Northern Oil and Gas, Inc.

Greetings and welcome to the NOG's fourth quarter and full year 2023 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If you would like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, Evelyn Inferna, Vice President, Investor Relations. Thank you. You may begin.

Good morning. Welcome to NOG's fourth quarter and year-end 2023 earnings conference call. Yesterday after the close, we released our financial results for the fourth quarter and full year. You can access our earnings release and presentation on our Investor Relations website at NOGinc.com. Our Form 10-K will be filed with the FCC within the next several days. I'm joined this morning by our Chief Executive Officer, Nick O'Grady, our President, Adam Derlam, our Chief Financial Officer, Chad Allen, and our Chief Technical Officer, Jim Evans. Our agenda for today's call is as follows. Nick will provide his remarks on the quarter and our recent accomplishments. Then Adam will give you an overview of operations and business development activities. And Chad will review our financial results and walk through our 2024 guidance. After our prepared remarks, the team will be available to answer any questions. But before we begin, let me go over 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 risk and uncertainties that could cause actual results to be materially different from the expectations contemplated by our forward-looking statements. Those risks include, among others, matters that we described in our earnings release, as well as our filings with the SEC, including our annual report on Form 10-K and our quarterly reports on Form 10-Q. We disclaim any obligation to update these forward-looking statements. During today's call, We may discuss certain non-GAAP financial measures, including adjusted EBITDA, adjusted net income, and free cash flow. Reconciliations of these measures to the closest GAAP measures can be found in our earnings release. With that, I will turn the call over to Nick.

Thank you, Evelyn. Welcome and good morning, everyone, and thank you for your interest in our company. I'll get right to it with four key points to start the year. Number one, scoreboard. Execution delivering growth and profits. On our second quarter call, I spoke about the importance of delivering growth and profitability year over year. I'd like to use that framework today to put the results from the fourth quarter into context. Our fourth quarter adjusted EBITDA was up 52% year over year. And our quarterly cash flow from operations including working capital, was up 55% year-over-year. Over this same period, our weighted average fully diluted share count was up about 17%, significantly less, reflecting the impact from our October offering, but not the impact of our fourth quarter bolt-on deals. We achieved outsized growth in profits despite a more challenging commodity backdrop than the prior year. Oil prices were down over 5% and natural gas prices were down 52% versus the prior period a year ago. Even more impressive is the fact that our LQA debt ratio was 1.1 times this quarter, down about 17% versus the prior year. So in summary, our leverage was down, our per share profits up markedly, even as commodity prices were down. The point I continue to make is that our company is focused on the same simple philosophy. finding ways to grow profits per share through cycle and over time for our investors. We believe that is the path to driving sustainable share price outperformance. While oil and gas prices go through down periods that can and will affect our profits, again, it is our job to find ways to grow the business through such times. The scoreboard we share with you is something that keeps us honest. Being a cyclical business does not afford us a perfectly linear path, and we will have our ups and downs, but we are actively investing, hedging, and looking to drive consistent long-term growth to profits and cash returns. This has and will drive dividend growth and share performance. I'm pleased to say, as Chad will highlight in a bit, that our guidance for 2024 reflects 20% production growth on a budget that is very similar to last year's. Look across the upstream sector, and you'll find very few companies offering that. Once again, we stand out, and I believe we have a lot more levers to pull, which brings me to my next point. Number two, be greedy when others are fearful. The fourth quarter was ground game 101, highlighted by what happens when people run out of money. We saw operators pull forward activity even as budgets were exhausted. We chose to turn the ship directly into the storm and take on some of the best returning small-scale acquisitions we've seen in some time, and these should help capital efficiency as we head into 2024 and beyond. We are diligently chipping away one opportunity at a time, and Adam and his team continue to innovate with creative structures of every kind to solve for our operators' needs. This does mean we will spend money countercyclically at times. But spending money is what provides longer-term growth opportunities for our investors. Growth isn't free. And as a non-operator, sometimes our capital commitments will accelerate and come sooner, and the timing of our projects can vary somewhat, as we saw in the fourth quarter. But it doesn't change the soundness of these investment decisions. As we track well performance through our look-back analysis and review our return parameters internally, we continue to see excellent results across the board. Number three. Shareholder returns. I typically leave this category for last, but I'm going to address it sooner this quarter, particularly as I've observed weaker relative and absolute performance for our equity out of the gate for the start of this year. We talk a lot at NOG about dynamic capital allocation, and we get asked about share repurchases and where they rank in the stack. As I have said before and I'll say again, we try to seize on opportunities and allocate capital accordingly. Our valuation has compressed in recent months, so in 2024, our stock may well be front and center in our capital allocation stack. We don't buy back stock with reckless abandon only when flush with cash and when times are good and when our valuation is high. Instead, stock repurchases legitimately compete as a use of capital to maximize the long-term returns on the capital we employ, which by nature means focusing on the point of entry and being discerning on when we do so. You've seen us be aggressive in repurchasing equity during times of value compression, like in early 2022. We try to allocate capital efficiently and seize on the opportunity when the time is right. From this vantage point, it certainly seems as though this is the moment when the macro outlook has been more in flux and commodities have been more range-bound and volatile and our own value has compressed. If the market gives us lemons for the first time in a while, we're more than happy to make some lemonade. Number four, I have not yet begun to fight. Sailor John Paul Jones immortalized that defiant phrase during the American Revolutionary War when asked to surrender by the British in the naval battle. My use of it here is meant to convey that while our team has grown our business tremendously over the past six years, you'd be mistaken if you think our growth story is over. Far from it. We've worked hard to claim the mantle of the non-operating partner of choice. Given the opportunities and landscape in front of us, I believe we can, with thoughtful execution, double the size of our company again, if not more, over the next five years. And this time, I believe we can do it more creatively. It's an enormous goal and will pose a tremendous challenge, but I believe the opportunity is there for the taking. We will stay humble to our roots as a small company, but we have great ambition to grow the business to the benefit of our stakeholders. and our board has incentivized us and aligned us with our investors to do so for the long term and to do it the right way. And done right, it will add tremendous per share value, grow dividends significantly, and drive market outperformance, all while continuing to lower the business risk. It would be stating the obvious to point out that it's been an active time in the M&A sphere in oil and gas of late, as we've seen many mega merger transactions as well as many private to public transactions in 2023. The fallout from these mega transactions is likely to create even more opportunity for our company over time, providing both improved cost efficiencies on our properties and a broad variety of potential acquisitions as combined portfolios are rationalized. We're already seeing signs of significant cost benefits on our properties from some of these mergers. While I just spoke about our dedication and focus on shareholder returns, I also want to highlight that NOG's path to growth through acquisition also remains very, very strong. We are involved in as many if not more conversations today than at any point in my history at the company, and the quality of these counterparties is very different, as are the nature of these discussions. That is largely because our company today has become de facto the only viable entity for complex solutions for our partners, that is truly of scale and commercial. We believe we've built a reputation as creative problem solvers. Our balance sheet is locked and loaded with capacity for deals in 2024. While we remain selective, I have no doubt there will be a myriad of opportunities in front of us this year. But it should go without saying that our main goal is to grow our business the right way. One of the first questions we always ask ourselves when we look at an opportunity is, will this make our company not just bigger, but will it make it better? We pass on a lot of things that would certainly make us a lot bigger, but we question whether they'll make us a better company. Asset quality, governance if needed, value, operatorship, inventory, and commodity price resilience are all factors that go into driving these transactions. These questions have driven us to where we are today and will continue to drive us as we move forward. Adam will fill you in further on the deal front, but expect an active 2024. I'll close out as I always do by thanking the NOG engineering, land, BD, finance, and planning teams and everyone else on board, our investors and covering analysts for listening, and our operators and contractors for all the hard work they do in the field that actually creates what you see in NOG's results quarter after quarter. we entered 2024 formatively positioned with our strongest balance sheet, the highest level of liquidity and largest size and scale since our formation. And as always, our team is ready to pounce on the opportunities to drive the best possible outcome for our investors, whether that's growth through our ground game, through our organic assets, through M&A or through share repurchases in our quest to deliver the optimal total return. That's because we're a company run by investors for investors. With that, I'll turn it over to Adam.