NOG

• Capital Allocation and Shareholder Returns

  • Generated free cash flow of $159 million in Q2 2026, with adjusted EBITDA up 17% sequentially and free cash flow up over 400% quarter-over-quarter, demonstrating the strength of the diversified business model
  • Repurchased 2.95 million shares (~3% of outstanding shares) at an average price of $20.37, offsetting share issuance for the DuVernay acquisition to keep total share count roughly flat
  • Subsequent to quarter end, the Board increased total share repurchase authorization to $243 million, and declared a $0.45 per share quarterly dividend ($48 million total), which is multiple times covered by Q2 free cash flow

• Operational Activity

  • Drilling activity outperformed internal expectations, with the D&C backlog growing to almost 52 net wells as operators pulled activity forward in the Permian and Williston
  • The company exercised options for ~17 net wells, a 20% increase over the trailing 12-month run rate, with 90% of these options allocated to oil-weighted basins; normalized AFE costs are 5% lower than the 2025 average
  • Recent early well results across all basins have outperformed internal type curve expectations, most notably in Appalachia's West Virginia joint development and the Uinta basin

• Business Development and Strategy

  • Closed the DuVernay (Parallax) joint development acquisition in early June 2026, which adds 20 years of drilling inventory with an average break-even price below $50 per barrel, at a cost of less than $600,000 per location, and expands NOG's footprint into Canada
  • The annual ground game leasing program has amassed ~80 new undeveloped locations in Appalachia, replacing drilled inventory and building long-term optionality; year-to-date 2026 ground game activity has already matched the full 2025 total of new drilling opportunities
  • Management maintains that NOG's assets are materially undervalued by the public market: internal estimates place total asset value at over $7 billion, against a current enterprise value of $4.6 billion
  • NOG is a disciplined acquirer with a track record of over 20% annualized returns on acquisitions, and will actively pursue opportunities to unlock this unrecognized value for shareholders via asset acquisitions, monetizations, or additional capital returns

• The company reaffirmed its full year 2026 capital expenditure guidance, with total D&C capital expected to fall between $850 million and $900 million
• Full year 2026 adjusted EBITDA is projected to be between $1.4 billion and $1.5 billion, generating full year free cash flow of approximately $375 million to $500 million after capital spending, with the dividend multiple times covered across this range
• Management acknowledged that current implied H2 2026 production guidance is conservative, with upside potential from faster-than-expected resolution of Permian Waha logistical challenges, accelerated operator drilling activity, and the addition of DuVernay production
• NOG's long-term target for lease operating expense (LOE) is to maintain flat to declining levels, supported by the addition of low-LOE DuVernay production and growing natural gas volumes, offsetting natural LOE increases from maturing legacy assets

NOG is a diversified non-operated upstream oil and gas company with assets across five core basins, with capital allocation for Q2 2026 split as follows: 37% to Permian, 33% to Williston, 14% to Appalachia, 14% to Uinta, and 2% to the newly acquired DuVernay Canadian position. Total production increased 9% year-over-year, with record natural gas volumes up 35% year-over-year and 5% sequentially, though the Permian Waha region saw significant temporary curtailments due to poor local economics. Post-curtailment, volumes have returned online, with three net wells brought online that will contribute to Q3 2026 production. Williston and Uinta production exceeded internal expectations, and Appalachia set a new volume record, driven by a full quarter of contribution from the Utica joint development. Total Q2 2026 capital expenditure was $196 million, with $151 million allocated to organic drilling and completion (D&C) and $45 million to ground game leasing/inventory acquisition activity. The company ended the quarter with over $1 billion in total liquidity.

• Volatile oil and natural gas pricing can impact production curtailment decisions, operator activity levels, and cash flow generation; Waha basis pressure in the Permian created significant temporary curtailments in Q2 2026, though this pressure has receded heading into Q3
• Extreme winter weather could create operational disruptions for gas production and infrastructure, though management notes that recent infrastructure investments have improved resilience, and NOG would benefit financially from high gas prices resulting from major winter weather events
• There is a fundamental perception disconnect in public markets: NOG's non-operator business model, which prioritizes long-term asset value accumulation and annual inventory replacement over near-term free cash flow screens, is not properly valued relative to operated E&P companies that deplete their inventory over time
• Legacy wells in mature basins (Williston and Permian) face natural LOE increases from inflation and aging well profiles, though this trend is expected to be offset by new low-cost production additions

Q: Why can NOG maintain full year 2026 capex guidance while most peer E&P companies are raising 2026 capex estimates? / A: NOG's guidance already planned for a steady activity increase through the year, so accelerating activity timing does not change the full year total capital quantum. When the DuVernay acquisition was announced, NOG implicitly cut capex by $50 million based on production efficiencies. The company is also now realizing 6-12 month tailwinds from cost reductions that occurred in 2025, due to accrual accounting practices for well costs that delay recognition of cost savings. These factors offset any potential upward pressure on capital spending.

Q: Why does NOG believe its stock is trading at a significant discount to underlying asset value, and what explains this value disconnect? / A: As a non-operator, NOG is incorrectly compared to operated E&P companies that are judged on quarterly production guidance and near-term free cash flow yield, while NOG's value comes from long-term asset appreciation and high-return investments. Unlike most public E&Ps, NOG budgets annually for new inventory acquisition, which reduces near-term free cash flow screens but adds lasting asset value. Many of NOG's acquired assets have already appreciated meaningfully since purchase, but this value is not reflected in the current stock price. Management is committed to taking action to close this value gap.

Q: What is NOG's framework for evaluating debt reduction versus other capital allocation options like acquisitions or share buybacks? / A: The leverage on NOG's balance sheet exists specifically to fund the acquisition of high-value undervalued assets, which have already appreciated since purchase. Because the assets are liquid and desirable, NOG could reduce leverage very quickly if it chooses to do so. Right now, share repurchases at current prices are massively accretive to shareholder value, so this opportunity is prioritized over debt reduction, while the situation remains fluid.

Q: What is the outlook for upside to second half 2026 production versus current guidance? / A: Current guidance is indeed conservative, as Permian logistical challenges that delayed production growth have resolved faster than expected, and many operators are pulling previously delayed activity forward into the second half of 2026. The addition of new production from DuVernay also creates upside, but management prefers to wait for actual production results before updating guidance. Some operators are also adding rigs earlier than planned for 2027, which would create additional upside for NOG if that trend continues.

Q: What is your long-term strategic approach to portfolio diversification across basins? / A: NOG has no fixed target for equal weighting across basins; the company is purely focused on allocating capital to the highest economic return opportunities available, which changes dynamically over time. Williston is a mature base with few new high-return opportunities today, while Permian activity cycles up and down, and Uinta, Utica, and DuVernay offer strong long-term returns. As a non-operator, diversification does not create the same operational and cost challenges it does for operated E&P companies, since NOG's core function is just capital allocation. NOG currently has ~15 active large transactions under review, a mix of formal auctions and bilateral discussions, and will pursue any opportunity that meets return hurdles, everything from existing basin expansion to entry to new basins.