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Strategies & Market Trends : Value Investing
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To: robert b furman who wrote (78248)10/15/2025 9:58:27 AM
From: Sean Collett1 Recommendation

Recommended By
E_K_S

  Read Replies (2) of 78430
 
Hi Bob,

Took a bit of a deeper dive into $NOG. They are raising cash by issuing debt and as in 2024 & 2022 the FCF was positive after you account for debt borrowing/repayment. This is how they're funding their common buyback & dividend.

The convertible debt they issued a few years ago has grown as it looks like they issued more recently to pay down their bank facility. Conversion price is ~$36.87 so unlikely to trigger but dilution is a risk and would look like, just looking at share counts, some front-door buybacks here. In 2023 they raised $514M from issuing common stock as well. Diluted share count has been on rise since 2022 and while down a bit this year still not enough to make me trust what I would see here. On May 23rd, 2024 the board approved the company to increase the authorized common share count from 135,000,000 to 270,000,000.

If I use a historical multiple of ~3.5x I get a share value of around $29.38/s and if I bump it up to 4x $NOG is maybe around $37.47/s.

$1,185.11M is due between bank debt & senior bonds between now and 2028. Risk is increasing so I would think they may be issuing new higher cost bonds and/or more convertibles to compensate. IMO probably better preserving cash instead of paying $0.45/s for the common dividend. Their last 10-K had them still planning on $1.05B - $1.2B in CAPEX for 2025.

Perhaps it is a decent buy if oil recovers but balance sheet isn't ideal.

Happy investing,
Sean
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