Kodiak Oil & Gas Corp. Announces Second Quarter 2014 Results and Operations Update Highlights include:

- Q2-14 Oil and Gas Sales of $300 million, 73% Increase from Q2-13

- Q2-14 Adjusted EBITDA of $197 million, 50% Growth from Q2-13

- Q2-14 Average Daily Sales Volumes of 38,271 BOE/d, 65% Increase from Q2-13

DENVER, July 31, 2014 /PRNewswire/ -- Kodiak Oil & Gas Corp. (NYSE: KOG), an oil and gas exploration and production company with primary assets in the Williston Basin of North Dakota, today reported financial results for the second quarter ended June 30, 2014 and provided a Williston Basin operations update. 

Financial Results

For the second quarter-ended June 30, 2014, the Company reported oil and gas sales of $300.0 million, as compared to $173.5 million during the same period in 2013, representing an increase of 73%. Kodiak reported an overall 65% increase in quarter-over-quarter equivalent sales volumes with 3.5 million barrels of oil equivalent (MMBOE) sold, or an average of 38,271 BOE per day (BOE/d) during the second quarter 2014, as compared to 2.1 million BOE, or an average of 23,205 BOE/d in the second quarter of 2013. Crude oil revenue accounted for approximately 93% of oil and gas sales recorded during the second quarter 2014.

Adjusted EBITDA was $196.9 million for the second quarter 2014, as compared to $131.1 million in the same period in 2013, reflecting a 50% increase. Adjusted EBITDA is a non-GAAP financial measure. For additional information please refer to the reconciliation of this measure at the end of this news release.

Kodiak reported net cash provided by operating activities during the second quarter 2014 of $183.1 million, as compared to $118.3 million during the same period in 2013, an increase of 55%. Kodiak reported net cash provided by operating activities during the six-month period ended June 30, 2014 of $346.6 million, as compared to $232.9 million in 2013.

For the second quarter 2014, the Company reported net income of $21.2 million, or $0.08 per diluted share, compared to net income of $44.3 million, or $0.17 per diluted share, for the same period in 2013.

General and administrative expenses (G&A) for the second quarter 2014 totaled $12.8 million, or $3.68 per BOE, compared to $10.3 million, or $4.89 per BOE, in the second quarter 2013. The decrease in G&A expense per BOE for the second quarter 2014, as compared to the same period in 2013, is attributed primarily to increased production which offset an overall increase in G&A as the Company has expanded operations. As of June 30, 2014, Kodiak had 226 employees, as compared to 134 employees as of June 30, 2013.

Lease operating expenses (LOE) for the second quarter 2014 totaled $32.4 million or $9.29 per BOE, an increase over the second quarter 2013. The Company has continued to experience an incremental increase in LOE. The increase is primarily a result of continuing costs for winterization work and increased workover expenses, including but not limited to the installation of new, more effective pumps. Additionally, as the portfolio of producing wells age, LOE per barrel sold has increased as the production on older wells has declined, yet the Company continues to incur ongoing fixed costs to operate these wells. Kodiak has experienced an even larger incremental per barrel increase in LOE from non-operated properties.

During the second quarter ended June 30, 2014, Kodiak recognized total interest expense related to its outstanding senior notes and credit facility of approximately $31.8 million. The Company capitalized interest costs of $7.6 million for the second quarter 2014.

The following table summarizes the Company's costs on a per-unit basis for the periods shown:

 

Kodiak Oil & Gas Corp.



% Change

Net Sales Volumes Comparison

Q2-14


Q1-14


Q2-13


Sequential


Q-o-Q

Net Sales Volumes










Crude Oil  (MBbls)

3,030


2,677


1,838


13%


65%

Natural Gas (MMcf)

2,716


2,310


1,641


18%


66%

Barrels of Oil Equivalent (MBOE)

3,483


3,062


2,112


14%


65%

Average Daily Volumes










Daily Sales (BOE/day)

38,271


34,025


23,205


12%


65%

Unhedged Product Price Received










Average Price Received Oil ($/Bbl)

$91.72


$88.62


$88.88


3%


3%

Average Price Received Gas ($/Mcf)

$8.15


$8.56


$6.16


(5)%


32%

Average Price Received BOE ($/BOE)

$86.15


$83.93


$82.15


3%


5%

Commodity Price Risk Management Activities










Settlements on Commodity Derivative Instruments ($/BOE)

$(6.46)


$(3.95)


$0.83


64%


(878)%

Expenses










Lease Operating Expense ($/BOE)

$9.29


$7.43


$6.33


25%


47%

Production Tax ($/BOE)

$9.07


$8.95


$8.77


1%


3%

Gathering, Transportation & Marketing Expense ($/BOE)

$2.35


$2.25


$2.67


4%


(12)%

DD&A Expense ($/BOE)

$28.44


$29.27


$29.56


(3)%


(4)%

Total G&A Expense ($/BOE)

$3.68


$4.54


$4.89


(19)%


(25)%

Non-cash Stock-based Compensation Expense ($/BOE)

$1.47


$1.67


$1.66


(12)%


(11)%

Drilling and Completion Operations

Year to date, Kodiak has invested approximately $441.1 million related to its oilfield operations and leasehold acquisitions compared to its full year capital expenditure guidance of approximately $940.0 million. Additional detail on our capital expenditures as of the end of the second quarter of 2014 versus our full year 2014 budget is provided in the table below ($ in millions).






Six Months Ended



Annual


June 30, 2014



2014 Budget


Actual

Capital Expenditures





Drilling and completion costs


$

890.0


$

433.0

Infrastructure and leasehold acquisitions


50.0


8.1

     Total capital expenditures


$

940.0


$

441.1






Divestitures





Proved and unproved oil and gas properties




$

(70.8)






Non-Cash Capitalized Costs





Asset retirement obligations




$

2.1

Capitalized interest




16.0






Total capitalized costs, net of divestitures




$

388.4

Pilot Program Update

Downspacing work continues in the Company's Polar operating area where we are testing wells spaced approximately 600-650 feet apart within each reservoir.  The Company plans to test up to 16 wells within this 1,280-acre DSU with eight wells in the Middle Bakken and eight wells within the Three Forks.

The following table summarizes production data from the Company's downspacing projects.


Average Production per Well (BOE/d)



Producing Days


BOE/d

Polar Pilot 1.0





Middle Bakken (6 wells)


330


414

Three Forks (6 wells)


300


360






Polar Pilot 2.0





Middle Bakken (2 wells)


150


534

Three Forks (2 wells)


150


414






Smokey Pilot





Middle Bakken (6 wells)


270


368

Three Forks (6 wells)


240


244

 

Q2-14 Results Teleconference Call

In conjunction with Kodiak's release of its financial and operating results, investors, analysts and other interested parties are invited to participate in a conference call with management on Friday, August 1, 2014 at 11:00 a.m. Eastern Daylight Time.

Kodiak Oil & Gas Corp. Q2-14 Financial and Operating Results Conference Call


Date:

August 1, 2014


Time:

11:00 a.m. EDT


10:00 a.m. CDT


  9:00 a.m. MDT


  8:00 a.m. PDT


Call:

(877) 870-4263 (US/Canada) and (412) 317-0790 (International)


Internet:

Live and rebroadcast over the Internet: http://www.videonewswire.com/event.asp?id=98847


Replay:

Available for 30 days at http://www.kodiakog.com or

http://www.videonewswire.com/event.asp?id=98847


About Kodiak Oil & Gas Corp.
Denver-based Kodiak Oil & Gas Corp. is an independent energy exploration and development company focused on exploring, developing and producing oil and natural gas primarily in the Williston Basin in the U.S. Rocky Mountains.  For further information, please visit www.kodiakog.com.  The Company's common shares are listed for trading on the New York Stock Exchange under the symbol: "KOG."

Forward-Looking Statements

This press release includes statements that may constitute "forward-looking" statements, usually containing the words "believe," "estimate," "project," "expect" or similar expressions. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements.  Forward looking statements are statements that are not historical facts and are generally, but not always, identified by the words "expects," "plans," "anticipates," "believes," "intends," "estimates," projects," "potential" and similar expressions, or that events or conditions "will," "would," "may," "could" or "should" occur. Forward-looking statements in this press release include statements regarding the Company's pilot program, the Company's drilling program, including timing and capital expenditures, the completion of the proposed business combination with Whiting Petroleum (the "Arrangement") and the realization of the potential benefits of the Arrangement.  Factors that could cause or contribute to such differences include, but are not limited to,  projecting future timing of development activities, operating risks, the failure to receive the necessary shareholder or regulatory approvals or the failure to satisfy other closing conditions of the Arrangement, the business of the Company and Whiting Petroleum not being integrated successful or such integration proving more difficult, time consuming or costly than expected,  and other risks detailed in the Company's periodic report filings with the Securities and Exchange Commission.

Important Additional Information and Where to Find It

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of a vote or proxy. The proposed Arrangement anticipates that the shares of Whiting Petroleum Corporation ("Whiting") to be issued pursuant to the Acquisition will be exempt from registration under the United States Securities Act of 1933, as amended (the "Securities Act"), pursuant to Section 3(a)(10) of the Securities Act. Consequently, the Whiting shares will not be registered under the Securities Act or any state securities laws. In connection with the proposed Arrangement, Whiting and Kodiak intend to file relevant materials with the Securities and Exchange Commission ("SEC") and other governmental or regulatory authorities, including a joint proxy statement and circular. INVESTORS ARE URGED TO READ THE JOINT PROXY STATEMENT AND CIRCULAR AND ANY OTHER RELEVANT MATERIALS WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT WHITING, KODIAK AND THE PROPOSED ARRANGEMENT. The joint proxy statement and circular and certain other relevant materials (when they become available) and other documents filed by Whiting or Kodiak with the SEC may be obtained free of charge at the SEC's website at http://www.sec.gov. In addition, investors may obtain copies of these documents (when they become available) free of charge by written request to Whiting Investor Relations, 1700 Broadway, Suite 2300, Denver, CO 80290-2300 or calling (303) 390-4051 or by written request to Kodiak Investor Relations, 1625 Broadway, Suite 250, Denver, CO 80202 or calling (303) 592-8030.

Participants in the Solicitation

Kodiak, Whiting and their respective executive officers and directors may be deemed to be participants in the solicitation of proxies in connection with the proposed Arrangement. Information about the executive officers and directors of Kodiak and the number of Kodiak's common shares beneficially owned by such persons is set forth in the proxy statement for Kodiak's 2014 Annual Meeting of Shareholders which was filed with the SEC on May 9, 2014, and Kodiak's Annual Report on Form 10-K for the period ended December 31, 2013. Information about the executive officers and directors of Whiting and the number of shares of Whiting's common stock beneficially owned by such persons is set forth in the proxy statement for Whiting's 2014 Annual Meeting of Stockholders which was filed with the SEC on March 23, 2014, and Whiting's Annual Report on Form 10-K for the period ended December 31, 2013. Investors may obtain additional information regarding the direct and indirect interests of Kodiak, Whiting and their respective executive officers and directors in the Arrangement by reading the joint proxy statement and circular regarding the Arrangement when it becomes available.

For further information, please contact:

Mr. Lynn A. Peterson, CEO and President, Kodiak Oil & Gas Corp. +1-303-592-8075
Mr. James Henderson, CFO, Kodiak Oil & Gas Corp. +1-303-592-8075

Footnotes to the Financial Statements
The notes accompanying the financial statements are an integral part of the consolidated financial statements and can be found in Kodiak's filing on Form 10-Q for the quarter-ended June 30, 2014.

 

 

KODIAK OIL & GAS CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)




June 30, 2014


December 31, 2013

ASSETS







Current Assets:







Cash and cash equivalents


$

11,230



$

90


Accounts receivable







Trade


70,500



108,883


Accrued sales revenues


137,484



121,843


Inventory and prepaid expenses


14,251



11,367


Deferred tax asset, net


27,574



14,300


Total Current Assets


261,039



256,483









Oil and gas properties (full cost method), at cost:







Proved oil and gas properties


4,054,620



3,556,667


Unproved oil and gas properties


532,084



641,644


Equipment and facilities


27,804



27,712


Less-accumulated depletion, depreciation, amortization, and accretion


(793,007)



(605,700)


Net oil and gas properties


3,821,501



3,620,323









Commodity price risk management asset




1,290


Property and equipment, net of accumulated depreciation of $2,638 at June 30, 2014 and $1,980 at December 31, 2013


3,920



3,928


Deferred financing costs, net of amortization of $26,104 at June 30, 2014 and $22,963 at December 31, 2013


38,605



41,746









Total Assets


$

4,125,065



$

3,923,770









LIABILITIES AND STOCKHOLDERS' EQUITY







Current Liabilities:







Accounts payable and accrued liabilities


$

253,151



$

272,858


Accrued interest payable


24,216



24,425


Commodity price risk management liability


61,548



20,334


Total Current Liabilities


338,915



317,617









Noncurrent Liabilities:







Credit facility


775,000



708,000


Senior notes, net of accumulated amortization of bond premium of $1,366 at June 30, 2014 and $1,024 at December 31, 2013


1,554,634



1,554,976


Commodity price risk management liability


4,004




Deferred tax liability, net


177,974



133,700


Asset retirement obligations


19,120



16,405


Total Noncurrent Liabilities


2,530,732



2,413,081









Total Liabilities


2,869,647



2,730,698









Stockholders' Equity:







Common stock—no par value; unlimited authorized







Issued and outstanding:  267,253,911 shares as of June 30, 2014 and 266,249,765 shares as of December 31, 2013


1,036,524



1,024,462


Retained earnings


218,894



168,610


Total Stockholders' Equity


1,255,418



1,193,072









Total Liabilities and Stockholders' Equity


$

4,125,065



$

3,923,770


 

 

KODIAK OIL & GAS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share data)

(Unaudited)




For the Three Months Ended

June 30,


For the Six Months Ended

June 30,



2014


2013


2014



2013


Revenues:













Oil sales


$

277,897



$

163,369



$

515,146



$

319,212


Gas sales


22,146



10,109



41,912



19,316


Total revenues


300,043



173,478



557,058



338,528















Operating expenses:













Oil and gas production


72,157



37,531



129,194



73,522


Depletion, depreciation, amortization and accretion


99,065



62,409



188,694



119,794


General and administrative


12,804



10,326



26,722



20,628


Total operating expenses


184,026



110,266



344,610



213,944















Operating income


116,017



63,212



212,448



124,584















Other income (expense):













Gain (loss) on commodity price risk management activities, net


(56,290)



22,667



(81,095)



6,923


Interest income (expense), net


(25,574)



(15,785)



(50,124)



(29,595)


Other income (expense), net


(771)



256



55



682


Total other income (expense)


(82,635)



7,138



(131,164)



(21,990)















Income before income taxes


33,382



70,350



81,284



102,594















Income tax expense


12,210



26,100



31,000



38,900















Net income


$

21,172



$

44,250



$

50,284



$

63,694















Earnings per common share:













Basic


$

0.08



$

0.17



$

0.19



$

0.24


Diluted


$

0.08



$

0.17



$

0.19



$

0.24















Weighted average common shares outstanding:













Basic


266,726,108



265,434,514



266,510,637



265,381,746


Diluted


270,395,642



267,906,171



270,048,000



267,851,680


 

 

KODIAK OIL & GAS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)




For the Three Months Ended

 June 30,


For the Six Months Ended

June 30,



2014


2013


2014


2013

Cash flows from operating activities:













Net income


$

21,172



$

44,250



$

50,284



$

63,694


Reconciliation of net income to net cash provided by operating activities:













Depletion, depreciation, amortization and accretion


99,065



62,409



188,694



119,794


Amortization of deferred financing costs and debt premium


1,408



828



2,799



1,746


(Gain) loss on commodity price risk management activities, net


56,290



(22,665)



81,095



(6,923)


Settlements on commodity derivative instruments


(22,498)



1,755



(34,587)



3,195


Stock‑based compensation


5,116



3,501



10,236



7,225


    Deferred income taxes


12,210



26,100



31,000



38,900


Changes in current assets and liabilities:













Accounts receivable‑trade


14,077



12,859



39,069



(2,154)


Accounts receivable‑accrued sales revenues


2,156



2,404



(15,641)



(7,035)


Prepaid expenses and other


(1,256)



(320)



(1,624)



(186)


Accounts payable and accrued liabilities


1,094



(1,425)



(4,516)



6,068


Accrued interest payable


(5,759)



(11,365)



(209)



8,580


Net cash provided by operating activities


183,075



118,331



346,600



232,904















Cash flows from investing activities:













Oil and gas properties


(263,025)



(246,805)



(473,708)



(522,610)


Sale of oil and gas properties






70,848




Equipment, facilities and other


(243)



(2,955)



(740)



(7,020)


Cash held in escrow




(51,000)





(51,000)


Net cash used in investing activities


(263,268)



(300,760)



(403,600)



(580,630)















Cash flows from financing activities:













Borrowings under credit facility


115,000



191,000



195,000



354,875


Repayments under credit facility


(40,000)





(128,000)



(358,875)


Proceeds from the issuance of senior notes








350,000


Proceeds from the issuance of common shares


2,997



230



3,697



490


Purchase of common shares


(2,540)





(2,557)



(518)


Debt and share issuance costs




(1,314)





(8,234)


Net cash provided by financing activities


75,457



189,916



68,140



337,738















Increase (decrease) in cash and cash equivalents


(4,736)



7,487



11,140



(9,988)















Cash and cash equivalents at beginning of the period


15,966



6,585



90



24,060















Cash and cash equivalents at end of the period


$

11,230



$

14,072



$

11,230



$

14,072















Supplemental cash flow information:













Oil & gas property accrual included in accounts payable and accrued liabilities


$

149,334



$

155,032



$

149,334



$

155,032


Cash paid for interest


$

37,539



$

33,732



$

63,563



$

35,190


 

 

KODIAK OIL & GAS CORP.

RECONCILIATION OF ADJUSTED EBITDA

(In thousands)

(Unaudited)




For the Three Months Ended

June 30,


For the Six Months Ended

 June 30,



2014


2013


2014



2013


Reconciliation of Adjusted EBITDA:













Net income


$

21,172



$

44,250



$

50,284



$

63,694


  Add back:













     Depreciation, depletion, amortization and accretion


99,065



62,409



188,694



119,794


     Amortization of deferred financing costs and debt premium


1,408



828



2,799



1,746


     (Gain) loss on commodity price risk management activities, net


56,290



(22,665)



81,095



(6,923)


     Settlements on commodity derivative instruments


(22,498)



1,755



(34,587)



3,195


     Stock based compensation expense


5,116



3,501



10,236



7,225


     Income tax expense


12,210



26,100



31,000



38,900


     Interest expense


24,180



14,970



47,354



27,872


Adjusted EBITDA


$

196,943



$

131,148



$

376,875



$

255,503


 

In evaluating its business, Kodiak considers earnings before interest, income taxes, depletion, depreciation, amortization, and accretion, amortization of deferred financing costs and debt premium, impairment, gains or losses on foreign currency, the net (gain) loss on commodity price risk management activities less settlements on commodity derivative instruments, and stock‑based compensation expense, ("Adjusted EBITDA") as a key indicator of financial operating performance and as a measure of the ability to generate cash for operational activities, future capital expenditures and an indication of our potential borrowing base under our credit facility.  Adjusted EBITDA is not a Generally Accepted Accounting Principle ("GAAP") measure of performance. The Company uses this non-GAAP measure to compare its performance with other companies in the industry that make a similar disclosure, as a measure of its current liquidity, in developing our capital expenditure budget, to evaluate our compliance with covenants under our credit facility and as a component of the corporate objectives to which we tie the vesting of equity-based awards made to senior executives. The Company believes that this measure may also be useful to investors for the same purpose and for an indication of the Company's ability to generate cash flow at a level that can sustain or support our operations and capital investment program, and that disclosure of this measure provides investors with visibility as to the corporate objectives that affect our executive compensation program. Investors should not consider this measure, or other non-GAAP measures such as adjusted net income, in isolation or as a substitute for operating income or loss, cash flow from operations determined under GAAP or any other measure for determining the Company's operating performance that is calculated in accordance with GAAP. In addition, because Adjusted EBITDA is not a GAAP measure, it may not necessarily be comparable to similarly titled measures employed by other companies.  A reconciliation of Adjusted EBITDA and net income for the three and six months ended June 30, 2014 and 2013 is provided in the table above.

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SOURCE Kodiak Oil & Gas Corp.



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