Northern Oil and Gas' Q3 2025: Contradictions Emerge on Industry Outlook, CapEx Strategy, Production Growth, M&A Market, and Activity Levels

Date of Call: November 05, 2025

Financials Results

• EPS: $1.03 per diluted share (adjusted); adjusted net income $102.0M (no YOY provided)

Guidance:

• Increased full-year production guidance to 132,500–134,000 BOE/day.
• Expect 23–25 net well TILs in Q4 to support a stronger exit into 2026.
• Tightened full-year CapEx guidance to $950M–$1.025B.
• Increased annual LOE guidance; revised production taxes to a lower run rate for Q4 based on mix.
• Expect >$300M additional liquidity vs. beginning of 2025 and extended debt maturities (no major maturities until 2029).

Business Commentary:

* Production and Financial Performance: - Northern Oil and Gas reported third quarter total average daily production of approximately 131,000 BOE per day, up 8% versus Q3 of 2024, and down 2% from Q2 2025. - The company's adjusted EBITDA for the quarter was $387.1 million, and free cash flow was $118.9 million. - This performance was supported by strong operational results and disciplined capital allocation.

• Capital Management and Financial Strategies:
• Northern Oil and Gas has increased its liquidity through transactions, expecting more than $300 million additional liquidity by the end of 2025.
• The company successfully extended its bond and tender transaction, reducing interest rates with new RBL terms, and increased its debt maturity from three years to six years.

• These strategic moves enhance the company's ability to capitalize on countercyclical investments and maintain a strong financial position.

• Operational Efficiency and Well Costs:

• The normalized AFE costs decreased by nearly 5% due to a 10% increase in lateral lengths, which has also improved expected returns.
• Operators have adopted longer lateral lengths across all basins, leading to improved well productivity and lower normalized costs.

• These efficiencies are expected to continue benefiting the company's bottom line.

• Business Development and Growth Opportunities:

• Northern Oil and Gas is actively pursuing inorganic opportunities, with a robust backlog of potential transactions valued at over $8 billion.
• The company's ground game strategy has resulted in the addition of over 6,000 net acres and 11.6 net wells year-to-date across various basins.
• This strategic approach aims to enhance the company's portfolio with high-quality assets, positioning it for long-term growth.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management: "the business remains solid as a rock." Chad: 23rd consecutive quarter of positive free cash flow ($118.9M in Q3) and adjusted EBITDA $387.1M. Company raised production guidance, tightened CapEx, and highlighted >$300M incremental liquidity and extended debt maturities, signaling financial strength and optionality.

Q&A:

• Question from Charles Mead (Johnson Rice): You sample many operators—what are you seeing for 2026 industry baseline and how might NOG differ?
  Response: Activity is broadly stable versus prior quarter; management expects material gas growth next year, will remain return-driven and delay formal 2026 guidance until commodity/backlog clarity.

• Question from Charles Mead (Johnson Rice): You guide to sequential growth in Q4 with 23–25 net wells—how many are online now and how is timing distributed?
  Response: On track; many wells came online late in Q3 and early Q4, which combined with 23–25 expected net TILs gives confidence in a Q4 volume bump and stronger exit into 2026.

• Question from Scott Handold (RBC): How does current M&A/ground-game opportunity set compare to a few years ago and how would you fund larger deals?
  Response: Deal flow is broader and multi-basin (not Permian-centric); transactions span ~$100M–$4B; NOG will finance opportunistically but only if accretive, leveraging abundant liquidity and diversified financing tools.

• Question from Scott Handold (RBC): How broadly are lateral lengths increasing and what is the impact on capital efficiency and declines?
  Response: Lateral lengths rising across basins (Williston ~14–15k ft observed), lowering normalized AFE costs ~5%, improving returns, and producing flatter, longer-lasting production profiles (decline rate improvements to be refined as data accrues).

• Question from John Freeman (Raymond James): What is current well cost on the DNC list per foot and where do deferred/shed volumes stand?
  Response: DNC average roughly $821 per lateral foot (current AFEs); deferred/shed volumes are about 2–4% and broadly stable quarter-to-quarter.

• Question from Paul Diamond (Citi): Beyond longer laterals, what drove the ~5% sequential well cost reduction and any change on refracs?
  Response: Primary driver is longer laterals and operational efficiencies; material further cost reductions likely require lower activity/vendor consolidations; refracs (mainly in Williston) show early uplift but remain early-stage for underwriting changes.

• Question from Noah Hungness (Bank of America): What's driving the build in wells-in-progress and what are the biggest moving parts for implied Q4 oil production range?
  Response: Wells-in-process remain stable absent a material price move; the key driver of Q4 oil range is timing of completions/TILs (late completions materially affect reported quarterly volumes).

Contradiction Point 1

Industry Activity Outlook

It involves differing expectations about industry activity levels for 2026, which is crucial for forecasting future production and revenue growth.

What is your outlook for 2026? What is the industry baseline for 2026, and how does NOG differ from it? - Charles Mead (Johnson Rice)

2025Q3: We expect activity to remain relatively flat, similar to 2025. - Nick O'Grady(CEO)

Are there plans to pursue increased inorganic growth? - Scott Michael Hanold (RBC Capital Markets)

2025Q2: The fundamentals of oil are uncertain, leading many operators to preserve inventory until the environment is clearer. - Nicholas L. O'Grady(CEO & Director)

Contradiction Point 2

Capital Expenditure (CapEx) Reduction Strategy

It involves differing approaches to reducing capital expenditures, which directly affects the company's financial strategy and operations.

How is growth CapEx allocated in your updated 2025 capital budget? - Charles Arthur Meade (Johnson Rice & Company, L.L.C.)

2025Q3: We've cut about $275 million from our peak to trough, which included approximately $250 million to $300 million for growth capital. - Nicholas L. O'Grady(CEO & Director)

What methods are you using to reduce CapEx? - Charles Arthur Meade (Johnson Rice & Company, L.L.C.)

2025Q2: Activities are down, but it's now largely pressured by pricing and private operators focusing on profitability. - Adam Dirlam(President)

Contradiction Point 3

Production Growth Expectations

It involves differing expectations for production growth, which is a critical indicator for investors regarding the company's operational performance and potential revenue increases.

What is your 2026 outlook and how does NOG compare to the industry baseline? - Charles Mead (Johnson Rice)

2025Q3: We expect activity to remain relatively flat, similar to 2025. The outlook depends on oil prices; if they change, activity may shift. Currently, our outlook for next year is similar to this year's annual guidance, with potential material gas growth. - Nick O'Grady(CEO)

How do you account for your optimism about production growth this year and next year, and does it incorporate the recent wildfires and deferments? - Neal Dingmann (Truist Securities)

2024Q4: The optimism is driven by two factors. First, we are spudding more wells than we are completing this year, which inherently drives growth in 2026. The completion timing is relatively back half weighted, so we are not getting the full credit for these volumes this year. However, we will see the full benefit in 2026, resulting in a significant growth in our 24-month average. - Nick O'Grady(CEO)

Contradiction Point 4

M&A Market Conditions

It highlights the changing dynamics of the M&A market, impacting strategic decision-making and potential acquisition opportunities.

How has the M&A market evolved compared to a few years ago, and how do you approach funding for both ground game and larger deals? - Scott Handold (RBC)

2025Q3: The current market is broader and more robust than before, with opportunities across multiple basins. - Nick O'Grady(CEO)

How has the M&A market changed in the past few months? - Noah B. Hungness (BofA Securities)

2025Q2: Volatility in commodity prices creates wide bid-ask spreads. - Adam Dirlam(President)

Contradiction Point 5

Activity Levels and Oil and Gas Production

It involves differing perspectives on the stability and predictability of oil and gas activity levels, which directly impacts production estimates and financial forecasting.

Have you noticed changes in oil and gas activity due to recent price changes? - Neil Dingman

2025Q3: Activity levels have remained stable, with oil activity flat and gas stable to growing. We haven't observed significant changes in activity since last quarter, despite recent price movements. - Nick O'Grady(CEO)

Can you provide details on the production cadence given macroeconomic uncertainty and strong Q1 production performance? - Noah Hungness(Bank of America)

2025Q1: We expect Flash production cadence to be lowest in Q2 and early Q3, with CapEx likely to be sequentially down in Q2. Q4 should see the highest production level absent significant curtailments. - Chad Allen(CFO)