Can Output Growth Aid Northern Oil and Gas (NOG) Q4 Earnings?

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Northern Oil and GasNOG is scheduled to release fourth-quarter 2018 results on Mar 12, before the opening bell.

In the preceding three-month period, the upstream player missed the Zacks Consensus Estimate by 8.33%. Nevertheless, the firm has a decen t earnings surprise history. The company surpassed the Zacks Consensus Estimate thrice in the last four quarters, delivering average positive surprise of 11.46%.

Northern Oil and Gas, Inc. Price and EPS Surprise

Northern Oil and Gas, Inc. Price and EPS Surprise | Northern Oil and Gas, Inc. Quote

Investors are keeping their fingers crossed and hoping that the company can continue to surpass earnings estimates this time around too. However, our model indicates that Northern Oil and Gas might not beat on earnings in the fourth quarter.

Let's see which way estimates are treading for the to-be-reported quarter.

The current Zacks Consensus Estimate for the quarter to be reported is a profit of 14 cents on revenues of $159.3 million. While earnings estimates reflect 40% year-over-year increase, revenue estimates for fourth-quarter 2018 reflect a massive jump from the year-ago figure of $37 million. Notably, the Zacks Consensus Estimate for fourth-quarter earnings per share has has remained stable over the past 30 days.

Let's delve deeper and take a look at the factors shaping up the upcoming results.

Factors Setting the Tone for Northern Oil and Gas' Q4 Results

Northern Oil and Gas - whose activities are primarily focused on the Williston Basin, as well as Bakken and Three Forks plays in North Dakota and Montana - has been consistently making efforts to boost long-term growth prospects in its core operating region via entering into prudent acquisition deals in 2018. These include the $114.8-million buyout of W Energy Partners, along with snapping up Williston acreage from Salt Creek Oil & Gas LLC and Pivotal Petroleum. These strategic buyouts are likely to bolster output growth of the company.

As it is, the company provided an update on fourth-quarter operations in January 2019. Northern Oil and Gas expects fourth-quarter 2018 output at the upper end of the guided range of 35,000-36,000 barrels of oil equivalent per day (Boe/d). This indicates a massive jump from the year-ago production level of 16,742 Boe/d. The ramped-up production is driven by acquisition benefits and augmented activities, as Northern Oil and Gas brought around eight net wells online in the quarter, bringing total net well additions to nearly 30 in 2018.

Northern Oil and Gas - whose peers include Antero Resources Corporation AR , Jones Energy, Inc. JONE and Torchlight Energy Resources, Inc. TRCH - is poised to benefit from operational efficiencies, as it has managed to lower lease operating and production expenses per barrel. With the company having hedged most of its oil production at $63.66 a barrel, it was not much exposed to the weakness in crude prices in the month of December.

What Our Model Says

However, our proven model does not conclusively predict that Northern Oil and Gas will beat the Zacks Consensus Estimate in the to-be-reported quarter. This is because it doesn't have the right combination of the two key ingredients - a positive Earnings ESP and Zacks Rank #3 (Hold) or higher - for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate stand at a profit of 14 cents.

Zacks Rank: Northern Oil and Gas currently has a Zacks Rank #3, which increases the predictive power of ESP. However, we also need to have a positive Earnings ESP to be confident of a positive surprise.

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Note that we caution against stocks with a Zacks Ranks #4 or 5 (Sell rated) going into an earnings announcement, especially when the company is seeing a negative estimate revision.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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