2026 is starting off with fresh uncertainty regarding the situation in Venezuela and global oil markets. The oil-rich nation, with larger reserves than Saudi Arabia, has been producing nearly 1 million barrels per day, a drop in the bucket of the global market. That's also a far cry from its production peak of over 3 million barrels per day.
The real question, following the U.S. removal of Venezuela's President Maduro, is what happens next. So far, the oil market itself hasn't moved much. It's easy to see why, given Venezuela's outdated infrastructure and a 12-to-18-month time frame before exports can rise meaningfully. For energy users who need oil today, it's not coming from Venezuela.
Energy investors who want to look stateside should look at one producer in particular that looks attractive thanks to its high yield and business model that keeps its costs lower than traditional oil producers.
Image source: Getty Images.
Northern Oil and Gas: A valuation and income powerhouse
As of the end of Q3 2025, Northern Oil and Gas (NOG 3.39%) produced over 131,000 barrels per day, with a mix of 55% oil and 45% gas. That's an 8% increase from the same quarter in 2024.
NYSE: NOG
Key Data Points
With lackluster energy prices, however, overall revenue was down 9% in the quarter despite increased production. And the market has punished shares with a brutal 45% drop in the past 12 months.
However, shares have largely held to the $20 range, just above where shares trade as I write this. And at current prices, the stock is attractively valued, with a price-to-earnings (P/E) ratio of 11.4. That's less than half the 31 times earnings that investors are paying for the S&P 500 (^GSPC 1.52%).
Why the market disconnect? While earnings appear strong and it reported revenue of $2.2 billion over the past 12 months as of its latest report, Northern Oil & Gas reported free cash flow of negative $177 million. Over time, that could prove a threat to valuation, as it could mean the company reports losses -- or potentially reduces its dividend.
However, while energy prices have been lackluster, the delay in new production from Venezuela likely means that oil prices won't go too much lower anytime soon.
Today's investors could see more upside as capital flows into the energy space. More importantly, investors in Northern Oil and Gas will be well paid to wait, thanks to the big 8.2% dividend yield that is more than twice the 3.2% from oil giant Chevron.
However, with a forward dividend payout of $1.80 per share in the next 12 months, and with prior 12-month earnings per share at $1.82, Northern Oil and Gas' dividend could be at risk unless earnings substantially improve. Increased oil production and higher oil prices could do just that.
But what makes Northern Oil and Gas an off-the-radar play now isn't just a hefty dividend yield. It's a business model that keeps costs down and gives me confidence that it can continue paying a big dividend.
Northern Oil and Gas' secret to rapid expansion
It's no secret that the energy space is capital intensive. It takes tremendous time, labor, materials, and infrastructure to find and develop energy assets.
For Northern Oil and Gas, however, the solution is simple: It doesn't take a majority ownership stake in projects.
By buying a minority stake in successful U.S. oil and gas wells, the company avoids the high start-up drilling costs associated with exploration. And this stake provides the owner of the well with capital to move from exploration to production.
Northern Oil and Gas has ownership stakes in over 11,000 wells across North America, a 15% increase over the past year.
The good news? This diversification provides coverage across the major oil-producing regions without being dependent on just one region or even one oilfield. The bad news? In the short term, the cost of acquiring wells eats into free cash flow.
The company is deliberately investing more than it generates in operations to grow production and reserves. That's a long-term strategy that should play out well, but is taking a toll on key metrics in the short term.
While free cash flow is currently negative and the hefty 8.2% dividend yield may be in peril if this trend continues, the company's ability to slow down its expansion could quickly turn that around.
A unique opportunity for income with growth potential
Since Venezuela swept back into the news, the stocks of oil and gas companies with exposure to the country have soared. But that may prove temporary, as it will take time, not to mention money, to get access to the country's reserves and pull the oil out of the ground.
In the meantime, domestic oil and gas producers fell on the news. Yet they're up and running now. That may be creating an opportunity for a slight edge in today's markets.
With an 8% dividend yield at today's oil prices, combined with a low-cost, lower-risk business model for a commodity investment, Northern Oil and Gas offers an unusual combination of asset growth and high income.
Ultimately, shares may see better returns than Venezuela oil stock plays that have already popped on short-term news. Northern Oil and Gas is producing now, and is seeing negative cash flow from its rapid expansion. Once the company slows its growth, profitability should soar -- without the geopolitical risks on the rise for other oil and gas plays. And that could mean better returns for investors chasing today's oil headlines.
