Citi Starts Northern Oil and Gas (NOG) at Buy, 'Intriguing E&P Non-Op Strategy'
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Citi analyst Brian Downey initiates coverage on Northern Oil and Gas (NYSE: NOG) with a Buy rating and a price target of $17.00.
The analyst comments "Some argue a ‘static’ non-op portfolio should trade in line with, if not at a slight discount to, similar operated assets given the inherent lack of direct development control. Non-operators often benefit from ‘leaner’ G&A structures (as is the case with NOG with only ~25 employees; although some indirect overhead is occasionally passed through from operators via production expenses). The ability to opt-out of wells via “non-consent” is also a useful tool (particularly for names with diversified operator/basin exposure). However, we’d argue one of NOG’s biggest value creation opportunities is through acquisition. Given industry shifts towards operated ‘maintenance’ levels and free cash flow generation, and some traditional non-op holders (private equity, family offices, etc.) looking for exits, we think NOG should continue to experience value accretive acquisition tailwinds as its niche strategy among public E&Ps provides a currency and large opportunity set."
Shares of Northern Oil and Gas closed at $12.84 yesterday.
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