Northern Oil and Gas Q3 2025 Earnings Call: Contradictions Emerge in Operator Activity, Production Spending, Capital Allocation, Service Costs, and M&A Opportunities

Date of Call: November 7, 2025

Financials Results

• Revenue: None provided
• EPS: $1.03 per diluted share, down 8% YOY
• Gross Margin: None provided
• Operating Margin: None provided

Guidance:

• Annual production guidance increased to 132,500 to 134,000 BOE per day.
• Q4 production expected to grow sequentially due to 23-25 net wells coming online.
• Gas volumes up 15% YOY and 3% QOQ.
• Capital efficiency improving with 10% longer lateral lengths, reducing normalized AFE costs by nearly 5%.
• 4Q net well additions expected to provide momentum into 2026.

Business Commentary:

* Strong Financial Performance: - NOG reported adjusted EBITDA of $387.1 million in Q3, with free cash flow of $118.9 million, marking their 23rd consecutive quarter of positive free cash flow, exceeding $1.9 billion over that period. - The company reported a net loss of $129 million due to a noncash impairment charge of $319 million. - The adjusted net income was $102 million or $1.03 per diluted share. - These financial results were driven by steady production and cost management, despite a challenging macro environment and net well additions.

• Production and Capital Expenditure Trends:
• Third-quarter production was approximately 131,000 BOE per day, with oil production at 73,000 barrels of oil per day and natural gas at 352 MMcf per day.
• The company increased annual production guidance to a range of 132,500 to 134,000 BOE per day.
• CapEx for the quarter was $272 million, with projections for full-year CapEx tightened to a range of $950 million to $1.025 billion.

• This was attributed to consistent drilling and development activity across Permian, Williston, Appalachia, and Uinta, along with operational efficiencies and cost reductions.

• Mergers and Acquisitions and Business Development:

• NOG is actively involved in M&A and business development efforts, with a robust backlog of transactions across multiple basins.
• The company recently acquired mineral and royalty interests in the Uinta, adding 1,000 net royalty acres across 400 gross locations.

• This strategic move is part of a broader trend of capital allocation to long-term value creation rather than growth-driven strategies, focusing on disciplined, low-risk assets.

• Balance Sheet and Liquidity Management:

• NOG has successfully managed its balance sheet by raising $725 million in new notes and extending its revolving credit facility through 2030, improving the pricing grid by 60 basis points.
• These actions have increased liquidity and reduced interest rates, setting the stage for countercyclical investments.
• The company expects to end 2025 with more than $300 million additional liquidity compared to the beginning of the year.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management emphasized stable and solid business performance, with strong operational results and a focus on return-driven capital allocation. They highlighted improvements in gas volumes, cost efficiency, and a robust business development pipeline. The tone was confident, with statements about abundant liquidity, strong production guidance, and resilient assets. Management expressed optimism about future performance, citing a balanced and disciplined capital approach and long-term value creation opportunities.

Q&A:

• Question from Charles Meade (Johnson Rice & Company): Nick, you approached the outlook for 2026 in your prepared comments, but I wondered if you could just elaborate a little bit more on what you're seeing. And I suppose if you wanted to give '26 guidance, you would have given it. But I'm really curious to hear what you're seeing because you sample so many different operators across many or most of the important producing areas in the Lower 48. So what -- maybe you could offer what you think the industry baseline is going to be and then perhaps a delta for what NOG might be versus that industry baseline.
  Response: Activity remains stable and flat; no significant change in oil or gas volumes expected. NOG sees substantial gas growth next year regardless of commodity prices. The outlook is return-driven, and capital allocation will be based on breakevens and project optionality.

• Question from Scott Hanold (RBC Capital Markets): Nick, I'd say that you had a pretty strong view on what you're seeing on M&A and ground game and obviously very encouraging. And frankly, I think it's one of the most robust comments to that effect I've heard from you from a while. And can you kind of compare and contrast what you're seeing in the market for that view today relative to, say, a few years ago when you did a number of large acquisitions? And how do you think about funding both ground game and larger transactions if it does meet your hurdle rates?
  Response: The M&A backlog is broader now, not just Permian-centric. We're seeing deals across all basins, from $100M to $1B. Funding is based on long-term benefit to stakeholders, and we have ample liquidity at sub-6% cost.

• Question from Neal Dingmann (William Blair): My question, Nick, is centered on your continued activity. Specifically, you all have talked about, I'm just wondering, given the notable changes we've seen in oil prices now still sub-$60 and natural gas now nearly $4.50, are you all getting a sense of things begin to change into '26, meaning are you seeing some oil activity continue to slow down? And are you seeing maybe potentially some gas activity picking up? Or have you all noticed anything different with prices now in these ranges for, I guess, now a few weeks?
  Response: No immediate change in activity. Oil volumes are stable, gas volumes are stable to growing, a trend seen all year.

• Question from John Freeman (Raymond James): Just following up on the nice progress on the AFE dropping to $806 a foot this quarter versus the $841 last quarter. Can you give us kind of like you did last quarter, where the well cost stands on your current D&C list on a per foot basis?
  Response: AFE cost is translating to D&C list, with expectations around $821 per foot.

• Question from Paul Diamond (Citigroup): Just wanted to quickly touch on AFEs. You talked about a 5% sequential well cost reduction, noting lateral length, but was there anything else in those numbers? And I guess, any other contributions and any opportunity that you see for kind of continuing that trend?
  Response: Cost savings are primarily from longer lateral lengths and efficiencies. Other potential savings from vendor consolidation and centralization are under discussion.

• Question from Noah Hungness (BofA Securities): For my first question, I was wondering if you could talk about what's driving the continued build in wells in progress and when you think that number will start to decline? And if the higher TIL count for 4Q versus 3Q would ultimately result in a drawdown on the wells in progress.
  Response: Activity remains stable. A shift in commodity prices could impact future activity, but no immediate decline expected.

Contradiction Point 1

Operator Activity and Capital Allocation

It involves changes in expectations regarding operator activity and capital allocation, which are crucial for understanding the company's growth strategy and financial outlook.

Have recent price drops affected oil and gas activity? - Neal Dingmann(William Blair)

2025Q3: We haven't seen a change in activity since last quarter. Oil activity remains flat, and gas activity is stable to growing. - Nicholas O'Grady(CEO)

How will lower Williston activity impact oil production guidance and 2026 expectations? - Scott Hanold(RBC Capital Markets)

2025Q2: The trend remains consistent with earlier in the year. We expect the decline in activity will be balanced by an increase in gas activity. - Nicholas O'Grady(CEO)

Contradiction Point 2

Production Cadence and Spending

It involves changes in the production cadence and spending levels, which are critical factors affecting financial performance and investor expectations.

Update on 4Q '25 with 23–25 net wells expected online: How many have come online, and what’s the timing for those TILs? - Charles Meade(Johnson Rice)

2025Q3: We are on track, with many late Q3 and early Q4 wells expected to have a significant impact on Q4 production. The IP rates for wells aren't the only factor; it takes 30 days for wells to clean up and fully produce. We expect strong production as we head into early next year. - Nicholas O'Grady(CEO)

Can you provide details on production cadence given macroeconomic uncertainty and strong Q1 production? How should we expect production cadence to evolve for the remainder of the year? - Noah Hungness(Bank of America)

2025Q1: NOG expects a production cadence with the lowest activity levels in the first three quarters of Q2 and early Q3, with CapEx expected to be sequentially down in Q2. A majority of wells are scheduled for later in 2025, with Q4 expected to see the highest production levels absent significant spending cutbacks. - Chad Allen(CFO)

Contradiction Point 3

Capital Allocation and Production Growth

It involves the company's approach to capital allocation and its impact on production growth, which are critical factors affecting operational performance and investor expectations.

Can you elaborate on the 2026 outlook and NOG's expected performance relative to the industry baseline? - Charles Meade(Johnson Rice)

2025Q3: Our return-driven approach will guide how we allocate capital. - Nicholas O'Grady(CEO)

How do you justify optimism for production growth later this year and next year, given Q4 events? Does this include deferred production? - Neal Dingmann(Truist Securities)

2024Q4: Optimism is based on two factors: 1) More wells are being spudded than completed this year, leading to growth in 2026. 2) Completion timing is back-end loaded, so the benefit will be seen mostly in 2026, resulting in significant growth over a 24-month period. - Nick O'Grady(CEO)

Contradiction Point 4

Service Pricing and Cost Trends

It involves changes in service pricing and cost trends, which directly impact operational efficiency and financial forecasting.

What other factors contribute to well cost reduction besides lateral length? - Paul Diamond(Citigroup)

2025Q3: We haven't seen significant service cost reductions. Some savings come from vendor management, where large operators centralize their field teams to negotiate better rates. Activity levels also impact costs. - Nicholas O'Grady(CEO)

How has service pricing changed with an AFE compared to the beginning of the year? - Noah Hungness(Bank of America)

2025Q1: On a normalized basis, service pricing has seen about a 10% decrease due to a 20%-25% increase in overall lateral lengths. Drilling rates have been relatively sticky, while some relief is seen in completions. Cost estimates and guidance remain flat as per Q1. - Adam Dirlam(President)

Contradiction Point 5

M&A Market and Strategic Opportunities

It involves changes in perceptions of the M&A market and strategic opportunities, which are important for evaluating the company's expansion and growth prospects.

Can you compare today's market to that of a few years ago and discuss transaction funding? - Scott Hanold(RBC Capital Markets)

2025Q3: Today's backlog is broader and more robust, not just Permian-centric. We see a wealth of opportunities across multiple basins. - Nicholas O'Grady(CEO)

How has the M&A market evolved compared to previous months? - Noah Hungness(Bank of America)

2025Q2: The M&A market remains robust, with diverse opportunities from non-ops to co-buying. - Nicholas O'Grady(CEO)