Northern Oil & Gas Inc (NOG) reported strong financial and operational results for Q3 2026, setting new records in key metrics. The company achieved record quarterly Adjusted EBITDA, up 11% from Q2 and 15% year-over-year, alongside record production, which increased 7% sequentially and 19% year-over-year. Oil volumes rose 10% from the previous quarter, while natural gas production hit a new high, up 39% year-over-year. Cash margin per barrel of oil equivalent (BOE) improved to $30.74, driven by tighter oil differentials and better gas realizations.
NOG generated approximately $150 million in free cash flow for the quarter, marking the 27th consecutive quarter of positive free cash flow. The company reduced total debt by over $100 million, achieving a net debt to EBITDA ratio below 1.5x ahead of schedule. Shareholders benefited from share repurchases totaling about 668,000 shares at an average price of $23.96, and a well-covered dividend of $0.45 per share, with free cash flow exceeding the payout by more than 3x.
Despite the positive results, NOG faces some challenges. Production expenses ran higher than expected, primarily due to elevated processing costs in the Williston Basin, with updated guidance of $9.75 to $9.85 per BOE. The company also noted potential headwinds from a lower 2027 gas strip at $2.90, which could bias activity lower in gas basins. Additionally, NOG's non-consent rate is around 3%, focused on weaker operators in the Williston Basin, indicating some challenges in optimizing capital allocation.
During the earnings call, CEO Nicholas O'Grady emphasized the company's strong capital allocation strategy, noting that the equity is as compelling as it has ever been. He highlighted the dividend's role in returning capital to shareholders and the company's intention to further reduce leverage in moderation. O'Grady also addressed concerns about the Uinta Basin, stating that performance is on track and the issue is transitory amid basin expansion. He noted that NOG is increasing rig activity there, with significant growth expected beyond 90 days.