NORTHERN OIL & GAS, INC.NOG
NORTHERN OIL & GAS, INC. Fair Value Disclosure
FAIR VALUE
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The Company uses a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Financial Assets and Liabilities
As required, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels. The following
tables set forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of December 31, 2025 and 2024.
| Fair Value Measurements at | |||||||||||||||||||||||||||||
| December 31, 2025 Using | |||||||||||||||||||||||||||||
| (In thousands) | (Level 1) | (Level 2) | (Level 3) | Effect of Counterparty Netting | Total | ||||||||||||||||||||||||
| Commodity Derivatives – Current Assets | $ | — | $ | 224,726 | $ | — | $ | (58,100) | $ | 166,626 | |||||||||||||||||||
| Commodity Derivatives – Noncurrent Assets | — | 30,986 | — | (27,950) | 3,036 | ||||||||||||||||||||||||
| Commodity Derivatives – Current Liabilities | — | (58,100) | — | 58,100 | — | ||||||||||||||||||||||||
| Commodity Derivatives – Noncurrent Liabilities | — | (75,697) | — | 27,950 | (47,747) | ||||||||||||||||||||||||
| Interest Rate Derivatives – Current Assets | — | 52 | — | — | 52 | ||||||||||||||||||||||||
| Interest Rate Derivatives – Noncurrent Liabilities | — | (355) | — | — | (355) | ||||||||||||||||||||||||
| Total | $ | — | $ | 121,612 | $ | — | $ | — | $ | 121,612 | |||||||||||||||||||
| Fair Value Measurements at | |||||||||||||||||||||||||||||
| December 31, 2024 Using | |||||||||||||||||||||||||||||
| (In thousands) | (Level 1) | (Level 2) | (Level 3) | Effect of Counterparty Netting | Total | ||||||||||||||||||||||||
| Commodity Derivatives – Current Assets | $ | — | $ | 124,977 | $ | — | $ | (78,612) | $ | 46,365 | |||||||||||||||||||
| Commodity Derivatives – Noncurrent Assets | — | 60,874 | — | (51,145) | 9,729 | ||||||||||||||||||||||||
| Commodity Derivatives – Current Liabilities | — | (98,527) | — | 78,612 | (19,915) | ||||||||||||||||||||||||
| Commodity Derivatives – Noncurrent Liabilities | — | (144,751) | — | 51,145 | (93,606) | ||||||||||||||||||||||||
| Interest Rate Derivatives – Current Assets | — | 160 | — | — | 160 | ||||||||||||||||||||||||
| Interest Rate Derivatives – Noncurrent Assets | — | 103 | — | — | 103 | ||||||||||||||||||||||||
| Total | $ | — | $ | (57,164) | $ | — | $ | — | $ | (57,164) | |||||||||||||||||||
Commodity Derivatives. The Level 2 instruments presented in the tables above include commodity derivative instruments (see Note 12). The fair value of the Company’s commodity derivative instruments is determined based upon future prices, volatility and time to maturity, among other things. Counterparty statements are utilized to determine the value of the commodity derivative instruments and are reviewed and corroborated using various methodologies and significant observable inputs. The Company’s and the counterparties’ nonperformance risk is evaluated. The fair value of commodity derivative contracts is reflected in the balance sheets. The current derivative asset and liability amounts represent the fair values expected to be settled in the subsequent twelve months.
Interest Rate Derivatives. The Level 2 instruments presented in the tables above include interest rate derivative instruments (see Note 12). The fair value of the Company’s interest rate derivative instruments is determined based upon contracted notional amounts, active market-quoted interest yield curves, and time to maturity, among other things. Counterparty statements are utilized to determine the value of the interest rate derivative instruments and are reviewed and corroborated using various methodologies and significant observable inputs. The Company’s and the counterparties’ nonperformance risk is evaluated. The fair value of interest rate derivative contracts is reflected in the balance sheets. The current interest rate derivative asset balances represent the fair values expected to be settled in the subsequent twelve months.
Fair Value of Other Financial Instruments
The carrying amounts of cash equivalents, receivables and payables approximate fair value due to the highly liquid or short-term nature of these instruments.
Long-term debt is not presented at fair value in the balance sheets, as it is recorded at carrying value, net of unamortized debt issuance costs and unamortized premium (see Note 4). The fair value of the Company’s Senior Notes due 2028, Convertible
Notes due 2029, Senior Notes due 2031 and Senior Notes due 2033 was $20.3 million, $675.4 million, $505.0 million, and $724.1 million respectively, at December 31, 2025. These fair values are based on market quotes that represent Level 2 inputs.
There is no active market for the Revolving Credit Facility. The recorded value of the Revolving Credit Facility approximates its fair value because of its floating rate structure based on the SOFR spread, secured interest, and the Company’s borrowing base utilization. The fair value measurement for the Revolving Credit Facility represents Level 2 inputs.
Non-Financial Assets and Liabilities
The Company estimates asset retirement obligations pursuant to the relevant accounting standards. The initial measurement of AROs at fair value is calculated using discounted cash flow techniques and based on internal estimates of future retirement costs associated with oil and natural gas properties. Given the unobservable nature of the inputs, including plugging costs and reserve lives, the initial measurement of the AROs liability is deemed to use Level 3 inputs. AROs incurred and acquired during the year ended December 31, 2025 were approximately $5.5 million.
The Company issued common stock warrants in January 2022 as a part of the purchase consideration for certain oil and natural gas properties acquired by the Company. Upon issuance, the Warrants granted holders the right to purchase 1,939,998 shares of the Company’s common stock at an exercise price equal to $28.30 per share (subject to certain adjustments), generally exercisable from April 27, 2022 until January 27, 2029. A portion of the Warrants were surrendered and cancelled in March 2023, and the remaining Warrants were surrendered and cancelled in March 2024, in each case in exchange for shares of common stock. See Note 6. The fair value of the Warrants consideration was determined by utilizing an Option Pricing Model. These non-recurring fair value measurements are primarily determined using inputs that are observable or can be corroborated by observable market data (Level 2 inputs).
For all transactions accounted for as business combinations, the Company uses the acquisition method of accounting. In those instances, the Company conducts assessments of net assets acquired and recognizes amounts for identifiable assets acquired and liabilities assumed at the estimated acquisition date fair values, while transaction costs associated with the acquisitions are expensed as incurred. The Company makes various assumptions in estimating the fair values of assets acquired and liabilities assumed. The most significant assumptions relate to the estimated fair value of oil and natural gas properties. The fair value of these properties is measured using a discounted cash flow model that converts future cash flows to a single discounted amount. These assumptions represent Level 3 inputs under the fair value hierarchy. See Note 3 for additional discussion of the Company’s acquisitions of oil and natural gas properties accounted for under the business combination method of accounting during the years ended December 31, 2025 and 2024, and discussion of the significant inputs to the valuations.
Though the Company believes the methods used to estimate fair value are consistent with those used by other market participants, the use of other methods or assumptions could result in a different estimate of fair value. There were no transfers of financial assets or liabilities between Level 1, Level 2 or Level 3 inputs for the years ended December 31, 2025 and 2024.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2022 | Feb 24, 2023 | |
| 2020 | Mar 12, 2021 | |
| 2019 | Mar 12, 2020 | |
| 2018 | Mar 18, 2019 | |
| 2017 | Feb 23, 2018 | |
| 2016 | Mar 2, 2017 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.