2014

Northern Oil and Gas, Inc. Announces 2012 Third Quarter Results of Operations

WAYZATA, 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 HIGHLIGHTS

  • Quarterly 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 UPDATE

During 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 RESULTS

The following tables summarize Northern Oil's third quarter operating and financial results for 2012 as compared to 2011:

 


Three Months Ended

September 30,




2012


2011


% Change

Net Production:






Oil (Bbl)

954,831


491,646


94

Natural Gas and other liquids (Mcf)

498,846


220,298


126

Total (Boe)

1,037,972


528,362


96







Average Daily Production:






Oil (Bbl)

10,379


5,344



Natural Gas and other liquids (Mcf)

5,422


2,395



Total (Boe)

11,282


5,743









Average Sales Prices:






Oil (per Bbl)

$   82.89


$85.70



Effect of oil hedges on average price (per Bbl)

1.78


(3.71)



Oil net of hedging (per Bbl)

84.67


81.99


3

Natural Gas and other liquids (per Mcf)

3.10


7.01


(56)

Realized price per Boe(a)

79.38


79.22


-







Average Production Costs (per Boe of production):






Production Expenses

$   8.42


$   7.40


14

Production Taxes

7.80


8.07


(3)

General and Administrative, including non-cash share based compensation

9.12


7.71


18

Depletion

26.93


20.34


32














(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 UPDATE

The following table summarizes Northern Oil's current oil derivative contracts, by fiscal quarter:


 


COSTLESS COLLARS


SWAPS

Contract Period


Volume (Bbls)


Weighted Average

Floor/Ceiling Price (per Bbl)


Volume (Bbls)


Weighted Average Price

(per Bbl)

2012:









Q4


384,140


$91.20 - $105.93


562,500


$93.66

2013:









Q1


565,550


$89.65 - $103.94


180,000


$91.58

Q2


526,481


$89.74 - $104.02


225,000


$91.17

Q3


543,374


$90.29 - $104.35


255,000


$92.48

Q4


517,864


$90.38 - $104.41


300,000


$92.03

2014:









Q1


60,000


$90.00-$99.05


540,000


$92.42

Q2


60,000


$90.00-$99.05


600,000


$92.13

Q3


60,000


$90.00-$99.05


300,000


$91.26

Q4


60,000


$90.00-$99.05


300,000


$91.26

MANAGEMENT COMMENT

Michael 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 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 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 Call
Replay Dial-In Number: (888) 203-1112 (US/Canada) and (719) 457-0820 (International)
Replay Access Code:  4664162 - Replay will be available through November 22, 2012

ABOUT NORTHERN OIL AND GAS

Northern 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 HARBOR

This 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 Relations
Erik Nerhus
952-476-9800


 

NORTHERN OIL AND GAS, INC.
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011
(UNAUDITED)




















Three Months Ended


Nine Months Ended









September 30,


September 30,









2012


2011


2012


2011

 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)


27,105,400


18,125,928


26,675,003


 Other Revenue


12,486


88,738


160,752


218,984


 Total Revenues


60,095,613


69,050,038


229,826,206


122,402,885
















 OPERATING EXPENSES










 Production Expenses


8,734,636


3,910,859


22,540,237


8,542,761


 Production Taxes


8,092,843


4,261,407


20,829,732


10,188,308


 General and Administrative Expense


9,467,711


4,073,988


18,568,696


10,113,995


 Depletion of Oil and Gas Properties


27,952,585


10,749,384


71,781,894


25,962,463


 Depreciation and Amortization


104,830


75,597


304,226


214,205


 Accretion of Discount on Asset Retirement Obligations


23,709


7,781


61,162


20,305


 Total Expenses


54,376,314


23,079,016


134,085,947


55,042,037
















 INCOME FROM OPERATIONS


5,719,299


45,971,022


95,740,259


67,360,848
















 OTHER INCOME (EXPENSE)










 Interest Expense


(5,205,822)


(182,499)


(8,130,225)


(425,687)


 Interest Income


106


1,699


1,206


567,327


 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


513,583


45,790,222


87,611,240


67,717,580
















 INCOME TAX PROVISION


213,422


17,173,000


34,878,772


25,725,300
















 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)


-


-


-


173,846


Reclassification 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)


-


176,950


62,309


518,900

 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 


62,589,256


61,919,641


62,410,110


61,708,537

 Weighted Average Shares Outstanding – Diluted


62,882,673


62,265,502


62,753,241


62,114,115


















 

NORTHERN OIL AND GAS, INC.
BALANCE SHEETS
SEPTEMBER 30, 2012 AND DECEMBER 31, 2011


















September 30, 2012


December 31,








(UNAUDITED)


2011

 CURRENT ASSETS





 Cash and Cash Equivalents

$            8,234,566


$         6,279,587


 Trade Receivables

79,324,983


51,418,830


 Advances to Operators

4,050,511


17,530,474


 Prepaid Expenses

758,476


486,421


 Other Current Assets

280,052


317,460


 Derivative Instruments

4,005,611


-


 Deferred Tax Asset

-


4,472,000

 Total Current Assets

96,654,199


80,504,772











 PROPERTY AND EQUIPMENT





 Oil and Natural Gas Properties, Full Cost Method of Accounting







 Proved

1,051,333,841


566,195,321




 Unproved

104,910,316


137,784,903




 Other Property and Equipment

3,173,798


2,988,641

 Total Property and Equipment

1,159,417,955


706,968,865


 Less - Accumulated Depreciation and Depletion

135,352,039


63,265,919

 Total Property and Equipment, Net

1,024,065,916


643,702,946











 DERIVATIVE INSTRUMENTS

2,283,655


-











 DEBT ISSUANCE COSTS

12,211,806


1,386,201











 TOTAL ASSETS

$       1,135,215,576


$     725,593,919











LIABILITIES AND STOCKHOLDERS' EQUITY

 CURRENT LIABILITIES





 Accounts Payable

$        122,259,062


$   110,133,286


 Accrued Expenses

2,769,351


65,443


 Accrued Interest

9,022,667


98,798


 Derivative Instruments

-


9,363,068


 Deferred Tax Liability

709,000


-

 Total Current Liabilities

134,760,080


119,660,595











 LONG-TERM LIABILITIES





 Revolving Credit Facility

68,000,000


69,900,000


 8% Senior Notes Due 2020

300,000,000


-


 Derivative Instruments

-


2,574,903


 Other Noncurrent Liabilities

1,422,683


959,366


 Deferred Tax Liability

65,657,000


35,929,000

 Total Long-Term Liabilities

435,079,683


109,363,269











 TOTAL LIABILITIES

569,839,763


229,023,864











 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)

63,491


63,330


 Additional Paid-In Capital

464,209,170


448,198,350


 Retained Earnings

101,103,152


48,370,684


 Accumulated Other Comprehensive Loss

-


(62,309)

 Total Stockholders' Equity

565,375,813


496,570,055











 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$     1,135,215,576


$   725,593,919













 


NORTHERN OIL AND GAS, INC.
Reconciliation of Adjusted EBITDA
(UNAUDITED)








Three Months Ended


Nine Months Ended







September 30, 2012


September 30, 2011


September 30, 2012


September 30, 2011














Net Income




$        300,161


$        28,617,222


$     52,732,468


$    41,992,280

Add Back:













Interest Expense

5,205,822


182,499


8,130,225


425,687


Income Tax Provision

213,422


17,173,000


34,878,772


25,725,300


Depreciation, Depletion, Amortization, and Accretion

28,081,124


10,832,762


72,147,282


26,196,973


Non- Cash Share Based Compensation

6,998,765


2,188,900


11,295,664


5,552,245


Unrealized Loss (Gain) on Derivative Instruments

22,308,470


(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 Ended


Nine Months Ended



September 30, 2012


September 30, 2011


September 30, 2012


September 30, 2011










Net Income


$        300,161


$    28,617,222


$    52,732,468


$41,992,280

Add:









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


$25,488,277










Weighted Average Shares Outstanding – Basic 


62,589,256


61,919,641


62,410,110


61,708,537

Weighted Average Shares Outstanding – Diluted


62,882,673


62,265,502


62,753,241


62,114,115










Net Income Per Common Share – Basic


$              -


$             0.46


$             0.84


$           0.68

Add:









Change 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 Tax


0.05


-


0.05


-

Adjusted Net Income Per Common Share – Basic


$             0.27


$             0.19


$             0.72


$           0.41










Net Income Per Common Share – Diluted

Add:


$                   -


$             0.46


$             0.84


$           0.68

Change 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 Tax


0.05


-


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.



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