- Initial Production Data Provided on First Two Middle Bakken
Producers; Wells IP at 1,394 BOE/d and 711 BOE/d on 24-hour
Production Tests DENVER, May 7 /PRNewswire-FirstCall/ -- Kodiak Oil
& Gas Corp. (NYSE Amex: KOG), an oil and gas exploration and
production company with assets in the Green River Basin of
southwest Wyoming and Colorado and the Williston Basin of North
Dakota and Montana, today reported financial and operating results
for the first quarter 2009 and provided an interim update on its
Williston Basin drilling and completion activities. First Quarter
2009 Operational Results Williston Basin -- Dunn County, North
Dakota Kodiak's exploration efforts target oil and gas production
from the middle member between the upper and lower Bakken shales,
which are the source for existing hydrocarbons. The Three Forks /
Sanish Formation, a productive interval lying directly below the
lower Bakken shale, is also expected to be a future exploration
target. Commercial production from the Three Forks / Sanish
Formation is being reported by operators in the immediate area.
Q109 Drilling Activity The Moccasin Creek (MC) #16-34-2H well, a
well in progress from the fourth quarter of 2008, reached total
depth in January 2009. Kodiak operates the well with 60% working
interest (WI) and 49% net revenue interest (NRI). Located in the
southwestern portion of Kodiak's leasehold, the well was drilled on
320-acre spacing to an approximate total vertical depth (TVD) of
10,350 feet and a total measured depth (TMD) of 15,525 feet with a
4,169 foot lateral in the middle Bakken. The well successfully
reached TMD and had the liner in the hole in 41 days. Completion
operations are discussed below. The MC #16-34H well (Kodiak
operates with 60%WI and 49% NRI) reached total depth in February
2009. The well was drilled on 320-acre spacing to an approximate
TVD of 10,350 feet and a TMD of 14,810 feet with a 4,159 foot
lateral in the middle Bakken. The well successfully reached TMD and
had the liner in the hole in 36 days. Completion operations are
discussed below. The Two Shields Butte (TSB) #16-8-16H well (Kodiak
operates with 50% WI and 41% NRI) reached total depth in March
2009. The well, located in the northwestern portion of Kodiak's
leasehold, was drilled on 320-acre spacing to an approximate TVD of
10,350 feet and a TMD of 15,760 feet with a 4,465 foot lateral in
the middle Bakken. The well successfully reached TMD and had the
liner in the hole in 31 days. Completion operations are anticipated
to commence in late May 2009. The TSB #16-8-7H well (Kodiak
operates with 37.5% WI, before payout (36% WI after payout) and 30%
NRI, before payout (29.5% NRI after payout)) reached total depth in
April 2009. The well, located in the northwestern portion of
Kodiak's leasehold, was drilled to an approximate TVD of 10,350
feet and a TMD of 19,743 feet with an 8,995 foot lateral in the
middle Bakken. The well, drilled on 640-acre spacing with two
lay-down 320s, successfully reached TMD and had the liner in the
hole in 28 days. Completion operations are anticipated to commence
in June 2009. Subsequent to the end of the first quarter 2009,
Kodiak is rigging up on the TSB #14-33-6H well (Kodiak operates
with 50% WI and 41% NRI). The well is located roughly in the middle
of the Company's FBIR acreage block and will be drilled to an
approximate TVD of 10,380 feet with an approximate 4,500 foot
lateral on a 320-acre drilling block. The TSB #14-33-28H well will
be drilled immediately following off of the same drilling pad. This
well will be drilled on a 1,280-acre spacing unit with an
approximate 9,000 foot lateral. Completion Activity Subsequent to
the end of the first quarter 2009, Kodiak successfully completed
its first two wells in the Moccasin Creek operating area of its
FBIR leasehold. The wells were both drilled on 320-acre spacing.
Fracture stimulation procedures were completed on the MC #16-34-2H
well on April 23, 2009. During drilling operations, a liner was run
into the 4,159 foot horizontal lateral section of the well bore
utilizing sliding sleeves with the expectation of an eight-stage
fracture stimulation treatment. During completion operations the
well encountered mechanical issues when one of the sleeves opened
prematurely, preventing stimulation procedures to be completed on
four of the eight stages. As a result, only four frac stages were
successfully put away in the intended zones. At this time the well
will be produced and the production rates will be monitored. No
further near-term work is anticipated, however additional
stimulation work could be initiated at a later date. The well is
currently flowing back oil and frac fluid up 4 1/2" frac string to
the tank batteries. Initial 24-hour production rates were 604
barrels of oil and approximately 643 thousand cubic feet per day
(Mcf/d) of natural gas, or 711 barrels of oil equivalent (BOE). The
well is only being produced during non-working hours as completion
work on the MC #16-34H continues from the same drilling pad.
Fracture stimulation procedures were completed on the MC #16-34H
well on May 4, 2009. The well was completed utilizing sliding
sleeves with a five-stage fracture stimulation design in the 4,169
foot horizontal lateral section of the well bore. The well is
currently flowing back frac fluid and oil up 4 1/2" frac string to
the tank batteries. Initial 24-hour production rates were 1,274
barrels of oil and 717 Mcf/d of natural gas, or 1,394 BOE. Work is
in progress on the TSB #16-8-16H and the TSB #16-8-7H wells, which
we expect to complete in early June 2009. As of March 31, 2009,
Kodiak had approximately 54,000 gross and 37,000 net acres under
lease on the Fort Berthold Indian Reservation (FBIR) in Dunn
County, N.D. Kodiak operates all of its leasehold on the FBIR, with
the exception of approximately 18,000 gross and 9,000 net acres
that are in a participating area previously established with
another operator. As of March 31, 2009, Kodiak had 11 approved
drilling permits, six permits in process and awaiting approval and
had an inventory of three drilling pads built and awaiting new
drilling activities. Management Comment Commenting on the recent
activity, Kodiak's President and CEO Lynn Peterson said: "The first
order of business was to strengthen our financial condition and
liquidity. Our recently announced equity financing, which is
discussed below, will help us complete our planned 2009 capital
expenditure program. This placement, which is subject to certain
closing conditions, was completed with existing shareholders that
have helped us build our Company over the past five years. With our
2009 drilling and completion schedule, we expect to see an
improvement in our cash flow over the coming quarters. Ultimately
we believe that our early results will help position us to access
the capital we will need to develop this significant oil play in
North Dakota. "Completing the first two Middle Bakken wells on our
FBIR leasehold is a significant milestone for Kodiak. The
mechanical issues on the first completion were disappointing, as we
are unable to properly evaluate the true productive potential of
the well. Despite down-hole issues, the rates are encouraging from
the four successful stages. The second well was completed in an
efficient manner without any difficulties and we are pleased with
the production we are seeing from the well. It is too early to
provide per-well estimated ultimate recoveries, but we believe that
our stated range of 350 MBOE to 500 MBOE for the shorter 4,500 foot
laterals remains as a Company target. We are awaiting completion
results from our first long lateral which should continue to give
us further information as to the most efficient method of drilling
and recovery of hydrocarbons from this resource play. Our drilling
operations continue to become more efficient with each well that we
drill. Our technical team has met the challenges and we are seeing
our well costs come down significantly." Vermillion Basin--Wyoming
Vermillion Basin Deep--Baxter Shale and Frontier and Dakota
Sandstone At March 31, 2009, Kodiak owned or controlled
approximately 44,000 gross (17,000 net) acres in the Vermillion
Basin of the Green River Basin in Wyoming and Colorado. Kodiak's
exploration efforts focus on the over-pressured Baxter Shale at
depths to approximately 13,000 feet. The Company's joint venture
partner, Devon Energy Production Company, L.P., drilled four wells
during 2008 to obtain and evaluate data points from different
locations within the acreage block, specifically in the Horseshoe
Basin Unit located on the western edge of Kodiak's acreage and the
Coyote Flats Federal Unit located on the northern edge. Two of the
wells were drilled horizontally and are awaiting completion. The
other two wells were drilled vertically into the Baxter formation
and additional work will be done on these wells at a later date.
Due to the current low natural gas prices, completion work is being
deferred with limited work expected during 2009. Kodiak has an
approximate 50% working interest in these wells which have yet to
be completed. Liquidity and Capital Resources During the first
three months of 2009, Kodiak incurred capital expenditures of
approximately $4.4 million. The Company's previously announced
estimated capital expenditure budget allocates up to $15.3 million
for the full-year 2009. The 2009 estimated capital expenditure
budget does not include any potential costs or fees associated with
the second drill rig that the Company has contracted and is now
attempting to terminate or defer its obligation to a later date.
Kodiak continues to evaluate and monitor its capital expenditures
in relation to commodity prices. The Company anticipates that its
expenditures could be less than $15.3 million if current economic
conditions continue throughout 2009. It was originally estimated
that, of the $15.3 million total projected expenditures, $4.0
million would be allocated to the Vermillion Basin of Wyoming and
Colorado and the remaining $11.3 million would be allocated to the
Williston Basin of North Dakota. However, the Company has revised
its projections, and it now anticipates that actual expenditures
during 2009 in the Vermillion Basin will be less than $4.0 million,
in which case, the Company anticipates that it will re-allocate
such difference to the Williston Basin. On May 6, 2009, the Company
entered into agreements to issue 10.0 million shares of its common
stock to certain institutional investors and insiders, including
management, in a non-brokered registered direct offering ("Proposed
Financing"). If the Proposed Financing closes as expected on or
about May 11, 2009, the Company anticipates that the resulting
gross proceeds of approximately $7.5 million, together with its
projected 2009 cash flows from operations and its prepaid tubular
goods and surface equipment, would be sufficient to support
Kodiak's planned capital expenditure program through December 2009.
If the Proposed Financing were not to close, it will be necessary
for the Company to complete an alternate arrangement in order to
fund the Company's 2009 capital expenditures. First Quarter 2009
Results Oil and Gas Sales Kodiak's first quarter 2009 oil and gas
sales volumes grew by 23% to 33,100 barrels of oil equivalent
(BOE), as compared to 26,950 BOE in the same period in 2008. Oil
sales volumes were up 4% to 16,490 barrels for the first quarter
2009, as compared to 15,850 barrels in the same period in 2008.
Natural gas production increased by 50% in the first quarter of
2009 to 99.6 million cubic feet (MMcf), as compared to 66.6 MMcf in
the prior-year period. The increase in natural gas production is
attributed to new wells that came on production in late 2008. By
commodity in the first quarter 2009, crude oil constituted 50% of
the production base. For the first quarter 2009, the average gas
price received decreased 60% to $2.83 per Mcf, as compared to the
$6.99 per Mcf received in the same period in 2008. On a
quarter-over-quarter basis, Kodiak experienced a 66% decrease in
the average price received for crude oil in 2009. The Company sold
its oil volumes for $30.04 per barrel during the first quarter
2009, as compared to the $89.12 per barrel received during the
prior-year period. Kodiak currently does not hedge any of its oil
and gas production volumes. The Company intends to evaluate an
appropriate risk management strategy as the production base
increases from future drilling in the Eastern Bakken oil play in
Dunn County, N.D. During the first quarter 2009, Kodiak invested
$4.4 million primarily for the drilling of Bakken shale wells and
related infrastructure. Approximately $550,000 was allocated toward
the acquisition of new leasehold and seismic activities. The
Company now has working interests in 26 gross (14.9 net) wells, of
which 16 gross (10.6 net) are Kodiak-operated wells. Financial
Results The Company reported a net loss for the quarter-ended March
31, 2009, of $1.6 million, or $0.02 per basic and diluted share,
compared with a net loss of $2.6 million, or $0.03 per basic and
diluted share, for the same period in 2008. Total revenues for the
first quarter 2009 were $791,000, versus $2.0 million for the same
period in 2008. Oil and gas sales were $778,000 for the first
quarter 2009, as compared to $1.9 million in 2008. Crude oil
revenue accounted for approximately 64% of first quarter 2009 oil
and gas sales. For the first quarter 2009, Adjusted EBITDA was a
negative $492,000, as compared to $2,400 for the same period in
2008. Kodiak defines Adjusted EBITDA as net income before interest,
taxes, depreciation, depletion, amortization and accretion,
non-cash stock-based compensation expense, impairment charges and
gains or losses on foreign currency exchange. Reconciliations of
Adjusted EBITDA, a non-GAAP measure, to net loss are included in
this news release and in the Company's filing on Form 10-Q.
Additional disclosure regarding the Company's use of Adjusted
EBITDA are also included in the Company's filing on Form 10-Q.
Total assets were $37.9 million at March 31, 2009, as compared to
$39.0 million at December 31, 2008. Stockholders' equity was $32.2
million at March 31, 2009, as compared to $33.0 million at year-end
2008. The Company's cash and cash equivalents position at March 31,
2009, was $2.0 million, and it currently has no long-term debt. In
addition, prepaid expenses, including tubular goods and surface
equipment, were $8.9 million and accounts receivable was $4.8
million, both at March 31, 2009. Kodiak's total current assets at
March 31, 2009 were $15.7 million and its total current liabilities
were $4.8 million, providing working capital of $10.9 million.
General and administrative (G&A) expense decreased to $1.9
million for the first quarter 2009, from $2.5 million for the same
period in 2008. Included in the G&A expense for the 2009 period
is a non-cash stock-based compensation charge of $781,000 for
options issued to officers, directors and employees, as compared to
$1.5 million for the same period in 2008. The 24%
quarter-over-quarter reduction in G&A is attributed to the 48%
reduction in stock-based compensation in the 2009 period.
Teleconference Call In conjunction with Kodiak's release of its
results, investors, analysts and other interested parties are
invited to participate in a conference call with management on
Friday, May 8, 2009 at 11:00 a.m. Eastern Daylight Time. Date:
Friday, May 8, 2009 Time: 11:00 a.m. EDT 10:00 a.m. CDT 9:00 a.m.
MDT 8:00 a.m. PDT Call: (877) 257-3168 (US/Canada) and (706)
643-3820 (International) Passcode 97397558 Internet: Live and
rebroadcast over the Internet
http://www.videonewswire.com/event.asp?id=58430 or at:
http://www.kodiakog.com/ Replay: Available through Friday, May 15,
2009 at (800) 642-1687 (US/Canada) and (706) 645-9291
(International) using passcode 97397558 and for 30 days at
http://www.kodiakog.com/ About Kodiak Oil & Gas Corp. Kodiak
Oil & Gas, Denver-based, is an independent energy exploration
and development company focused on exploring, developing and
producing oil and natural gas in the Williston and Green River
Basins in the U.S. Rocky Mountains. For further information, please
visit http://www.kodiakog.com/. The Company's common shares are
listed for trading on the NYSE Amex 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 exploration, drilling and development
plans, the Company's expectations regarding the timing and success
of such programs, the Company's expectations regarding the timing
and amount of future revenues and the Company's expectations
regarding the future production of its oil & gas properties.
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. 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
period ended March 31, 2009 filed with the Securities and Exchange
Commission on May 7, 2009. KODIAK OIL & GAS CORP. CONSOLIDATED
BALANCE SHEETS (Unaudited) (Audited) March 31, December 31, ASSETS
2009 2008 ------ ---- ---- Current Assets: Cash and cash
equivalents $2,007,423 $7,581,265 Accounts receivable Trade
4,018,063 1,934,818 Accrued sales revenues 757,962 516,870 Prepaid
expenses and other 8,903,613 10,621,980 --------- ---------- Total
Current Assets 15,687,061 20,654,933 ---------- ---------- Oil and
gas properties (full cost method), at cost: Proved oil and gas
properties 99,267,199 97,934,058 Unproved oil and gas properties
12,049,766 11,985,533 Wells in progress 3,730,114 728,093
Less-accumulated depletion, depreciation, amortization, accretion
and asset impairment (93,102,757) (92,804,911) -----------
----------- Net oil and gas properties 21,944,322 17,842,773
---------- ---------- Other property and equipment, net of
accumulated depreciation of $299,402 in 2009 and $270,620 in 2008
240,722 272,705 Restricted investments - 246,068 ------- -------
Total Assets $37,872,105 $39,016,479 =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------ Current Liabilities: Accounts
payable and accrued liabilities $2,682,673 $4,125,335 Advances from
joint interest owners 2,150,020 1,105,740 --------- --------- Total
Current Liabilities 4,832,693 5,231,075 Noncurrent Liabilities:
Asset retirement obligation 887,405 787,180 ------- ------- Total
Liabilities 5,720,098 6,018,255 --------- --------- Commitments and
Contingencies - Note 7 Stockholders' Equity: Common stock - no par
value; unlimited authorized Issued and outstanding: 95,129,431
shares in 2009 and 95,129,431 shares in 2008 Contributed surplus
137,079,234 136,297,845 Accumulated deficit (104,927,227)
(103,299,621) ------------ ------------ Total Stockholders' Equity
32,152,007 32,998,224 ---------- ---------- Total Liabilities and
Stockholders' Equity $37,872,105 $39,016,479 ===========
=========== KODIAK OIL & GAS CORP. CONSOLIDATED STATEMENTS OF
OPERATIONS For the Three Months Ended March 31,
-------------------- 2009 2008 ---- ---- Revenues: Gas production
$282,474 $465,865 Oil production 495,259 1,412,306 Interest 13,627
83,366 ------ ------ Total revenue 791,360 1,961,537 -------
--------- Cost and expenses: Oil and gas production 148,529 982,951
Depletion, depreciation, amortization and accretion 355,340
1,097,299 General and administrative 1,915,951 2,495,042
(Gain)/loss on currency exchange (853) 18,281 ---- ------ Total
costs and expenses 2,418,967 4,593,573 --------- --------- Net loss
$(1,627,607) $(2,632,036) =========== =========== Basic &
diluted weighted-average common shares outstanding 95,129,431
87,992,931 ========== ========== Basic & diluted net loss per
common share $(0.02) $(0.03) ====== ====== KODIAK OIL & GAS
CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended
March 31, ------------------ 2009 2008 ---- ---- Cash flows from
operating activities: Net loss $(1,627,607) $(2,632,036)
Reconciliation of net loss to net cash (used in) provided by
operating activities: Depletion, depreciation, amortization and
accretion 355,340 1,097,299 Stock based compensation 781,389
1,518,810 Changes in current assets and liabilities: Accounts
receivable-trade (2,083,245) 274,800 Accounts receivable-accrued
sales revenue (241,092) (9,958) Prepaid expenses and other 380,077
60,350 Accounts payable and accrued liabilities (38,253)
(2,738,207) ------- ---------- Net cash (used in)/provided by
operating activities (2,473,391) (2,428,942) ---------- ----------
Cash flows from investing activities: Oil and gas properties
(3,817,427) (3,128,461) Sale of oil and gas properties - 2,437,892
Equipment - 11,416 Prepaid tubular goods 467,704 - Restricted
investment: undesignated as restricted 249,272 (3,204) -------
------ Net cash (used in) investing activities (3,100,451)
(682,357) ---------- -------- Net cash provided by financing
activities - - --- --- Net change in cash and cash equivalents
(5,573,842) (3,111,299) Cash and cash equivalents at beginning of
the period 7,581,265 13,015,318 --------- ---------- Cash and cash
equivalents at end of the period $2,007,423 $9,904,019 ==========
========== Supplemental cash flow information Oil & gas
property accrual included in Accounts payable and accrued
liabilities $1,097,060 $1,095,418 ========== ========== Asset
retirement obligation $71,514 $(65,143) ======= ======== Use of
Non-GAAP Financial Matters --------------------------------- In
evaluating its business, Kodiak considers earnings before interest,
taxes, depreciation, for operational activities and future capital
expenditures. Adjusted EBITDA is not a Generally Accepted
Accounting Principle ("GAAP") measure of performance. The Company
uses this non-GAAP measure primarily to compare its performance
with other companies in the industry that make a similar disclosure
and as a measure of its current liquidity. 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 its operations and
capital investment program. Investors should not consider this
measure 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 EBITDA is
not a GAAP measure, it may not necessarily be comparable to
similarly titled measures employed by other companies. KODIAK OIL
& GAS CORP. RECONCILIATION OF ADJUSTED EBITDA Three months
ended Three months ended March 31, March 31, Reconciliation of
Adjusted EBITDA: 2009 2008 ---- ---- Net Loss $(1,627,607)
$(2,632,036) Add back: Depreciation, depletion, amortization and
accretion 355,340 1,097,299 (Gain) / loss on foreign currency
exchange (853) 18,281 Stock based compensation expense 781,389
1,518,810 --------- ------ Adjusted EBITDA $(491,731) $2,354
========= ====== DATASOURCE: Kodiak Oil & Gas Corp. CONTACT:
Mr. Lynn A. Peterson, CEO and President of Kodiak Oil & Gas
Corp., +1-303-592-8075; or Mr. David P. Charles of Sierra Partners
LLC, +1-303-757-2510, ext. 11, for Kodiak Oil & Gas Corp. Web
Site: http://www.kodiakog.com/
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