Business Wire | Nov 6, 2020 07:00AM EST

Northern Oil and Gas, Inc. Announces Third Quarter 2020 Results and 2021 Guidance

Nov. 06, 2020

MINNEAPOLIS--(BUSINESS WIRE)--Nov. 06, 2020--Northern Oil and Gas, Inc. (NYSE American: NOG) ("Northern") today announced the company's third quarter results.

MANAGEMENT COMMENTS

"Northern's business model continues to deliver on its 2020 plan," commented Nick O'Grady, Northern's Chief Executive Officer. "Costs were down, production was up and we generated meaningful free cash flow while continuing to strategically bolt on high return assets. As of November 6, 2020, our debt is already down $160 million year-to-date, and our 2021 outlook continues to be focused on delivering more free cash flow, debt reduction and taking advantage of market distress. Despite the industry challenges, we continue to work through a great pipeline of deal flow at some of the most compelling valuations seen in energy in decades."

THIRD QUARTER FINANCIAL RESULTS

Third quarter Adjusted Net Income was $27.5 million or $0.51 per diluted share. Third quarter GAAP net loss was $233.0 million or $5.44 per diluted share, driven in large part by non-cash items: a $199.5 million impairment expense and a $70.2 million mark-to-market loss on unsettled commodity derivatives. Cash flow from operations was $69.0 million in the third quarter, excluding $12.6 million spent to reduce net working capital. Adjusted EBITDA in the third quarter was $82.7 million. (See "Non-GAAP Financial Measures" below.)

PRODUCTION

Third quarter production was 29,051 Boe per day, a 22% increase from the second quarter. Oil production represented 77% of total production at 22,335 Bbls per day. Production increased due to an increase in net completions and a partial return of curtailed production by many of Northern's operating partners. Northern estimates that curtailments, shut-ins and delayed well completions still reduced the Company's average daily production by over 11,000 Boe per day in the third quarter. Northern had 3.4 net wells turned online during the third quarter, compared to 1.3 net wells turned online in the second quarter of 2020.

PRICING

During the third quarter, NYMEX West Texas Intermediate ("WTI") crude oil averaged $40.90 per Bbl, and NYMEX natural gas at Henry Hub averaged $1.97 per million cubic feet ("Mcf"). Northern's unhedged net realized oil price in the third quarter was $34.36, representing a $6.54 differential to WTI prices. Oil differentials narrowed from significantly higher levels in the second quarter. Northern's third quarter unhedged net realized gas price was $0.83 per Mcf, representing approximately 42% realizations compared with Henry Hub pricing.

OPERATING COSTS

Lease operating costs were $24.2 million in the third quarter of 2020, or $9.04 per boe, down 9% on a total basis and down 27% on a per unit basis compared to the second quarter. Third quarter general and administrative ("G&A") costs totaled $4.6 million, which includes non-cash stock-based compensation. Cash G&A expense totaled $3.7 million or $1.39 per Boe in the third quarter, down 14% on a per unit basis compared to the second quarter.

CAPITAL EXPENDITURES AND ACQUISITIONS

Capital spending for the third quarter was $43.8 million, made up of $27.7 million of organic drilling and completion ("D&C") capital and $16.1 million of total acquisition spending and other items, inclusive of ground game D&C spending. Northern added 3.4 net wells to production in the third quarter, and wells in process increased to 28.3 net wells, up 1.6 net wells from the prior quarter. On the ground game acquisition front, Northern closed on 10 transactions during the third quarter totaling 4.6 net wells, 653 net mineral acres and 141 net royalty acres (standardized to a 1/8 royalty interest).

LIQUIDITY AND CAPITAL RESOURCES

On November 2, 2020, Northern's borrowing base under its revolving credit facility was reaffirmed at $660 million. As of November 6, 2020, Northern has $550.0 million of borrowings outstanding on its revolving credit facility, with $110.0 million of current borrowing capacity. Northern expects an additional $15 - 30 million reduction in borrowings under the revolving credit facility by the end of 2020, but will continue to defer payment of any dividends on its Perpetual Preferred Stock due to the current environment.

As of September 30, 2020, Northern had $1.8 million in cash and $571.0 million of borrowings outstanding on its revolving credit facility. Northern had total liquidity of $90.8 million as of September 30, 2020, consisting of cash and borrowing availability under the revolving credit facility.

As of September 30, 2020, Northern had additional debt outstanding consisting of a $130.0 million 6% Senior Unsecured Note and $287.8 million of 8.5% Senior Secured Notes. During the third quarter, Northern strengthened its balance sheet through two negotiated agreements with noteholders, which resulted in $9.5 million in principal amount of the 8.5% Senior Secured Notes being retired, capturing $0.8 million in discounts to par value. In addition, Northern executed an agreement to retire approximately $7.6 million in liquidation value of its Perpetual Preferred Stock, capturing a discount to liquidation value of approximately $3.6 million.

2021 ESTIMATED GUIDANCE RANGES

Full Year 2021

Base Case $35-$40 WTI Sub-$35 WTI $40+ WTI

Production (Boe/day) 37,500 - 42,500 32,500 - 37,500* 27,500 - 32,500**

Total Capital $190 - $240 $100 - $175 $50 - $100Expenditures million million million

____________

*

Assumes approximately 2,500-5,000 Boe per day of production is shut-in or curtailed for low prices

**

Assumes approximately 3,500-5,500 Boe per day of production is shut-in or curtailed for low prices

Northern reiterates its 2020 total capital spending and production guidance. Northern continues to closely monitor oil pricing with its operating partners to best determine the appropriate cadence to return remaining curtailments to sales.

Northern is providing WTI price based capital spending and production guidance for 2021. Northern allocates its capital budget based on rate of return. Northern's 2021 base case is unchanged from the second quarter and predicated upon $40+ average WTI oil price for 2021. In this scenario, Northern expects total capital expenditures of $190 - $240 million and production of 37,500 - 42,500 Boe per day for 2021. A significant portion of capital allocated in this scenario would be for wells in process that would turn to sales in 2022 and beyond. If oil prices are greater than $35 but less than $40, Northern anticipates continued curtailments, limited new drilling, and the bulk of its capital going towards the completion of wells in process. If WTI prices average less than $35, Northern anticipates additional curtailments, minimal new drilling, and potentially only a portion of wells in process being completed and turned to sales. However, in scenarios where WTI averages below $40, Northern anticipates significantly higher free cash flow due to the reduced capital spending.

Northern expects to enter 2021 with nearly 9.0 net wells drilled and completed but delayed from being turned to sales. Northern conservatively projects in its base case that the bulk of its wells will be turned to sales in the second quarter through the fourth quarter in 2021. As is typical in the Williston basin, Northern expects the first quarter of 2021 to be seasonally lower than the annual range due to winter weather restrictions for the completions of new wells.

THIRD QUARTER 2020 RESULTS

The following tables set forth selected operating and financial data for the periods indicated.

____________

* Assumes approximately 2,500-5,000 Boe per day of production is shut-in or curtailed for low prices

** Assumes approximately 3,500-5,500 Boe per day of production is shut-in or curtailed for low prices

Northern reiterates its 2020 total capital spending and production guidance. Northern continues to closely monitor oil pricing with its operating partners to best determine the appropriate cadence to return remaining curtailments to sales.

Northern is providing WTI price based capital spending and production guidance for 2021. Northern allocates its capital budget based on rate of return. Northern's 2021 base case is unchanged from the second quarter and predicated upon $40+ average WTI oil price for 2021. In this scenario, Northern expects total capital expenditures of $190 - $240 million and production of 37,500 - 42,500 Boe per day for 2021. A significant portion of capital allocated in this scenario would be for wells in process that would turn to sales in 2022 and beyond. If oil prices are greater than $35 but less than $40, Northern anticipates continued curtailments, limited new drilling, and the bulk of its capital going towards the completion of wells in process. If WTI prices average less than $35, Northern anticipates additional curtailments, minimal new drilling, and potentially only a portion of wells in process being completed and turned to sales. However, in scenarios where WTI averages below $40, Northern anticipates significantly higher free cash flow due to the reduced capital spending.

Northern expects to enter 2021 with nearly 9.0 net wells drilled and completed but delayed from being turned to sales. Northern conservatively projects in its base case that the bulk of its wells will be turned to sales in the second quarter through the fourth quarter in 2021. As is typical in the Williston basin, Northern expects the first quarter of 2021 to be seasonally lower than the annual range due to winter weather restrictions for the completions of new wells.

THIRD QUARTER 2020 RESULTS

The following tables set forth selected operating and financial data for the periods indicated.

Three Months Ended September 30,

2020 2019 % Change

Net Production:

Oil (Bbl) 2,054,847 3,002,789 (32) %

Natural Gas and NGLs (Mcf) 3,706,853 4,496,860 (18) %

Total (Boe) 2,672,656 3,752,266 (29) %



Average Daily Production:

Oil (Bbl) 22,335 32,639 (32) %

Natural Gas and NGLs (Mcf) 40,292 48,879 (18) %

Total (Boe) 29,051 40,786 (29) %



Average Sales Prices:

Oil (per Bbl) $ 34.36 $ 50.90 (33) %

Effect of Gain on Settled Oil Derivatives 21.11 6.12 on Average Price (per Bbl)

Oil Net of Settled Oil Derivatives (per 55.47 57.02 (3) %Bbl)



Natural Gas and NGLs (per Mcf) 0.83 1.15 (28) %

Effect of Gain on Settled Natural Gas 0.13 - Derivatives on Average Price (per Mcf)

Natural Gas and NGLs Net of Settled Natural 0.96 1.15 (17) %Gas Derivatives (per Mcf)



Realized Price on a Boe Basis Excluding 27.57 42.10 (35) %Settled Commodity Derivatives

Effect of Gain on Settled Commodity 16.40 4.90 Derivatives on Average Price (per Boe)

Realized Price on a Boe Basis Including 43.97 47.00 (6) %Settled Commodity Derivatives



Costs and Expenses (per Boe):

Production Expenses $ 9.04 $ 8.62 5 %

Production Taxes 2.60 4.10 (37) %

General and Administrative Expenses 1.72 1.12 54 %

Depletion, Depreciation, Amortization and 11.52 14.81 (22) %Accretion



Net Producing Wells at Period End 468.8 444.0 6 %

HEDGING

Northern hedges portions of its expected production volumes to increase the predictability of its cash flow and to help maintain a strong financial position. The following table summarizes Northern's open crude oil commodity derivative contracts scheduled to settle after September 30, 2020.

Crude Oil Commodity Derivative Swaps^(1)

Contract Period Volume (Bbls) Volume (Bbls/Day) Weighted Average Price (per Bbl)

2020:

4Q 2,372,362 25,787 $58.03

2021:

1Q 2,021,250 22,458 $56.48

2Q 1,815,458 19,950 $56.99

3Q 1,625,410 17,668 $54.44

4Q 1,616,506 17,571 $54.45

2022:

1Q 450,000 5,000 $51.77

2Q 91,000 1,000 $50.05

3Q 92,000 1,000 $50.05

4Q 92,000 1,000 $50.05

_____________

(1)

This table does not reflect additional potential hedged volumes under "swaption" contracts, which are crude oil derivative contracts entered into by Northern that give counterparties the option to extend certain current derivative contracts for additional periods. Based on current pricing, none of these swaptions would be expected to be exercised.

The following table summarizes Northern's open natural gas commodity derivative contracts scheduled to settle after September 30, 2020.

_____________

This table does not reflect additional potential hedged volumes under "swaption" contracts, which are crude oil derivative contracts entered(1) into by Northern that give counterparties the option to extend certain current derivative contracts for additional periods. Based on current pricing, none of these swaptions would be expected to be exercised.

The following table summarizes Northern's open natural gas commodity derivative contracts scheduled to settle after September 30, 2020.

Natural Gas Commodity Derivative Swaps

Contract Period Gas (MMBTU) Volume (MMBTU/Day) Weighted Average Price (per Mcf)

2020:

4Q 2,760,000 30,000 $2.44

2021:

1Q 3,375,000 37,500 $2.47

2Q 3,185,000 35,000 $2.51

3Q 3,220,000 35,000 $2.51

4Q 3,220,000 35,000 $2.51

2022:

Q1 900,000 10,000 $2.61

Q2 910,000 10,000 $2.61

Q3 920,000 10,000 $2.61

Q4 920,000 10,000 $2.61

CAPITAL EXPENDITURES & DRILLING ACTIVITY

Three Months Nine Months(In millions, except for net well data) Ended Ended September 30, September 30, 2020 2020

Capital Expenditures Incurred:

Organic Drilling and Development Capital $ 27.7 $ 125.3 Expenditures

Ground Game Drilling and Development Capital $ 10.1 $ 24.4 Expenditures

Ground Game Acquisition Capital Expenditures $ 5.5 $ 12.9

Other $ 0.5 $ 2.4



Net Wells Added to Production 3.4 12.0



Net Producing Wells (Period-End) - 468.8



Net Wells in Process (Period-End) - 28.3

Increase in Wells in Process over Prior 1.6 2.6 Period



Weighted Average AFE for Wells Elected to $7.0 million $7.5 million

Capitalized costs are a function of the number of net well additions during the period, and changes in wells in process from the prior year-end. Capital expenditures attributable to the increase of 2.6 in net wells in process during the nine months ended September 30, 2020 are reflected in the amounts incurred year-to-date for drilling and development capital expenditures.

ACREAGE

As of September 30, 2020, Northern controlled leasehold of approximately 183,222 net acres primarily targeting the Bakken and Three Forks formations of the Williston Basin, and approximately 90% of this total acreage position was developed, held by production, or held by operations. As previously disclosed, Northern made its first Permian Basin acquisition in the third quarter, acquiring acreage with proposed wells in Lea County, NM.

THIRD QUARTER 2020 EARNINGS RELEASE CONFERENCE CALL

In conjunction with Northern's release of its financial and operating results, investors, analysts and other interested parties are invited to listen to a conference call with management on Friday, November 6, 2020 at 9:00 a.m. Central Time.

Those wishing to listen to the conference call may do so via the company's website, www.northernoil.com, or by phone as follows:

Website: https://78449.themediaframe.com/dataconf/productusers/nog/mediaframe/41688/indexl.html Dial-In Number: (866) 373-3407 (US/Canada) and (412) 902-1037 (International) Conference ID: 13712449 - Northern Oil and Gas, Inc. Third Quarter 2020 Earnings Call Replay Dial-In Number: (877) 660-6853 (US/Canada) and (201) 612-7415 (International) Replay Access Code: 13712449 - Replay will be available through November 16, 2020

UPCOMING CONFERENCE SCHEDULE

Bank of America Leveraged Finance Conference November 30, 2020

Capital One Annual Energy Conference December 7-8, 2020

ABOUT NORTHERN OIL AND GAS

Northern Oil and Gas, Inc. is a company with a primary strategy of investing in non-operated minority working and mineral interests in oil & gas properties, with a core area of focus in the Williston Basin Bakken and Three Forks play in North Dakota and Montana. More information about Northern Oil and Gas, Inc. can be found at www.northernoil.com.

SAFE HARBOR

This press release contains forward-looking statements regarding future events and future results that are subject to the safe harbors created under the Securities Act of 1933 (the "Securities Act") and the Securities Exchange Act of 1934 (the "Exchange Act"). All statements other than statements of historical facts included in this release regarding Northern's financial position, operating and financial performance, business strategy, plans and objectives of management for future operations, industry conditions, and indebtedness covenant compliance are forward-looking statements. When used in this release, forward-looking statements are generally accompanied by terms or phrases such as "estimate," "project," "predict," "believe," "expect," "continue," "anticipate," "target," "could," "plan," "intend," "seek," "goal," "will," "should," "may" or other words and similar expressions that convey the uncertainty of future events or outcomes. Items contemplating or making assumptions about actual or potential future sales, market size, collaborations, and trends or operating results also constitute such forward-looking statements.

Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond our company's control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following: the effects of the COVID-19 pandemic and related economic slowdown, changes in crude oil and natural gas prices, the pace of drilling and completions activity on Northern's current properties, infrastructure constraints and related factors affecting Northern's properties, ongoing legal disputes over and potential shutdown of the Dakota Access Pipeline, Northern's ability to acquire additional development opportunities, Northern's ability to consummate any pending acquisition transactions, other risks and uncertainties related to the closing of pending acquisition transactions, changes in Northern's reserves estimates or the value thereof, general economic or industry conditions, nationally and/or in the communities in which Northern conducts business, changes in the interest rate environment, legislation or regulatory requirements, conditions of the securities markets, Northern's ability to raise or access capital, changes in accounting principles, policies or guidelines, financial or political instability, health-related epidemics, acts of war or terrorism, and other economic, competitive, governmental, regulatory and technical factors affecting Northern's operations, products and prices.

Northern has based these forward-looking statements on its current expectations and assumptions about future events. While management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond Northern's control. Northern does not undertake any duty to update or revise any forward-looking statements, except as may be required by the federal securities laws.

CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)

Three Months Ended Nine Months Ended September 30, September 30,

(In thousands,except share and 2020 2019 2020 2019per share data)

Revenues

Oil and Gas Sales $ 73,680 $ 157,989 $ 224,541 $ 440,519

Gain (Loss) onCommodity (26,361) 75,892 277,582 (27,139) Derivatives, Net

Other Revenue 3 3 12 10

Total Revenues 47,322 233,883 502,135 413,389



Operating Expenses

Production 24,159 32,347 88,132 83,146 Expenses

Production Taxes 6,936 15,391 20,750 41,944

General andAdministrative 4,605 4,206 14,185 15,506 Expense

Depletion,Depreciation, 30,786 55,566 129,350 146,791 Amortization andAccretion

Impairment ofOther Current - 5,275 - 7,969 Assets

Impairment Expense 199,489 - 962,205 -

Total Operating 265,975 112,784 1,214,622 295,355 Expenses



Income (Loss) From (218,653) 121,100 (712,487) 118,034 Operations



Other Income (Expense)

Interest Expense,Net of (14,637) (21,510) (45,145) (58,836) Capitalization

Write-off of Debt (1,543) - (1,543) - Issuance Costs

Gain (Loss) onUnsettled Interest 224 - (1,205) - Rate Derivatives,Net

Gain (Loss) onExtinguishment of 1,592 - (3,718) (425) Debt, Net

Debt ExchangeDerivative Gain/ - (23) - 1,390 (Loss)

Contingent - (5,262) - (28,633) Consideration Loss

Other Income 13 75 14 88 (Expense)

Total Other Income (14,351) (26,719) (51,597) (86,416) (Expense)



Income (Loss)Before Income (233,004) 94,381 (764,084) 31,619 Taxes



Income TaxProvision - - (166) - (Benefit)



Net Income (Loss) $ (233,004) $ 94,381 $ (763,918) $ 31,619



CumulativePreferred Stock (3,718) - (10,986) - Dividend



Net Income (Loss)Attributable to $ (236,722) $ 94,381 $ (774,904) $ 31,619 CommonShareholders



Net Income (Loss)Per Common Share - $ (5.44) $ 2.38 $ (18.53) $ 0.83 Basic*

Net Income (Loss)Per Common Share - $ (5.44) $ 2.38 $ (18.53) $ 0.83 Diluted*

Weighted AverageCommon Shares 43,517,074 39,604,482 41,812,553 38,204,403 Outstanding -Basic*

Weighted AverageCommon Shares 43,517,074 39,653,070 41,812,553 38,274,426 Outstanding -Diluted*

___________

*

Adjusted for the 1-for-10 reverse stock split.

___________

* Adjusted for the 1-for-10 reverse stock split.

CONDENSED BALANCE SHEETS

(In thousands, except par value and share data)

September 30, 2020

December 31, 2019

Assets

(Unaudited)

Current Assets:

Cash and Cash Equivalents

$

1,803

$

16,068

Accounts Receivable, Net

60,067

108,274

Advances to Operators

714

893

Prepaid Expenses and Other

1,697

1,964

Derivative Instruments

119,468

5,628

Income Tax Receivable

-

210

Total Current Assets

183,749

133,037

Property and Equipment:

Oil and Natural Gas Properties, Full Cost Method of Accounting

Proved

4,344,346

4,178,605

Unproved

10,328

11,047

Other Property and Equipment

2,215

2,157

Total Property and Equipment

4,356,889

4,191,809

Less - Accumulated Depreciation, Depletion and Impairment

(3,533,887)

(2,443,216)

Total Property and Equipment, Net

823,002

1,748,593

Derivative Instruments

6,826

8,554

Deferred Income Taxes

-

210

Acquisition Deposit

225

-

Other Noncurrent Assets, Net

11,722

15,071

Total Assets

$

1,025,524

$

1,905,465

Liabilities and Stockholders' Equity (Deficit)

Current Liabilities:

Accounts Payable

$

20,372

$

69,395

Accrued Liabilities

70,203

110,374

Accrued Interest

8,442

11,615

Derivative Instruments

5,438

11,298

Current Portion of Long-term Debt

65,000

-

Other Current Liabilities

1,000

795

Total Current Liabilities

170,455

203,477

Long-term Debt

918,327

1,118,161

Derivative Instruments

2,456

8,079

Asset Retirement Obligations

17,891

16,759

Other Noncurrent Liabilities

126

345

Total Liabilities

$

1,109,255

$

1,346,822

Commitments and Contingencies (Note 8)

Stockholders' Equity (Deficit)

Preferred Stock, Par Value $.001; 5,000,000 Shares Authorized;

2,218,732 Series A Shares Outstanding at 9/30/2020

1,500,000 Series A Shares Outstanding at 12/31/2019

2

2

Common Stock, Par Value $.001; 135,000,000* Shares Authorized;

45,556,326* Shares Outstanding at 9/30/2020

40,608,518* Shares Outstanding at 12/31/2019

448

406

Additional Paid-In Capital

1,554,053

1,431,438

Retained Deficit

(1,638,234)

(873,203)

Total Stockholders' Equity (Deficit)

(83,731)

558,643

Total Liabilities and Stockholders' Equity (Deficit)

$

1,025,524

$

1,905,465

CONDENSED BALANCE SHEETS

(In thousands, except par value and share data) September 30, December 31, 2020 2019

Assets (Unaudited)

Current Assets:

Cash and Cash Equivalents $ 1,803 $ 16,068

Accounts Receivable, Net 60,067 108,274

Advances to Operators 714 893

Prepaid Expenses and Other 1,697 1,964

Derivative Instruments 119,468 5,628

Income Tax Receivable - 210

Total Current Assets 183,749 133,037



Property and Equipment:

Oil and Natural Gas Properties, Full Cost Method of Accounting

Proved 4,344,346 4,178,605

Unproved 10,328 11,047

Other Property and Equipment 2,215 2,157

Total Property and Equipment 4,356,889 4,191,809

Less - Accumulated Depreciation, Depletion and (3,533,887) (2,443,216) Impairment

Total Property and Equipment, Net 823,002 1,748,593



Derivative Instruments 6,826 8,554

Deferred Income Taxes - 210

Acquisition Deposit 225 -

Other Noncurrent Assets, Net 11,722 15,071



Total Assets $ 1,025,524 $ 1,905,465



Liabilities and Stockholders' Equity (Deficit)

Current Liabilities:

Accounts Payable $ 20,372 $ 69,395

Accrued Liabilities 70,203 110,374

Accrued Interest 8,442 11,615

Derivative Instruments 5,438 11,298

Current Portion of Long-term Debt 65,000 -

Other Current Liabilities 1,000 795

Total Current Liabilities 170,455 203,477



Long-term Debt 918,327 1,118,161

Derivative Instruments 2,456 8,079

Asset Retirement Obligations 17,891 16,759

Other Noncurrent Liabilities 126 345



Total Liabilities $ 1,109,255 $ 1,346,822



Commitments and Contingencies (Note 8)



Stockholders' Equity (Deficit)

Preferred Stock, Par Value $.001; 5,000,000Shares Authorized;

2,218,732 Series A Shares Outstanding at 9/30/ 2 2 2020

1,500,000 Series A Shares Outstanding at 12/31/2019

Common Stock, Par Value $.001; 135,000,000*Shares Authorized; 448 406 45,556,326* Shares Outstanding at 9/30/2020

40,608,518* Shares Outstanding at 12/31/2019

Additional Paid-In Capital 1,554,053 1,431,438

Retained Deficit (1,638,234) (873,203)

Total Stockholders' Equity (Deficit) (83,731) 558,643

Total Liabilities and Stockholders' Equity $ 1,025,524 $ 1,905,465 (Deficit)

__________

*

Adjusted for the 1-for-10 reverse stock split.

Non-GAAP Financial Measures

Adjusted Net Income and Adjusted EBITDA are non-GAAP measures. Northern defines Adjusted Net Income (Loss) as net income (loss) excluding (i) (gain) loss on unsettled commodity derivatives, net of tax, (ii) (gain) loss on extinguishment of debt, net of tax, (iii) debt exchange derivative (gain) loss, net of tax, (iv) contingent consideration loss, net of tax, (v) acquisition transaction costs, net of tax, (vi) impairment of other current assets, net of tax, (vii) impairment expense, net of tax, (viii) (gain) loss on unsettled interest rate derivatives, net of tax, and (ix) write-off of debt issuance costs, net of tax. Northern defines Adjusted EBITDA as net income (loss) before (i) interest expense, (ii) income taxes, (iii) depreciation, depletion, amortization and accretion, (iv) non-cash stock-based compensation expense, (v) (gain) loss on extinguishment of debt, (vi) debt exchange derivative (gain) loss, (vii) contingent consideration loss, (viii) (gain) loss on unsettled commodity derivatives, (ix) (gain) loss on unsettled interest rate derivatives, (x) impairment of other current assets, (xi) impairment expense, and (xii) write-off of debt issuance costs. A reconciliation of each of these measures to the most directly comparable GAAP measure is included below. Where references are pro forma, forward-looking or prospective in nature, and not based on historical fact, the table does not provide a reconciliation. Northern could not provide such reconciliation without undue hardship because such Adjusted EBITDA numbers are estimations, approximations and/or ranges. In addition, it would be difficult for Northern to present a detailed reconciliation on account of many unknown variables for the reconciling items, including without limitation future income taxes, full-cost ceiling impairments, and unrealized gains or losses on commodity derivatives. For the same reasons, Northern is unable to address the probable significance of the unavailable information, which could be material to future results.

Management believes the use of these non-GAAP financial measures provides useful information to investors to gain an overall understanding of current financial performance. Specifically, management believes the non-GAAP financial measures included herein provide useful information to both management and investors by excluding certain expenses and unrealized commodity gains and losses that management believes are not indicative of Northern's core operating results. In addition, these non-GAAP financial measures are used by management for budgeting and forecasting as well as subsequently measuring Northern's performance, and management believes it is providing investors with financial measures that most closely align to its internal measurement processes.

__________

* Adjusted for the 1-for-10 reverse stock split.

Non-GAAP Financial Measures

Adjusted Net Income and Adjusted EBITDA are non-GAAP measures. Northern defines Adjusted Net Income (Loss) as net income (loss) excluding (i) (gain) loss on unsettled commodity derivatives, net of tax, (ii) (gain) loss on extinguishment of debt, net of tax, (iii) debt exchange derivative (gain) loss, net of tax, (iv) contingent consideration loss, net of tax, (v) acquisition transaction costs, net of tax, (vi) impairment of other current assets, net of tax, (vii) impairment expense, net of tax, (viii) (gain) loss on unsettled interest rate derivatives, net of tax, and (ix) write-off of debt issuance costs, net of tax. Northern defines Adjusted EBITDA as net income (loss) before (i) interest expense, (ii) income taxes, (iii) depreciation, depletion, amortization and accretion, (iv) non-cash stock-based compensation expense, (v) (gain) loss on extinguishment of debt, (vi) debt exchange derivative (gain) loss, (vii) contingent consideration loss, (viii) (gain) loss on unsettled commodity derivatives, (ix) (gain) loss on unsettled interest rate derivatives, (x) impairment of other current assets, (xi) impairment expense, and (xii) write-off of debt issuance costs. A reconciliation of each of these measures to the most directly comparable GAAP measure is included below. Where references are pro forma, forward-looking or prospective in nature, and not based on historical fact, the table does not provide a reconciliation. Northern could not provide such reconciliation without undue hardship because such Adjusted EBITDA numbers are estimations, approximations and/or ranges. In addition, it would be difficult for Northern to present a detailed reconciliation on account of many unknown variables for the reconciling items, including without limitation future income taxes, full-cost ceiling impairments, and unrealized gains or losses on commodity derivatives. For the same reasons, Northern is unable to address the probable significance of the unavailable information, which could be material to future results.

Management believes the use of these non-GAAP financial measures provides useful information to investors to gain an overall understanding of current financial performance. Specifically, management believes the non-GAAP financial measures included herein provide useful information to both management and investors by excluding certain expenses and unrealized commodity gains and losses that management believes are not indicative of Northern's core operating results. In addition, these non-GAAP financial measures are used by management for budgeting and forecasting as well as subsequently measuring Northern's performance, and management believes it is providing investors with financial measures that most closely align to its internal measurement processes.

Reconciliation of Adjusted Net Income

Three Months Ended Nine Months Ended September 30, September 30,

(In thousands,except share and 2020 2019 2020 2019per share data)

Net Income (Loss) $ (233,004) $ 94,381 $ (763,918) $ 31,619

Add:

Impact of Selected Items:

(Gain) Loss onUnsettled 70,198 (57,506) (124,800) 62,806 CommodityDerivatives

Impairment ofOther Current - 5,275 - 7,969 Assets

Write-off of Debt 1,543 - 1,543 - Issuance Costs

(Gain) Loss onExtinguishment of (1,592) - 3,718 425 Debt

Debt ExchangeDerivative (Gain) - 23 - (1,390) Loss

Contingent - 5,262 - 28,633 Consideration Loss

Acquisition - 1,250 - 1,763 Transaction Costs

(Gain) Loss onUnsettled Interest (224) - 1,205 - Rate Derivatives

Impairment Expense 199,489 - 962,205 -

Selected Items,Before Income 269,414 (45,696) 843,871 100,204 Taxes

Income Tax of (8,920) (12,380) (19,588) (32,401) Selected Items^(1)

Selected Items,Net of Income 260,494 (58,077) 824,283 67,803 Taxes



Adjusted Net $ 27,490 $ 36,304 $ 60,365 $ 99,422 Income



Weighted AverageShares Outstanding 43,517,074 39,604,482 41,812,553 38,204,403 - Basic

Weighted AverageShares Outstanding 53,582,333 39,653,070 51,707,412 38,274,426 - Diluted



Net Income (Loss)Per Common Share - $ (5.35) $ 2.38 $ (18.27) $ 0.83 Basic

Add:

Impact of SelectedItems, Net of 5.98 (1.46) 19.71 1.77 Income Taxes

Adjusted NetIncome Per Common $ 0.63 $ 0.92 $ 1.44 $ 2.60 Share - Basic



Net Income (Loss)Per Common Share - $ (4.35) $ 2.38 $ (14.77) $ 0.83 Diluted

Add:

Impact of SelectedItems, Net of 4.86 (1.46) 15.94 1.77 Income Taxes

Adjusted NetIncome Per Common $ 0.51 $ 0.92 $ 1.17 $ 2.60 Share - Diluted

______________

(1)

For the three and nine months ended September 30, 2020, this represents a tax impact using an estimated tax rate of 24.5%, which includes an adjustment of $57.1 million and $187.2 million, respectively, for a change in valuation allowance. For the three and nine months ended September 30, 2019, this represents a tax impact using an estimated tax rate of 24.5%, which includes an adjustment of $23.6 million and $7.9 million, respectively, for a change in valuation allowance.

______________

For the three and nine months ended September 30, 2020, this represents a tax impact using an estimated tax rate of 24.5%, which includes an adjustment of $57.1 million and $187.2 million, respectively, for a change(1) in valuation allowance. For the three and nine months ended September 30, 2019, this represents a tax impact using an estimated tax rate of 24.5%, which includes an adjustment of $23.6 million and $7.9 million, respectively, for a change in valuation allowance.

Reconciliation of Adjusted EBITDA

Three Months EndedSeptember 30,

Nine Months EndedSeptember 30,

(In thousands)

2020

2019

2020

2019

Net Income (Loss)

$

(233,004)

$

94,381

$

(763,918)

$

31,619

Add:

Interest Expense

14,637

21,510

45,145

58,836

Income Tax Provision (Benefit)

-

-

(166)

-

Depreciation, Depletion, Amortization and Accretion

30,786

55,566

129,350

146,791

Impairment of Other Current Assets

-

5,275

-

7,969

Non-Cash Stock-Based Compensation

890

(114)

3,183

4,280

Write-off of Debt Issuance Costs

1,543

-

1,543

-

(Gain) Loss on Extinguishment of Debt

(1,592)

-

3,718

425

Debt Exchange Derivative (Gain) Loss

-

23

-

(1,390)

Contingent Consideration Loss

-

5,262

-

28,633

(Gain) Loss on Unsettled Interest Rate Derivatives

(224)

-

1,205

-

(Gain) Loss on Unsettled Commodity Derivatives

70,198

(57,506)

(124,800)

62,806

Impairment Expense

199,489

-

962,205

-

Adjusted EBITDA

$

82,723

$

124,396

$

257,465

$

339,968

View source version on businesswire.com: https://www.businesswire.com/news/home/20201106005117/en/

CONTACT: CONTACT: Mike Kelly, CFA EVP Finance 952-476-9800 mkelly@northernoil.com