Q1’26 Results: NOG’s FY’26 Hedge Position Could Become a Significant Earnings Headwind if Oil Prices Remain Elevated Through Q2 and Beyond

NOG benefits operationally from stronger commodity prices, however company has materially hedged a significant portion of its future oil production at prices largely in the mid-to-high $60s/bbl, with collar ceilings generally near ~$71–72/bbl. As a result, if elevated oil prices persist, hedge contracts currently carrying significant unrealized mark-to-market losses may ultimately settle into realized cash losses in future quarters

We believe that for upcoming 2026 quarters Q2, Q3 & Q4 the unsettled derivative will convert into realized settled commodity losses, negatively impacting total revenue, EBITDA margin, free cash flow and potentially increasing leverage while pressuring interest coverage ratio

If oil prices remain materially above hedge ceilings, currently estimated derivative losses could increase further. As of June 2026, NYMEX WTI prices remained elevated ~$95/bbl

Investment Snapshot:

Under our base-case commodity assumptions:

• Q2’26 WTI averages approximately $106.8/bbl, with elevated pricing continuing through the remainder of FY’26

  • Based on disclosed hedge volumes and hedge structures, we estimate Q2’26 net settled commodity derivative losses of approximately ~$95–100M, primarily driven by oil hedge settlements, partially offset by gains from natural gas hedge positions

  • These losses represent the direct cash/economic impact of the hedge book and would negatively affect realized revenues and cash flow generation in 2026 quarters

  • In addition to settled losses, NOG may also recognize substantial unrealized mark-to-market (“MTM”) derivative losses if oil prices and forward commodity curves remain elevated

  • Given that April oil prices averaged above $100/bbl, continued strength in forward oil curves could lead to potential Q2’26 unrealized MTM derivative losses in the range of ~$600–700M

  • These unrealized losses are primarily non-cash accounting adjustments reflecting the declining fair value of NOG’s future hedge contracts and swaptions in a higher commodity price environment

Q1’26 Results

• Reported total revenue decreased 99.2% YoY to $5.0M, primarily due to a ($539.1)M loss on commodity derivatives driven by mark-to-market revaluation of the company’s hedge portfolio amid sharp increase in oil prices

  • Realized derivative losses were ($17.6)M while unrealized mark-to-market losses totaled ($521.4)M

Revenue by Product

• Oil revenue (81% of total revenue excl. gain/loss on derivatives): Declined by 4.5% YoY to $439.1M from $459.7M in Q1’25. The decline was driven by decrease in production of oil by 6.5% YoY to 6.6 MMBbl from 7.0 MMBbl in Q1’25, partially offset by increase in oil price by 2.2% YoY to $66.3 per Bbl from $64.9 per Bbl  

• During March 2026, a significant increase in oil prices occurred as a result of the threatened and actual closing of oil shipping routes, including the Strait of Hormuz, by Iran and affiliated groups in connection with the joint U.S.-Israel strikes on Iran, with the NYMEX price for oil reaching levels not seen since Q2’22         

• Natural gas and NGL revenue (18.5% of total revenue excl. gain/loss on derivatives): Decreased by 14.1% YoY to $100.8M from $117.3M in Q1’25. The decrease was driven by lower prices, which declined by 35.2% YoY to $2.5 per MMBtu from $3.9 per MMBtu in Q1’25, partially offset by higher production of NGL, which increased 32.8% YoY to 40.3 Bcf from 30.4 Bcf in Q1’25

Highlights

• One key thing to note in NOG’s Q1’26 results: Oil, natural gas and NGL sales excluding the effect of settled commodity derivatives, decreased 6.2% YoY to $544.1 from $580.3M in Q1’25, due to 14.8% decrease in realized prices on a Boe basis, which were partially offset by a 10% increase in production volumes

  •  Acquisition contributed significantly to the increase in production volumes

Credosh Adjusted EBITDA

• NOG generated a Credosh adj. EBITDA of $335.6M, 22.6% YoY decrease and an EBITDA margin of 63.8% v/s 73.2% in Q1’25. The margin compression was primarily driven by lower realized pricing on BOE basis and hedge related impacts

Free Cash Flow

• NOG generated an FCF of $(311.1)M, post Capex of $634.7M, cash interest of $8.3M, cash taxes of $0.4M and source of working capital of $26.4M

  • Capex was split into drilling and development of $222M and $412M for acquisition of oil & gas properties. Capex as % revenue increased significantly primarily driven by higher acquisition activity, management noted during the conference call that the company is evaluating over $10B of potential assets across eight transactions, indicating continued acquisition appetite

Leverage & Liquidity

• Gross/net leverage has increased to 1.7x based on LTM Q1’26 CREDOSH Adj. EBITDA of $1,527M.

• As of March 2026, Net LTV was 50.7%, Liquidity was $1,359M with cash of $37.0M and $1,332M of availability under RCF. NOG has a DSCR of 9.1x

  
  

FY’26 Guidance (unchanged in Q1’26)

Given the volatile pricing outlook for oil, NOG did not provided any update to FY’26 guidance

Low Activity Guidance 

• NOG expects an annual production of (oil & gas) 141 MBoe/day at midpoint (+4.4% YoY, 135 Mboe/day in FY’25)

• Annual oil production of 70 MBbl/day at midpoint (-7.5% YoY, 75.6 MBbl/day in FY’25)

• Total budget capital expenditure of $875M at midpoint (-30% YoY) 

High Activity Guidance

• Annual production of (oil & gas) 146 MBoe/day at midpoint (+8.1% YoY, 135 Mboe/day in FY’25)

• Annual oil production of 74 MBbl/day at midpoint (-2.2% YoY, 75.6 MBbl/day in FY’25)

• Total budget capital expenditure of $1,050M at midpoint (-16% YoY) 

Other Key Things

• NOG acquired 40% stake in Ohio Utica Shale Upstream and Midstream Assets from Antero with remaining 60% acquired by Infinity Natural Resources (INR). INR will be the operator for assets

• Management continued its “Ground Game” acquisition strategy during Q1’26, completing 41 smaller bolt-on transactions and additional leasing activity across core basins

• The company increased its revolving credit facility commitments from ~$1.6B to ~$1.8B

• NOG completed an equity offering in March 2026, issuing ~8.3M shares and raising ~$228M of net proceeds

• NOG maintained its quarterly dividend at $0.45/share