Northern Oil & Gas provided investors with an update on its business operations in the fourth quarter as pricing improved.
Specifically, the energy company said that its operations saw “steady and continued improvement” during the fourth quarter of 2020. Northern Oil & Gas (NOG) also saw higher development and completion activity in the quarter, partially due to improved pricing. It has now narrowed its 4Q 2020 production guidance from 30,000-40,000 Boe (barrel of oil equivalent) per day to 34,000-36,000 Boe per day, citing “improved pricing and activity levels in November and December”.
The company also expects steady improvements to its natural gas realizations owing to higher propane and natural gas prices.
Northern also said that its wells in process inventory remains “at or near all-time highs”, with 28.1 net wells as of the end of 2020. In addition, its backlog of acquisition opportunities currently exceeds $1 billion in potential deal value.
Furthermore, the company brought down its total debt outstanding in 2020 by about $178 million, including the retirement of $130 million of its senior secured notes. It exited 2020 with about $130 million of liquidity. Northern anticipates a steady reduction in its debt and higher liquidity over time, based on additional “significant” free cash flow anticipated this year.
Prior to the company’s update, Raymond James analyst John Freeman initiated a Buy rating on the stock with a price target of $14. Freeman cited the company’s “historic focus” in the Williston Basin, a newfound opportunity set in the Permian and its non-operator business model that enables it to operate on a “bare-bones cost structure” as some of the reasons for his bullish stance.
Freeman added “the non-op acreage/interests on the auction block should grow meaningfully over the next few years as tightened E&P budgets force the larger players to focus on the operated portions of their acreage. In addition, the company’s oilier production base (75+% oil) makes it one of the biggest beneficiaries of our bullish oil price forecast ($57/bbl in 2021 and $65/bbl in 2022).”
Overall, the Street’s Strong Buy analyst consensus for Northern Oil & Gas is backed by 4 unanimous Buys. Shares have declined 54.4% over the past year as the pandemic hurt fuel demand in the energy sector. Meanwhile, the average price target of $11.50 indicates upside potential of 12.6% from current levels.