KODIAK OIL & GAS CORP 
By DENVER, May 1, 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 first quarter ended March 31, 2014 and provided a Williston Basin operations update.
http://photos.prnewswire.com/prnvar/20131007/LA93138LOGO
Financial Results
For the first quarter-ended March 31, 2014, the Company reported oil and gas sales of $257.0 million, as compared to $165.1 million during the same period in 2013, representing an increase of 56%. Kodiak reported an overall 57% increase in quarter-over-quarter equivalent sales volumes with 3.1 million barrels of oil equivalent (MMBOE) sold, or an average of 34.0 MBOE per day (MBOE/d) during the first quarter of 2014, as compared to 2.0 MMBOE, or an average of 21.7 MBOE/d in the first quarter of 2013. Crude oil revenue accounted for approximately 92% of oil and gas sales recorded during the first quarter 2014.
Adjusted EBITDA was $179.9 million for the first quarter 2014, as compared to $124.4 million in the same period in 2013. 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.
For the first quarter 2014, the Company reported net income of $29.1 million, or $0.11 per diluted share, compared to net income of $19.4 million, or $0.07 per diluted share, for the same period in 2013.
Kodiak reported net cash provided by operating activities during the first quarter 2014 of $163.5 million, as compared to $114.6 million during the same period in 2013, an increase of 43%.
General and administrative expenses (G&A) for the first quarter 2014 totaled $13.9 million, or $4.54 per BOE, compared to $10.3 million, or $5.28 per BOE, in the first quarter 2013. The decrease in G&A expense per BOE for the first 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 March 31, 2014, Kodiak had 214 employees, as compared to 116 employees as of March 31, 2013 and 202 employees as of December 31, 2013.
Lease operating expenses (LOE) for the first quarter 2014 totaled $22.7 million or $7.43 per BOE, an 8% increase per BOE over the first quarter 2013 and an increase of 14% over the fourth quarter of 2013. The increase is primarily the result of winter operations. The Company expects to see a reduction in per unit LOE for the remainder of the year. Additionally, the Company continues efforts to decrease operating costs, primarily by addressing water disposal costs, the largest component of LOE.
During the first quarter ended March 31, 2014, Kodiak incurred total interest expense related to its outstanding senior notes and credit facility of approximately $31.6 million. The Company capitalized interest costs of $8.4 million for the first quarter 2014.
The following table summarizes the Company's sales volumes and costs on a per-unit basis for the periods shown:
Kodiak Oil & Gas
Corp. % Change
Net Sales Volumes
Comparison and
Unit Cost Analysis Q1-14 Q4-13 Q1-13 Sequential Q-o-Q
----- ----- ----- --------- -----
Net Sales Volumes
-----------------
Crude Oil (MBbls) 2,677 2,964 1,716 (10)% 56%
Natural Gas (MMcf) 2,310 2,163 1,420 7% 63%
Barrels of Oil
Equivalent (MBOE) 3,062 3,324 1,953 (8)% 57%
----- ----- -----
Average Daily
Volumes
-------------
Daily Sales (BOE/
day) 34,025 36,100 21,700 (6)% 57%
Unhedged Product
Price Received
----------------
Average Price
Received Oil
($/Bbl) $88.62 $85.09 $90.80 4% (2)%
Average Price
Received Gas
($/Mcf) $8.56 $6.61 $6.48 30% 32%
Average Price
Received BOE
($/BOE) $83.93 $80.17 $84.51 5% (1)%
Expenses
--------
Lease Operating
Expense ($/BOE) $7.43 $6.54 $6.90 14% 8%
Production Tax
($/BOE) $8.95 $8.65 $9.08 3% (1)%
Gathering,
Transportation &
Marketing Expense
($/BOE) $2.25 $2.19 $2.45 3% (8)%
DD&A Expense
($/BOE) $29.27 $30.18 $29.38 (3)% -%
Total G&A Expense
($/BOE) $4.54 $4.22 $5.28 8% (14)%
Non-cash Stock-
based Compensation
Expense ($/BOE) $1.67 $1.37 $1.91 22% (13)%
Drilling and Completion Operations
During the first quarter of 2014, Kodiak completed 20 gross (15.2 net) operated wells and participated in the completion of 26 gross (3.8 net) non-operated wells.
Kodiak's drilling operations continue with seven operated rigs which the Company plans to maintain throughout 2014, along with continuing participation in non-operated activities. Well costs continue to decline as a result of decreased spud-to-rig-release times, as well as some cost reductions across the full drilling spectrum.
Pilot Program Update
Downspacing work continues in the Company's Polar operating area. Drilling operations are in progress on the second and third four-well pads in the drilling spacing unit (DSU) comprising the Polar Pilot 2.0. Each pad will consist of two wells drilled in the Middle Bakken and two in the Three Forks spaced approximately 600-650 feet apart within each reservoir. The Company plans to test 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)
----------------------------
Polar Pilot 1.0
---------------
30
Days 60 Days 90 Days 120 Days 150 Days 180 Days 210 Days
---- ------- ------- -------- -------- -------- --------
Middle Bakken (6
wells) 1,020 845 735 666 611 562 518
Three Forks (6
wells) 933 751 645 570 519 471 432
Polar Pilot 2.0
---------------
30
Days 60 Days
---- -------
Middle Bakken (2
wells) 1,040 790
Three Forks (2
wells) 792 606
Smokey Pilot
------------
30
Days 60 Days 90 Days 120 Days 150 Days
---- ------- ------- -------- --------
Middle Bakken (6
wells) 940 738 648 566 506
Three Forks (6
wells) 659 516 417 357 316
2014 Capital Expenditures
During the first quarter of 2014, Kodiak has invested approximately $208.6 million related to its oilfield operations and leasehold acquisitions compared to its full year capital expenditure guidance of approximately $940.0 million. Additional detail on our capital expenditures as of the end of the first quarter of 2014 versus our full year 2014 budget is provided in the table below ($ in millions).
Three
Months
Ended
2014 March
Annual 31,
2014
Budget Actual
------ ------
Capital Expenditures
Drilling and completion costs $890.0 $204.9
Infrastructure and leasehold
acquisitions 50.0 3.7
---- ---
Total capital expenditures $940.0 $208.6
---- ------
Divestitures
Proved and unproved oil and
gas properties $(70.8)
Non-Cash Capitalized Costs
Asset retirement obligations $0.9
Capitalized interest 8.4
Total capitalized costs, net
of divestitures $147.1
======
Updated 2014 Production Guidance
In late November 2013 and continuing through February 2014, North Dakota experienced colder than normal weather. Due to these conditions, completion and workover activities on both operated and non-operated properties were slowed, resulting in lower than expected first quarter production. As conditions improved in March and continued through April, the activity and production levels have returned to the expected levels. After assessing first quarter production, the impact of asset divestitures, and an update to our non-operated completion schedule for the remainder of 2014, Kodiak is revising its average 2014 full-year production guidance to a range of 39,000 to 42,000 BOE/d, or 35% to 45% year-over-year sales volume growth.
Management Comments
Commenting on recent developments, Kodiak's Chairman and CEO, Lynn A. Peterson said, "We have just completed a challenging quarter as weather adversely affected our activity level. Although the team worked tirelessly through the weather conditions, the impact on our operations was of a meaningful enough size that we believed it to be prudent to reset our full year production guidance."
"During the first quarter of 2014, nearly a third of our completed operated wells were drilled in our Wildrose area of northern Williams County to hold acreage. This is an area with a thinner reservoir section and less source rock that results in lower reservoir pressures and less gas, and corresponding lower production rates and reserves. Wells in this area also have to be put on pump soon after completion, which was delayed because of weather. We are excited about the remainder of the year as our activity is all concentrated in the heart of our core leasehold in southern Williams, McKenzie and Dunn Counties, where we continue to deliver consistent well results."
"Based upon early production our downspacing projects continue to show encouraging results. Through the first seven months of production our 12-well downspacing project in the Polar area has produced on average approximately 100,000 BOE per well, putting them well on their way towards payout."
"Our development program continues to see efficiency gains with both fewer drilling days and fewer days for completion work, helping to drive down our well costs. We currently estimate our completed and equipped well costs, using 100% ceramic proppants, are approximately $8.5 million to $9.0 million, which should be reflected in the later quarters of 2014. As we move toward full-scale development of our core Williston Basin properties, we will continue to look for additional opportunities to improve drilling efficiencies and further drive down completed well costs."
Q1-14 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, May 2, 2014 at 11:00 a.m. Eastern Daylight Time.
Kodiak Oil & Gas Corp. Q1-14 Financial and Operating Results Conference Call
----------------------------------------------------------------------------
Date: May 2, 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
--- -----------------------------------------------
Upcoming Investor Conferences
Kodiak also today announced management's participation in upcoming investor conferences. If a webcast is available, links can be found on the Company's website at www.kodiakog.com.
Conference City Date Time
---------- ---- ---- ----
Baird Growth Stock Chicago, IL May 8,
Conference 2014 11:20 AM ET
------------------ ----------- ------- -----------
ISI Bermuda Energy Bermuda May 14,
Conference 2014 None
------------------ ------- -------- ----
UBS Global Oil & Gas Austin, TX May 21,
Conference 2014 8:30 AM ET
-------------------- ---------- -------- ----------
RBC Global Energy New York, NY Jun. 3,
Conference 2014 None
----------------- ------------ -------- ----
Bank of America Merrill Jun. 4,
Lynch Global Energy & 2014
Power Leveraged Finance
Conference New York, NY TBD
----------------------- ------------ -------- ---
IPAA OGIS Toronto Toronto, ON Jun. 5,
Conference 2014 8:45 AM ET
----------------- ----------- -------- ----------
Presentation times and webcasting are subject to change at the discretion of the conference organizer. Please reference Kodiak's Presentations & Events page for further details regarding conferences and other events in which the Company may elect to participate.
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 document include statements regarding the Company's expectations as to its growth and development including trends in production, cash flow and reserves, the Company's expectations regarding potential improvements in LOE, the Company's pilot program, the Company's drilling and completion program, including timing and improvements in per-well costs, and trends in the availability and cost of oil field services. Factors that could cause or contribute to such differences include, but are not limited to, fluctuations in the prices of oil and gas, uncertainties inherent in estimating quantities of oil and gas reserves and projecting future rates of production and timing of development activities, competition, operating risks, acquisition risks, liquidity and capital requirements, the effects of governmental regulation, adverse changes in the market for the Company's oil and gas production, dependence upon third-party vendors, and other risks detailed in the Company's periodic report filings with the Securities and Exchange Commission.
For further information, please contact:
Mr. Lynn A. Peterson, Chairman and CEO, Kodiak Oil & Gas Corp. +1-303-592-8075
Mr. Aaron Gaydosik, Vice President of Finance, Kodiak Oil & Gas Corp. +1-720-399-3284
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 March 31, 2014.
KODIAK OIL & GAS CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
March 31, December
2014 31, 2013
--------- ---------
ASSETS
------
Current Assets:
Cash and cash
equivalents $15,966 $90
Accounts receivable
Trade 84,316 108,883
Accrued sales revenues 139,640 121,843
Inventory and prepaid
expenses 12,838 11,367
Deferred tax asset, net 19,740 14,300
------ ------
Total Current Assets 272,500 256,483
------- -------
Oil and gas properties
(full cost method), at
cost:
Proved oil and gas
properties 3,772,963 3,556,667
Unproved oil and gas
properties 572,410 641,644
Equipment and facilities 27,804 27,712
Less-accumulated
depletion,
depreciation,
amortization, and
accretion (694,657) (605,700)
-------- --------
Net oil and gas
properties 3,678,520 3,620,323
--------- ---------
Commodity price risk
management asset 283 1,290
Property and equipment,
net of accumulated
depreciation of $2,302
at March 31, 2014 and
$1,980 at December 31,
2013 4,031 3,928
Deferred financing
costs, net of
amortization of $24,524
at March 31, 2014 and
$22,963 at December 31,
2013 40,186 41,746
------ ------
Total Assets $3,995,520 $3,923,770
======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
--------------------
Current Liabilities:
Accounts payable and
accrued liabilities $274,833 $272,858
Accrued interest payable 29,975 24,425
Commodity price risk
management liability 31,779 20,334
------ ------
Total Current
Liabilities 336,587 317,617
------- -------
Noncurrent Liabilities:
Credit facility 700,000 708,000
Senior notes, net of
accumulated
amortization of bond
premium of $1,193 at
March 31, 2014 and
$1,024 at December 31,
2013 1,554,807 1,554,976
Commodity price risk
management liability 264 -
Deferred tax liability,
net 157,930 133,700
Asset retirement
obligations 17,520 16,405
------ ------
Total Noncurrent
Liabilities 2,430,521 2,413,081
--------- ---------
Total Liabilities 2,767,108 2,730,698
--------- ---------
Stockholders' Equity:
Common stock-no par
value; unlimited
authorized
1,030,690
Issued and outstanding:
266,506,464 shares as
of March 31, 2014 and
266,249,765 shares as
of December 31, 2013 1,024,462
Retained earnings 197,722 168,610
------- -------
Total Stockholders'
Equity 1,228,412 1,193,072
--------- ---------
Total Liabilities and
Stockholders' Equity $3,995,520 $3,923,770
======== ========
KODIAK OIL & GAS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data)
(Unaudited)
For the Three Months
Ended March 31,
--------------------
2014 2013
---- ----
Revenues:
Oil sales $237,249 $155,843
Gas sales 19,766 9,207
------ -----
Total revenues 257,015 165,050
------- -------
Operating expenses:
Oil and gas production 57,037 35,991
Depletion, depreciation,
amortization and accretion 89,629 57,385
General and administrative 13,918 10,302
------ ------
Total operating expenses 160,584 103,678
------- -------
Operating income 96,431 61,372
Other income (expense):
Loss on commodity price risk
management activities, net (24,805) (15,744)
Interest income (expense),
net (24,550) (13,810)
Other income 826 426
--- ---
Total other income (expense) (48,529) (29,128)
------- -------
Income before income taxes 47,902 32,244
Income tax expense 18,790 12,800
------ ------
Net income $29,112 $19,444
======= =======
Earnings per common share:
0.07
Basic $0.11 $
===== ===
0.07
Diluted $0.11 $
===== ===
Weighted average common
shares outstanding:
Basic 266,292,773 265,328,392
=========== ===========
Diluted 269,935,030 267,969,663
=========== ===========
KODIAK OIL & GAS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
For the Three
Months Ended
March 31,
--------------
2014 2013
---- ----
Cash flows from operating
activities:
19,444
Net income $29,112 $
Reconciliation of net income to
net cash provided by operating
activities:
Depletion, depreciation,
amortization and accretion 89,629 57,385
Amortization of deferred
financing costs and debt
premium 1,391 918
Loss on commodity price risk
management activities, net 24,805 15,744
Settlements on commodity
derivative instruments (12,089) 1,438
Stock?based compensation 5,120 3,724
Deferred income taxes 18,790 12,800
Changes in current assets and
liabilities:
Accounts receivable?trade 24,992 (15,013)
Accounts receivable?accrued
sales revenues (17,797) (9,439)
Prepaid expenses and other (368) 134
Accounts payable and accrued
liabilities (5,610) 7,493
Accrued interest payable 5,550 19,945
Net cash provided by operating
activities 163,525 114,573
------- -------
Cash flows from investing
activities:
Oil and gas properties (210,683) (275,805)
Sale of oil and gas properties 70,848 -
Equipment, facilities and other (497) (4,065)
Net cash used in investing
activities (140,332) (279,870)
-------- --------
Cash flows from financing
activities:
Borrowings under credit
facility 80,000 163,875
Repayments under credit
facility (88,000) (358,875)
Proceeds from the issuance of
senior notes - 350,000
Proceeds from the issuance of
common shares 700 260
Purchase of common shares (17) (518)
Debt and share issuance costs - (6,920)
--- ------
Net cash provided by (used in)
financing activities (7,317) 147,822
------ -------
Increase (decrease) in cash and
cash equivalents 15,876 (17,475)
Cash and cash equivalents at
beginning of the period 90 24,060
--- ------
6,585
Cash and cash equivalents at
end of the period $15,966 $
======= ==
Supplemental cash flow
information:
146,840
Oil & gas property accrual
included in accounts payable
and accrued liabilities $172,110 $
======== ==
1,458
Cash paid for interest $26,024 $
======= ==
KODIAK OIL & GAS CORP.
RECONCILIATION OF ADJUSTED EBITDA
(In thousands)
(Unaudited)
For the Three
Months Ended
March 31,
--------------
2014 2013
---- ----
Reconciliation of Adjusted
EBITDA:
Net income $29,112 $19,444
Add back:
Depreciation, depletion,
amortization and accretion 89,629 57,385
Amortization of deferred
financing costs and debt
premium 1,391 918
Loss on commodity price
risk management
activities, net 24,805 15,744
Settlements on commodity
derivative instruments (12,089) 1,438
Stock based compensation
expense 5,120 3,724
Income tax expense 18,790 12,800
Interest expense 23,174 12,902
------ ------
124,355
Adjusted EBITDA $179,932 $
====== ==
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 months ended March 31, 2014 and 2013 is provided in the table above.
Logo - http://photos.prnewswire.com/prnh/20131007/LA93138LOGO
SOURCE Kodiak Oil & Gas Corp.
