NOG Declares $0.40 Quarterly Cash Dividend, 18% Increase Year-over-Year and Provides Update on Current Hedge Position
- NOG declared a cash dividend of $0.40 per share, in line with the previously disclosed quarterly level for 2024.
- The company has added substantial additional oil and natural gas hedges for 2024 and beyond, aiming to protect underwritten returns on capital and cover basis differentials in various regions.
- Management plans to prioritize further growth investments and potential share repurchases to maximize total shareholder return in 2024.
- None.
Insights
The declaration of a cash dividend by Northern Oil and Gas, Inc. (NOG) is a significant signal to the market, reflecting the company's current financial health and future expectations. A dividend of $0.40 per share aligns with NOG's previously disclosed quarterly level for 2024, which can be perceived as a commitment to shareholder returns. This move might attract income-focused investors and could potentially lead to a positive impact on the stock's demand, hence possibly influencing its market price.
Moreover, the CFO's statement on prioritizing growth investments and share repurchases in 2024 indicates a strategy to enhance total shareholder return. This approach suggests that the company is confident in its ability to generate strong free cash flow and is considering capital allocation strategies that could create value beyond the dividend payments, such as investing in new projects or buying back shares to reduce the number of shares outstanding, which in turn could increase earnings per share and the stock's intrinsic value.
NOG's update on its hedging positions is a critical aspect of its risk management strategy, particularly in the volatile energy sector. The company's systematic approach to hedging by entering crude oil and natural gas commodity derivative swap contracts and collars is designed to protect returns on capital committed to acquisitions and development. These financial instruments allow NOG to lock in prices for its future production, thereby reducing exposure to fluctuating commodity prices.
The detailed hedging positions provided in the tables show that NOG has secured a range of weighted average prices for oil and gas that are above current market prices at the time of this analysis. This can serve as a buffer against potential downturns in commodity prices, ensuring a level of revenue stability. Stakeholders should note, however, that while hedging can protect against price declines, it also limits the upside potential should prices increase significantly beyond the hedged rates.
The disclosed hedging strategy by NOG demonstrates a proactive approach to risk management. The use of derivative swaps and collars is a common practice to mitigate the risk associated with price volatility in the commodities market. The collars, in particular, provide a ceiling and floor price, which creates a price range within which NOG can plan its financials more predictably. This is an important aspect for investors to consider as it speaks to the company's ability to manage cash flow and profitability amidst market uncertainties.
It is also worth noting that the effectiveness of these hedging strategies depends on the accuracy of NOG's forecasts for future commodity prices and the company's operational performance. Discrepancies between hedged volumes and actual production can lead to unanticipated financial outcomes. Investors should consider both the potential stability offered by these hedges and the opportunity costs of foregone profits if market prices exceed the ceiling prices of the collars.
DIVIDEND DECLARATION
NOG’s Board of Directors has declared a cash dividend in the amount of
MANAGEMENT COMMENTS
“We continue to deliver on our plan to generate strong free cash flow that can be dynamically allocated to create value for our investors,” commented Chad Allen, NOG’s Chief Financial Officer. “At the same time, through our practice of systematic hedging, we are protecting our underwritten returns. With an improved hedge profile, strong balance sheet and significant free cash flow, we have great options to deliver growth and value in multiple forms. Given our attractive current dividend yield of approximately
HEDGING UPDATE
NOG periodically enters into hedging agreements to protect the underwritten returns on the capital it commits to acquisitions and development on its properties. Since the third quarter of 2023, NOG has added substantial additional oil and natural gas hedges for 2024 and beyond, as well as additional hedges to cover basis differentials in the various regions in which the Company operates.
The following table summarizes NOG’s open crude oil commodity derivative swap contracts scheduled to settle after December 31, 2023.
|
|
Crude Oil Commodity
|
|
Crude Oil Commodity Derivative Collars |
|||||||||
Contract Period |
|
Volume
|
|
Weighted
|
|
Collar
|
|
Collar
|
|
Weighted
($/BBL) |
|
Weighted
|
|
2024: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1 |
|
2,130,923 |
|
|
|
2,423,147 |
|
1,908,428 |
|
|
|
|
|
Q2 |
|
2,229,737 |
|
|
|
2,560,637 |
|
1,918,517 |
|
|
|
|
|
Q3 |
|
2,265,096 |
|
|
|
1,725,056 |
|
1,573,256 |
|
|
|
|
|
Q4 |
|
2,067,109 |
|
|
|
1,436,749 |
|
1,262,800 |
|
|
|
|
|
2025: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1 |
|
1,242,749 |
|
|
|
413,286 |
|
314,849 |
|
|
|
|
|
Q2 |
|
1,236,633 |
|
|
|
273,171 |
|
199,233 |
|
|
|
|
|
Q3 |
|
552,394 |
|
|
|
234,994 |
|
161,970 |
|
|
|
|
|
Q4 |
|
548,911 |
|
|
|
208,511 |
|
135,487 |
|
|
|
|
|
2026: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1 |
|
263,726 |
|
|
|
43,226 |
|
39,289 |
|
|
|
|
|
Q2 |
|
266,657 |
|
|
|
43,707 |
|
39,727 |
|
|
|
|
|
Q3 |
|
269,587 |
|
|
|
44,187 |
|
40,163 |
|
|
|
|
|
Q4 |
|
269,587 |
|
|
|
44,187 |
|
40,163 |
|
|
|
|
|
(1) |
|
Includes derivative contracts entered into through February 2, 2024. This table does not include volumes subject to call options or swaptions, which are derivative contracts NOG has entered into that may increase swapped volumes at the option of NOG’s counterparties. |
The following table summarizes NOG’s open natural gas commodity derivative swap contracts scheduled to settle after December 31, 2023.
|
|
Natural Gas Commodity
|
|
Natural Gas Commodity Derivative Collars |
|||||||||
Contract Period |
|
Volume
|
|
Weighted
|
|
Collar
|
|
Collar
|
|
Weighted
($/MMBTU) |
|
Weighted
($/MMBTU) |
|
2024: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1 |
|
10,661,616 |
|
|
|
5,945,000 |
|
5,945,000 |
|
|
|
|
|
Q2 |
|
10,875,805 |
|
|
|
6,902,500 |
|
6,902,500 |
|
|
|
|
|
Q3 |
|
10,860,457 |
|
|
|
7,360,000 |
|
7,360,000 |
|
|
|
|
|
Q4 |
|
7,717,909 |
|
|
|
8,176,586 |
|
8,176,586 |
|
|
|
|
|
2025: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1 |
|
1,485,000 |
|
|
|
9,196,417 |
|
9,196,417 |
|
|
|
|
|
Q2 |
|
920,000 |
|
|
|
8,771,297 |
|
8,771,297 |
|
|
|
|
|
Q3 |
|
920,000 |
|
|
|
8,407,569 |
|
8,407,569 |
|
|
|
|
|
Q4 |
|
760,000 |
|
|
|
7,618,723 |
|
7,618,723 |
|
|
|
|
|
2026: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1 |
|
450,000 |
|
|
|
5,828,249 |
|
5,828,249 |
|
|
|
|
|
Q2 |
|
460,000 |
|
|
|
6,024,706 |
|
6,024,706 |
|
|
|
|
|
Q3 |
|
460,000 |
|
|
|
6,024,706 |
|
6,024,706 |
|
|
|
|
|
Q4 |
|
455,000 |
|
|
|
4,304,642 |
|
4,304,642 |
|
|
|
|
|
(1) |
|
Includes derivative contracts entered into through February 2, 2024. This table does not include volumes subject to call options or swaptions, which are derivative contracts NOG has entered into that may increase swapped volumes at the option of NOG’s counterparties. |
ABOUT NOG
NOG is a real asset company with a primary strategy of acquiring and investing in non-operated minority working and mineral interests in the premier hydrocarbon producing basins within the contiguous
SAFE HARBOR
This press release contains forward-looking statements regarding future events and future results that are subject to the safe harbors created under the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts included or referenced in this press release regarding NOG’s plans and practices for capital allocation, dividends and other shareholder returns (including timing, amounts and relative performance), financial position, business strategy, plans and objectives for future operations, industry conditions, cash flow, and borrowings are forward-looking statements. When used in this presentation, forward-looking statements are generally accompanied by terms or phrases such as “estimate,” “project,” “predict,” “believe,” “expect,” “continue,” “anticipate,” “target,” “could,” “plan,” “intend,” “seek,” “goal,” “will,” “should,” “may” or other words and similar expressions that convey the uncertainty of future events or outcomes. Items contemplating or making assumptions about actual or potential future sales, market size, collaborations, and trends or operating results also constitute such forward-looking statements.
Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond NOG’s control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following: changes in NOG’s capitalization, changes in crude oil and natural gas prices; the pace of drilling and completions activity on NOG’s properties and properties pending acquisition; NOG’s ability to acquire additional development opportunities; the projected capital efficiency savings and other operating efficiencies and synergies resulting from NOG’s acquisition transactions; integration and benefits of property acquisitions, or the effects of such acquisitions on NOG’s cash position and levels of indebtedness; changes in NOG’s reserves estimates or the value thereof; general economic or industry conditions, nationally and/or in the communities in which NOG conducts business; changes in the interest rate environment or market dividend practices; legislation or regulatory requirements; conditions of the securities markets; NOG’s ability to consummate any pending acquisition transactions; other risks and uncertainties related to the closing of pending acquisition transactions; NOG’s ability to raise or access capital; changes in accounting principles, policies or guidelines; and financial or political instability, acts of war or terrorism, and other economic, competitive, governmental, regulatory and technical factors affecting NOG’s operations, products, services and prices. Additional information concerning potential factors that could affect future plans and results is included in the section entitled “Item 1A. Risk Factors” and other sections of NOG’s most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q, as updated from time to time in amendments and subsequent reports filed with the SEC, which describe factors that could cause NOG’s actual results to differ from those set forth in the forward-looking statements.
NOG has based these forward-looking statements on its current expectations and assumptions about future events. While management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory, and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond NOG’s control. You are urged not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. Except as may be required by applicable law or regulation, NOG does not undertake, and specifically disclaims, any obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240206687382/en/
Evelyn Leon Infurna
Vice President of Investor Relations
952-476-9800
ir@northernoil.com
Source: Northern Oil and Gas, Inc.
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