Northern Oil And Gas (NOG) Tops Q2 EPS by 8c

Northern Oil And Gas (NYSE: NOG) reported Q2 EPS of $0.19, $0.08 better than the analyst estimate of $0.11.

MANAGEMENT COMMENT

"Northern continues to be judicious with our capital expenditures by allocating spending to our highest rate of return opportunities," commented Northern's Chairman and Chief Executive Officer, Michael Reger. "Our financial position remains strong with a robust hedging position and liquidity of approximately $370 million. Northern's capital budget is on track for approximately $140 million in 2015, down substantially from last year, while maintaining flat year-over-year production. Our capital allocation discipline, combined with the cost reductions operators are making in the field, should continue to drive returns higher."

GUIDANCE AND LIQUIDITY UPDATE

Northern's 2015 guidance remains unchanged, with 2015 total production expected to be essentially flat with 2014 based on Northern's planned $140 million capital budget. Lower net well additions during the second half of 2015 will be partially offset by an increase in per well productivity.

During the second quarter, Northern issued $200 million in aggregate principle amount of 8.00% senior notes due 2020, resulting in net proceeds of $185 million that were used to repay borrowings under Northern's revolving credit facility. As a result, at June 30, 2015, Northern had $188 million in outstanding borrowings under its revolving credit facility, which has a total borrowing base of $550 million. The remaining borrowing capacity under the revolving credit facility, together with an additional $7.1 million in cash, results in available liquidity of approximately $370 million at quarter-end.

CAPITAL EXPENDITURE UPDATE

During the second quarter of 2015, Northern incurred $30.3 million of capital expenditures on drilling and completion and capitalized workover costs. Capital expenditures trended higher in the first half of the year as wells in process reduced throughout the first half. In addition, during the second quarter Northern spent $2.1 million on acreage acquisitions and other acreage related activities in the Williston Basin, and incurred $0.9 million of other capitalized costs.

DRILLING AND COMPLETIONS UPDATE

Northern added 6.9 net wells to production during the second quarter, bringing its total producing well count to 199.2 net wells as of June 30, 2015. In the first half of 2015, Northern added a total of 13.5 net wells to production.

As of June 30, 2015, Northern was participating in 205 gross (10.8 net) wells that were drilling or awaiting completion, 94% of which are in Mountrail, McKenzie, Williams or Dunn County. Northern estimates that approximately 30% of these in-process wells will not be completed until late 2015 or early 2016.

As expected, the decline in Williston Basin activity has significantly reduced costs. During the second quarter of 2015, the weighted average authorization for expenditure (or AFE) cost for wells that Northern elected to participate in was $7.3 million, down 21% compared to the wells that Northern elected to participate in during 2014. In addition, with drilling activity concentrated in the core, Northern is seeing a significant increase in estimated ultimate recovery (or EUR) of the wells it is electing to participate in during 2015. From an internal rate of return perspective, this combination of lower costs and higher EURs is helping to offset the negative impact of lower commodity prices.

For earnings history and earnings-related data on Northern Oil And Gas (NOG) click here.

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