EX-99.3 4 exhibit993-nogveritasprofo.htm EX-99.3

Exhibit 99.3

UNAUDITED PRO FORMA FINANCIAL STATEMENTS AND OTHER DATA

On January 27, 2022 (the “Closing Date”), Northern Oil and Gas, Inc. (the “Company”) completed its acquisition (the “Veritas Acquisition”) of non-operated oil and gas properties, interests and related assets located in the Permian Basin pursuant to that certain purchase and sale agreement (the “PSA”), dated as of November 16, 2021, by and among Veritas TM Resources, LLC, Veritas Permian Resources, LLC, Veritas Lone Star Resources, LLC, and Veritas MOC Resources, LLC (collectively, “Veritas”) and the Company. In accordance with the PSA, the Company paid consideration to Veritas in respect of the acquired assets consisting of $411.6 million in cash (which includes a $40.7 million cash deposit previously paid by the Company upon the execution of the PSA and held in escrow in accordance with the terms of the PSA) and warrants to purchase 1,939,998 shares of the Company’s common stock, par value $0.001 per share, at an exercise price equal to $28.30 per share with a preliminary fair value of $17.9 million. The cash portion of the consideration is net of preliminary and customary purchase price adjustments and remains subject to final post-closing settlement between the Company and Veritas.

The following unaudited pro forma financial statements have been prepared in accordance with Article 11 of Regulation S-X, Pro Forma Financial Information, as amended by the final rule, Release No. 33-10786 (“Article 11”). In accordance with Article 11, the historical financial statements may be adjusted in the unaudited pro forma financial statements to give pro forma effect to provide for “Transaction Accounting Adjustments” reflecting only the application of required accounting for the transaction. The Company has not included any Management Adjustments as defined under Release No. 33-10786.

The following unaudited pro forma financial statements present (i) our unaudited pro forma balance sheet as of December 31, 2021 and (ii) our unaudited pro forma statement of operations for the year ended December 31, 2021. The unaudited pro forma balance sheet has been developed by applying pro forma adjustments to our historical balance sheet to give effect to the Veritas Acquisition as if it had occurred on December 31, 2021. The unaudited pro forma statement of operations have been developed by applying pro forma adjustments to our historical statement of operations to give effect to the Veritas Acquisition as if it had occurred on January 1, 2021.

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NORTHERN OIL AND GAS, INC.

UNAUDITED PRO FORMA BALANCE SHEET

for the Year Ended December 31, 2021

(in thousands)

			Historical Northern Oil and Gas, Inc.						Historical Veritas Acquisition						Veritas Acquisition Pro Forma Adjustments						Notes						Financing Pro Forma Adjustments						Notes						Pro Forma Combined
Assets
Current Assets:
Cash and Cash Equivalents			$	9,519					$	9,589					$	(9,589)					(a)						$	370,947					(c)						$	2,542
															(370,947)						(a)
															(6,977)						(b)
Accounts Receivable, Net			193,554						32,606						(32,606)						(a)																		193,554
Advances to Operators			6,319						—						—																								6,319
Prepaid Expenses and Other			3,417						1,268						(1,268)						(a)																		3,417
Derivative Instruments			2,519						—						—																								2,519
Total Current Assets			215,328						43,463						(421,387)												370,947												208,351
Oil and Natural Gas Properties, Full Cost Method of Accounting:
Proved			5,034,769						281,340						124,012						(a)						—												5,440,121
Unproved			24,998						2,403						23,859						(a)						—												51,260
Other Property Equipment			2,616						—						—												—												2,616
Less Accumulated Depreciation, Depletion, Amortization and Impairment			(3,809,042)						(77,328)						77,328						(a)						—												(3,809,042)
Total Property and Equipment, Net			1,253,341						206,415						225,199												—												1,684,955
Other Assets:
Derivative Instruments			1,863						—						—												—												1,863
Acquisition Deposit			40,650						—						(40,650)						(a)						—												—
Other Noncurrent Assets, Net			11,683						—						—												—												11,683
Total Assets			$	1,522,865					$	249,878					$	(236,838)											$	370,947											$	1,906,852
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts Payable			$	65,464					$	—					$	—											$	—											$	65,464
Accrued Liabilities			105,590						77,294						(77,294)						(a)						—												105,590
Accrued Interest			20,498						—						—												—												20,498
Derivative Instruments			134,283						—						—												—												134,283
Other Current Liabilities			1,722						—						—												—												1,722
Total Current Liabilities			327,557						77,294						(77,294)												—												327,557
Long-Term Liabilities:
Long-term Debt, Net			803,437						79,832						(79,832)						(a)						370,947						(c)						1,174,384
Derivative Instruments			147,762						—						—												—												147,762
Asset Retirement Obligations			25,865						2,905						(758)						(a)						—												28,012
Other Noncurrent Liabilities			3,110						—						—												—												3,110
Total Liabilities			1,307,731						160,031						(157,884)												370,947												1,680,825
Commitments and Contingencies
Stockholders’ Equity (Deficit):
Preferred Stock, Par Value $.001; 5,000,000 Authorized; 2,218,732 Shares Outstanding at 12/31/2021			2						—						—												—												2
Common Stock, Par Value $.001; 135,000,000 Authorized; 77,341,921 Shares Outstanding at 12/31/2021			479						—						—												—												479
Members Equity			—						89,847						(89,847)						(a)						—												—
Additional Paid-in Capital			1,988,649						—						17,870						(a)						—												2,006,519
Retained Deficit			(1,773,996)						—						(6,977)						(a)						—												(1,780,973)
Total Stockholders’ Equity (Deficit)			215,134						89,847						(78,954)												—												226,027
Total Liabilities and Stockholders’ Equity (Deficit)			$	1,522,865					$	249,878					$	(236,838)											$	370,947											$	1,906,852

See notes to the unaudited pro forma financial information.

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NORTHERN OIL AND GAS, INC.

UNAUDITED PRO FORMA STATEMENT OF OPERATIONS

for the Year Ended December 31, 2021

(in thousands)

			Historical Northern Oil and Gas, Inc.						Historical Veritas Acquisition						Veritas Acquisition Pro Forma Adjustments						Notes						Financing Pro Forma Adjustments						Notes						Pro Forma Combined
Revenues
Oil and Gas Sales			$	975,089					$	179,642					$	—											$	—											$	1,154,731
Loss on Derivative Instruments, Net			(478,193)						—						(55,688)						(d)						—												(533,881)
Other Revenue			3						—						—												—												3
Total Revenues			496,899						179,642						(55,688)												—												620,853
Operating Expenses
Production Expenses			170,817						25,812						—												—												196,629
Production Taxes			76,954						13,073						—												—												90,027
General and Administrative Expenses			30,341						62,361						6,977						(e)						—												41,794
															(57,885)						(i)						—												—
Depletion, Depreciation, Amortization, and Accretion			140,828						39,285						11,915						(f)						—												192,178
			—						—						150						(g)						—												—
Total Expenses			418,940						140,531						(38,843)												—												520,628
Income (Loss) From Operations			77,959						39,111						(16,845)												—												100,225
Other Income and Expense
Interest Expense, Net of Capitalization			(59,020)						(997)						—												(11,200)						(h)						(71,217)
Gain (Loss) on Unsettled Interest Rate Derivatives			1,043						—						—												—												1,043
Loss on the Extinguishment of Debt			(13,087)						—						—												—												(13,087)
Contingent Consideration Loss			(292)						—						—												—												(292)
Gain (Loss) on Derivative Instruments, Net			—						(55,688)						55,688						(d)						—												—
Other Income (Expense)			(9)						39						—												—												30
Total Other Income (Expense)			(71,365)						(56,646)						55,688												(11,200)												(83,523)
Income (Loss) Before Taxes			6,594						(17,535)						38,843												(11,200)												16,702
Income Tax Expense			233						6,556						—												—												6,789
Net Income (Loss)			$	6,361					$	(24,091)					$	38,843											$	(11,200)											$	9,913
Cumulative Preferred Stock Dividend			(14,761)						—						—												—												(14,761)
Net Loss Attributable to Common Shareholders			$	(8,400)					$	(24,091)					$	38,843											$	(11,200)											$	(4,848)
Net Loss Per Common Share - Basic			$	(0.13)					$	—					$	—											$	—											$	(0.16)
Net Loss Per Common Share - Diluted			$	(0.13)					$	—					$	—											$	—											$	(0.16)
Weighted Average Shares Outstanding - Basic			62,989,543						—						—												—												62,989,543
Weighted Average Shares Outstanding - Diluted			62,989,543						—						—												—												62,989,543

See notes to the unaudited pro forma financial information.

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Note 1. Basis of Pro Forma Presentation

These financial statements present our unaudited pro forma balance sheet as of December 31, 2021 and our unaudited pro forma statement of operations for the year ended December 31, 2021. These unaudited statements have been prepared in accordance with Article 11 and have been developed by applying pro forma adjustments to our historical financial statements to give effect to the Veritas Acquisition.

The unaudited pro forma financial statements are for illustrative and informational purposes only and are not intended to represent or be indicative of what our results of operations would have been had the Veritas Acquisition and related financing for the transaction occurred as of or on the dates indicated. The unaudited pro forma financial statements also should not be considered representative of our future results of operations.

The pro forma adjustments related to the Veritas Acquisition and related financing for the transaction are based on preliminary estimates, accounting judgments and currently available information and assumptions that management believes are reasonable and are subject to change. Accordingly, these pro forma adjustments are preliminary and have been made solely for the purpose of providing these unaudited pro forma financial statements. Differences between these preliminary estimates and the final acquisition accounting may occur and these differences could be material. The differences, if any, could have a material impact on the accompanying unaudited pro forma financial statements and our future results of operations.

The unaudited pro forma financial statements have been derived from and should be read together with:

			•						the accompanying notes to the unaudited pro forma financial statements;

			•						our historical financial statements and the related notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31 2021; and

			•						the historical financial statements and related notes for the assets acquired from Veritas for the year ended December 31, 2021.

The pro forma basic and diluted earnings per share amounts presented in the unaudited pro forma statement of operations are based on the weighted average number of the Company’s shares outstanding, assuming the Veritas Acquisition occurred at the beginning of the earliest period presented.

The pro forma adjustments related to the purchase price allocation of the Veritas Acquisition are preliminary and are subject to revisions as additional information becomes available. Revisions to the preliminary purchase price allocation may have a significant impact on the pro forma amounts. The pro forma adjustments related to the Veritas Acquisition reflect the fair values of the assets acquired as of January 27, 2022 (the closing date of the transaction). The pro forma adjustments do not necessarily reflect the fair values that would have been recorded if the acquisition had occurred on January 1, 2021.

Note 2. Estimated Consideration and Preliminary Purchase Price Allocation

The Company has performed a preliminary valuation analysis of the fair value of the acquired assets. Using the total consideration for the Veritas Acquisition, the Company has estimated the allocation to such assets. The following table summarizes the allocation of the preliminary purchase price as of the transaction’s closing date, January 27, 2022:

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(In thousands)
Proved Properties			$	405,351
Unproved Properties			26,262
Total Assets Acquired			431,613
Asset Retirement Obligations Assumed			(2,146)
Net Assets Acquired			$	429,467
Cash Purchase Consideration			$	411,597
Fair Value of Warrants Issued			17,870
Total Estimated Purchase Price			$	429,467

This preliminary purchase price allocation has been used to prepare the transaction accounting adjustments in the pro forma balance sheet and statement of operations. The final purchase price allocation will be determined when the Company has completed the detailed valuations and necessary calculations. The final allocation is expected to be completed when the Company files its report on Form 10-K for the year ended December 31, 2022 and could differ materially from the preliminary allocation used in the transaction accounting adjustments. The final allocation may include changes in fair values of proved and unproved properties.

The pro forma financial statements do not include any pro forma income tax adjustments, due to the taxable loss position and a full valuation allowance on the deferred tax assets.

Note 3. Pro Forma Adjustments and Assumptions

The accompanying unaudited pro forma financial statements reflect the following pro forma adjustments:

(a)Reflects the consideration transferred and the preliminary purchase price allocation for the Veritas Acquisition consisting of: i.the total cash consideration paid to Veritas of $411.6 million, which consists of a cash payment of $370.9 million and the release of the $40.7 million acquisition deposit recorded for the Veritas Acquisition as of December 31, 2021, which was released to Veritas at closing; ii.the $17.9 million fair value of the warrants to purchase 1,939,998 shares of the Company’s common stock which were issued as part of the purchase consideration and determined to be equity-classified; iii.the elimination of historical assets, liabilities, and members’ capital related to the Veritas Acquisition that we are not acquiring or assuming; iv.the recognition of the incremental fair value of the acquired Veritas proved and unproved oil and natural gas properties based on the preliminary allocation of the purchase price to these properties of $431.6  million; and v.the recognition of the incremental fair value of the assumed Veritas asset retirement obligations on the proved properties acquired based on the preliminary allocation of the purchase price to the assumed liabilities of $2.1 million.

(b)			Represents the cash payment and retained earnings impact for the transaction costs incurred in conjunction with the Veritas Acquisition that have not yet been recognized in the historical period.

(c)			Represents additional borrowings of $370.9 million under the Company’s existing revolving credit facility which were drawn to fund the cash payment associated with the acquisition of Veritas.

(d)			Represents the adjustment to conform the “Gain (Loss) on Derivative Instruments, Net” of historical Veritas, who had previously elected presentation through “Other Income and Expense,” to present through the historical Northern Oil and Gas election as “Revenue”.

(e)			Represents the expense recognized for incremental transaction costs incurred in conjunction with the Veritas Acquisition.

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(f)			Represents the increase in depletion expense computed on a unit of production basis following the preliminary purchase price allocation to proved and unproved oil and natural gas properties, as if the Veritas Acquisition was consummated on January 1, 2021.

(g)			Represents the increase in accretion expense attributable to the assumed Veritas asset retirement obligations on the proved properties acquired based on the preliminary purchase price allocation of $2.1 million, as if the Veritas Acquisition was consummated on January 1, 2021.

(h)			Represents the increase to interest expense resulting from the interest on the additional borrowings under the Company’s existing revolving credit facility that were used to finance the acquisition based on an assumed combined interest rate of 3.02%, which reflects the Company’s current estimated variable rate under the interest rate provisions of the revolving credit facility. A 1/8 of a percent point increase or decrease in the benchmark rate would result in a change in interest expense of approximately $0.5 million for the year ended December 31, 2021.

(i)			Represents an expense related to the Class B Units profit-sharing arrangement resulting from the entrance into the PSA, which is included in general and administrative expense. This is a non-recurring expense and therefor was eliminated as a pro forma adjustment.

Note 3. Earnings per Share

The pro forma financial statements reflect a net loss attributable to common shareholders and therefore the 1,939,998 shares of the Company’s common stock underlying the warrants issued as purchase consideration were excluded from the computation of pro forma diluted net loss as including them would have had an anti-dilutive effect.

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Supplemental Pro Forma Combined Oil and Natural Gas

Reserve and Standardized Measure Information (Unaudited)

The following unaudited supplemental pro forma oil and natural gas reserve tables present how the combined oil and natural gas reserves and standardized measure information of the Company and Veritas Acquisition may have appeared had the Veritas Acquisition occurred on January 1, 2021. The supplemental pro forma combined oil and natural gas reserves and standardized measure information are for illustrative purposes only. Numerous uncertainties are inherent in estimating quantities and values of proved reserves including future rates of production, exploration and development expenditures, commodity prices, and service costs which may affect the reserve volumes attributable to the Properties and the standardized measure of discounted future net cash flows.

The following tables provide a summary of the changes in estimated proved reserves for the year ended December 31, 2021, as well as pro forma proved developed and proved undeveloped reserves as of the beginning and end of the year, giving effect to the Veritas Acquisition as if it had occurred on January 1, 2021. The pro forma standardized measure does not include future income taxes attributable to Veritas because it is considered a pass-through entity for tax purposes.

Estimated Pro Forma Combined Quantities of Proved Reserves

			Natural Gas (mcf)
			Historical Northern Oil and Gas						Historical Veritas						Pro Forma Combined
(In thousands)
Proved Developed and Undeveloped Reserves at December 31, 2020			159,641						29,170						188,811
Revisions of Previous Estimates			89,115						2,330						91,445
Extensions, Discoveries, and Other Additions			32,432						2,833						35,265
Purchases of Minerals in Place			700,610						15,780						716,390
Production			(44,074)						(6,657)						(50,731)
Proved Developed and Undeveloped Reserves at December 31, 2021			937,724						43,456						981,180

			Oil (bbls)
			Historical Northern Oil and Gas						Historical Veritas						Pro Forma Combined
(In thousands)
Proved Developed and Undeveloped Reserves at December 31, 2020			96,025						11,559						107,584
Revisions of Previous Estimates			19,914						(751)						19,163
Extensions, Discoveries, and Other Additions			12,759						1,094						13,853
Purchases of Minerals in Place			14,985						4,718						19,703
Production			(12,288)						(2,646)						(14,934)
Proved Developed and Undeveloped Reserves at December 31, 2021			131,395						13,974						145,369

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			As of December 31, 2021
			Historical Northern Oil and Gas						Historical Veritas						Pro Forma Combined
(In thousands)
Proved Reserves
Developed:
Natural Gas (Mmcf)			498,558						34,993						533,551
Oil (Mbbl)			87,505						12,109						99,614
Undeveloped:
Natural Gas (Mmcf)			439,165						8,463						447,628
Oil (Mbbl)			43,890						1,865						45,755
Total Proved Reserves
(MBOE)			287,682						21,216						308,898

Pro Forma Combined Standardized Measure of Discounted Future Net Cash Flows

			As of December 31, 2021
(In thousands)			Historical Northern Oil and Gas						Historical Veritas						Pro Forma Combined
Future Cash Inflows			$	11,339,861					$	856,496					$	12,196,357
Future Production Costs			(4,213,186)						(268,842)						(4,482,028)
Future Development Costs			(932,303)						(13,205)						(945,685)
Future Income Tax Expense			(947,303)						—						(947,303)
Future Net Cash Flows			5,246,892						574,449						5,821,341
10% Annual Discount for Estimated Timing of Cash Flows			(2,356,783)						(201,671)						(2,558,454)
Standardized Measure of Discounted Future Net Cash Flows			$	2,890,109					$	372,778					$	3,262,887

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Pro Forma Combined Changes in the Standardized Measure of Discounted Future Net Cash Flows

			Year Ended December 31, 2021
(In thousands)			Historical Northern Oil and Gas						Historical Veritas						Pro Forma Combined
Standardized Measure, Beginning of Period			$	712,011					$	127,400					$	839,411
Sale of Oil and Natural Gas Produced, Net of Production Costs			(727,317)						(140,853)						(868,170)
Extensions and Discoveries			258,399						31,282						289,681
Previously Estimated Development Cost Incurred During the Period			85,526						—						85,526
Net Change of Prices and Production Costs			1,366,197						151,609						1,517,806
Change in Future Development Costs			(103,806)						74,120						(29,686)
Revisions of Quantity and Timing Estimates			607,774						(6,090)						601,684
Accretion of Discount			71,254						12,740						83,994
Change in Income Taxes			(450,455)						—						(450,455)
Purchases of Minerals in Place			940,910						132,322						1,073,232
Other			129,615						(9,752)						119,863
Standardized Measure, End of Period			$	2,890,109					$	372,778					$	3,262,886