Press release from PR Newswire
Northern Oil and Gas, Inc. Announces 2012 Third Quarter Results of Operations
Thursday, November 08, 2012
Northern Oil and Gas, Inc. Announces 2012 Third Quarter Results of Operations06:45 EST Thursday, November 08, 2012WAYZATA, Minn., Nov. 8, 2012 /PRNewswire/ -- Northern Oil and Gas, Inc. (NYSE MKT: NOG) ("Northern Oil") today announced 2012 third quarter results of operations.2012 THIRD QUARTER HIGHLIGHTSQuarterly production of 1,037,972 barrels of oil equivalent ("Boe"), or 11,282 average Boe per day 96% year-over-year production growth compared to 2011 third quarter Oil and Gas Sales including the impact of settled derivatives of $82.4 million, representing a 97% year-over-year increase compared to 2011 third quarter 10.9 net wells completed and placed into production during 2012 third quarter, resulting in 98.5 total net producing wells as of September 30, 2012 Adjusted Net Income for the third quarter of 2012 was $16.7 million, or $0.27 per diluted share. This compares to $0.22 per diluted share for the second quarter of 2012. Adjusted Net Income for the third quarter of 2012 excludes the impact of unrealized mark-to-market losses on derivative instruments and severance expenses in connection with the departure of our former president. Northern Oil's GAAP net income for the third quarter of 2012 was $0.3 million, or less than $0.01 per diluted share, as compared to $43.6 million, or $0.70 per diluted share, in the second quarter of 2012.For the third quarter of 2012, Northern Oil's oil and gas sales including the impact of settled derivatives was $82.4 million, a sequential increase of 19% as compared to the second quarter of 2012. Adjusted EBITDA for the third quarter of 2012 was $63.1 million, a sequential increase of 19% as compared to the second quarter of 2012. ACREAGE UPDATE As of September 30, 2012, Northern Oil controlled approximately 184,000 net acres in the Williston Basin Bakken and Three Forks plays. During the third quarter of 2012, Northern Oil acquired or earned through farm-in arrangements leasehold interests covering an aggregate of 3,815 net acres in its key prospect areas, for an average cost of approximately $2,060 per net acre. As of September 30, 2012, Northern Oil controlled approximately 114,000 net acres that were developed, held by production, held by operations or permitted, representing approximately 62% of Northern Oil's overall Williston Basin position. Approximately 72% of Northern Oil's acreage position in North Dakota was developed, held by production, held by operations or permitted as of September 30, 2012.DRILLING AND COMPLETIONS UPDATEDuring the third quarter of 2012, Northern Oil participated in 149 gross (10.9 net) wells that were completed and placed into production. As a result, Northern Oil's producing wells totaled 1,104 gross (98.5 net) as of September 30, 2012. In addition to these wells, Northern Oil was participating in 153 gross (10.1 net) Bakken or Three Forks wells drilling or awaiting completion at September 30, 2012. Northern Oil participated in approximately 418 gross (32.7 net) wells that were spud during the first nine months of 2012. THIRD QUARTER 2012 OPERATING AND FINANCIAL RESULTSThe following tables summarize Northern Oil's third quarter operating and financial results for 2012 as compared to 2011: Three Months Ended September 30,20122011% ChangeNet Production:Oil (Bbl)954,831491,64694Natural Gas and other liquids (Mcf)498,846220,298126Total (Boe)1,037,972528,36296Average Daily Production:Oil (Bbl)10,3795,344Natural Gas and other liquids (Mcf)5,4222,395Total (Boe)11,2825,743Average Sales Prices:Oil (per Bbl)$ 82.89$85.70Effect of oil hedges on average price (per Bbl)1.78(3.71)Oil net of hedging (per Bbl)84.6781.993Natural Gas and other liquids (per Mcf)3.107.01(56)Realized price per Boe(a)79.3879.22-Average Production Costs (per Boe of production):Production Expenses$ 8.42$ 7.4014Production Taxes7.808.07(3)General and Administrative, including non-cash share based compensation9.127.7118Depletion26.9320.3432(a) Realized prices include realized gains or losses on cash settlements for commodity derivatives.In the third quarter of 2012, oil, natural gas and NGL sales, including the effect of settled derivatives, increased 97% as compared to the third quarter of 2011, driven primarily by a 96% increase in production. Higher oil price differentials in the third quarter of 2012 lowered the average realized price in the third quarter of 2012 as compared to the same period in 2011. The oil price differential during the third quarter of 2012 was $10.18 per barrel, as compared to $4.91 per barrel in the third quarter of 2011.As a result of forward oil price changes, Northern Oil recognized mark-to-market non-cash derivative losses of $22.3 million in the third quarter of 2012 compared to non-cash gains of $27.1 million in the third quarter of 2011. Additionally, as a result of crude oil derivative settlements, Northern Oil incurred a net cash gain of $1.7 million in the third quarter of 2012, compared to a loss of $1.8 million in the third quarter of 2011. Production expenses were $8.7 million in the third quarter of 2012 compared to $3.9 million in the third quarter of 2011. Northern Oil experiences increases in aggregate operating expenses as it adds new wells and maintains production from existing properties. On a per unit basis, production expenses per Boe increased from $7.40 per barrel sold in the third quarter of 2011 to $8.42 in the third quarter of 2012. This increase was primarily due to increased saltwater disposal costs and production-enhancing workover activities. Northern Oil pays production taxes based on realized oil and gas sales. These costs were $8.1 million in the third quarter of 2012, compared to $4.3 million in the third quarter of 2011. Production taxes were 10.0% in the third quarter of 2012 and 9.8% in the third quarter of 2011. The third quarter of 2012 average production tax rate was higher than the third quarter of 2011 average due to greater levels of production from properties that did not qualify for reduced rates or tax exemptions during 2012. Total general and administrative expense (including non-cash share based compensation) was $9.5 million for the third quarter of 2012, compared to $4.1 million for the third quarter of 2011. General and administrative expenses for the third quarter of 2012 include a one-time severance charge in connection with the departure of our former president comprised of $4.3 million of non-cash, share based compensation and other expenses estimated at $0.6 million. General and administrative expenses net of non-cash share based compensation were approximately $2.5 million for the third quarter of 2012, compared to $1.9 million for the third quarter of 2011. Excluding the one-time severance charge, the year-over-year increase in general and administrative expenses is primarily the result of increased staffing to support Northern Oil's growth. Depletion, depreciation, amortization and accretion ("DD&A") was $28.1 million in the third quarter of 2012, compared to $10.8 million in the third quarter of 2011. The increase in aggregate DD&A expense for the third quarter of 2012 compared to the third quarter of 2011 was driven by a 96% increase in production. Depletion expense, the largest component of DD&A, was $26.93 per Boe in the third quarter of 2012, compared to $20.34 per Boe in the third quarter of 2011, which increase was primarily due to increased estimates of future drilling, completion and operating costs. The provision for income taxes was $0.2 million in the third quarter of 2012, compared to $17.2 million in the third quarter of 2011. The effective tax rate in the third quarter of 2012 was 41.6%, compared to an effective tax rate of 37.5% in the third quarter of 2011. Net income was $0.3 million in the third quarter of 2012, compared to net income of $28.6 million in the third quarter of 2011. Net income per fully diluted share was $0.00 in the third quarter of 2012, compared to $0.46 in the third quarter of 2011.Adjusted Net Income for the third quarter of 2012 was $16.7 million, or $0.27 per diluted share, as compared to $11.9 million, or $0.19 per diluted share, for the third quarter of 2011. The increase in Adjusted Net Income is primarily due to Northern Oil's continued addition of crude oil and natural gas production from new wells, which was partially offset by a higher depletion rate in the third quarter of 2012 compared to the third quarter of 2011. Northern Oil defines Adjusted Net Income as net income (loss) excluding (i) unrealized gain (loss) on derivative instruments, net of tax, and (ii) severance expenses in connection with the departure of Northern Oil's former president, net of tax.Adjusted EBITDA for the third quarter of 2012 was $63.1 million, which represents a 98% increase over Adjusted EBITDA of $31.9 million for the third quarter of 2011. Northern Oil defines Adjusted EBITDA as net income (loss) before (i) interest expense, (ii) income taxes, (iii) depreciation, depletion, amortization and accretion, (iv) unrealized gain (loss) on derivative instruments and (v) non-cash share based compensation expense. Adjusted Net Income and Adjusted EBITDA are non-GAAP measures. A reconciliation of these measures to their most directly comparable GAAP measure is included in the accompanying financial tables found later in this release. Management believes the use of these non-GAAP financial measures provides useful information to investors to gain an overall understanding of current financial performance. Specifically, management believes the non-GAAP results included herein provide useful information to both management and investors by excluding certain expenses and unrealized derivatives gains and losses that management believes are not indicative of Northern Oil's core operating results. In addition, these non-GAAP financial measures are used by management for budgeting and forecasting as well as subsequently measuring Northern Oil's performance, and management believes it is providing investors with financial measures that most closely align to its internal measurement processes. DERIVATIVES UPDATEThe following table summarizes Northern Oil's current oil derivative contracts, by fiscal quarter: COSTLESS COLLARSSWAPSContract PeriodVolume (Bbls)Weighted AverageFloor/Ceiling Price (per Bbl)Volume (Bbls)Weighted Average Price(per Bbl)2012:Q4384,140$91.20 - $105.93562,500$93.662013:Q1565,550$89.65 - $103.94180,000$91.58Q2526,481$89.74 - $104.02225,000$91.17Q3543,374$90.29 - $104.35255,000$92.48Q4517,864$90.38 - $104.41300,000$92.032014:Q160,000$90.00-$99.05540,000$92.42Q260,000$90.00-$99.05600,000$92.13Q360,000$90.00-$99.05300,000$91.26Q460,000$90.00-$99.05300,000$91.26MANAGEMENT COMMENTMichael Reger, CEO, commented: "We continue to be very pleased with our results. Our record quarterly production reflects our high quality asset base, the quality of our operating partners, and exceptional performance by the entire Northern Oil team. As many of our operating partners have mentioned, we expect improved operational efficiencies and service costs to trend lower. The availability of completion services has shortened spud to sales times, and take-away capacity remains healthy. We remain committed to maintaining a strong balance sheet and focused on executing our simple and effective business plan."THIRD QUARTER 2012 EARNINGS RELEASE CONFERENCE CALLIn 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 Thursday, November 8, 2012 at 9:00 a.m. Central Standard Time. Details for the conference call are as follows: Dial-In Number: (800) 811-0667 (US/Canada) and (913) 312-0960 (International)Conference ID: 4664162 - Northern Oil and Gas, Inc. Third Quarter 2012 Earnings CallReplay Dial-In Number: (888) 203-1112 (US/Canada) and (719) 457-0820 (International)Replay Access Code: 4664162 - Replay will be available through November 22, 2012ABOUT NORTHERN OIL AND GASNorthern Oil and Gas, Inc. is an exploration and production company with a core area of focus in the Williston Basin Bakken and Three Forks play in North Dakota and Montana. More information about Northern Oil and Gas, Inc. can be found at www.NorthernOil.com.SAFE HARBORThis press release contains forward-looking statements regarding future events and 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 release regarding Northern Oil's 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 release, 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 Northern Oil's control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following: changes in crude oil and natural gas prices, general economic or industry conditions, nationally and/or in the communities in which Northern Oil conducts business, changes in the interest rate environment, legislation or regulatory requirements, conditions of the securities markets, Northern Oil's ability to raise capital, changes in accounting principles, policies or guidelines, financial or political instability, acts of war or terrorism, and other economic, competitive, governmental, regulatory and technical factors affecting Northern Oil's operations, products, services and prices. Northern Oil has based these forward-looking statements on its current expectations and assumptions about future events. While 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 Northern Oil's control. CONTACT:Investor RelationsErik Nerhus952-476-9800 NORTHERN OIL AND GAS, INC.STATEMENTS OF INCOME AND COMPREHENSIVE INCOMEFOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011(UNAUDITED)Three Months EndedNine Months EndedSeptember 30, September 30, 2012201120122011 REVENUES Oil and Gas Sales $ 80,690,301$ 43,680,619$216,268,712$106,203,904 Gain (Loss) on Settled Derivatives 1,701,296(1,824,719)(4,729,186)(10,695,006) Unrealized (Loss) Gain on Derivative Instruments (22,308,470)27,105,40018,125,92826,675,003 Other Revenue 12,48688,738160,752218,984 Total Revenues 60,095,61369,050,038229,826,206122,402,885 OPERATING EXPENSES Production Expenses 8,734,6363,910,85922,540,2378,542,761 Production Taxes 8,092,8434,261,40720,829,73210,188,308 General and Administrative Expense 9,467,7114,073,98818,568,69610,113,995 Depletion of Oil and Gas Properties 27,952,58510,749,38471,781,89425,962,463 Depreciation and Amortization 104,83075,597304,226214,205 Accretion of Discount on Asset Retirement Obligations 23,7097,78161,16220,305 Total Expenses 54,376,31423,079,016134,085,94755,042,037 INCOME FROM OPERATIONS 5,719,29945,971,02295,740,25967,360,848 OTHER INCOME (EXPENSE) Interest Expense (5,205,822)(182,499)(8,130,225)(425,687) Interest Income 1061,6991,206567,327 Gain on Available for Sale Securities ---215,092 Total Other Income (Expense) (5,205,716)(180,800)(8,129,019)356,732 INCOME BEFORE INCOME TAXES 513,58345,790,22287,611,24067,717,580 INCOME TAX PROVISION 213,42217,173,00034,878,77225,725,300 NET INCOME $ 300,161$ 28,617,222$ 52,732,468$ 41,992,280 OTHER COMPREHENSIVE INCOME, NET OF TAX Unrealized Gains on Marketable Securities (Net of Tax of $109,000 for the nine months ended September 30, 2011) ---173,846Reclassification of Derivative Instruments Included in Income (Net of Tax of $119,000 for the three months ended September 30, 2011 and $39,000 and $331,000 for the nine months ended September 30, 2012 and 2011, respectively) -176,95062,309518,900 Total Other Comprehensive Income $ -$ 176,950$ 62,309$ 692,746 COMPREHENSIVE INCOME $ 300,161$ 28,794,172$ 52,794,777$ 42,685,026 Net Income Per Common Share ? Basic $ 0.00$ 0.46$ 0.84$ 0.68 Net Income Per Common Share ? Diluted $ 0.00$ 0.46$ 0.84$ 0.68 Weighted Average Shares Outstanding ? Basic 62,589,25661,919,64162,410,11061,708,537 Weighted Average Shares Outstanding ? Diluted 62,882,67362,265,50262,753,24162,114,115 NORTHERN OIL AND GAS, INC.BALANCE SHEETSSEPTEMBER 30, 2012 AND DECEMBER 31, 2011September 30, 2012December 31,(UNAUDITED)2011 CURRENT ASSETS Cash and Cash Equivalents $ 8,234,566$ 6,279,587 Trade Receivables 79,324,98351,418,830 Advances to Operators 4,050,51117,530,474 Prepaid Expenses 758,476486,421 Other Current Assets 280,052317,460 Derivative Instruments 4,005,611- Deferred Tax Asset -4,472,000 Total Current Assets 96,654,19980,504,772 PROPERTY AND EQUIPMENT Oil and Natural Gas Properties, Full Cost Method of Accounting Proved 1,051,333,841566,195,321 Unproved 104,910,316137,784,903 Other Property and Equipment 3,173,7982,988,641 Total Property and Equipment 1,159,417,955706,968,865 Less - Accumulated Depreciation and Depletion 135,352,03963,265,919 Total Property and Equipment, Net 1,024,065,916643,702,946 DERIVATIVE INSTRUMENTS 2,283,655- DEBT ISSUANCE COSTS 12,211,8061,386,201 TOTAL ASSETS $ 1,135,215,576$ 725,593,919LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable $ 122,259,062$ 110,133,286 Accrued Expenses 2,769,35165,443 Accrued Interest9,022,66798,798 Derivative Instruments -9,363,068 Deferred Tax Liability 709,000- Total Current Liabilities 134,760,080119,660,595 LONG-TERM LIABILITIES Revolving Credit Facility 68,000,00069,900,000 8% Senior Notes Due 2020 300,000,000- Derivative Instruments -2,574,903 Other Noncurrent Liabilities 1,422,683959,366 Deferred Tax Liability 65,657,00035,929,000 Total Long-Term Liabilities 435,079,683109,363,269 TOTAL LIABILITIES 569,839,763229,023,864 COMMITMENTS AND CONTINGENCIES (NOTE 8) STOCKHOLDERS' EQUITY Preferred Stock, Par Value $.001; 5,000,000 Authorized, No Shares Outstanding -- Common Stock, Par Value $.001; 95,000,000 Authorized, (9/30/2012 ? 63,490,667 Shares Outstanding and 12/31/2011 ? 63,330,421 Shares Outstanding) 63,49163,330 Additional Paid-In Capital 464,209,170448,198,350 Retained Earnings 101,103,15248,370,684 Accumulated Other Comprehensive Loss -(62,309) Total Stockholders' Equity 565,375,813496,570,055 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,135,215,576$ 725,593,919 NORTHERN OIL AND GAS, INC.Reconciliation of Adjusted EBITDA(UNAUDITED)Three Months EndedNine Months EndedSeptember 30, 2012September 30, 2011September 30, 2012September 30, 2011Net Income$ 300,161$ 28,617,222$ 52,732,468$ 41,992,280Add Back:Interest Expense5,205,822182,4998,130,225425,687Income Tax Provision213,42217,173,00034,878,77225,725,300Depreciation, Depletion, Amortization, and Accretion28,081,12410,832,76272,147,28226,196,973Non- Cash Share Based Compensation6,998,7652,188,90011,295,6645,552,245Unrealized Loss (Gain) on Derivative Instruments22,308,470(27,105,400)(18,125,928)(26,675,003)Adjusted EBITDA$ 63,107,764$ 31,888,983$ 161,058,483$ 73,217,482 NORTHERN OIL AND GAS, INC.Reconciliation of GAAP Net Income to Adjusted Net Income(UNAUDITED)Three Months EndedNine Months EndedSeptember 30, 2012September 30, 2011September 30, 2012September 30, 2011Net Income $ 300,161$ 28,617,222$ 52,732,468$41,992,280Add:Unrealized Loss (Gain) on Derivative Instruments, Net of Tax(a) 13,429,470(16,766,400)(10,911,928)(16,504,003)Severance Expense, Net of Tax(b)2,954,631-2,954,631-Adjusted Net Income$ 16,684,262$ 11,850,822$ 44,775,171$25,488,277Weighted Average Shares Outstanding ? Basic 62,589,25661,919,64162,410,11061,708,537Weighted Average Shares Outstanding ? Diluted 62,882,67362,265,50262,753,24162,114,115Net Income Per Common Share ? Basic $ -$ 0.46$ 0.84$ 0.68Add:Change due to Unrealized Loss (Gain) on Derivative Instruments, Net of Tax0.22(0.27)(0.17)(0.27)Change due to Severance Expense, Net of Tax0.05-0.05-Adjusted Net Income Per Common Share ? Basic $ 0.27$ 0.19$ 0.72$ 0.41Net Income Per Common Share ? Diluted Add:$ -$ 0.46$ 0.84$ 0.68Change due to Unrealized Loss (Gain) on Derivative Instruments, Net of Tax 0.22(0.27)(0.17)(0.27)Change due to Severance Expense, Net of Tax0.05-0.04-Adjusted Net Income Per Common Share ? Diluted $ 0.27$ 0.19$ 0.71$ 0.41_________________(a) Adjusted to reflect related tax benefit (expense) of $8,879,000 and ($10,339,000) for the three months ended September 30, 2012 and 2011, respectively, and ($7,214,000) and ($10,171,000) for the nine months ended September 30, 2012 and 2011, respectively.(b) Reflects severance expense recognized in connection with the departure of the Company's president and co-founder, Ryan Gilbertson. Adjusted to reflect related tax benefit of $1,954,000 for the three and nine months ended September 30, 2012, respectively.SOURCE Northern Oil and Gas, Inc.