Kodiak Oil & Gas Corp. (NYSE Alternext US: 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 third quarter 2008.
Please reference Kodiak's simultaneously issued news release entitled "Kodiak Oil & Gas Corp. Announces Preliminary 2009 CAPEX, Exploration Joint Venture and Updates Operations" for further discussion of events subsequent to the third quarter 2008.
Third Quarter Financial Results
The Company reported a net loss for the quarter-ended September 30, 2008, of $18.0 million, or $0.20 per basic and diluted share, compared with a net loss of $22.0 million, or $0.25 per basic and diluted share, for the same period in 2007. The 2008 and 2007 periods' net loss include $15.5 million and $20.0 million, respectively, in non-cash charges related to an impairment of the carrying value of oil and gas properties.
As of September 30, 2008, based on oil and gas prices of $87.81 per barrel of crude oil and $4.69 per Mcf of natural gas, the value of Kodiak's proved reserves as calculated under SEC guidelines did not support the costs included in the full cost pool. Consequently, the Company recorded an asset impairment of $15.5 million during the three month period ended September 30, 2008. The impairment primarily relates to falling commodity prices and a revision of our previously recorded proved undeveloped locations (PUD). In comparison to prices at September 30, 2008 noted above, average prices received during the third quarter were $107.47 per barrel of crude oil and $3.57 per Mcf of natural gas and average prices received during October 2008 prices were $62.56 per barrel of crude oil and $3.59 per Mcf of natural gas. As a result of the deteriorating commodity prices and the Company's strategy to focus its capital expenditures on the Bakken oil play in North Dakota, we reassessed all of our PUDs. Based on the uncertain timing of any potential drilling program on these PUDs and the current environment of lower commodity prices, the present value of these PUDs was deemed non-commercial. Accordingly, we recorded an impairment charge for a significant portion of our previous PUDs.
"The ceiling test and resultant non-cash impairment charge essentially cleans the slate for our oil and gas properties base as we focus Kodiak-operated capital expenditures on the Bakken oil play in North Dakota," said Kodiak's President and CEO Lynn A. Peterson. "We are fortunate to have a blend of oil and gas opportunities providing flexibility in allocating investment dollars to the highest-return plays in our inventory."
Total revenues for the third quarter 2008 were $1.8 million, versus $2.5 million for the same period in 2007. Oil and gas sales were $1.7 million for the third quarter 2008, as compared to $2.2 million in 2007. Crude oilrevenue accounted for approximately 91% of third quarter 2008 oil and gas sales, as compared to 90% in the same period in 2007.
For the third quarter 2008, Adjusted EBITDA was approximately negative $462,000 as compared to $816,000 for the same period in 2007. The negative third quarter Adjusted EBITDA is attributed in part to decreased oil production as a result of workovers on producing wells, discussed below, as well as the increase in workover expense incurred during the third quarter. Kodiak defines Adjusted EBITDA as net income (loss) before interest, income taxes, depreciation, depletion, amortization and accretion, non-cash stock- based compensation expense, impairment expense 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 Form 10-Q for the quarter ended September 30, 2008. Additional disclosure regarding the Company's use of Adjusted EBITDA is also included in the Company's Form 10-Q for the quarter ended September 30, 2008.
General and administrative (G&A) expense was $2.2 million for the third quarter 2008, as compared to $2.1 million for the same period in 2007. Included in the G&A expense for the 2008 period is a stock-based compensation charge of $775,000 for options issued to officers, directors and employees, as compared to $862,000 for the same period in 2007.
Nine-month Period
For the nine months ended September 30, 2008, Kodiak reported a net loss of $22.5 million, or $0.25 per basic and diluted share, compared with a net loss of $36.9 million, or $0.42 per basic and diluted share, for the same period in 2007. The 2008 and 2007 period's net loss include $15.5 million and $34.0 million respectively in non-cash charges related to an impairment of the carrying value of oil and gas properties.
Total revenues for the nine-month period of 2008 were $5.7 million, versus $7.0 million for the same period in 2007. Oil and gas sales were $5.6 million for the first nine months of 2008, as compared to $5.6 million in 2007. Crude oil revenue accounted for approximately 80% of 2008 oil and gas sales, as compared to 87% in the same nine month period in 2007.
For the nine-month period of 2008, Adjusted EBITDA was approximately negative $1.1 million, as compared to $2.1 million for the same period in 2007.
Included in the G&A expense for the 2008 period is stock-based compensation charge of $2.7 million for options issued to officers, directors and employees, as compared to $1.7 million for the same period in 2007.
Total assets were $69.4 million at September 30, 2008, as compared to $74.3 million at December 31, 2007. Stockholders' equity was $66.2 million at September 30, 2008, as compared to $68.3 million at year-end 2007.
Oil and Gas Sales
Kodiak's third quarter 2008 oil and gas sales volumes were 21,800 barrels of oil equivalent (BOE) as compared to 36,400 BOE in the same period in 2007. Oil sales volumes were 14,800 barrels for the third quarter 2008, as compared to 27,600 barrels in the same period in 2007. By commodity in the third quarter of 2008, crude oil constituted 68% of the production base, as compared to 76% in the third quarter of 2007.
For the third quarter 2008, the average gas price received decreased 16.5% to $3.57 per thousand cubic feet of natural gas (Mcf), as compared to the $4.28 per Mcf received in 2007. The average price received for crude oil increased 50%. The Company sold its oil for $107.47 per barrel during the third quarter 2008, as compared to the $71.65 per barrel received during the prior-year period. Kodiak currently does not hedge any of its oil and gas production volumes.
During the first nine months of 2008, Kodiak invested $9.5 million, of which $2.8 million was invested during the third quarter 2008, primarily for acreage acquisition, seismic and for the Williston Basin oil well workover program discussed below. Capital expenditures are net of $2.4 million of proceeds from divestitures. The Company now has working interests in 23 gross (13.5 net) wells, of which 14 gross (11.2 net) are Kodiak-operated wells.
For the nine-month period of 2008, oil and gas sales volumes were 67,800 BOE, as compared to 104,900 BOE in the same period in 2007. Oil sales volumes were 43,700 barrels for the nine-month period of 2008, as compared to 79,700 barrels in the same period in 2007. The decline in oil production was caused by the shutting in of three wells in the Mon-Dak Field producing from the Bakken Formation. The wells underwent workovers and recompletions during the second and third quarters of 2008 while being returned to production in the third quarter. By commodity in the first nine-months of 2008, crude oil constituted 64% of the production base, as compared to 76% in the prior-year period.
For the nine-month period of 2008, the average gas price received increased 50% to $7.45 per Mcf, as compared to the $4.97 per Mcf received in 2007. Compared to the nine-month period of 2007, the average price received for crude oil increased 68% in the same period in 2008. The Company sold its crude oil for $103.18 per barrel during the nine-month period of 2008, as compared to the $61.44 per barrel received during the prior-year period. Kodiak currently does not hedge any of its oil and gas production volumes.
Liquidity
The Company's cash and cash equivalents position at September 30, 2008, was $11.2 million. Its prepaid expenses position was approximately $7.0 million, of which $6.9 million consists of tubular goods and surface equipment necessary for Bakken shale oil well drilling and completion activities.
The Company recently executed a $20 million Senior Secured Revolving Credit Facility with The Bank of the West. The borrowing base, reflecting the maximum amount that may be outstanding under the Senior Secured Revolving Credit Facility at any time, is currently $5 million. The borrowing base will be re-determined on May 1, 2009 and thereafter semi-annually each May 1 and November 1. Currently the facility is undrawn, and the Company has no long-term debt.
Kodiak's ability to fund operations in future periods will depend upon our future operating performance, and more broadly, on the availability of equity and debt financing, which will be affected by prevailing economic conditions in our industry and financial, business and other factors, some of which are beyond the Company's control. Kodiak cannot be certain that additional funding will be available on acceptable terms, or at all. If the Company is unable to raise additional capital when required or on acceptable terms, it may have to significantly delay, scale back or discontinue its drilling or exploration program, seek to enter into additional joint venture arrangements with third parties, or seek to sell one or more of its properties. A significant delay in obtaining additional financing would have a material adverse effect on the Company's business. -- www.cnxmarketlink.com
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