Northern Oil and Gas, Inc. Announces 2015 Fourth Quarter and Full Year Results

WAYZATA, MINNESOTA — March 2, 2016 — Northern Oil and Gas, Inc. (NYSE MKT: NOG) today announced 2015 fourth quarter and full year results.

MANAGEMENT COMMENT

LIQUIDITY

At December 31, 2015, Northern had $150 million in outstanding borrowings under its revolving credit facility, down from $188 million at June 30, 2015.  With a $550 million borrowing base under the revolving credit facility, Northern had approximately $403.4 million of available liquidity at year-end, including cash on-hand.  As of March 1, 2016, outstanding borrowings under the revolving credit facility had been further reduced to $125 million.  As of March 1, 2016, the estimated cash settlement value of all of Northern's derivative instruments scheduled for settlement during 2016 was $74.0 million.

HEDGING

Northern hedges portions of its expected production volumes to increase the predictability of its cash flow and to help maintain a strong financial position.  The following table summarizes Northern's open crude oil swap derivative contracts scheduled to settle after December 31, 2015.

 

 

CAPITAL EXPENDITURES & DRILLING ACTIVITY

 

		Fourth Quarter 2015				Full Year 2015
Capital Expenditures Incurred:
Drilling, Completion & Capitalized Workover Expense		$18.9 million				$116.3 million
Acreage		$2.9 million				$7.8 million
Other		$1.5 million				$4.6 million
Net Wells Added to Production		2.4				18.6
Net Producing Wells (Period-End)		204.3				NA
Net Wells in Process (Period-End)		9.7				NA
Weighted Average AFE for In-Process Wells (Period End)		$7.9 million				NA

Capital expenditures continued to trend lower throughout 2015.  For the year, the weighted average authorization for expenditure (or AFE) cost for wells that Northern elected to participate in (consented) was $7.7 million; however, these costs were based on original AFE estimates and actual costs may be lower.

2016 CAPITAL BUDGET

Northern has approved a 2016 capital expenditure budget of up to $99.8 million for development and acreage acquisitions.  The amount, timing and allocation of capital expenditures are highly discretionary and subject to a variety of factors, including commodity prices and the timing of drilling and completion activities on Northern's properties.

ACREAGE

As of December 31, 2015, Northern controlled approximately 165,908 net acres targeting the Williston Basin Bakken and Three Forks formations.  In 2015, Northern acquired leasehold interests covering an aggregate of approximately 4,355 net acres, for an average cost of $1,314 per net acre.  In the fourth quarter, Northern acquired leasehold interests covering an aggregate of approximately 1,198 net acres, for an average cost of $1,970 per net acre.  As of December 31, 2015, approximately 80% of Northern's North Dakota acreage position, and approximately 73% of Northern's total acreage position, was developed, held by production or held by operations.

2015 YEAR-END RESERVES

Based on reports prepared by Ryder Scott Company, L.P., Northern's estimated total proved reserves at December 31, 2015 were approximately 65.3 million barrels of oil equivalent (MMBoe).  Pre-Tax PV-10 of the proved reserves as of December 31, 2015 is approximately $575.7 million, with 90% of that value categorized as proved developed.  The reserves were 87% oil.

Additional information regarding Northern's proved reserves, including estimated future cash flows, discounted at an annual rate of 10 percent before giving effect to income taxes (commonly known as Pre-Tax PV-10 value, which may be considered a non-GAAP measure), is attached at the end of this release.

FOURTH QUARTER 2015 RESULTS

The following table sets forth selected operating and financial data for the periods indicated.

 

Oil and Natural Gas Sales

In the fourth quarter of 2015, oil, natural gas and NGL sales, excluding the effect of settled derivatives, decreased 58% as compared to the fourth quarter of 2014, driven by a 52% decrease in realized prices and a 13% decrease in production.  The lower average realized price in the fourth quarter of 2015 as compared to the same period in 2014 was principally driven by lower average NYMEX oil and gas prices, which were partially offset by a lower oil price differential.  Oil price differential during the fourth quarter of 2015 was $8.30 per barrel, as compared to $12.89 per barrel in the fourth quarter of 2014.

Derivative Instruments (Hedges)

Production expenses decreased from $16.3 million in the fourth quarter of 2014 to $11.8 million in the fourth quarter of 2015.  On a per unit basis, production expenses decreased 17% from the fourth quarter of 2014 to $8.15 per Boe in the fourth quarter of 2015 primarily as a result of lower contract labor and maintenance costs.

Adjusted Net Income for the fourth quarter of 2015 was $15.6 million (representing approximately $0.25 per diluted share), compared to $12.8 million (representing approximately $0.21 per diluted share) for the fourth quarter of 2014.  Northern defines Adjusted Net Income as net income excluding (i) (gain) loss on the mark-to-market of derivative instruments, net of tax, (ii) restructuring costs, net of tax, (iii) impairment of oil and natural gas properties, net of tax and (iv) certain legal settlements, net of tax.

Adjusted EBITDA for the fourth quarter of 2015 was $67.7 million, compared to Adjusted EBITDA of $81.6 million for the fourth quarter of 2014.  The decrease in Adjusted EBITDA is primarily due to lower realized commodity prices in 2015 compared to 2014.  Northern defines Adjusted EBITDA as net income before (i) interest expense, (ii) income taxes, (iii) depreciation, depletion, amortization, and accretion, (iv) (gain) loss on the mark-to-market of derivative instruments, (v) non-cash share based compensation expense and (vi) impairment of oil and natural gas properties.

FULL YEAR 2015 RESULTS

The following table sets forth selected operating and financial data for the periods indicated.

Oil and Natural Gas Sales

In 2015, oil, natural gas and NGL sales, excluding the effect of settled derivatives, decreased 53% as compared to 2014, driven by a 54% decrease in realized prices, partially offset by a 3% increase in production.  Oil price differential during 2015 was $9.42 per barrel, as compared to $13.67 per barrel in 2014.

Derivative Instruments (Hedges)

Northern enters into derivative instruments to manage the price risk attributable to future oil production.  Gain (loss) on derivative instruments, net is comprised of (i) cash gains and losses recognized on settled derivatives during the period, and (ii) non-cash mark-to-market gains and losses incurred on derivative instruments outstanding at period-end.

Production expenses decreased from $55.7 million in 2014 to $52.1 million in 2015.  On a per unit basis, production expenses decreased 9% or $0.89 per Boe to $8.77 per Boe in 2015 compared to 2014.  The lower cost on a per unit basis in 2015 is primarily due to reduced contract labor and maintenance costs.

Impairment of Oil and Natural Gas Properties

Adjusted Net Income for 2015 was $47.6 million (representing approximately $0.78 per diluted share) as compared to Adjusted Net Income for 2014 of $57.5 million (representing approximately $0.95 per diluted share).  For 2015, the decrease in Adjusted Net Income is primarily due to lower realized commodity prices as well as higher interest expense, which were partially offset by lower depletion expense.  Northern defines Adjusted Net Income as net income excluding (i) (gain) loss on the mark-to-market of derivative instruments, net of tax, (ii) restructuring costs, net of tax, (iii) impairment of oil and natural gas properties, net of tax and (iv) certain legal settlements, net of tax.

Adjusted EBITDA for 2015 was $277.3 million, compared to Adjusted EBITDA of $309.6 million for 2014.  The decrease in Adjusted EBITDA in 2015 as compared to 2014 is primarily due to lower realized commodity prices.  Northern defines Adjusted EBITDA as net income before (i) interest expense, (ii) income taxes, (iii) depreciation, depletion, amortization, and accretion, (iv) (gain) loss on the mark-to-market of derivative instruments, (v) non-cash share based compensation expense and (vi) impairment of oil and natural gas properties.

FOURTH QUARTER AND FULL-YEAR 2015 EARNINGS RELEASE CONFERENCE CALL

In conjunction with Northern'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, March 3, 2016 at 10:00 a.m. Central Time.

Those wishing to listen to the conference call may do so via the company's website, www.northernoil.com, or by phone as follows:

Dial-In Number:  (855) 638-5677 (US/Canada) and (262) 912-4762 (International)

Conference ID:  50772234 - Northern Oil and Gas, Inc. Year End 2015 Earnings Call

Replay Dial-In Number: (855) 859-2056 (US/Canada) and (404) 537-3406 (International)

Replay Access Code:  50772234 - Replay will be available through March 10, 2016

UPCOMING CONFERENCE SCHEDULE

44^th Annual Scotia Howard Weil Energy Conference

March 20 – March 23, 2016, New Orleans, LA

IPAA Oil and Gas Investment Symposium

April 11 – April 12, 2016, New York, NY

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'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'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, the pace of drilling and completions activity on Northern's properties, Northern's ability to acquire additional development opportunities, changes in Northern's reserves estimates or the value thereof, general economic or industry conditions, nationally and/or in the communities in which Northern conducts business, changes in the interest rate environment, legislation or regulatory requirements, conditions of the securities markets, Northern'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's operations, products, services and prices.

Northern 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's control.

CONTACT:

Brandon Elliott

EVP, Corporate Development and Strategy

952-476-9800

belliott@northernoil.com

SOURCE Northern Oil and Gas, Inc.

NORTHERN OIL AND GAS, INC.

STATEMENTS OF OPERATIONS

NORTHERN OIL AND GAS, INC.

BALANCE SHEETS

Reconciliation of Adjusted Net Income

_______________

(1)

For the years ended 2015 and 2014 columns, this represents a tax impact using an estimated tax rate of 36.9% and 37.8%, respectively.  The 2015 column includes a $232.3 million adjustment for a change in valuation allowance for the year ended December 31, 2015.  For the three months ended 2015 and 2014 columns, this represents a tax impact using an estimated tax rate of 36.1% and 37.8%, respectively.  The three months ended 2015 column includes a $62.2 million adjustment for a change in valuation allowance.

Reconciliation of Adjusted EBITDA

Proved Reserve Summary at December 31, 2015

___________________

(1)

The SEC Pricing Proved Reserves table above values oil and natural gas reserve quantities and related discounted future net cash flows as of December 31, 2015 assuming constant realized prices of $50.28 per barrel of oil and $2.58 per Mcf of natural gas, which includes an uplift factor of 0.6 to reflect liquids and condensates (natural gas liquids are included with natural gas).  Under SEC guidelines, these prices represent the average prices per barrel of oil and per Mcf of natural gas at the beginning of each month in the 12-month period prior to the end of the reporting period, which averages are then adjusted to reflect applicable transportation and quality differentials.  The average resulting price used as of December 31, 2015 was $42.03 per barrel of oil and $1.63 per Mcf of natural gas.

(2)	Boe are computed based on a conversion ratio of one Boe for each barrel of oil and one Boe for every 6,000 cubic feet (i.e., 6 Mcf) of natural gas.

(3)	Pre-tax PV10%, or "PV-10," may be considered a non-GAAP financial measure as defined by the SEC and is derived from the standardized measure of discounted future net cash flows, which is the most directly comparable GAAP measure.

The table above assumes prices and costs discounted using an annual discount rate of 10% without future escalation, without giving effect to non-property related expenses such as general and administrative expenses, debt service and depreciation, depletion and amortization, or federal income taxes.  The information in the table above does not give any effect to or reflect our commodity derivatives.

Reconciliation of PV-10 to Standardized Measure

PV-10 is derived from the Standardized Measure of discounted future net cash flows, which is the most directly comparable GAAP financial measure.  PV-10 is a computation of the Standardized Measure of discounted future net cash flows on a pre-tax basis.  PV-10 is equal to the Standardized Measure of discounted future net cash flows at the applicable date, before deducting future income taxes, discounted at 10 percent.  We believe that the presentation of PV-10 is relevant and useful to investors because it presents the discounted future net cash flows attributable to our estimated net proved reserves prior to taking into account future corporate income taxes, and it is a useful measure for evaluating the relative monetary significance of our oil and natural gas properties.  Further, investors may utilize the measure as a basis for comparison of the relative size and value of our reserves to other companies.  We use this measure when assessing the potential return on investment related to our oil and natural gas properties. PV-10, however, is not a substitute for the Standardized Measure of discounted future net cash flows.  Our PV-10 measure and the Standardized Measure of discounted future net cash flows do not purport to represent the fair value of our oil and natural gas reserves.

The following table reconciles the pre-tax PV10% value of our SEC Pricing Proved Reserves as of December 31, 2015 to the Standardized Measure of discounted future net cash flows.

____________

(1)

The expected tax benefits to be realized from utilization of the net operating loss and tax credit carryforwards are used in the computation of future income tax cash flows.  As a result of available net operating loss carryforwards and the remaining tax basis of our assets at December 31, 2015, our future income taxes were significantly reduced.

Uncertainties are inherent in estimating quantities of proved reserves, including many risk factors beyond our control.  Reserve engineering is a subjective process of estimating subsurface accumulations of oil and natural gas that cannot be measured in an exact manner.  As a result, estimates of proved reserves may vary depending upon the engineer valuing the reserves.  Further, our actual realized price for our oil and natural gas is not likely to average the pricing parameters used to calculate our proved reserves. As such, the oil and natural gas quantities and the value of those commodities ultimately recovered from our properties will vary from reserve estimates.