Northern Oil and Gas, Inc.

Greetings and welcome to the NOG's first quarter 2024 earnings conference call. At this time, all participants are in listen-only mode. The question and answer session will follow the formal presentation. If you would like to ask a question during this time, simply press star 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 is now my pleasure to introduce your host, Evelyn Imprina, Vice President, Investor Relations. Thank you. You may begin.

Good morning. Welcome to NOG's first quarter 2024 earnings conference call. Earlier this morning, we released our financial results for the first quarter. You can access our earnings release and presentation on our Investor Relations website at NOGinc.com. Our Form 10-Q will be filed with the SEC within the next few days. I am joined this morning by our Chief Executive Officer, Nick O'Grady, our President, Adam Durlam, 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. Chad will review our financial results, and after our prepared remarks, the team will be available to answer any questions. Before we begin, 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 risks 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 have been described in our earnings release as well as in 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. Reconciliation of these measures to the closest GAAP measures can be found in our earnings release. With that, I'll 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. Number one, coming out strong right out of the gates. We saw significantly better than expected results in the first quarter driven by two primary factors, strong well performance and a pull forward of activity with more wells turned in line than we expected. We had highlighted strong well performance last quarter as well, but it was less noticeable in Q4 results due to higher level of curtailments. With the rampant mascot in full swing, our other JVs performing well, and higher oil prices, we are seeing organic activity accelerate, which bodes well for our 2024 production overall. The larger than expected till count increased our overall capital, but was more than made up for by higher cash flow and production that will benefit us as we head into the second quarter. We expect modest additional pull forward in the second quarter, though not to the same extent. as good pricing continues to bring value forward for our investors. This highlights one of the greatest facets of our non-operated business model, which is the alignment with our operators. When prices are high, we typically see the economic incentives work their magic to bring forward value into the higher price periods like it did here. And additionally, as we talk about the asymmetry of hedging, we produce more barrels when prices are higher leaving us more on hedge than we expected in a higher-priced period. While we've seen development accelerate into the highest-priced period of the strip for the year, boosting our profits for the quarter, our plans for all of 2024 remain largely unchanged, with only very modest changes to the pace. Our hope would be, to the extent that commodity prices stay robust, that it warrants activity levels and returns that trend toward the middle or upper band of our guidance. which should translate into higher production as we exit the year and into 2025. With that said, we want to remain flexible with our capital, as always, to ensure we're earning significant returns. Chad will highlight it further, but despite the lower headline free cash flow number, under the surface, we've made substantial progress on the working capital front and made better progress than we anticipated on our balance sheet year to date. After closing the last of our Q4 acquisitions, we paid about $40 million in dividends spent about $20 million on share repurchases, and still paid down about $50 million worth of debt. All this was during a period of hefty investment, so we expect our free cash flow pace to pick up even more meaningfully in the second quarter and continue as the year progresses. Number two, waiting for the right opportunity. As we highlight nearly every year, our ground game business typically has a quiet first quarter, and this one was no different. We characteristically see people aggressively spending their budgets early in the year, Additionally, strong crude prices can have an effect on risk-taking from smaller competitors who may not have the wherewithal to invest in the down cycles. On the larger M&A front, we've been actively engaged. We've seen relatively wide bid-ask spreads, negative risk-view from high crude prices, and asset quality that's kept us from being overly aggressive. The good news is that on the more scalable front, we continue to work on drilling partnerships, carve-outs, and true non-op and JV front on larger, more impactful, and bespoke processes. We shied away from some of the less value-added marketed processes that, in our view, have been both lower quality and saturated, with returns that in many cases did not meet our thresholds. These market conditions ebb and flow and can change within a given year, so we stay active in all facets of business development to capture the right opportunities. Given the overall backlog, we're staying disciplined for the right transaction to grow our business, and I have the utmost confidence that over time we will find great opportunities for growth. Number three, dynamic capital allocation 101. With the positive acquisitions and relative weakness of our equity performance early in the year, we did elect to dynamically direct our capital towards share repurchases and simplifying our capital stack. Dynamic capital allocation is just that, dynamic. Our flexible business model allows us to quickly adapt to changing circumstances. The contraction in our equity valuation in the first quarter, as I highlighted in our last earnings call, provided a favorable time for share repurchases, and we pounced on the opportunity at attractive prices. We also cleaned up the last tranche of our remaining equity warrants, which were issued as part of an acquisition in 2022, at lower prices than current in a net exercise style exchange. This simplifying transaction both reduces short pressure on our equity as well as long-term dilution potential in another value-added move. Most of those warrants were already accounted for in our diluted share count, but over time, the potential dilution from stock performance and dividend payments could have grown meaningfully and were very bullish on our outlook. As we look forward, one of the primary goals for this year is to put the business in a position to have increased optionality as we head into 2025. whether that's to further increase the dividend, allocate more to buybacks, or allocate more to growth prospects. The key to dynamic capital allocation is to make decisions that maximize total return. While dogmatic formulaic approaches may seem tempting, over time they are prone to missed opportunities. Given weak natural gas prices, high interest rates, and an uncertain economic outlook in an election year, there's a high probability we will have market volatility events, which could potentially create great buyback acquisition opportunities or chances to grow the dividend for us. We want you to know that, as always, we are watching closely and are highly aligned with our shareholders to deliver. Number four, confident for 2024 and 2025. We recently issued an updated and much improved ESG report, and in it, I talk a lot about our philosophy of Kaizen here at NOG. Kaizen is a Japanese term which basically means continuous improvement, and that's built into our culture here at NOG. After launching our AI-powered data lake system, Drakkar, last year, we continue to enhance and expand its functionality, and internally we remain focused on improving data quality to further leverage our analytics, our underwriting, and predictive capabilities to help grow our business. Not a week goes by where I don't hear that one of our departments is building out new capabilities to exploit our massive trove of data. What that data is showing us gives me tremendous confidence in the people at NOG, our assets, and our outlook for 2024, 2025, and beyond. We continue to add systems, talent, and new processes to get better and better at what we do. As with Kaizen, we're never satisfied with leaving well enough alone. For 2024 specifically, as I mentioned in my first point, our sound investment process and core tenet of focusing on high-quality assets is time and time again proving itself out with better-than-expected well performance, and our culture of conservatism has delivered the strong results we've seen today. While we reiterate our forecast for the year, we're working diligently to augment those results and find additional paths to growth. Before I hand it over to Adam, I'd like to thank the entire NOG team for their hard work and dedication for another great quarter, and thank our analysts and all of you for your interest in our company today. Thanks also to our operators out there for their incredible field work and the great partnerships we've forged. We've had another great start to the year, and while it's early, the assets are performing exceptionally well as we convert a lot of the money in the ground from the past six months into production and cash flow this year. As 2024 progresses, I also expect we will see more growth opportunities emerge. And given what's in front of us today, I remain confident that NOG remains a superior investment product to our peers and that our growth trajectory is unmatched in the upstream space. As a management team, we are aligned and incentivized to maximize total return for our investors year in and year out. That's because we are a company run by investors for investors. With that, I'll turn it over to Adam.