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

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:

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).

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.

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.

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.

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.