Good day, everyone, and welcome to Northern Oil and Gas Incorporated's Fourth Quarter and Year-End 2017 Earnings Results Conference Call. This call is being recorded. With us today from the company is Northern's interim President, Brandon Elliott; and interim Chief Financial Officer, Chad Allen. At this time, I'll turn the call over to Brandon. Please go ahead, sir.

All right. Thanks, Jonathan. Good morning everyone. We are happy to welcome you to Northern's fourth quarter and year-end 2017 earnings call. Before we get to the results, let me cover our Safe Harbor language. Please be advised that our remarks today, including the answers to your questions, may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from the expectations contemplated by these forward-looking statements. Those risks included among others matters that we have described in our earnings release, as well as in our filings with the SEC, including our Annual Report on Form 10-K, and our quarterly reports on Form 10-Q. We disclaim any obligation to update these forward-looking statements. During this conference call, we may discuss certain non-GAAP financial measures, including adjusted net income, adjusted EBITDA, and PV10 Value. Reconciliations of these measures to the closest GAAP measure can be found in the earnings release that we issued last night. All right, with that out of the way, here is our plan for today. I will cover 2017 and our strong finish to the year, I will then cover how some of the strategic initiatives we have undertaken over the past several years are contributing to our current momentum. I will also cover the proposed foreign exchange we recently announced and how this would position Northern's balance sheet going forward, and that opportunities it could open up to us. I will then turn the call over to Chad Allen, our interim CFO and Chief Accounting Officer to walk you through the financials. Then we will turn the call over to Bahram Akradi, Chairman of the Board, who has joined us today, and he can give…

Thanks, Brandon. Our fourth quarter production increased 22% year-over-year and 9% sequentially to an average of 16,742 barrels of oil equivalent per day totaling approximately 1.45 million Boe. This resulted in total 2017 production increasing by 8% over 2016. The 7.1 net well additions in the fourth quarter coupled with increased well performance from enhanced completions and our bread and butter ground game of acquiring additional well interests has set us up nicely for 2018 and beyond. Based on the improved results we're seeing with initial production rates and EURs we continue to be very optimistic about the composition of our in-process well inventory. As of December 31, 2017, we had 18.3 net wells in process, which is our highest quarter end number since 2014. Our wells in-process inventory continues to be complimented by many of the best in-class operators in the Williston Basin with Continental Resources leading the way with one third of our in-process inventory. Continental just recently announced their top 5 all-time 30-day ranked Bakken wells, all of which Northern has a working interest in. Our capital expenditures were $57.3 million in the fourth quarter and a $156 million for the year. The capital spending increase over our initial plans was driven by a higher-than-expected number of net wells that we added to production as well as the growth of our in process well inventory, which we expect to drive strong results in 2018. We are currently expecting to add 20 to 22 net wells to production during 2018 using the capital expenditure budget of $165 million to $180 million. We expect our 2018, total annual production to increase approximately 16% to 20% over 2017 levels. In last year's press release, we provided our 2017 year-end proved reserves prepared under the guidelines for scrap by the SEC.…

All right, and I'm actually going to turn the call over to Northern's Chairman of the Board Bahram Akradi. Bahram?

Thanks, Brandon. I appreciate a few minutes of everyone's time to give you my perspective as to why I'm excited not only as Chairman of the Northern, but as a significant shareholder. Northern was the original consolidator and clearing house for a non-operator working interest in the Williston Basin. Over the years, many tried to copy this strategy, which is a good thing, as we discuss later, but Northern had always been the largest pure-play non-operated that is also publicly held with public currency in the market, making the business itself as a growing concern and natural engine for growth. To continue to execute on our core strategy and dramatically grow the business, Northern has taken several important steps over the past few months. The first step was to turn out the previous revolving credit facility with a new five-year $400 million TPG term loan, and solve the near-term maturity overhang from that revolver. Second, with the recent announcement of the proposed bond exchange, Northern has outlined a path forward to meaningfully de-lever the company. Once completed, Northern will have a net debt to EBITDA profile of approximately 3.5 times. We're working to have that agreement through all the necessary conditions to close and be approved by the shareholders as quickly as possible. This step will dramatically strengthen our balance sheet and gives Northern the necessary capital to return as an aggressive consolidator of non-op interest in the Williston basins. The timing of this next step couldn't be better as oil prices have improved and the rates of return and recent well results have placed a Williston Basin back at the forefront of the pack as one of the most attractive oil plays anywhere in the world. As you can tell, I am extremely excited about the future of this…

All right, thanks Bahram. I think we have covered our view from Northern. So with that, we will turn the call over to the operator for Q&A. Jonathan, if you could please give the instructions for the Q&A portion of the call.

[Operator Instructions] Our first question comes from the line of Jason Wangler from Imperial Capital. Your question, please.

Good morning, Jason.

Good morning. Bahram, if I could actually ask you one question, and I appreciate the color you provided. You've been, I think, invested here for some time, but you're obviously getting much more involved of late. Just was curious if you'd be able to comment on what you're seeing that's evolving, not only with the company, but yourself as the strategy moves forward, and why you specifically are coming in and being more involved, not just with your money, but your time as well?

I see a unique opportunity with Northern, as I mentioned. This company has completely been misunderstood. I've asked Brandon and Chad to provide a presentation to our shareholders and make an announcement, hopefully early next week that would properly demonstrate the real value of the company. First of all, the company is not valued on any of its intellectual property, knowledge of the basin, it's not valued for the growing concern, it's not valued for being publicly held, it's not valued for being able to execute any strategy. And when they're looking at it from just pure asset value, as if a company is shutting down, even that is misunderstood because you're not valuing the opportunity, as Chad explained earlier. And once we do that, I am absolutely certain that the stock will substantially move up when people can see how much value is hidden in here. Now, SEC does the right thing. They want to make sure things are measured and people cannot manipulate reports. But sometimes, unfortunately, that same type of approach backfires and the companies are completely misunderstood. This I think would be one of those cases. With our fiduciary responsibility to all shareholders, we are going to do everything we can to make sure the value of this company is properly presented. We can do everything within our power to make sure every shareholder is being taken care of properly. And then we're going to move forward. Once we get this transaction completed, this company is uniquely positioned with being the only publicly held non-op company to move forward and become the clearinghouse. As I mentioned before, many of these companies who have copied NOG's model, it's actually a very good thing for us. Many of them need an opportunity to do debt liquidity. And NOG, with the right balance sheet, right currency will be the company that can do that. So this is a very, very unique opportunity for this company, it's a very unique time. And I am super excited about what we can accomplish, and this management team. And again, as I mentioned, the partners, all the bondholders have been fantastic, TPG, TRT, the alignment is great amongst everybody. Everybody is working to make sure this company can accomplish what it has the ability to do.

I appreciate the color, thank you. And Brandon, if I could ask you one follow-up, in the transactions that are ongoing, specifically as you guys talk about wanting to be the clearing house, if you will, up in the Bakken, the land piece, is that -- I guess they could be structured many ways. But as I think about it, could it simply be as easy as you guys looking at some properties and using shares to equitize that acquisition as you guys have talked before. Or are there other ways that you're looking at that part of the deal as you go forward?

Yes, I mean obviously we've got two avenues there. Within the exchange agreement we do have the ability to bring in assets in exchange for equity there. We also have the ability, yes -- I mean with that exchange agreement is a new equity component. So when you combine that with, obviously, the cash we have on the balance sheet as well as the relationship we have with TPG and that additional delayed draw feature of that credit facility, I think we've got plenty of capital with a lot of capital on the balance sheet that I think we can use to go bring that kind of rollup strategy.

Great. I look forward to listening to more. I'll turn it back.

Great. Hey, Jason, appreciate it.

Thank you. [Operator Instructions] Our next question comes from the line of Neal Dingmann from SunTrust. Your question please.

Good morning guys, and be the first to say it's nice to say that Reger is back in the fold.

Good morning, Neal.

My question is first just on, last year you obviously, and I think with good idea, played a bit more defensive role with the budget that you all laid out, yesterday it looks like about somewhere around a 30% increase or so. Could you talk a bit about, I don't know if you want to call that offensive mode, but from a higher level, how you sort of see? Obviously you've got the opportunity so it does, to me, pay to probably be a little more offensive. But yet until you get the bond swap done could you kind of talk how you'll sort of walk through that.

Yes, I do think it is getting a little bit more on the offense. I think the biggest driver is really these well results we've seen. I think as you know, in our conversations and conversations with the street, we take a fairly conservative approach on what we think new wells are going to do. And so I think we came in to '17 obviously very attuned with was happening with these new completion designs. And I think as the year went on we just became more and more comfortable that those returns were really pretty outstanding. And I think from an EBITDA kind of accretive standpoint and with the returns we're seeing. I mean, obviously Bahram mentioned them in his comments. It just makes sense for us to continue to push that consent rate given the returns we're seeing. So yes, I would say a little bit more offensive. And then we'll just see, when we get through the bond exchange, obviously that'll give us the ability to look more at the A&D market as well.

Okay. And can you talk a bit about just what the AFE activity looks like. I mean, again, in your slides you've always shown you certainly have a material amount of acres. I guess what I'm thinking more about is it just a participation level? I mean it looks like it'll be a bit back-half weighted. But I'm just wondering are there new companies coming in? I guess I'm just kind of wondering on just activity in general as it unfolds this year.

Yes. I think you're obviously seeing, and you saw through '17 consent rates pretty high, so we are seeing a pickup in activity there, the wells that we consented to during '17 obviously outstanding. I would say that the top guys on the list are still Whiting -- or Continental obviously leads it, Whiting, Conoco, Oasis, Marathon, Slawson Exploration is on there as well. So yes, I think it's a pretty solid list of operators, some of which have picked up a little bit of activity, as well as just more activity on our acreage.

And then one quick housekeeping, did Chad say -- you talk about the operators. Did he say that Continental was the third, I'm just trying to reconcile between that previous slide that you show, sort of operators by percentage where currently Slawson has been sort of number one, followed by Continental. Has that shifted much since the last update then? I just want to make sure I understand what you were saying about the Continental exposure.

Yes, Neal, Continental represents one-third of our in-process well inventory, followed by Whiting, and Slawson. Slawson is still our largest operator, although Continental is closing the gap.

That makes sense, great partners to have. Thanks guys, and way to turn this around.

Yes, thanks.

Thank you. Our next question comes from the line of Park Carrere from Howard Weil. Your question, please.

Hey, good morning guys.

Good morning, Park.

Good morning. Could you all talk about your target leverage metrics you'd like to get to? And then I think I heard you mention returning capital to shareholders. Could you maybe talk about where you think you are in the lifecycle to be able to do that?

Yes, I will, I guess, target. And then Bahram's got a comment as well. I mean I think if you see us get through this exchange agreement we're hoping to drive that solidly into the mid-3s. And then obviously per that exchange agreement the goal is to drive it sub-3. So yes, our target metrics is going to be to achieve that. There's obviously a pick component in our exchange agreement that goes away once we get under three times, so our goal would be to remove that pick component. And we think at that point you're really in a position to reenter the kind of standard funding market, both from a traditional bank lending facility potentially as well as refinance the debt that we've taken on in those last few steps. We think that really puts us in a position where, as you mentioned, we can look to the next step after we've gotten through those steps to start looking to put some of this capital back in shareholders' pockets directly.

Let me jump in, this is Bahram, and add a little bit to what Brandon just told you. Our long-term strategy to get this company to a net debt to EBITDA around 2, which would be efficient capital structure, we would like to get this company to a point where we have a natural hedge in place which basically is low enough debt to EBITDA where we can be a profitable company with at $50 oil or $60 oil or $70 oil it doesn't matter. We want to be in a position where if oil drops down we have enough cash flow, we have enough assets on the balance sheet where we can go and acquire more opportunities at that time. As well as the opportunity to grow when the oil is moving in the direction of being more expensive. So, in order to do that what we need to do is finish this transaction. We're confident we'll get it done here shortly. The large amount of equity coming in, I think that the first step for the company, as I mentioned earlier, is to do a great job next week. Make another press release demonstration in full charts what the company's value really should be if you look at all of our future opportunities and make that assessment, then we'll do a transaction, complete that. We start doing acquisitions using our currency whenever appropriate, grow the company. I am less concerned about the number of shares, more concerned about the share price itself moving up, and the company's total assets moving up, debt to EBITDA going down. And that's really what we're going to work on. Everybody is aligned. The Board of Directors are aligned, the large shareholders are aligned. And this alignment that we have today at NOG, from shareholders, board members, management, is really the exciting factor. We are uniquely positioned to execute on this strategy, and we're going to get it done.

Great, thanks. So would you say the priority of capital would be reduce debt, then acquisitions, then return capital to shareholders maybe longer-term?

We have both of them moving simultaneously. We have a number of discussions right now with different companies. I will obviously not be in a position to tell you whom, so don't ask. But we have a number of companies that we're in discussion with for doing acquisitions. Some are going to do it with cash, some are going to do it through cash and stock, some are going to do it strictly for stock. So this will happen. Again, and I emphasize a lot of hang up has been with the price per share. Price per share for all new people coming in is almost irrelevant because we are doing so many new shares coming into the company via acquisition, accepting shares, bond holders taking shares, and new equity coming with that, that really whatever the price is that is going to coming, is going to be the sticky point for the price per share. The only people that I am trying to protect is the small shareholders who may not have the money to participate. For that, we will do everything we can to express the value of this company as accurately as we have demonstrated early next week. But really this thing is going to go forward, is going to get done. And once we do that, you'll see constant action will be reporting regularly with the new acquisitions that we signed up coming in the company. Does that help, Mark?

Yes, it's great. Thanks for the answers.

Appreciate it.

Thank you. Your next question comes from the line of Owen Douglas from Baird. Your question, please?

Hi, good morning, guys. Thanks for taking my questions here.

You bet. Good morning, Owen.

Right. Had a quick one, so just as you guys look to 2018, can you provide any color in terms of how you are seeing in terms of the cost per wells or any other items around cost inflation?

Yes, I think we are -- I mean I guess on an apples to apples basis, we are seeing or expecting that we would see a little bit of inflation going forward. You have seen our average wells on the D&C list about 7.6 million. So again, not a whole of lot of inflation built into what we consenting now. I would expect that to lift a little bit on the completion side as we move through the year. But at this point, if you look at our presentations and our disclosures over the last couple of quarters, it has been bouncing around in that 74 - 75 range. So, not a lot built in, would expect a little bit.

Okay, that's helpful there. And let me know if I am thinking about this wrong here, but you are guys are certainly investing in the business. It's good to see production numbers trending upwards. Just wanted to get your sense for what's really the kind of point at which you say, okay, we are at a stage of production growth where we feel comfortable and we are going to try to kind of keep that growth rate somewhat steady to minimize the amount of external capital that needs to be raised? Is there sort of minimum cash in the balance sheet number? Is there a free cash flow out spend? Just help me think about that a bit.

Yes, obviously you know that we are very capital allocation IRR driven. So that's really going to be the determining factor I think. As we have said the IRRs we are seeing in the wells is going to have us commit that capital. I think as Bahram mentioned, our goal is to really get through this exchange, get that debt reduction component done and really kind of grow the EBITDA and make accretive EBITDA decisions until we get that total debt to EBITDA sub 3 times and as Bahram mentioned a long-term goal down into 2s. I think as we get towards that point that is the point you heard me mentioned. You look out down the road and say, can you begin to position yourself to in the kind of maybe harvest mode where you can return capital to shareholders. We got a lot of work to do between now and then. But that as Bahram mentioned, a debt-to-EBITDA in 2s and sub 3s is a level that I think when we get there that's a time we can look to the next steps.

Okay, I will just make sure I am clear on this. When is the anticipated date when this exchange agreement as well as the equity infusion will be finalized?

It's still up in the air. I mean May we have got to go through a shareholder's vote, so April-May time period. You will see proxies and all that that will give you a guidepost.

Great, very helpful. Thank you very much. Appreciate it.

You bet.

Thank you. [Operator Instructions] our next question comes from the line of John Aschenbeck from Seaport Global. Your question, please?

Good morning, John.

Good morning. Thanks for taking my question. A follow-up on the just a general comments of the value of Northern being misunderstood, I think one thing that really surprised me in the prepared remarks was in regards with average returns of the company is deemed over 60%. I think that's substantially higher than what the market's current perception is. So if that is indeed the case, it's certainly agree that the value here is misunderstood, so just thinking about that and then the upcoming update here in the coming next week or so what should we expect? I guess, specifically should we expect maybe a more fulsome update in regard to your depth of inventory and the associated economics?

Yes, that's really it. I mean, I think what has caused us to really refocus on the locations in the reserve base really has been the results over this last year. And yes, some outstanding results. So I think in the light of 2017 well productivity, it's really caused us to look back at the inventory numbers and the acreage position and look at the uplift we have seen from new completion designs and enhanced completion designs, and operational enhancements and performance over the last couple years. And really kind of focus in on what happened and what transpired in 2017 and applying some of the 2017 results back across obviously specifically the core, as well as what I think people would say is on the fringe between Tier I and Tier II, and out into the other areas. We've seen operators with results in what I think we would all have called maybe Tier III, Tier II, Tier III area that has picked up significantly over the last couple years. So again, I think it's their well results that have caused us to really look back at our reserve base. Yes, and I think good operators, as you guys well know, that the service -- that the increases in the benefits the service companies provide gets shared across operators eventually and so we are really saying good operators move into the great category. So yes, I think you should expect from us an update just kind of our locations updates on what we think the average EURs and well performance it should be across some different Tiers, again to give you a little bit more transparency and clarity of the results and what we think the new 2017 vintage would look like if we applied it across a broader acreage position.

Okay, great. That was great color. Appreciate that. Last one for me just from a higher level strategy standpoint, Understand the near term plan here is to be the basin's clearinghouse sort to speak but think about the longer term game plan of the company, how do you see that, just the general evolution of the company applying out long-term.

I think we have -- this is Bahram. We have a long runway here of opportunities that coming up with the strategy that we have laid out. The one think about non-op that is completely again misunderstood to trades at a disadvantage to the operating companies with a misunderstanding that the companies with non-op don't have control of their own destiny. That's contrary to the actual fact, if you look at the performance of this company and how promptly they have been able to actually lowered the CapEx that step on a brake and or step on a gas in terms of going back forward. I think there should be a different perspective maybe that this strategy is actually a pretty smart strategy. So I think we want to become the largest non-op publicly held company and grow that I hope to get at least to a mid-cap size company. Beyond that, I think we can look at the mineral opportunity. We can look at -- okay, at some point doesn't make sense to buy operating company and get into that before right now we want to grow the strategy we have stated.

Okay, great. And then I guess kind of follow-up there do you think it would ever make sense that potentially moving to another basin?

Yes, I mean we've talked about that. I think you see us lean on the incredible and we've all mentioned it today right, the incredible amount of data that is inherent within Northern in the Williston Basin. And that's the data and a knowledge advantage that I think would be difficult to replicate outside of this basin and we think we've got so many opportunities within the basin now. That it just seems like that's the logical place for us to focus our attention but, obviously would if we think it's accretive to shareholders and accretive to the value of the company, we'd maybe consider it, but for the time being, I think we have enough with the chap inside the basin.

Okay, great. That's it from me. Thanks for the time.

Thanks.

Thank you. And this does conclude the question-and-session of today's program. I'd like to hand the program back to Brandon Elliott for any further remarks.

All right. We certainly appreciate everybody's time and interest in Northern, and we look forward to getting together with some of you in the future. I will take 30 seconds to make a public service announcement. We want to send a shout-out and congratulations to Minnesota native, Jessie Diggins and her partner in the Olympics ladies team sprint final. Everyone here in the room is looking at me like, "What the hell am I up to." They have the first medal in Nordic skiing. I am sure not many of you will have tuned into that, but it was an awesome event and the first medal for the U.S. in Nordic skiing in 46 years and the first gold. So, public service announcement. Hope everyone has a great rest of the week; good weekend, and call us if you have any questions.