Northern Oil & Gas Inc.
08/09/2010 | Press release | Archived content
Northern Oil and Gas, Inc. Announces Record Second Quarter Earnings, Record Production Volumes Exceeding Previous Guidance and Provides Operations Update
WAYZATA, Minn., Aug. 9/PRNewswire-FirstCall/ -- Northern Oil and Gas, Inc. (NYSE/Amex: NOG) ("Northern Oil") today reported net income of $6,120,866, or $0.12per share, on total revenues of $16,231,773for the quarter ended June 30, 2010. Second quarter 2010 production volumes increased by 38% from the first quarter of 2010, exceeding previous expectations of 20% to 30% quarter-over-quarter production increases.
SECOND QUARTER 2010 RESULTS
Revenues from the sale of crude oil and natural gas, including hedge settlements, for the second quarter were $11,968,792, which represents a 46% increase compared to the first quarter of 2010 and a 426% increase compared to the second quarter of 2009. Total revenue, including the mark-to-market value of hedge instruments, for the second quarter were $16,231,773, which represents a 125% increase compared to the first quarter of 2010 and a 613% increase compared to the second quarter of 2009.
During the second quarter of 2010, Northern Oil's average realized price for crude oil was $70.98per barrel, which included a $1.83per barrel gain due to the settlement of crude oil derivative contracts. This compares to an average $68.70per barrel realized price in the first quarter of 2010, which included a $1.48per barrel loss due to the settlement of crude oil derivative contracts, and an average $52.36per barrel realized price in the second quarter of 2009, which included a $2.85per barrel loss due to the settlement of our crude derivative contracts.
Northern Oil's production volumes for the second quarter 2010 were a quarterly record of 172,663 barrels of oil equivalent ("BOE"), representing a 38% increase compared to the first quarter 2010 and a 235% increase compared to the second quarter 2009. This increase represents Northern Oil's tenth consecutive quarterly increase in production. Second quarter 2010 production consisted of 96% crude oil and approximately 4% associated natural gas. Northern Oil exited the second quarter of 2010 with production volumes of approximately 2,703 BOE per day. During the second quarter of 2010, production was added from approximately 3.89 net wells. Northern Oil has maintained a 100% drilling success rate in the WillistonBasin Bakken and Three Forkstrends since the company's inception.
Northern Oil's reported production expenses for the second quarter of 2010 were $561,427, or $3.30per BOE on an accrued basis, compared to $332,330, or $3.15per BOE, in the first quarter 2010 and $119,751, or $2.41per BOE, in the second quarter 2009.
Depletion expense for the second quarter of 2010 was $2,600,836, or $15.06per BOE, compared to $1,883,605, or $15.06per BOE, from the first quarter 2010 and $548,124, or $10.64per BOE, from the second quarter 2009.
Cash general and administrative (G&A) expenses for the second quarter of 2010 were $718,471, representing a 20% decrease compared to $893,671in the first quarter 2010.
Northern Oil's reported net income for the second quarter of 2010 was $6,120,866, or $0.12per diluted share, compared to net income of $1,559,630, or $0.04per diluted share, for the first quarter 2010 and net income of $418,396, or $0.01per diluted share, for the second quarter 2009.
Northern Oil's net income for the second quarter of 2010, excluding unrealized mark-to-market hedging gains, was $3,502,667, or $0.07per diluted share, compared to net income in the first quarter 2010 excluding unrealized mark-to-market hedging losses of $2,172,446, or $0.05per diluted share.
Northern Oil defines Adjusted EBITDA as net income before (i) interest expense, (ii) income taxes, (iii) depreciation, depletion and amortization, (iv) accretion of abandonment liability, (v) pre-tax unrealized gain and losses on commodity risk and (vii) non-cash expenses relating to share based payments recognized under ASC Topic 718. Adjusted EBITDA for the second quarter of 2010 was $9,677,386, or $0.19per diluted share, which represents a 51% increase over adjusted EBITDA of $6,417,708, or $0.14per diluted share, for the first quarter of 2010.
Net income excluding unrealized mark-to-market hedging gains and adjusted EBITDA are non-GAAP measures. A reconciliation of these measures to GAAP is included in our accompanying financial tables found later in this release.
In the six months ending June 30, 2010, Northern Oil's capital expenditures relating to exploration and development activities approximated $54 million.
OPERATIONS UPDATE AND INCREASED PRODUCTION GUIDANCE
Northern Oil is currently participating in the drilling or completion of an additional 63 gross Bakken or Three Forkswells and one gross Red Riverwell, for an aggregate of 7.24 net wells currently drilling or awaiting completion.
As of August 9, 2010, Northern Oil has spud approximately 13.85 net wells in 2010. Management reaffirms its previously announced guidance to spud approximately 18 net wells throughout 2010 and expects to increase production volumes by 30 to 35% in the third quarter of 2010 compared to previous guidance of 20 to 30% in the second quarter of 2010.
RECENT COMPLETION HIGHLIGHTS
The following table illustrates the most recent well completions in which Northern Oil participated.
DAYS
USED TO
INITIAL COMPUTE
COUNTY/ PRODUCTION AVG. AVG.
WELL NAME OPERATOR STATE WI BOEPD BOEPD BOEPD
SUMMERFIELD 15-15H AMERICAN DUNN, ND 5.10% 2,799 37 974
KUBIK TRUST
#1-18-19H ANSCHUTZ DUNN, ND 3.20% 2,441 60 861
JACK CVANCARA 19-18
#1H BRIGHAM MOUNTRAIL, ND 3.16% 5,035 30 1,800
LIFFRIG #29-20 1-H
TFS BRIGHAM MOUNTRAIL, ND 6.25% 2,477 84 654
GILLUND #1-32H CONTINENTAL DIVIDE, ND 9.62% 623 N/A N/A
JOANNE #1-7H CONTINENTAL DIVIDE, ND 37.58% 452 N/A N/A
SHONNA #2-15H CONTINENTAL DIVIDE, ND 14.84% 402 N/A N/A
UXBRIDGE #1-9H CONTINENTAL DIVIDE, ND 9.04% 795 N/A N/A
VAN HOOK #100-15H
TFS EOG RESOURCES MOUNTRAIL, ND 10.00% 1,585 100 931
RS-NELSON FARMS
2829H-1 HESS CORP MOUNTRAIL, ND 45.55% 751 N/A N/A
EDWARDS #5992 44-10 OASIS BURKE, ND 21.00% 612 88 315
BADGER #1-9H SLAWSON MOUNTRAIL, ND 28.38% 2,518 N/A N/A
COUGAR FEDERAL
#1-30H SLAWSON MOUNTRAIL, ND 3.81% 1,493 90 706
LUNKER FEDERAL
#1-30-4H SLAWSON MOUNTRAIL, ND 6.40% 2,186 N/A N/A
MACHETE #1-19H SLAWSON MOUNTRAIL, ND 14.74% 1,303 60 705
MINX #1-29H SLAWSON MOUNTRAIL, ND 22.00% 1,475 90 473
SNIPER FEDERAL
#1-6-7H SLAWSON MOUNTRAIL, ND 21.41% 3,784 24 1,426
STALLION #1-1-12H SLAWSON MOUNTRAIL, ND 22.41% 2,753 125 953
VANDAL #1-16H SLAWSON RICHLAND, MT 20.00% 478 57 271
SCHILKE #2-24H PEAK MCKENZIE, ND 5.24% 1,679 N/A N/A
UPDATED HEDGING ACTIVITY
The following table reflects the weighted average price of Northern Oil's open commodity derivative contracts as of July 31, 2010, by year with associated volumes.
Weighted Average Price
Of Open Commodity Contracts
Volumes Weighted
Year (Barrels) Average Price
2010 315,000 $ 80.36
2011 372,500 $ 80.32
2012 141,000 $ 79.39
MANAGEMENT COMMENT
Michael Reger, Northern Oil's Chief Executive Officer, commented, "Our strong production growth has been a result of continued improvement in well results, increased core acreage additions, robust drilling activity and growing efficiencies in this premier oil resource play. We continue to be impressed by the expanding size and scope of the Bakken and Three Forkstrend as well as the evolution in completion techniques. We would like to thank all of the operators with whom we have been fortunate enough to work for all of their efforts in advancing the collective success of all participants in this exciting and high return oil play. We remain well capitalized and positioned to continue to execute on our strategy of acquiring high quality non-operated interests and developing our substantial core Bakken position. Northern Oil would like to reaffirm its focus on the WillistonBasin Bakken play as we continue to exploit our leasing advantage and turn our high quality acreage to production."
SECOND QUARTER EARNINGS RELEASE TELECONFERENCE CALL
In conjunction with Northern Oil's release of its financial and operating results, investors, analysts and other interested parties are invited to listen to a conference call with management on Monday, August 9, 2010 at 10:00 a.m. Central Daylight Time. Details for the conference call are as follows:
Dial-In Number: (866) 261-2650 (US/Canada) and (703) 639-1221 (International) Conference ID: 1474933, Northern Oil and Gas Second Quarter Earnings Release
ABOUT NORTHERN OIL AND GAS
Northern Oil and Gas, Inc. is an exploration and production company based in Wayzata, Minnesota. Northern Oil's core area of focus is the WillistonBasin Bakken and Three Forkstrend in North Dakotaand Montana.
More information about Northern Oil and Gas, Inc. can be found at www.NorthernOil.com.
SAFE HARBOR
This press release contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933 (the "Securities Act") and the Securities Exchange Act of 1934 (the "Exchange Act"). All statements other than statements of historical facts included in this report regarding our financial position, business strategy, plans and objectives of management for future operations, industry conditions, and indebtedness covenant compliance are forward-looking statements. When used in this report, forward-looking statements are generally accompanied by terms or phrases such as "estimate," "project," "predict," "believe," "expect," "anticipate," "target," "plan," "intend," "seek," "goal," "will," "should," "may" or other words and similar expressions that convey the uncertainty of future events or outcomes. Items contemplating or making assumptions about, actual or potential future sales, market size, collaborations, and trends or operating results also constitute such forward-looking statements.
Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond our Company's control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following, general economic or industry conditions, nationally and/or in the communities in which our Company conducts business, changes in the interest rate environment, legislation or regulatory requirements, conditions of the securities markets, our ability to raise capital, changes in accounting principles, policies or guidelines, financial or political instability, acts of war or terrorism, other economic, competitive, governmental, regulatory and technical factors affecting our Company's operations, products, services and prices.
We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control.
FINANCIAL INFORMATION
ASSETS
June 30,
2010 December 31,
(UNAUDITED) 2009
CURRENT ASSETS
Cash and Cash Equivalents $ 70,167,911 $ 6,233,372
Trade Receivables 11,311,742 7,025,011
Prepaid Drilling Costs 6,431,446 1,454,034
Prepaid Expenses 481,371 143,606
Other Current Assets 272,392 201,314
Short - Term Investments - 24,903,476
Derivative Asset 1,068,924 -
Deferred Tax Asset 863,000 2,057,000
Total Current Assets 90,596,786 42,017,813
PROPERTY AND EQUIPMENT
Oil and Natural Gas Properties, Full Cost Method
(including unevaluated cost
of $86,422,227 at 6/30/2010 and $53,862,529 at
12/31/2009) 156,185,056 96,801,626
Other Property and Equipment 2,193,447 439,656
Total Property and Equipment 158,378,503 97,241,282
Less - Accumulated Depreciation and Depletion 9,626,536 5,091,198
Total Property and Equipment, Net 148,751,967 92,150,084
DEBT ISSUANCE COSTS 1,525,703 1,427,071
Total Assets $ 240,874,456 $ 135,594,968
LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable $ 9,987,487 $ 6,419,534 Line of Credit - 834,492 Accrued Expenses 1,938,696 316,977 Derivative Liability - 1,320,679 Other Liabilities 18,574 18,574 Total Current Liabilities 11,944,757 8,910,256 LONG-TERM LIABILITIES Revolving Credit Facility - - Derivative Liability 85,544 1,459,374 Subordinated Notes 400,000 500,000 Other Noncurrent Liabilities 315,727 243,888 Total Long-Term Liabilities 801,271 2,203,262 DEFERRED TAX LIABILITY 5,192,000 922,000 Total Liabilities 17,938,028 12,035,518 STOCKHOLDERS' EQUITY Common Stock, Par Value $.001; 100,000,000 Authorized, 51,079,143 Outstanding (2009 - 43,911,044 Shares Outstanding) 51,080 43,912 Additional Paid-In Capital 215,539,549 124,884,266 Retained Earnings 8,522,388 841,892 Accumulated Other Comprehensive Income (Loss) (1,176,589) (2,210,620) Total Stockholders' Equity 222,936,428 123,559,450 Total Liabilities and Stockholders' Equity $ 240,874,456 $ 135,594,968
NORTHERN OIL AND GAS, INC.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
2009 2009
2010 Adjusted * 2010 Adjusted *
REVENUES
Oil and Gas Sales $ 11,664,873 $ 2,418,496 $ 20,033,720 $ 3,059,230
Gain (Loss) on Settled
Derivatives 303,919 (143,412) 126,936 (125,878)
Mark-to-Market of
Derivative Instruments 4,251,199 - 3,260,383 -
Other Revenue 11,782 - 32,248 -
16,231,773 2,275,084 23,453,287 2,933,352
OPERATING EXPENSES
Production Expenses 561,427 119,751 893,757 214,140
Production Taxes 1,024,277 189,400 1,670,143 247,715
General and Administrative
Expense 718,471 519,014 1,612,142 910,674
Share Based Compensation 1,193,072 36,302 2,006,369 213,277
Depletion of Oil and Gas
Properties 2,600,836 548,124 4,484,441 850,326
Depreciation and
Amortization 26,267 22,777 50,897 45,456
Accretion of Discount on
Asset Retirement
Obligations 9,215 2,077 12,752 3,471
Total Expenses 6,133,565 1,437,445 10,730,501 2,485,059
INCOME FROM OPERATIONS 10,098,208 837,639 12,722,786 448,293
OTHER EXPENSE (144,342) (139,243) (232,290) (182,770)
9,953,866 698,396 12,490,496 265,523
INCOME BEFORE INCOME TAXES
INCOME TAX PROVISION 3,833,000 280,000 4,810,000 106,000
NET INCOME $ 6,120,866 $ 418,396 $ 7,680,496 $ 159,523
Net Income Per Common
Share - Basic $ 0.12 $ 0.01 $ 0.16 $ 0.00
Net Income Per Common
Share - Diluted $ 0.12 $ 0.01 $ 0.16 $ 0.00
Weighted Average Shares
Outstanding - Basic 49,934,409 34,582,282 47,032,602 34,404,093
Weighted Average Shares
Outstanding - Diluted 50,609,944 34,741,036 47,593,962 34,484,966
NORTHERN OIL AND GAS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009
(UNAUDITED)
Six Months Ended
June 30,
2009
2010 Adjusted *
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 7,680,496 $ 159,523
Adjustments to Reconcile Net Income to Net Cash
Provided by
Operating Activities:
Depletion of Oil and Gas Properties 4,484,441 850,326
Depreciation and Amortization 50,897 45,456
Amortization of Debt Issuance Costs 280,768 168,790
Accretion of Discount on Asset Retirement
Obligations 12,752 3,471
Income Tax Provision 4,810,000 106,000
Loss on Sale of Available for Sale Securities 197,556 -
Market Value adjustment of Derivative Instruments (3,260,383) -
Amortization of Deferred Rent (9,287) (9,286)
Share - Based Compensation Expense 2,006,369 213,277
Changes in Working Capital and Other Items:
Increase in Trade Receivables (4,286,731) (775,192)
Increase in Prepaid Expenses (337,765) (44,892)
Decrease (Increase) in Other Current Assets (71,078) -
Increase in Accounts Payable 3,567,953 2,585,014
Decrease in Accrued Expenses (138,281) (934,162)
Net Cash Provided By Operating Activities 14,987,707 2,368,325
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of Other Equipment and Furniture (1,753,791) (6,943)
Decrease (Increase) in Prepaid Drilling Costs (4,977,412) 19
Proceeds from Sale of Oil and Gas Properties 237,877 -
Proceeds from Sale of Available for Sale Securities 25,890,901 -
Increase in Oil and Gas Properties (51,636,851) (17,506,249)
Net Cash Used For Investing Activities (32,239,276) (17,513,173)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on Line of Credit (834,492) (12,338)
Advances on Revolving Credit Facility 5,300,000 16,000,000
Payments on Revolving Credit Facility (5,300,000) -
Increase (Decrease) in Subordinated Notes, net (100,000) 500,000
Debt Issuance Costs Paid (379,400) (1,190,061)
Proceeds from Issuance of Common Stock - Net of
Issuance Costs 82,500,000 12,701,049
Net Cash Provided by Financing Activities 81,186,108 27,998,650
NET INCREASE IN CASH AND CASH EQUIVALENTS 63,934,539 12,853,802
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 6,233,372 780,716
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 70,167,911 $ 13,634,518
Supplemental Disclosure of Cash Flow Information
Cash Paid During the Period for Interest $ 125,135 $ 189,128
Cash Paid During the Period for Income Taxes $ - $ -
Non-Cash Financing and Investing Activities:
Purchase of Oil and Gas Properties through Issuance
of Common Stock $ 5,698,337 $ 224,879
Payment of Compensation through Issuance of Common
Stock $ 4,224,114 $ 261,280
Capitalized Asset Retirement Obligations $ 69,802 $ 61,403
Fair Value of Warrants Issued for Debt Issuance
Costs $ - $ 221,153
Payment of Debt Issuance Costs through Issuance of
Common Stock $ - $ 475,200
USE OF NON GAAP FINANCIAL MEASURES
Northern Oil and Gas, Inc.
Reconciliation of Adjusted EBITDA
Three Months Ended
March 31, June 30,
2010 2010
Net Income $ 1,559,630 $ 6,120,866
Add Back:
Income Tax Provision 977,000 3,833,000
Depreciation, Depletion, Amortization,
and Accretion 2,062,170 2,766,688
Share Based Compensation 813,297 1,193,072
Unrealized Gain on Commodity
Price Risk Management Activities 990,816 (4,251,199)
Interest Expense 14,795 14,959
Adjusted EBITDA $ 6,417,708 $ 9,677,386
EBITDA Per Common Share - Basic $ 0.15 $ 0.19
EBITDA Per Common Share - Diluted $ 0.14 $ 0.19
Weighted Average Shares Outstanding - Basic 44,098,553 49,934,409
Weighted Average Shares Outstanding - Diluted 44,544,469 50,609,944
Northern Oil and Gas, Inc.
Reconciliation of GAAP Net Income to Earnings Without
the Effect of Certain Items
Three Months Ended
March 31, June 30,
2010 2010
Net Income, as Reported $ 1,559,630 $ 6,120,866
Unrealized Derivative Gains 990,816 (4,251,199)
Tax Impact (378,000) 1,633,000
Earnings without the Effect
of Certain Items $ 2,172,446 $ 3,502,667
Net Income Per Common Share - Basic $ 0.05 $ 0.07
Net Income Per Common Share - Diluted $ 0.05 $ 0.07
Weighted Average Shares Outstanding - Basic 44,098,553 49,934,409
Weighted Average Shares Outstanding - Diluted 44,544,469 50,609,944
CONTACT: Investor Relations 772-219-7525
SOURCE Northern Oil and Gas, Inc.
Released August 9, 2010