Northern Oil and Gas (NOG) on 1/14 traded over 5200 calls which is 20X daily average with 1000 June $42 calls bought and 2500 June $45 calls bought. NOG also traded another 1000 March $42 calls where 2000 have been bought recently. NOG has formed a monthly flag pattern in this $34/$44 range and above would move into a massive volume pocket for a stock that traded above $300 back in 2011. NOG made its largest acquisition to date last year purchasing 20% interest in XCL assets for $527.5M.

NOG is an independent energy company engaged in the acquisition, exploration, development and production of oil and natural gas properties in the United States, primarily in the Williston Basin, the Permian Basin and the Appalachian Basin. Its primary focus is investing in non-operated minority working and mineral interests in oil and gas properties, with a core area of focus in three premier basins within the United States. As a non-operator, NOG is able to diversify investment exposure by participating in a large number of gross wells, as well as entering into additional project areas by partnering with numerous experienced operating partners or pursuing value enhancing acquisitions. Permian is 46% of wells, Williston 40% and Appalachian at 14%.

NOG’s non operator model is a flexible and moderated approach to upstream investment, offering capital discipline, cost control & protection from downside exposure. NOG is unburdened by the need to have large contiguous acreage to support on-the-ground infrastructure.

NOG has a market cap of $4.11B and trades 7.9X Earnings, 3.7X EBITDA and 36.35X FCF with a near 4% dividend yield. NOG has generated $468M in FCF over the last twelve months and has been returning capital to shareholders. NOG has a strong balance sheet with Debt/EBITDA less than 1.2X. NOG’s ROCE of 21.8% is also impressive. Production breakdown last quarter was 58% Oil and 42% gas. NOG’s model is allowing for strong production growth along with declining and peer-leading cash G&A costs. A ~2.5x increase in NOG’s total proved reserves over the last 5 years, driven by its acquisition activity is expected to support durable FCF generation and de-risk the future development pipeline. Non-Ops have nearly unlimited scale benefits from growth, without the dis-synergies that come from operational diversity for multi-basin operators. Production per employee has roughly tripled over the last six years. Private equity players are in a divesting cycle and public companies are in a consolidation phase. This provides NOG episodic access to high quality, low break-even growth assets. NOG recently denied reports it was looking to acquire Granite Ridge.