Northern Oil and Gas NYSE: NOG reported higher second-quarter cash flow and production, citing the benefits of its diversified non-operated portfolio despite Permian Basin curtailments tied to weak Waha natural gas economics.
Chief Financial Officer Chad Allen said adjusted EBITDA increased 17% sequentially, while free cash flow rose more than 400% from the first quarter. The company generated $159 million of free cash flow during the quarter, according to Allen.
Total production increased 9% from a year earlier, supported by record natural gas volumes that rose 35% year over year and 5% sequentially. Allen said the company experienced significant production curtailments in the Permian during the quarter because of challenging Waha pricing, but volumes have begun returning as market conditions improved. Three net wells brought online are expected to contribute during the third quarter.
Production Mix and Costs
Outside of the Waha-driven curtailments, Northern Oil and Gas said its assets performed ahead of internal expectations in several regions. The Williston and Uinta basins exceeded internal expectations, while Appalachian production reached a record with a full quarter of contributions from the company’s Utica joint development.
President Adam Dirlam said early results from the Utica development have been strong. During the question-and-answer session, Chief Technical Officer Jim Evans said the company was seeing performance above internal expectations across its basins, including the Williston, where longer lateral wells have become more efficient.
Allen said Northern Oil and Gas’ unhedged net realized oil price improved 36% from the first quarter. Natural gas realizations were 90% of Henry Hub, while realized prices including hedges and Waha basis effects reached 123% of Henry Hub. Strong natural gas liquids pricing also contributed to results.
Production expenses per barrel of oil equivalent declined 4% from the prior-year period. The company reported budgeted capital expenditures of $196 million, including $151 million for organic drilling and completion activity and $45 million for its “ground game” acquisition efforts. Normalized well costs were $761 per lateral foot, largely unchanged from the first quarter.
Second-quarter spending was weighted toward oil-producing areas, with the Permian accounting for 37% and the Williston 33%. Appalachia and the Uinta each represented 14% of spending, while the recently acquired Duvernay position contributed 2%.
Capital Returns and Balance Sheet
Northern Oil and Gas ended the quarter with more than $1 billion in total liquidity. During the quarter, it repurchased 2.95 million shares, or about 3% of shares outstanding, at an average price of $20.37 per share. Allen said approximately 81% of those purchases occurred before the late-June dividend record date.
The repurchases largely offset shares issued to the seller of the company’s Duvernay acquisition, leaving the share count roughly flat, according to Allen. After quarter-end, the board increased the company’s repurchase authorization to approximately $243 million.
The board also declared a quarterly dividend of $0.45 per share, representing roughly $48 million that was paid July 31. Allen said the dividend was covered multiple times by second-quarter free cash flow and described it as a floor rather than a ceiling for shareholder returns.
Looking ahead, Chief Executive Officer Nick O’Grady said that, based on current commodity-price strip assumptions, the company expects its assets to generate $1.4 billion to more than $1.5 billion of adjusted EBITDA in 2026. He said sustaining current production volumes would require approximately $850 million to $900 million of drilling and completion capital, resulting in estimated free cash flow of about $375 million to more than $500 million.
Duvernay Expansion and Acquisition Strategy
Dirlam highlighted the company’s June closing of its Parallax acquisition, a Duvernay joint development transaction that expanded Northern Oil and Gas into Canada. He characterized the asset as self-funding, with roughly 20 years of inventory and an average breakeven below $50. The acquisition cost was less than $600,000 per location, he said.
The company continued to build its acreage and well inventory through its ground-game efforts. In Appalachia, Northern Oil and Gas has amassed roughly 80 locations through leasing activities, excluding acreage already converted into development, Dirlam said.
During the second quarter, the company acquired more than six net wells that were in process, weighted toward the Permian and Bakken. Through the first half of 2026, its ground-game activities had captured the same number of drilling opportunities as in all of 2025, according to Dirlam.
- The drilling and completion list grew to nearly 52 net wells as operators pulled forward some Permian and Williston activity.
- Northern Oil and Gas elected to participate in about 17 net wells, nearly 20% above its trailing 12-month run rate.
- About 90% of those elections were directed toward oil-focused basins, with normalized authorization-for-expenditure costs down 5% from the company’s 2025 average.
Management Addresses Valuation and Capital Allocation
O’Grady said management believes the public market is not fully recognizing the company’s asset value. He estimated that Northern Oil and Gas’ assets were worth more than $7 billion, compared with an enterprise value of $4.6 billion. He said the company would continue evaluating acquisitions, asset sales, dividends, share repurchases and debt reduction as potential capital-allocation tools.
In response to questions about leverage, O’Grady said debt reduction could be achieved through cash-flow growth or asset monetizations, while Allen said the company viewed share repurchases as attractive at current trading levels. O’Grady also said the company’s diversified non-operated model allows it to allocate capital among regions based on economics rather than maintain operating teams and drilling programs in each basin.
Management said activity in the Permian had begun to recover faster than previously expected as logistical constraints eased and operators pulled some development activity forward. O’Grady said the company was not yet prepared to declare a full recovery, but said the trend could support the remainder of the year.
About Northern Oil and Gas (NYSE:NOG)
Northern Oil and Gas, Inc is a publicly traded independent energy company focused on the acquisition, exploration and development of oil and natural gas resources in the United States. The company's primary operations are concentrated in the Williston Basin, where it secures acreage positions and partners with drilling operators to advance upstream projects. Through strategic leasehold acquisitions and joint ventures, Northern Oil and Gas seeks to expand its footprint in both conventional and unconventional reservoirs.
Northern Oil and Gas employs horizontal drilling and hydraulic fracturing technologies to develop unconventional resource plays, particularly in the Bakken, Three Forks and Red River formations of North Dakota and Montana.
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