Intrinsic value of Northern Oil&Gas - NOG

Previous Close

$1.15

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

  Value-price divergence*

-29%

Previous close

$1.15

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

 
Value-price divergence*

-29%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of NOG stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -47.27
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  145
  232
  358
  536
  778
  1,097
  1,509
  2,025
  2,659
  3,421
  4,321
  5,366
  6,561
  7,908
  9,409
  11,063
  12,869
  14,824
  16,925
  19,168
  21,551
  24,070
  26,722
  29,505
  32,419
  35,462
  38,635
  41,940
  45,378
  48,953
  52,669
Variable operating expenses, $m
 
  1,176
  1,817
  2,717
  3,943
  5,562
  7,647
  10,264
  13,478
  17,343
  21,905
  27,201
  33,256
  40,085
  47,693
  56,079
  65,233
  75,143
  85,793
  97,165
  109,242
  122,009
  135,452
  149,561
  164,330
  179,756
  195,841
  212,593
  230,022
  248,144
  266,979
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  374
  1,176
  1,817
  2,717
  3,943
  5,562
  7,647
  10,264
  13,478
  17,343
  21,905
  27,201
  33,256
  40,085
  47,693
  56,079
  65,233
  75,143
  85,793
  97,165
  109,242
  122,009
  135,452
  149,561
  164,330
  179,756
  195,841
  212,593
  230,022
  248,144
  266,979
Operating income, $m
  -229
  -944
  -1,458
  -2,181
  -3,165
  -4,465
  -6,138
  -8,240
  -10,819
  -13,921
  -17,584
  -21,835
  -26,696
  -32,177
  -38,285
  -45,016
  -52,364
  -60,319
  -68,868
  -77,997
  -87,691
  -97,940
  -108,731
  -120,056
  -131,911
  -144,294
  -157,206
  -170,653
  -184,643
  -199,190
  -214,310
EBITDA, $m
  -168
  -867
  -1,339
  -2,003
  -2,906
  -4,100
  -5,636
  -7,565
  -9,933
  -12,782
  -16,144
  -20,048
  -24,510
  -29,543
  -35,151
  -41,331
  -48,078
  -55,381
  -63,230
  -71,612
  -80,513
  -89,922
  -99,830
  -110,228
  -121,113
  -132,482
  -144,337
  -156,683
  -169,528
  -182,884
  -196,766
Interest expense (income), $m
  60
  60
  39
  63
  97
  144
  205
  285
  384
  507
  654
  827
  1,029
  1,259
  1,519
  1,808
  2,127
  2,476
  2,853
  3,258
  3,691
  4,150
  4,636
  5,147
  5,684
  6,246
  6,833
  7,445
  8,082
  8,745
  9,435
Earnings before tax, $m
  -295
  -1,004
  -1,497
  -2,244
  -3,262
  -4,609
  -6,344
  -8,524
  -11,203
  -14,428
  -18,238
  -22,662
  -27,724
  -33,436
  -39,804
  -46,824
  -54,492
  -62,795
  -71,721
  -81,255
  -91,382
  -102,090
  -113,366
  -125,204
  -137,595
  -150,540
  -164,039
  -178,098
  -192,726
  -207,936
  -223,745
Tax expense, $m
  -2
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -293
  -1,004
  -1,497
  -2,244
  -3,262
  -4,609
  -6,344
  -8,524
  -11,203
  -14,428
  -18,238
  -22,662
  -27,724
  -33,436
  -39,804
  -46,824
  -54,492
  -62,795
  -71,721
  -81,255
  -91,382
  -102,090
  -113,366
  -125,204
  -137,595
  -150,540
  -164,039
  -178,098
  -192,726
  -207,936
  -223,745

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  6
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  432
  690
  1,067
  1,595
  2,315
  3,266
  4,490
  6,027
  7,913
  10,183
  12,861
  15,971
  19,526
  23,535
  28,003
  32,926
  38,301
  44,119
  50,372
  57,049
  64,140
  71,636
  79,529
  87,813
  96,484
  105,541
  114,985
  124,821
  135,054
  145,694
  156,753
Adjusted assets (=assets-cash), $m
  426
  690
  1,067
  1,595
  2,315
  3,266
  4,490
  6,027
  7,913
  10,183
  12,861
  15,971
  19,526
  23,535
  28,003
  32,926
  38,301
  44,119
  50,372
  57,049
  64,140
  71,636
  79,529
  87,813
  96,484
  105,541
  114,985
  124,821
  135,054
  145,694
  156,753
Revenue / Adjusted assets
  0.340
  0.336
  0.336
  0.336
  0.336
  0.336
  0.336
  0.336
  0.336
  0.336
  0.336
  0.336
  0.336
  0.336
  0.336
  0.336
  0.336
  0.336
  0.336
  0.336
  0.336
  0.336
  0.336
  0.336
  0.336
  0.336
  0.336
  0.336
  0.336
  0.336
  0.336
Average production assets, $m
  483
  773
  1,194
  1,786
  2,591
  3,655
  5,025
  6,745
  8,857
  11,397
  14,395
  17,875
  21,854
  26,341
  31,341
  36,851
  42,867
  49,379
  56,377
  63,850
  71,787
  80,176
  89,010
  98,281
  107,986
  118,123
  128,693
  139,701
  151,154
  163,063
  175,440
Working capital, $m
  -30
  -23
  -36
  -54
  -78
  -110
  -151
  -202
  -266
  -342
  -432
  -537
  -656
  -791
  -941
  -1,106
  -1,287
  -1,482
  -1,693
  -1,917
  -2,155
  -2,407
  -2,672
  -2,951
  -3,242
  -3,546
  -3,864
  -4,194
  -4,538
  -4,895
  -5,267
Total debt, $m
  833
  535
  874
  1,350
  1,997
  2,853
  3,955
  5,338
  7,036
  9,078
  11,489
  14,288
  17,487
  21,096
  25,116
  29,547
  34,385
  39,621
  45,249
  51,258
  57,640
  64,386
  71,490
  78,946
  86,750
  94,901
  103,401
  112,253
  121,462
  131,039
  140,992
Total liabilities, $m
  919
  621
  960
  1,436
  2,083
  2,939
  4,041
  5,424
  7,122
  9,164
  11,575
  14,374
  17,573
  21,182
  25,202
  29,633
  34,471
  39,707
  45,335
  51,344
  57,726
  64,472
  71,576
  79,032
  86,836
  94,987
  103,487
  112,339
  121,548
  131,125
  141,078
Total equity, $m
  -487
  69
  107
  160
  231
  327
  449
  603
  791
  1,018
  1,286
  1,597
  1,953
  2,354
  2,800
  3,293
  3,830
  4,412
  5,037
  5,705
  6,414
  7,164
  7,953
  8,781
  9,648
  10,554
  11,499
  12,482
  13,505
  14,569
  15,675
Total liabilities and equity, $m
  432
  690
  1,067
  1,596
  2,314
  3,266
  4,490
  6,027
  7,913
  10,182
  12,861
  15,971
  19,526
  23,536
  28,002
  32,926
  38,301
  44,119
  50,372
  57,049
  64,140
  71,636
  79,529
  87,813
  96,484
  105,541
  114,986
  124,821
  135,053
  145,694
  156,753
Debt-to-equity ratio
  -1.710
  7.750
  8.190
  8.460
  8.630
  8.740
  8.810
  8.860
  8.890
  8.920
  8.930
  8.950
  8.960
  8.960
  8.970
  8.970
  8.980
  8.980
  8.980
  8.980
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
Adjusted equity ratio
  -1.157
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -293
  -1,004
  -1,497
  -2,244
  -3,262
  -4,609
  -6,344
  -8,524
  -11,203
  -14,428
  -18,238
  -22,662
  -27,724
  -33,436
  -39,804
  -46,824
  -54,492
  -62,795
  -71,721
  -81,255
  -91,382
  -102,090
  -113,366
  -125,204
  -137,595
  -150,540
  -164,039
  -178,098
  -192,726
  -207,936
  -223,745
Depreciation, amort., depletion, $m
  61
  77
  119
  179
  259
  366
  503
  675
  886
  1,140
  1,439
  1,787
  2,185
  2,634
  3,134
  3,685
  4,287
  4,938
  5,638
  6,385
  7,179
  8,018
  8,901
  9,828
  10,799
  11,812
  12,869
  13,970
  15,115
  16,306
  17,544
Funds from operations, $m
  114
  -927
  -1,378
  -2,066
  -3,003
  -4,243
  -5,841
  -7,850
  -10,318
  -13,288
  -16,798
  -20,875
  -25,539
  -30,802
  -36,669
  -43,139
  -50,205
  -57,857
  -66,083
  -74,870
  -84,203
  -94,072
  -104,465
  -115,375
  -126,797
  -138,728
  -151,170
  -164,128
  -177,610
  -191,629
  -206,201
Change in working capital, $m
  12
  -9
  -13
  -18
  -24
  -32
  -41
  -52
  -63
  -76
  -90
  -104
  -119
  -135
  -150
  -165
  -181
  -196
  -210
  -224
  -238
  -252
  -265
  -278
  -291
  -304
  -317
  -330
  -344
  -358
  -372
Cash from operations, $m
  102
  -918
  -1,365
  -2,048
  -2,979
  -4,211
  -5,800
  -7,798
  -10,254
  -13,212
  -16,708
  -20,771
  -25,420
  -30,668
  -36,519
  -42,974
  -50,024
  -57,662
  -65,873
  -74,645
  -83,965
  -93,820
  -104,200
  -115,097
  -126,505
  -138,423
  -150,852
  -163,797
  -177,266
  -191,272
  -205,829
Maintenance CAPEX, $m
  0
  -48
  -77
  -119
  -179
  -259
  -366
  -503
  -675
  -886
  -1,140
  -1,439
  -1,787
  -2,185
  -2,634
  -3,134
  -3,685
  -4,287
  -4,938
  -5,638
  -6,385
  -7,179
  -8,018
  -8,901
  -9,828
  -10,799
  -11,812
  -12,869
  -13,970
  -15,115
  -16,306
New CAPEX, $m
  -93
  -290
  -421
  -592
  -805
  -1,064
  -1,370
  -1,720
  -2,112
  -2,540
  -2,998
  -3,480
  -3,979
  -4,487
  -5,000
  -5,510
  -6,016
  -6,512
  -6,998
  -7,473
  -7,936
  -8,390
  -8,834
  -9,271
  -9,705
  -10,137
  -10,570
  -11,008
  -11,453
  -11,909
  -12,377
Cash from investing activities, $m
  -91
  -338
  -498
  -711
  -984
  -1,323
  -1,736
  -2,223
  -2,787
  -3,426
  -4,138
  -4,919
  -5,766
  -6,672
  -7,634
  -8,644
  -9,701
  -10,799
  -11,936
  -13,111
  -14,321
  -15,569
  -16,852
  -18,172
  -19,533
  -20,936
  -22,382
  -23,877
  -25,423
  -27,024
  -28,683
Free cash flow, $m
  11
  -1,256
  -1,863
  -2,759
  -3,962
  -5,535
  -7,536
  -10,021
  -13,040
  -16,638
  -20,846
  -25,690
  -31,186
  -37,340
  -44,153
  -51,618
  -59,725
  -68,460
  -77,809
  -87,756
  -98,286
  -109,388
  -121,052
  -133,270
  -146,038
  -159,359
  -173,235
  -187,674
  -202,690
  -218,296
  -234,513
Issuance/(repayment) of debt, $m
  -6
  -298
  339
  476
  647
  856
  1,102
  1,383
  1,698
  2,042
  2,411
  2,799
  3,200
  3,608
  4,020
  4,431
  4,837
  5,237
  5,628
  6,009
  6,382
  6,746
  7,104
  7,456
  7,804
  8,151
  8,500
  8,852
  9,210
  9,576
  9,953
Issuance/(repurchase) of shares, $m
  -1
  1,560
  1,535
  2,297
  3,334
  4,704
  6,466
  8,678
  11,392
  14,655
  18,505
  22,973
  28,080
  33,837
  40,250
  47,317
  55,029
  63,377
  72,346
  81,922
  92,091
  102,839
  114,156
  126,032
  138,463
  151,446
  164,983
  179,081
  193,749
  209,000
  224,851
Cash from financing (excl. dividends), $m  
  -8
  1,262
  1,874
  2,773
  3,981
  5,560
  7,568
  10,061
  13,090
  16,697
  20,916
  25,772
  31,280
  37,445
  44,270
  51,748
  59,866
  68,614
  77,974
  87,931
  98,473
  109,585
  121,260
  133,488
  146,267
  159,597
  173,483
  187,933
  202,959
  218,576
  234,804
Total cash flow (excl. dividends), $m
  3
  6
  10
  14
  19
  25
  32
  40
  50
  60
  70
  82
  94
  105
  118
  130
  141
  153
  164
  176
  187
  197
  208
  218
  228
  238
  248
  259
  269
  280
  291
Retained Cash Flow (-), $m
  289
  -1,560
  -1,535
  -2,297
  -3,334
  -4,704
  -6,466
  -8,678
  -11,392
  -14,655
  -18,505
  -22,973
  -28,080
  -33,837
  -40,250
  -47,317
  -55,029
  -63,377
  -72,346
  -81,922
  -92,091
  -102,839
  -114,156
  -126,032
  -138,463
  -151,446
  -164,983
  -179,081
  -193,749
  -209,000
  -224,851
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  -1,554
  -1,525
  -2,283
  -3,315
  -4,679
  -6,434
  -8,638
  -11,342
  -14,595
  -18,435
  -22,892
  -27,986
  -33,732
  -40,133
  -47,187
  -54,888
  -63,224
  -72,182
  -81,747
  -91,904
  -102,642
  -113,948
  -125,814
  -138,234
  -151,207
  -164,735
  -178,823
  -193,480
  -208,720
  -224,560
Discount rate, %
 
  14.50
  15.23
  15.99
  16.79
  17.62
  18.51
  19.43
  20.40
  21.42
  22.49
  23.62
  24.80
  26.04
  27.34
  28.71
  30.14
  31.65
  33.23
  34.90
  36.64
  38.47
  40.40
  42.42
  44.54
  46.76
  49.10
  51.56
  54.14
  56.84
  59.68
PV of cash for distribution, $m
 
  -1,357
  -1,148
  -1,463
  -1,782
  -2,078
  -2,323
  -2,492
  -2,568
  -2,544
  -2,424
  -2,222
  -1,961
  -1,665
  -1,361
  -1,071
  -810
  -590
  -412
  -277
  -179
  -110
  -65
  -37
  -20
  -10
  -5
  -2
  -1
  0
  0
Current shareholders' claim on cash, %
  100
  50.0
  2.2
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Northern Oil and Gas, Inc., an independent energy company, engages in the acquisition, exploration, development, and production of oil and natural gas properties in the United States. The company primarily holds interests in the Bakken and Three Forks formations in the Williston Basin of North Dakota and Montana. As of December 31, 2015, it owned working interests in 2,630 gross producing wells consisting of 2,628 wells targeting the Bakken and Three Forks formations, as well as 2 wells targeting other formations; and had proved reserves of 65.3 million barrels of oil equivalent. The company is based in Wayzata, Minnesota.

FINANCIAL RATIOS  of  Northern Oil&Gas (NOG)

Valuation Ratios
P/E Ratio -0.2
Price to Sales 0.5
Price to Book -0.1
Price to Tangible Book
Price to Cash Flow 0.7
Price to Free Cash Flow 8.1
Growth Rates
Sales Growth Rate -47.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -67.8%
Cap. Spend. - 3 Yr. Gr. Rate -23.7%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity -171%
Total Debt to Equity -171%
Interest Coverage -4
Management Effectiveness
Return On Assets -40.5%
Ret/ On Assets - 3 Yr. Avg. -32.4%
Return On Total Capital -59.6%
Ret/ On T. Cap. - 3 Yr. Avg. -45.3%
Return On Equity 85.5%
Return On Equity - 3 Yr. Avg. -77.1%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 68.3%
Gross Margin - 3 Yr. Avg. 80%
EBITDA Margin -120%
EBITDA Margin - 3 Yr. Avg. -132.4%
Operating Margin -157.9%
Oper. Margin - 3 Yr. Avg. -171.2%
Pre-Tax Margin -203.4%
Pre-Tax Margin - 3 Yr. Avg. -195.9%
Net Profit Margin -202.1%
Net Profit Margin - 3 Yr. Avg. -176.4%
Effective Tax Rate 0.7%
Eff/ Tax Rate - 3 Yr. Avg. 18.5%
Payout Ratio 0%

NOG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NOG stock intrinsic value calculation we used $145 million for the last fiscal year's total revenue generated by Northern Oil&Gas. The default revenue input number comes from 2016 income statement of Northern Oil&Gas. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our NOG stock valuation model: a) initial revenue growth rate of 60% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 14.5%, whose default value for NOG is calculated based on our internal credit rating of Northern Oil&Gas, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Northern Oil&Gas.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of NOG stock the variable cost ratio is equal to 506.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for NOG stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 7.2% for Northern Oil&Gas.

Corporate tax rate of 27% is the nominal tax rate for Northern Oil&Gas. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the NOG stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for NOG are equal to 333.1%.

Life of production assets of 10 years is the average useful life of capital assets used in Northern Oil&Gas operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for NOG is equal to -10%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $-487 million for Northern Oil&Gas - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 61.997 million for Northern Oil&Gas is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Northern Oil&Gas at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

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▶ US Crude Oil Production: Biggest Weekly Fall since July 2016   [Jun-29-17 12:35PM  Market Realist]
▶ US Distillate Inventories Rose for the Fourth Straight Week   [Jun-22-17 02:36PM  Market Realist]
▶ Could US Crude Oil Futures Hit $40 per Barrel?   [Jun-21-17 10:05AM  Market Realist]
▶ Fundamentals in Focus to Drive Energy Returns   [Jun-20-17 12:36PM  Market Realist]
▶ US Crude Oil Futures: Traders Track Key Moving Averages   [Jun-19-17 11:46AM  Market Realist]
▶ Analyzing US Gasoline Inventories and Gasoline Demand   [Jun-15-17 11:04AM  Market Realist]
▶ Goldman Sachs: OPEC and Russia Could Pressure Oil Prices   [May-23-17 08:50AM  Market Realist]
▶ Can OPEC and Russia Rescue the Oil Market?   [May-16-17 08:38AM  Market Realist]
▶ Northern Oil and Gas beats Street 1Q forecasts   [May-08-17 06:40AM  Associated Press]
▶ Why Investors Are Tracking US Gasoline Demand   [May-03-17 09:21AM  Market Realist]
▶ Will Russia Support OPEC if Production Cuts Continue?   [May-02-17 10:03AM  Market Realist]
▶ Will Gasoline Inventories Push Crude Oil Prices Higher?   [Apr-12-17 07:42AM  Market Realist]
▶ US Crude Oil Imports and Refinery Demand Impact Inventories   [Apr-06-17 09:36AM  Market Realist]
▶ Irans Crude Oil Exports Hit a Record: Whats Next?   [Apr-04-17 11:05AM  Market Realist]
▶ What to Expect from Crude Oil Prices in 2Q17   [Apr-03-17 09:36AM  Market Realist]
▶ Hedge Funds Reduced Their Bullish Bets on Crude Oil   [Mar-20-17 08:27AM  Market Realist]
▶ Conference-OGIS New York for Northern Oil & Gas, Inc.   [Mar-08-17 05:56PM  at Company Spotlight]
▶ This Year Is Ideal for Beaten-Stock Strategy   [Dec-05-16 12:16AM  at The Wall Street Journal]
▶ To Find January's Stock Winners, Look at December's Losers   [Dec-04-16 10:27PM  at The Wall Street Journal]
Stock chart of NOG Financial statements of NOG
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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