Greetings. And welcome to the NOG’s Third Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. The question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Evelyn Infurna, Vice President, Investor Relations. You may begin.

Good morning. Welcome to NOG’s third quarter earnings conference call. Yesterday, after the market closed, we released our financial results for the third quarter. You can access our earnings release and presentation on our Investor Relations website at noginc.com. We expect that our 10-Q will be filed in the next two days. I’m joined this morning by our Chief Executive Officer, Nick O'Grady; our President, Adam Dirlam; our Chief Financial Officer, Chad Allen; and our Chief Technical Officer, Jim Evans. Our agenda for today’s call is as follows. Nick will provide remarks on the quarter and our recent accomplishments, then Adam will give you an overview of operations and business development activities, and Chad will review our financial results. After our prepared remarks, the team will be available to answer any questions. Before we begin, 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 Security 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 our forward-looking statements. Those risks include, among others, matters that have been 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 today’s call, we may discuss certain non-GAAP financial measures, including adjusted EBITDA, adjusted net income and free cash flow. Reconciliations of these measures to the closest GAAP measures can be found in our earnings release. With that, I’ll turn the call over to Nick.

Thank you, Evelyn. Welcome and good morning, everyone, and thank you for your interest in our company. As usual, I’ll cover the highlights of the quarter with six key points. Number one, fruits of our labor. We’ve asked a lot from our investors over the past year as we went through a heavy investment cycle. The third quarter highlights the fruits of that labor. Three straight quarters of declining CapEx, fewer wells turned on and yet we’ve delivered growing oil volumes and activity is still spooling with a growing D&C list. Even in a quarter of weaker oil and gas prices, we generated record free cash flow, near-record adjusted EBITDA and drove volume growth in our two biggest contributing basins, the Permian and the Williston. As we noted last year, free cash flow would come with patience and we’re delivering on that promise. And the upfront investment and pull-forward of activity has shown its benefits as has strong well performance. The temptation for investors to focus on our capital spending in 92-day increments and draw conclusions was understandable, but often belies the longer-term benefits of those investments. This quarter’s results clearly reflect that as our capital efficiency shines through and proves the points we made then. Number two, balance sheet power. This is in reference to the all-cash nature of our recent acquisitions, which had many investors questioning if we would issue equity or even some suggesting we were going to be challenged moving forward from a balance sheet perspective versus the clear power of our business’ cash generation. We closed Point at the very end of the third quarter, and as a result, received little to no benefit from a cash flow perspective. And yet our net leverage ratio and net debt levels were almost unchanged quarter-over-quarter. While the…

Thank you, Nick. I will begin with our operational highlights and then turn to our business development efforts in the current M&A landscape. During the third quarter, production remained resilient at over 121,000 BOE per day, despite a nearly 70% sequential reduction in tills from Q2 as certain operators deferred completions. The wells that were added in late Q2, along with the completions in the third quarter, showed better than expected results. Reversing the trend in Permian-weighted completions, the Williston accounted for more than two-thirds of the activity during Q3 and is a testament to NOG’s core Williston position. While the till count was relatively subdued in the quarter compared to our Q2 highs for the year, drilling activity levels have ramped. Setting the table for a robust fourth quarter and moving into the new year. We added over 20 net wells to the D&C list during the third quarter, as accelerated activity pulled-forward almost 10 net wells relative to internal forecasts. We have also seen our average working interest in the Permian increase from 10% in Q2 to 17% at the end of the quarter, driven by an acceleration of development with our JV partners. Activity on our organic acreage also remained elevated as we reviewed almost 200 well proposals during the third quarter. Consent rates on well proposals held above 90%, both on a gross and net basis, as economics remained strong. Notably, we have seen forecasted well costs show moderate signs of deflation as absolute and normalized costs in the Permian declined for the third quarter and the Williston declined to the lowest cost per lateral foot on the year. In addition, discussions with our operating partners indicate encouraging trends in operational efficiencies and improvements in spud-to-sale timelines. These trends could position us to potentially deliver wells…

Thanks, Adam. Our third quarter results reflected the resilience of our asset portfolio. Average daily production in the quarter was 121,800 BOE per day, down 1% compared to Q2, but up 19% compared to Q3 of 2023. Oil production increased to 70,900 barrels per day, up 2% from Q2 and setting a new NOG record for oil production. Our Mascot Project, JV, contributed meaningfully as the wells that came online at the end of June fully contributed to production in the quarter. More importantly, our base asset continues to outperform our expectations. Adjusted EBITDA in the quarter was $412 million, slightly lower sequentially, given lower commodity prices. Free cash flow of $177 million in the quarter was 32% higher sequentially and up 39% from the same period last year, as we benefited from higher till count in Q2, coupled with strong well performance in Q3. We anticipate free cash flow to stay strong given the expectation of over 25 net wells forecasted for Q4, as well as the impact of having both Point and XCL contribute to production for a full quarter. Oil differentials came in at $3.45 per barrel for the quarter, better than our expectations as more of our production is weighted toward the Permian, which typically has better pricing than the Williston. Permian differentials were modestly lower on a sequential quarterly basis, with Williston differentials flat. Natural gas realizations were 72% of benchmark prices for the quarter, materially lower, but expected due to weaker in-basin pricing as a result of lower NGL price realizations, coupled with weaker natural gas prices and negative Waha gas for most of the quarter. With nine months of history to point to, we are adjusting our full-year natural gas realization guidance higher to a range of 90% to 95%, reflecting current full…

Thank you. [Operator Instructions] Thank you. Your first question comes from the line of Neal Dingmann with Truist Securities. Your line is open.

Good morning, everybody. It’s a nice quarter. Nick, I was going to ask for a detailed 2025 guide, but I’ll refrain for now. I’m really on what I’d call your operational and financial protection side. I heard you speak about prepared remarks, and obviously, in the election, there’s a lot of potential for volatility, now both maybe lower near-term and ramping potentially after that. I’m just wondering, Nick, I’m just wondering, if this happens, how -- can you talk a little bit about how you could pivot both, and I guess, what I’m wondering is, would that shift in your organic activity just come from largely your operators reducing capital or is there more to this? Thank you.

Yeah. I mean, I think based on experience, I mean, this is the best part of our business model, Neal, which is that really we’re not burdened by existing infrastructure, right? It’s just money. So, what we’ve observed during periods of volatility in the past is that we tend to be a little bit faster than the operators. So, using 2020 as an example, we had a big downward movement price and we reacted very swiftly, but then ultimately created a lot of opportunities and about two-thirds of our capital really shifted to the Ground Game during 2020, and then organic activity started to build as 2020 came to a close and oil prices returned, but that Ground Game capital became highly productive as it actually converted to sales in 2021 and created a huge windfall for us. And so, that’s kind of how you can convert those dollars into countercyclical success. I’d say this, that overall, I think we’ll remain flexible, and I think, that that’s why really in terms of where we are in the cycle right now, it’s why we continue to hedge and why we tend to be very protective, but the flexibility that our model really provides is very different from most operators, and that’s one of the best parts about what we do.

And that includes your Ground Game as well that, as far as the flexibility you would have around it?

That’s right. That’s right. Yeah. And even as it pertains to the Ground Game, ultimately, you’re going to see, if prices really unwind, you’re going to see deferral of activity, and so that plays into the part of what types of Ground Game activity you’re going to participate in, whether it be longer-dated type stuff, right? So, whether it be long-dated acreage acquisitions or development, that’s going to be timed towards a farther period out.

Yeah. Neal, this is Adam. I think the other thing I’d add is that the strip is naturally going to lead to the various operators as well as basins, right? You’re going to be looking at what those break-evens are. We’re running sensitivities on a real-time basis, understanding what the impact is to the total full-cycle return as we’re deploying that capital, depending on how big the asset is, then the hedging conversation would also come into play. But those are the types of things that we’re looking at day in and day out as we’re canvassing these types of opportunities and allocating capital.

Great point, Adam. And then just secondly, maybe for Chad, just wondering, second is on broad capital return questions, specifically, Nick, I think I’ve asked you or Chad about this before. Has anything changed these days versus, I don’t know, a year or so ago before all these deals, how you all think about allocating a dollar to your organic re -- organic activity or reinvestment versus Ground Game versus debt repayment versus dividend versus stock repurchases?

I’ll answer the first part, Chad. Feel free to fill in. I don’t think so, Neal. I mean, I think everything, we are truly mechanical and return-driven. I think we really think about this in terms of optimal total return, Neal. And so, in general, dollars in the Ground have higher risk but almost always have a higher return. And so, obviously, organic dollars go the farthest, followed probably by Ground Game and then ultimately acquisitions. Share repurchases are obviously generate also additional returns at a lower risk. And then dividends obviously provide a different type of return for our investors. This year, obviously, we pivoted some of our shareholder returns to buybacks, and then as we go in to meet with the Board at the end of the year, I think, one of the things we have to think about is as you deliver that return, while buybacks can provide a permanent type of efficiency, dividends provide a different type of value to investors and we’ll have to weigh those decisions as we go and analyze it to the Board of what type of long-term value that creates because they are different. And we’ve weighed them differently at points in time and that’s really a board-level decision. But we’ll take it in stride.

Yeah. Neal, the only thing I’d follow on with Nick’s comments is just, given that we’ve flexed the balance sheet a little bit here with both these acquisitions. So I think, in the near-term, we’ll be mindful of probably debt reduction over some of the other things. But like Nick mentioned, everything’s on the table.

We evaluate it all as one.

Thank you. [Operator Instructions] Your next question comes from Scott Hanold with RBC. Your line is open.

Yeah. Thanks. I appreciate the fact that you all are going to wait until early next year to provide some more details on the budget. But, Nick, you kind of made the point regarding, you need to take several quarters to evaluate capital spending and production trends, given the business model and the way things are accrued. As you see things building into fourth quarter and potentially early next year, could you kind of frame up like how you guys are set up into 4Q and into 1Q as far as like that production trajectory, as well as capital?

Yeah. I mean, the way I would just describe it, Scott, is that, there’s a number of kind of turning lines, call it, in the 90-ish range, which is sort of a sustaining number of turning lines, right? But the amount of capital we spend around that can vary wildly, right? So, especially as we talk about the accrual. So, the D&C list and think about that as the number of wells in process, whether we draw down our existing D&C list and sort of eat through that backlog or we build it as we build growth for the following year, as well as acquire inventory throughout the year can have a big difference. So, you can drill and complete 90 wells throughout the year and actually spend less than that equivalent capital or you can still spend a substantively larger amount of money and it really depends on the environment you’re in. I’d also add that, we are truly return-driven and so, if oil prices are $50, ultimately is 90 wells the right number? And if oil prices are $85, maybe 90 is too few. And so, I think really what we want to figure out is we want to take the time to go through both the projects that we have in hand organically, inorganically, and as we look through it and both make the right decision in terms of the actual number of wells we want to turn online. And then, on top of that, all of the projects and things we want to build towards the future year as well as the ad-hoc spending we want to tuck in there and that really drives that number. And that is why we try to take the amount as much time as we do. Chad?

Yeah. I think it’s the D&C list, but it’s also going to be the nature and the makeup of the D&C list, right? What’s the overall well productivity? What’s the stage of completions as we exit the year? What does that look like? And then, what is the organic asset pulling and the quality of the well proposals on that? And then, dovetailing into what, we’ve been talking about with Neal and prior comments on the Ground Game, right? If we’re going to see a pullback in commodity pricing, then you’re typically going to see operators retreating to the core and drilling some of their best stuff and lowest break-evens. And so, what does that mean in terms of the organic activity levels in the Ground Game as well?

Okay. Understood. And I’m going to just ask for one point of clarification and then I’ll add on to my second question. But does that mean 1Q is going to be relatively flat you think to what you look at fourth quarter kind of the fall of that.

I would say, historically, almost every quarter we’ve ever existed, we see a minor downtick in Q1 from Q4 and that’s just seasonality in the Williston, Scott. So, it’s usually down a couple percent. I think almost every year we’ve ever been here…

Okay.

… we’ve had a few miracles.

Okay.

Yeah. Few miracle of weather. But as long as the Williston becomes a substantive part of our production, it usually has some seasonality to it. But it’s not meaningful, but it’s almost always that case. And as Adam mentioned in his comments, we do anticipate, just given the nature of our big joint ventures, that we will be building the D&C list in the first half of the year and that’s just based on what we have at hand today, and so that will have some effect on it. But I don’t think it’s going to be dramatic.

Got it. Okay. That’s what I was looking for. And then my follow-up is, I noticed in your corporate presentation, when you broke out the commodity by basin, that a little bit of oil popped up this quarter for the first time in Appalachia. Could you give us a little bit of color on what that’s from? And just give us a sense, it sounds like you’re looking at some more kind of Ground Game opportunities popping up in Appalachia. Just give a little bit of color on that?

I’m impressed to notice. Yeah. We have obviously been expanding in the Utica and we have tapped into the oil window there. We’ve continued to have success on the ground. As I mentioned, we’ve had, in my prepared comments and Adam did, we’ve had really good success in brown leasing. The Utica is one of the areas in which we have been successful. I think we’ll continue to be so. Adam?

Yeah. I mean, I think we announced kind of our large-ish transaction in Q1 in the Utica this year and we’ve built on that, right? I think the press releases is the best advertisement in order to bring in those opportunities and so we’re going to treat the Utica no different than any other basin, walk before you run. And so we’re starting to get some of that traction and we’re going to keep that momentum.

The next question is from Charles Meade with Johnson Rice. Your line is open.

Yes. Good morning, Nick, Adam and Chad, and the whole NOG team there. Nick, you’ve covered a lot of ground on the CapEx trends here. And I’m sorry if I’m kind of belaboring this point, but if I look at your till guide and look at what you’ve done this year, I just want to make sure I’m understanding what it looks like on your end. Maybe this goes back to Chad’s comments. Are we looking at about 30 tills for 4Q, which would kind of be about even with what the 2Q number was and all other things being equal, which, of course, they never are, but that suggests…

Yeah. And…

… your 4Q cap has to be about the same as 2Q?

I would say 25 plus, Charles, right? So it could be as high as 30. Obviously, as a non-op, the timing can vary, but I’d say confident in 25 plus.

Yeah. October was certainly an active month. Obviously, we’ll see what November and December hold.

Yeah.

Okay. Got it. And then I wonder, you prepared comments, and this is about the Uinta Basin. You mentioned this Douglas Creek wells, the operator talked about those last week. Maybe you could share anything. I know it’s still early days, but what have you guys seen as you’ve been getting all the data and does it change anything on your thinking of what role the Uinta could play in the 2025 plan?

I mean, I think, look, the transition of operatorship is really just beginning, Charles, so it’s really early days. I think what I would tell you is that SM, obviously, they are just -- they talked about how they’re changing some stuff and extending laterals. That’s really them taking the reins of the plans that we had really underwritten in, which is that we really wanted to go with our own spacing plan and our own longer laterals, and it’s nice to see them going and doing that. That will change it up some. So I would say the only thing I would say is it’s an affirmation of what we wanted to do. Outside of that, I think in terms of Douglas Creek, seeing some positive results in the upper cube as we go into a full cube development is always a good thing to see. But I think what I’d also say is almost every single joint venture that we’ve been a part of is that the early days are always the part that you always watch with bated breath, which is that you see a period where a new operator is taking over and they get their sea legs over a few months, and then really we’ve seen in the kind of six months post-operatorship transition, we’ve seen real acceleration of development and huge gains, and we’re hopeful to see that. We’ve seen that on Forge and Noble as the operators have just really taken the reins once that they’ve had kind of full ownership and we’re not quite there yet, right? Obviously, they’ve barely taken possession. It’s been less than a month here.

Early days, but certainly encouraging. You look at the oil cut in the Douglas Creek and then shifting your focus on the cost and efficiency initiatives that everybody’s going to be laser-focused on. The sand mine is going to help with that. My prepared remarks alluded to shaving a couple few hundred thousand dollars off of well cost there, and then Nick alluded to, lateral length. All those types of things are going into how we can optimize overall operations and generate additional returns on top of what was even under.

The next question is from Phillips Johnston with Capital One. Your line is open.

Hey. Thanks for the question. Just to follow up on Charles’s question there on the XCL, so it sounds like the six wells that are being delayed, it sounds like that’s not going to have any material impact to your fourth quarter production trajectory. Is that the way to think about it?

That’s right. That’s right. I mean, I think that just highlights the diversification across our business. And so, where you might stumble in one place, you’re going to make that up. We’re taking a look at October results and some of the fires within the Williston and the production that we saw there and the Permian making up for that. I think we’re certainly encouraged. We talked about XCLs, didn’t necessarily talk about Point. I think we’re certainly encouraged about some of the early well results that we’re seeing on the new tills. I think those are outperforming, call it, 30% than what was originally underwritten with some of the new wells that those guys are bringing online. So we’re excited about that prospect and just given the overall asset base, you’re not going to see that type of reaction at a corporate wide level when certain things get delayed.

Yeah. Okay. Sounds good. And then just the production guidance for the year, it obviously implies a pretty big ramp here in the fourth quarter. Obviously, you’ve got the two larger acquisitions, but looking at the midpoint, it implies around $87,000 a day or so on oil. You guys comfortable with that implied midpoint or would you expect things to sort of shake out in the bottom half of the range for the year?

I think it’s really going to depend on timing, Phillips. So obviously, you have a huge number of tills and I hesitate to punt, but we have so many tills and as always, it really is going to depend on how quickly they come on. And as a knob, that is the one bad part, which is that we don’t control. So it is achievable to the extent that we see things come on extremely quickly. If not, obviously, I think the range is very comfortable with. I think the question will be one of timing and so that is really the driver. And so that -- but from a till perspective, we’ll get there. It’s just a question of the averaging within the quarter.

The next question is from Paul Diamond with Citi. Your line is open.

Good morning. Thanks for taking my call. Just a quick one. You guys talked about seeing some more kind of bespoke opportunities. You’re seeing as you kind of expand beyond the Ground Game traditional line up. So I wanted to dig in a little bit more there. Are these bilateral negotiations with existing partners or are these something a bit more specific?

Yeah. I would say that the bilateral are kind of off market, opportunities that we’re seeing are largely with discussions with our operators, understanding exactly what they’re trying to get out of a particular transaction. And then depending on what they’re trying to solve for, that’s where we can start bringing up different kind of structural conversations. And so whether that’s a joint development program, whether that’s a minority interest buy-down, whether they’re looking to grow and potentially doing some sort of co-purchase, those types of things, those are generally your off market types of conversations. If it’s a typical non-op package, that’s generally going to get put to market. And if it isn’t, then you should probably question what someone’s paying for it. But I think if it’s vanilla and regular way, then you’re generally going to see a typical marketed process. If it gets more involved and you’ve got more bells and whistles or levers that you need to pull, that’s where I think we can be more constructive in an off market type of conversation.

Understood. Thanks. And just one quick follow up. You guys have talked about this quarter and a few prior about kind of increasing activity cadence, you have 10 wells pulled-forward this quarter. How do you think about that in the longer term? Is that more compression or is that just timing this year? How should we think about if that trend continues?

I think we’ve adjusted, Paul, to the concept that overall speed of development has increased. And I think we’ve made adjustments accordingly. I think given the change in commodity prices where we are now, I think it’s less likely that we’re going to be surprised going forward. If anything, I think we start to see some pausing of development just because we’ve seen lower prices and some, especially on the small private side, you see deferrals here or there just as people wait for slightly better price environments. And so I think it’s less likely that we’re going to see true acceleration kind of beyond our measure. But I think the other thing is that we have seen ultimately to save money, speed of development has been the biggest driver over the last two years and so it’s just been completing wells faster, drilling wells faster. The cutting, shaving days has been the driver and we’ve had to adjust accordingly. Adam, I don’t know if you want to add to that.

I think no.

Your final question comes from the line of Noah Hungness with Bank of America. Your line is open.

Good morning, Nick and team. I just was hoping you guys could expand a little bit on maybe some of the well deferrals or if you had any insights on to maybe what the criteria is some of these operators are looking for. And if it is just lower commodity prices, do you think at some point if commodity prices just stabilize at a lower level, then they would turn those wells in line?

To your latter point, we’ve seen exactly that happen over time. We’ve seen producers, not to name names, but we’ve seen a handful of producers at times pause wells only to then turn them on when commodity prices didn’t go back up over time, hoping that prices would go up or what have you, and then ultimately just turn them on. And so that’s typical, especially with some of the small privates.

Yeah. The private operators are generally a bit more sensitive to it and then bring it in the hedge book. And whether or not they’re no hedges, no debt will certainly affect those types of decisions. But like the M&A market and volatility, you’ve got a bid-ask spread, but as things kind of settle up, then that’s when people generally get moving.

Makes sense. And then, could -- just as my last question, could you guys talk about how your decline rate has evolved this year and maybe where it’ll end up being or where you think it’ll be as an exit rate for 2024?

Yeah. Hey, Noel. We came into the year kind of in the high 30s with a lot of activity towards the back half of the year and some of the new acquisitions being pretty steep declines. As we’ve gone through the year, obviously it’s moderated a bit. We probably exit the year kind of in the mid-30s as Noble and other assets have kind of moderated from their peaks. I think kind of in the low to mid-30s is kind of our go-forward run rate we would expect. Obviously, if there’s less large acquisitions with high declines, we’ll continue to moderate throughout the year. But that’s kind of where we sit today.

This concludes the question-and-answer session. I’ll turn the call to Nick O'Grady for closing remarks.

Thanks all for joining us today. We look forward to meeting with you in the near future and thanks for your interest in our company.

This concludes today’s conference call. Thank you for joining. You may now disconnect.