Our $28 target price reflects a ~3.5x multiple on our 2026E DACF, broadly in line with similar SMID cap E&P target multiples. We assign this multiple in line with historical averages as well as relative valuation among peers and the wider industry, all of which have a correlative function against commodity pricing expectations.

We designate NOG as High Risk based on Citi's quant model (higher volatility) and the company's lower trading liquidity/market cap among broader E&P peers.


The primary risk to owning an E&P stock is the potential volatility in oil and/or natural gas prices. Operational execution is also vital as the inability of the company to meet production, cost, or capital spending targets could have a material impact on the stock. In addition, we highlight the following factors that relate specifically to Northern Oil and Gas.


Lack of Direct Development Control – Given its primary focus on non-operated investments, NOG does not have direct control over the development decisions on its acreage (pace of development spending, project queue, etc.). While non-op owners have certain mechanisms to mitigate these risks (including the ability to non-consent on wells, or attempt to purchase other owners’ interest in more favorable wells), development control is typically less than a direct operator.


Acquisition Market Opportunities – NOG’s current investment strategy involves capitalizing on non-op acquisition opportunities, given industry shifts leading some operators to focus on directly operated free cash flow generation. NOG’s strategy relies partly on being able to acquire at advantaged prices—changes in the A&D market that reduce the lineup of potential acquisitions or impact pricing thereof could cause the stock to underperform E&P peers. Similarly, the ability to access capital will also be important in conjunction with those A&D opportunities.


Smaller Market Cap/Trading Liquidity – While not the smallest within our broader Upstream Energy coverage, NOG currently has a smaller market cap and lower notional trading liquidity compared to larger-cap Energy companies. Lower trading liquidity could result in higher price volatility and limit certain investors from taking or exiting positions.


Williston Basin Differentials – With the majority of the company’s production coming from the Williston, NOG is exposed to basin oil differentials, particularly as regulatory risks around the Dakota Access Pipeline (DAPL) play out. A material widening of crude differentials could cause the stock to underperform.


If the impact from the above risks turns out to be greater than we expect, the shares could fail to achieve our target price.