NOG Q3 2026 earnings call transcript, November 6, 2026

Neil, I think the only thing that I had there is frankly, you know, we're taking a look at the AFDs that. coming across mine and Jim's desk on a daily basis and comparing that way and that against the ground game. And if we're able to source significantly better returns on the ground, then that's a trade we're going to make all day. That's what I was thinking, Adam. You have a much bigger portfolio, so I figure you could be a little bit futzer these days. But my second question, Nick, is for your chat on capital allocation. Specifically, has the capital allocation strategy changed now that you've reduced debt? Certainly to more than a manageable level. And, you know, the dividend yield, you know, obviously continues to be over 8%. Would love to hear your thoughts on the allocation. Yeah, I mean, open window opens on. Monday, Neil. And so, as I mentioned in my prepared comments, our equity is as compelling as it's ever been or in any given point on and I'm. I have to remind myself that oil is still 90. And when I look at what's happened with the equities, but at the same time, what I tell you is, look, we want to take leverage down further and we'll do that. So it's all about doing like everything. Like doing it in moderation. But I think the equity is a very, we've increased our buyback authorization on purpose, which is really to give us the flexibility to take advantage of periods like this. Look, I mean, you mentioned the yield, you know.

The cost of the equity and where it is today, you know, our dividend represents, you know, and it has, if you go back over the last three years, you know, roughly a third of the cash that we've been generating, and it doesn't really foot with where the yield is today. And ultimately, that creates a big advantage for us. Thank you. Neil, just to quote our chairman, you know, he would tell you, high stock price, happy face, low stock price, happy face, because it creates an opportunity.

and growth in that basin, something we never underwrote when we acquired it. Okay, that's good to hear. You obviously talked about the analyst day coming up and within that, I guess, you know, we'll hear more about... the opportunities to, you know, at least look at your portfolio and what makes sense to, you know, optimize. You mentioned divestitures and potentially other ways of optimizing the portfolio beyond divestiture. Like, are there other ways that you could evaluate, you know, optimizing that just at a high level? Yeah, I mean, I think I will reserve some comment on this in the sense that we have a number of private things we're going through. that aren't ready for prime time. But there are numerous ways, everything from how we source our capital to how we partner to how we trade and divestitures are certainly part of that. But we also, you know, we are an analytically driven. And so when we do these evaluations, we don't do it lightly. You know, what I would tell you is that many companies, when they feel they're undervalued, will sell a high value asset and they'll show accretion to Wall Street. But ultimately, they might have just sold their best asset or sold something. They've given away a lot of future upside that they're not being paid for even in that scenario. So the key thing about all this stuff is to do the research, to do it right, and to do it in a way that ultimately creates the most long-term value.

Okay, appreciate that. It sounds like there's that next evolution of the NOG business model then. Yeah, look, we have built tremendous scale, you know, and I don't think it's fully appreciated, you know, as a non-operator. Benefit from diversity, you know, I think it's harder for an operator to efficiently allocate capital in multiple places. But for us, it creates a huge flywheel effect. So the statistic I would give you that we gave to our board in midyear is that on the small and large asset transactions, because we are as broad as we are, our footprint was up 48 and 58% in those two categories respectively year over year. And so where I'm going with this is that the most the best way to be able to efficiently allocate capital over time is to have more shots on goal. And that is exactly what's happened as we've expanded the footprint. So look, we want to make the business better. You know, we want to grow our profits per share, but there are a lot of ways to do that that can be through. Reducing share count that can be through acquisitions. It can be through the drill bit, but at the end of the day, what we're really looking at, whether it's divestitures acquisitions or anything else is making the business better and more capital efficient as we grow those profits per share.

I think as we've prosecuted 2026, we've expected we sell from, you know, maybe some of the gas weighted, you know, activity, more activity, looking at the AFVs that we can. Just here in the third quarter, the Williston was leading the way. I think some of that is a function of, you know, concentrated working interest. And if you think about, you know, AFV costs, the Williston has been, you know, one of the leaders in terms of kind of. reduction on a normalized cost per foot. So I would expect, you know, the Permian will continue to be as active as it ever has been. You know, Williston, you went up, you know, will continue to be steady as it goes in the Duvernay. Well, it's early days, you know, the conversations that we've been having there has been accelerating ahead of kind of expectations. And so I think we continue to see that, you know, obviously notwithstanding any sort of material change in commodity prices. I don't think. You're necessarily going to see a massive acceleration from any of our operators, at least from the conversations that we've had. Maybe some of the privates lead in a little bit more than the public, but that's effectively what we're seeing on the ground right now. We expect that to continue. Yeah, and I would just say seasonally, Charles, as you head towards the end of the year, things tend to slow down a little bit, and that's just because people are getting close to exhausting their budgets and to the extent that they're ahead.

They will move that seasonal period in the back and where it's always slower in terms of completions, but where I'm going with that is that. If you actually look at the rate count in our basins, you know, quarter to quarter, month to month, it can vary, but the overall activities continue to rise. Are you into, as Adam mentioned, are you into Canadian operations are poised? The growth, I think, are Permian and Williston or Appalachia in gas.

Our cost, one of the reasons we acquired those properties is that our cost basis, meaning that our breakeven levels are some of the lowest in the industry, and so they'll be very resilient, and so you're not necessarily going to see a huge variability in activity like you might in the hand. or some of the higher cost plays. Got it. That's helpful elaboration. And then, Nick, I want to go back to a point I think you've already addressed a little bit, but I want to see if I'm understanding it correctly. I think... This is about acquisitions and how you would fund acquisitions, and maybe the right way to think of it is a relative priority. I think what I'm hearing is that you want debt levels to move lower, mostly maybe on... For a metric basis, you kind of view your equity as an expensive currency in the sense that you don't want to use your equity, so that kind of... To me, at least, leads me to think that any future acquisitions would have to, you know, that some of the funding would have to be from some, you know, some kind of asset sale. Is that the right, you know, I don't want to say... get you committed to anything, but is that kind of the right read on your posture now? I would give that a maybe. I mean, I think, look, we, you know, our focus this year, you know, we've spent roughly $150 million dollars on the ground or in an environment in a price environment like we're in right now.

It's, you know, I talked about this yesterday. I was speaking at a heart event and what I tell you is that.

Although we and everyone else would like to buy oily properties, you know, we tried very hard last year, but what tends to happen is in low price environments, the quality of the opportunities available to you tends to be lower. So we spent a lot more money on raw land and lethal bring. For today, there are a lot of high quality prospects out there, the backlog is as big if it's not bigger than it's ever been, but the risk you is not great for the acquirer right doesn't mean you can't hedge all that stuff, but you take activity risk and other things. alongside that so our desire to do large scale M&A and when you put it into context of yes, our equity is precious as it's always been, can you still do things accretively of course, but it is is it the level of accretion.

Fair, the answer is no. And so I think you have the firepower to do so, but I don't think.

Going to make a material to leverage and I'd say this, that we can do all of these things.

Also isn't something that is necessarily... Right. That's helpful. Nick, thank you.

I have to wait. What I'd say is that I don't see an outcome that's a bad one. So either, you know, either we can, you know, maintain the status quo and everything's great and our capital efficiency should be similar. Look, I think in general, well, costs are rising, but I'd say to Adam's point on a per foot basis, our lateral length. On a normalized per foot basis, I'm not sure we're going to see anything that meaningful.

I think the two places I would point to is thermal fracks and drilling time. I think that's probably where our operators are most focused in terms of trying to mitigate inflationary pressures that we're seeing and then obviously lateral lengths. The biggest of the three. Got it. Understood. Appreciate the clarity.