Why Is Northern Oil and Gas (NOG) Up 0.6% Since Last Earnings Report?
A month has gone by since the last earnings report for Northern Oil and Gas (NOG). Shares have added about 0.6% in that time frame, outperforming 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 the most recent earnings report in order to get a better handle on the important drivers.
Northern Oil Q2 Earnings & Revenues Outpace Estimates
Northern Oil and Gas, Inc. reported second-quarter 2023 adjusted earnings per share of $1.49, comfortably beating the Zacks Consensus Estimate of $1.35. The outperformance reflects strong production.
However, the company’s bottom line fell from the year-ago adjusted profit of $1.72 due to weaker oil realizations and an increase in costs.
NOG’s oil and gas sales of $416.5 million beat the Zacks Consensus Estimate of $411 million though the top line fell from the year-ago figure of $549.6 million.
In good news for investors, the company instituted a 2.7% dividend hike for the third quarter and saw its adjusted EBITDA improve 15.8% to $132.8 million.
Production & Price Realizations
Second-quarter production (comprising 60% oil) increased 25% from the year-ago level to 90,878 barrels of oil equivalent per day (Boe/d) and surpassed our estimate of 90,577 Boe/d. While oil volume came in at 54,738 barrels per day (up 31% year over year), natural gas (and NGLs) totaled 216,838 thousand cubic feet per day (up 17%). We called for 54,307 daily barrels of oil and 217,622 thousand cubic feet of natural gas.
The average sales price for crude during the second quarter was $71.03 per barrel, reflecting a 33% decrease from the prior-year realization of $106.26 and marginally less than our expectation of $71.60. The average realized natural gas price was $3.18 per thousand cubic feet compared to $8.63 in the year-earlier period and $1.94 as per our model.
Costs & Expenses
Total operating expenses in the quarter rose to $241.8 million from the year-ago quarter’s $171.3 million and exceeded our projection of $223.9 million. This was mainly on account of a surge in depreciation and production expenses. In particular, the company’s lease operating (or production) expenses rose to $10.20 per barrel of oil equivalent (Boe) from the year-ago figure of $9.77 per Boe. Meanwhile, depreciation outlay increased by 55% year over year on a per barrel basis.
Financial Position
Excluding working capital, cash flow from operations went up 11% to $280.4 million, while Northern’s organic drilling and development capital expenditures totaled $184.8 million. The company’s free cash flow for the quarter was $47.6 million.
As of Jun 30, this owner of non-operating, minority interests in thousands of oil and gas wells had $83 million in cash and cash equivalents. The company had long-term debt of $1.7 billion, reflecting a debt-to-capitalization of 54.2%.
Guidance
Taking into account the recent acquisitions, Northern's output for 2023 will now come in at 98,000 Boe/d, as per the midpoint of the latest guidance. The company gave this year's oil mix guidance in the range of 62-63%, while its annual capital spending guidance is between $764 million and $800 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
At this time, Northern Oil and Gas has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. 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, Chesapeake Energy (CHK), a stock from the same industry, has gained 5%. The company reported its results for the quarter ended June 2023 more than a month ago.
Chesapeake Energy reported revenues of $649 million in the last reported quarter, representing a year-over-year change of -81.6%. EPS of $0.64 for the same period compares with $4.87 a year ago.
Chesapeake Energy is expected to post earnings of $0.48 per share for the current quarter, representing a year-over-year change of -90.5%. Over the last 30 days, the Zacks Consensus Estimate has changed -12%.
Chesapeake Energy has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.
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