Northern Oil and Gas, Inc.

Greetings and welcome to the Northern Oil first quarter 2021 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. You can queue up for a question by pressing star 1 on your touch-tone phone. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Mike Kelly, Chief Strategy Officer. Thank you. You may begin.

Thanks, Diego. Good morning, and thank you for joining us for Discussion Northern's first quarter 2021 earnings release. This morning, before the market opened, we released our financial results for the first quarter. You can access our earnings release on our investor relations website, and our Form 10-Q will be filed with the SEC in the next few days. We also posted a new investor deck on the website this morning, if that's more of your speed. I am joined here this morning with Northern CEO Nick O'Grady, our COO Adam Dirlam, our CFO Chad Allen, and our Chief Engineer Jim Evans. Our agenda for the day is as follows. I will hand the mic over to Nick here for his comments regarding Q1. We'll do that in a minute or two. After Nick, Adam will give you an overview of our operations, and then Chad will review NOG's Q1 financials and 21 guidance. After that, the executive team will be available to answer any questions. Before we go any further, let me cover our safe harbor language. Please be advised that our remarks today, including the answers to your questions, may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to the risk and uncertainties that could cause actual results to be materially different from the expectations contemplated by these forward-looking statements. amongst others that we've described in our earnings release as well as our filings with the SEC include our annual report, our Form 10-K, and our quarterly reports on Form 10-Q. We disclaim any obligation to update these forward-looking statements. During this conference call, we may discuss certain non-GAAP financial measures including adjusted EBITDA and free cash flow. The reconciliations of these measures to the closest GAAP measure can be found in the earnings release that we issued this morning. All right, with that taken care of, I will now hand the call over to Northern CEO, Nick O'Grady.

Thanks, Mike. And I would like to thank everyone for joining us this morning. It's hard to believe it's been over a year since the beginning of the pandemic. This past year, we've seen the price of oil go from less than zero back to $65 a barrel. We're very fortunate that we've been able to thrive during this year, in part because of our hedging strategies and also because of the support of our shareholders and lenders. I'm very proud of the Northern team and how we've responded to the challenges. As usual, I'll get down to it with four points. Number one, the quarter. Our results for the first quarter beat our internal forecasts as a result of improving well performance in conjunction with robust pricing for gas and solid oil differentials. These improvements more than offset the work overspending associated with the costs we incurred for getting our production back online that we highlighted in our fourth quarter release. This is the third quarter in a row since the pandemic took hold that our production has risen. The increased work over costs are largely transitory and thus we should see unit costs continue to trend down throughout 2021. Our Bakken assets continue to see strong oil output and increased gas capture and combined with robust NGL pricing resulted in Northern exceeding our internal revenue estimates. Our capital spending was less than expected, which translated into free cash flow of $41.7 million for the quarter. In summation, as we enter mid-year, we are well ahead of our 2021 plan as it stands today. Number two, the balance sheet. As we've outlined in previous earnings calls, one of our primary objectives is continual improvement of our balance sheet and to decrease our operating leverage. Our free cash flow enabled us to pay off an additional $24 million of debt and fund the $17.5 million deposit for our Marsalis acquisition. Based on the current outlook, we expect to end the year with less absolute debt and a leverage ratio of less than two times, and we plan to further reduce the leverage ratio to the mid-ones level by mid-2022. Based on our internal forecasts, we expect to end the year with over $400 million of available liquidity, not including any potential increase to the revolver capacity. and at the current strip, the revolver is projected to be undrawn with significant cash on hand by maturity at the end of 2024. These forecasts take into account a cash dividend with growth over time, which we'll get more into later. I'd like to thank Bank of America for their increased commitment to our facility and the flaws execution advising us in the Marcellus transaction and along with Wells Fargo leading our Q1 financings. RBC, Truist, Citizens Fifth Third, US Bank, and other members of our bank syndicate have been truly great partners as we collectively and successfully navigated through the worst of the pandemic. And I'm particularly thankful that we've had such an incredibly supportive lending syndicate that never wavered in their sponsorship of the company. Number three, acquisition pipeline. We continue to enjoy a robust backlog of acquisition opportunities. from acreage to ground game development, and growing quantities of larger asset packages. Our team has never been busier, and we prosecute each opportunity with the same rigor, and we remain optimistic that from small to large we can create value for our stakeholders going forward. We are currently evaluating 15 different package opportunities, 12 of which are not formally being marketed. The bulk of these prospects are focused on the Williston, Permian, as well as the Eagleford. As I've mentioned previously, the deep bench of opportunities out there is non-operated properties is by our estimates over $10 billion. We believe strongly in creating win-win scenarios for us and potential sellers, but our own stakeholders come first. We are the natural consolidator of non-operated interests, now on a national level with an advantage cost of capital and unmatched size and scale. Number four, dividends and returns to our shareholders. Since we last spoke, we've spent a great deal of time with our board of directors researching the sector in regard to returning capital to our shareholders. We are pleased to announce our first-ever quarterly dividend of 3 cents per share about five months early from our initial plans. While it will be a very modest start for this program, this is just the beginning. Future increases will be tied directly to our reduction in overall leverage, and I'm pleased to tell you that our analysis of where we are and where we are heading has provided a bright outlook. This means we can create a dividend that can grow faster than that of our overall company. So for longer term investors, what will at first be a starter dividend should consistently grow into something more meaningful over the next several years. Additionally, we might be able to increase our dividend even faster if we are successful on the acquisition front in a leverage-accretive fashion, and to the extent that oil prices continue to be strong or rise even further, we might be able to accelerate this strategy or consider alternate forms of returns. As I wrote in our release, this is the culmination of over three years of work by our board and my executive team to get to this point, and I'm very proud of their work and thankful to our stakeholders and bankers who helped us get here. In conclusion, the outlook is bright. Our opportunity set continues to grow with each passing day, and as I will remind you each and every quarter here on out, we are a company run by investors for investors, and I truly thank each and every one of you for your interest. With that, let me turn it over to Adam Durland.