpassed the Zacks Consensus Estimate in each of the last four reported quarters, with the average positive surprise being 138.54%. The consecutive beats reflect the company’s operational excellence along with improved year-over year production growth.
Slew of Smart Acquisitions to Drive Growth
Northern Oil and Gas’ activities are primarily focused on the Williston Basin, Bakken, and Three Forks play in North Dakota and Montana. During 2017, the company added 354 gross producing wells in the Williston Basin. The firm has been consistently making efforts to boost long-term growth prospects in its core operating region, via entering into prudent acquisition deals.
In June, the company acquired non-operated acreage in the Williston Basin from Salt Creek Oil & Gas LLC, in a deal worth around $64 million. The acreage consisted of 1,319 net acres, with an average production capacity of 1,380 barrels of oil equivalent per day (Boe/d). Per the transaction, Northern Oil and Gas snapped up interests in 86 gross wells and 137 drilling locations. This buyout will likely draw synergies in the form of a $19-million increase in the acquirer’s cash flow from operations in 2018.
In September, it closed the acquisition of some more Williston Basin properties owned by Pivotal Petroleum. The assets comprised a number of producing wells, having a production capacity of around 4,100 Boe/d. In October, Northern Oil and gas completed the $114.8-million buyout of W Energy Partners, acquiring 10,633 acres in North Dakota, with approximately 52 drilling locations. The deal is expected to enhance the firm’s production by 6,750 Boe/d.
Apart from boosting the company’s acreage and production capacity, these acquisitions are likely to be accretive to earnings per share, cash flow and leverage metrics through 2020.
Upbeat 2018 Output Guidance Lifts Optimism
Northern Oil and Gas’ total production is expected between 23,670 Boe/d and 24,300 Boe/d for 2018, representing 60-64% growth from the production level in 2017. This ramped up production is driven by acquisition benefits and augmented activities, as Northern Oil and Gas is projected to bring approximately 25-27 net wells online in the current year.
On a further encouraging note, Northern Oil and Gas’ third-quarter production has been tracking well ahead of expectations. Last month, the company announced that its preliminary production for July and August topped 25,000 Boe/d, exceeding expectation of 23,000-24,000 Boe/d.
Northbound Estimates Raise Confidence
Earnings estimates for Northern Oil and Gas have moved north over the past 30 days, reflecting analysts’ confidence in the stock. The Zacks Consensus Estimate for 2018 and 2019 earnings has moved 3.8% and 3.1% upward to 55 cents and 65 cents per share, respectively.
3 More stocks You can Vouch Upon
Investors interested in the industry can consider other top-ranked stocks like Murphy Oil Corporation MUR Penn Virginia Corporation PVAC and Apache Corporation APA. While Murphy Oil and Penn Virginia sport a Zacks Rank #1 (Strong Buy), Apache carries a Zacks Rank #2.
Murphy Oil pulled off an average positive earnings surprise of 96.5% in the last four quarters.
Penn Virginia delivered an average positive earnings surprise of 14.96% in the trailing four quarters.
Apache’s top line for 2018 is expected to grow 679.2% year over year.
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