Northern Oil and Gas lifts 2026 output outlook as margins recover

By Grace Kim

Northern Oil and Gas raised its 2026 production forecast to 147,000-150,000 barrels of oil equivalent (boe) per day after reporting record third-quarter production and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization).

What changed in the 2026 outlook?

147,000-150,000 boe per day is now the company’s revised full-year production range. Chief Financial Officer Chad Allen said the increase reflected record third-quarter volumes and strong well performance.

$850 million to $900 million remains the full-year capital budget, and spending should land near the high end because of increased activity and smaller acquisitions.

• Adjusted EBITDA: Up 11% from the second quarter and 15% year over year.
• Total production: Up 7% sequentially and 19% year over year.
• Oil volumes: Up 10% from the second quarter.
• Natural gas production: A company record and up 39% year over year.

The higher output target does not require a larger budget, though management expects to use its existing range at the high end.

What lifted margins?

$9.77 per boe was the year-to-date production expense, while the updated full-year range is $9.75-$9.85. Allen said quarterly production expenses exceeded the full-year guidance range, largely because of elevated processing costs, primarily in the Williston Basin. Those costs rise with stronger natural gas liquids prices.

Allen said: “Better commodity realizations more than offset the higher expense rate.”

Oil differentials, or the discount to benchmark pricing, narrowed to less than $3 per barrel. Gas realizations improved to 98% of Henry Hub, the U.S. natural gas benchmark, from 90% in the second quarter. Permian gas realizations recovered to 85% of Henry Hub from 39% as pressure at the Waha hub eased.

Improved realizations added approximately $12 million during the quarter, and sequential cash margin rose to $30.74 per boe. Stronger commodity prices therefore absorbed the increase in processing costs.

How strong were cash flow and the balance sheet?

Approximately $150 million of free cash flow, meaning cash generated after capital spending, was produced in the third quarter despite higher capital spending, CEO Nick O’Grady said. Allen said it was Northern Oil and Gas’ 27th consecutive quarter of positive free cash flow.

• $247.3 million: Third-quarter budgeted capital expenditures, including $190.7 million for organic drilling and completion and $56.5 million for the company’s “ground game,” meaning smaller acquisitions and other transactions.
• More than $100 million: Reduction in total debt during the quarter. Net debt, meaning debt less cash, to last-quarter annualized adjusted EBITDA fell below 1.5 times, reaching the company’s stated range one quarter ahead of its year-end goal. Liquidity exceeded $1.6 billion at the end of September.
• $500 million: Senior notes issued in August at 7.5%, due in 2034. Northern Oil and Gas used the proceeds to reduce its revolving credit facility, or revolver, which stood at $223 million at quarter-end.
• Approximately 668,000 shares: Repurchased at an average price of $23.96, leaving about $227 million under the board authorization.
• $0.45 per share: Quarterly dividend declared by the board and paid on Oct. 30. Free cash flow was more than three times the dividend payout.

O’Grady said the company wants to reduce leverage further while retaining flexibility to repurchase shares. He described the stock as “a compelling investment for the company.”

Cash generation gave the company room to reduce debt and return capital, but management still places further deleveraging ahead of larger acquisitions.

What is management planning next?

23.9 net wells came online during the quarter, nearly twice the second-quarter total and almost entirely in oil-weighted basins, President Adam Dirlam said. Recent normalized authorization-for-expenditure costs, a measure of planned well-development spending, fell 3% from the prior quarter and more than 5% below the 2025 average, helped by drilling efficiencies and longer laterals.

19 ground-game transactions closed during the quarter. Year-to-date activity added 15.4 net wells and more than 8,500 net acres.

Roughly 14 larger asset packages across seven regions were under evaluation, with estimated total value exceeding $15 billion. O’Grady said the company was not currently interested in any transaction that would increase leverage. Most acquisitions are expected to use the regular ground-game budget or remain small enough not to affect leverage materially. Asset sales could fund purchases, although matching the timing of a sale and acquisition is not guaranteed.

About 8% of total production comes from the Uinta Basin, where O’Grady said performance remained on track. He described a potential slowdown as transitory and said the company was increasing rig activity.

The 2027 capital spending outlook remains unavailable because commodity-price volatility and potential projects make an estimate premature. Northern Oil and Gas also plans to hold its first investor day in the coming months, with further details to follow.

Management has a large acquisition pipeline, but leverage discipline will determine how quickly it moves.

What business does Northern Oil and Gas run?

Northern Oil and Gas is an independent energy company engaged in acquiring, developing and producing crude oil, natural gas and natural gas liquids in the United States. It primarily holds non-operated working interests, giving it stakes in wells drilled and managed by other exploration and production companies while maintaining exposure to a broad portfolio of assets. Historically, the company focused on properties in the Williston Basin of North Dakota and Montana before expanding into other major U.S. producing regions.

That non-operated model gives the company oil-and-gas exposure without managing every producing well directly.