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Output Growth to Aid Northern Oil and Gas (NOG) Q3 Earnings

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We expect Northern Oil and Gas, Inc. (NOG - Free Report) to beat expectations when it reports third-quarter 2018 results after the close of trading on Thursday, Nov 8. The current Zacks Consensus Estimate for the quarter under review is a profit of 12 cents per share on revenues of $119.1 million.

In the preceding three-month period, the Minnetonka, MN-based non-operator explorer and producer beat the consensus mark by 12.5% on strong production growth and favorable oil prices.

As far as earnings surprises are concerned, Bakken-focused producer is on a firm footing, having gone past the Zacks Consensus Estimate in three of the last four reports. This is depicted in the graph below:

Investors are keeping their fingers crossed and hoping that the upstream player can continue winning ways by surpassing earnings estimate this time around too. Thankfully, our model indicates that Northern Oil and Gas might beat on earnings in the third quarter.

Let’s delve deeper and find out the factors impacting the results.

Why a Likely Positive Surprise?

Our proven model shows that Northern Oil and Gas is likely to beat the Zacks Consensus Estimate this quarter as it has the right combination of two key ingredients. A stock needs to have both 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 +6.52%. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise.

Zacks Rank: Northern Oil and Gas currently has a Zacks Rank #2 (Buy), which, when combined with a positive ESP, makes us confident of earnings beat. 

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.

What is Driving the Better-Than-Expected Earnings?

The increase in output, coupled with the surge in oil prices, should lead to solid earnings growth.

With fundamentals pointing to a tighter market, the Zacks Consensus Estimate for the average sales price for crude oil in third quarter 2018 is $63 per barrel, up from $42.39 a year earlier. Importantly, Northern Oil and Gas’ output is heavily oil-weighted with crude making up approximately 85% of the total production. Therefore, the company’s ‘oilier’ nature of its volume mix positions it to benefit from strengthening oil prices.

Further, our model estimates third-quarter production volumes to average 24,664 barrels of oil equivalent per day (BOE/d), improving from 21,046 BOE/d in the second quarter and 61% above the year-ago output of 15,321 BOE/d.

Consequently, the Zacks Consensus Estimate for Northern Oil and Gas’ third-quarter earnings per share is pegged at 12 cents, 300% higher than the reported figure of 4 cents in the corresponding quarter of 2017.

Other Stocks to Consider

Northern Oil and Gas is not the only energy company looking up this earnings season. Here are some firms from the space you may want to consider on the basis of our model, which shows that they have the right combination of elements to post earnings beat this quarter:

TC PipeLines, LP (TCP - Free Report) has an Earnings ESP of +13.29% and a Zacks Rank #1 (Strong Buy). The partnership is anticipated to release earnings on Nov 9. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Helmerich & Payne, Inc. (HP - Free Report) has an Earnings ESP of +8.92% and a Zacks Rank #2. The company is expected to release earnings on Nov 16.

Cimarex Energy Co. (XEC - Free Report) has an Earnings ESP of +0.55% and a Zacks Rank #2. The company is anticipated to release earnings on Nov 6.

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