DENVER, Feb. 20, 2013 /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 announced preliminary
unaudited operational and financial results for the fiscal year
ended December 31, 2012.
Kodiak has prepared the preliminary operational and financial
information included in this news release based on the most current
information available to management. Its normal closing and
financial reporting processes with respect to the preliminary
operational and financial information have not been fully
completed. As a result, its actual operational and financial
results could be different from this summary preliminary data, and
any differences could be material. Kodiak expects to release
its fourth quarter 2012 operational and financial results after the
close of trading on February 28,
2013.
138% Increase in 2012 Estimated Proved Reserves
Quantities
Kodiak's estimated total proved reserves at December 31, 2012 were approximately 94.8 million
barrels of oil equivalent (MMBoe), as compared to 39.8 MMBoe at
December 31, 2011. The 2012
total represents a 138% increase from 2011's estimated proved
reserves on an equivalent basis, and is comprised of 80.9 million
barrels of crude oil and 83.1 billion cubic feet (Bcf) of natural
gas. The 2012 reserve mix is 85% crude oil, along with 15%
associated natural gas. Approximately 46% of the 2012 total
proved reserves are categorized as proved developed producing and
approximately 54% are classified as proved undeveloped.
Substantially all of the Company's estimated proved reserves are
located in the Williston Basin.
For 2012 reserve quantities, Kodiak's estimated future cash
flows, discounted at an annual rate of 10 percent before giving
effect to income taxes (commonly known as PV-10 value), for proved
reserves at year-end was $1.9
billion, as compared to $850.7
million at December 31, 2011,
reflecting a 126% increase. Please see below for further
disclosure regarding the PV-10 value and the Company's belief in
its usefulness in evaluating its reserves. Approximately
$1.4 billion of the PV-10 value is
attributed to the proved developed producing reserves.
Kodiak Oil & Gas Corp. Estimated Proved
Reserves Summary at December 31, 2012
|
Reserve
Category
|
%
of
Reserves
|
Oil
(MBbls)
|
Gas
(MMcf)
|
2012
(MBOE)
|
2011
(MBOE)
|
%
Change
|
2012
PV-10
($MM)
|
|
|
|
|
|
|
|
|
Proved
Developed Producing
|
46%
|
36,158
|
41,870
|
43,136
|
14,672
|
194%
|
1,364
|
Proved
Undeveloped
|
54%
|
44,772
|
41,254
|
51,648
|
25,160
|
105%
|
555
|
|
|
|
|
|
|
|
|
Total
Proved
|
100%
|
80,930
|
83,124
|
94,784
|
39,832
|
138%
|
1,919
|
Price deck: After adjusting for
transportation, quality and basis differentials, the average
resulting price used as of December 31, 2012 was $82.83 per barrel
of oil and $5.73 per Mcf for natural gas.
|
Reserve
Reconciliation
|
Oil
(MBbls)
|
Gas
(MMcf)
|
Equivalents
(MBOE)
|
|
|
|
|
Beginning
Balance, (12/31/11)
|
35,576
|
25,539
|
39,832
|
Revisions of previous estimates
|
1,965
|
17,955
|
4,958
|
Extensions
|
37,583
|
34,648
|
43,357
|
Discoveries
|
--
|
--
|
--
|
Sales of reserves in place
|
--
|
--
|
--
|
Purchases of reserves in place
|
10,510
|
8,284
|
11,891
|
Production
|
(4,704)
|
(3,302)
|
(5,254)
|
|
|
|
|
Balance, December 31, 2012
|
80,930
|
83,124
|
94,784
|
During 2012, Kodiak invested approximately $810 million in capital expenditures related to
drilling and completing new wells, including surface facilities and
pipeline connections. The 2012 drilling and completion
capital expenditures compare to Kodiak's previously provided
guidance of $738 million. The
Company attributes the budget overage primarily to more wells
drilled as a result of drilling efficiencies gained during the
year, capital expenditures related to non-operated activity, and
unseasonably good weather in the fourth quarter of 2012 allowing
for additional activity.
Reserve estimates for 2012 and 2011 were prepared by Kodiak's
independent reservoir engineering consultant, Netherland, Sewell
& Associates, Inc. and conform to the definition as set forth
in the SEC Regulation S-X Part 210.4-10 (a) as clarified by
subsequent SEC Staff Accounting bulletins. The proved
reserves are also in accordance with Financial Accounting Standards
Codification Topic 932, Extractive Activities – Oil and
Gas.
Interim Drilling and Completion Operations Update
Kodiak's drilling operations continue with seven operated
rigs. Currently, four drilling rigs are operating in the
Polar project area in southern Williams
County, with one rig in each of the Smokey and Koala project
areas in McKenzie County and one
rig operating in Dunn County.
Kodiak completion operations in the Williston Basin continue with two full-time,
24-hour-per-day crews. Since the last operational update
released on January 11, 2013, the
Company has completed 10 gross (7.9 net) operated
wells bringing the year-to-date completions to 18 gross (13.5 net)
operated wells.
The Company's program to test 12 wells within a 1,280-acre
drilling spacing unit (DSU) in each of the Company's Polar and
Smokey operating areas continues on schedule. Following is a
summary of recent developments concerning this program:
- The Polar pilot project wells are being drilled from three
four-well pads, with six wells targeting the Middle Bakken and six
wells targeting the three known productive intervals of the Three
Forks Sanish (TFS) Formation. Drilling activity from each of
the four-well pads has commenced. Geologic and geophysical
work on the DSU will include cores and high-resolution
logs to evaluate the middle Bakken and all benches of the TFS
formation. In addition, a micro seismic program is planned to
further evaluate completion procedure effectiveness. Oil, gas
and water infrastructure is being constructed and is expected to be
operational before completion activity begins in late second
quarter 2013.
- The Smokey Pilot project is being drilled on the same spacing
configuration as the Polar project. The project is being
drilled from four multi-well pads. The first five wells in
the DSU have been drilled from two separate pads, with two of the
wells currently producing and the other three expected to be
completed during the second quarter of 2013. The last seven
wells will be drilled and completed later this year.
Management Comment
Commenting on recent operations developments, Kodiak's Chairman
and CEO Lynn Peterson said:
"Our two pilot programs are a very important part of our 2013
drilling program. It is paramount that we
continue to test the spacing between wells in order to maximize
reservoir drainage. Our ongoing evaluation of well-bore
spacing indicates that an approximate 800-foot horizontal
separation of wells in the Middle Bakken should effectively drain
the reservoir while maximizing our returns. We anticipate
that we will see communication between the well bores during
completion operations. Recently, we have begun shutting in
producing wells during completions operations on offsetting
locations. While completing the new wells, we have observed
communication between well bores, resulting in stronger production
rates from the older wells upon their return to production.
"Regarding the TFS, we believe the multiple intervals
of TFS appear to exist only through the deeper part of the
Williston Basin where the TFS is
thicker and more thermally mature. We continue to view the
TFS as a single hydrocarbon system. Based upon our fracture
stimulation analysis, we believe that the production does
communicate between the TFS intervals; however, due to the
expanding thickness of the oil saturated reservoir, additional well
bores are required to optimize reservoir drainage. We do not
believe the lower TFS interval exists throughout our entire acreage
block, but that the interval is most likely present in the southern
portion of our Polar acreage block and in our Koala and Smokey
blocks. The tighter density of well bores in the Middle
Bakken will likely be effective only through these same geographic
areas as well as in our Dunn
County acreage where we continue to achieve strong well
results."
Estimated Drilling Locations
Based on results to date and the delineation of the Middle
Bakken and TFS formations throughout much of its acreage, Kodiak
believes it has a remaining inventory of approximately 1,260 gross
(950 net) operated and non-operated drilling locations. The
drilling inventory primarily assumes 1,280-acre drilling units that
have been substantially delineated across the Company's acreage
positions and are economic with today's oil prices and service
costs.
Kodiak Oil & Gas Corp. Williston Basin
Estimated Drilling Locations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Count
|
|
Net
Count
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
Total
|
|
Identified
|
Drillable
|
|
|
Unproven
|
Remaining
|
|
Drillable
|
|
|
Unproven
|
Remaining
|
|
DSU's
|
Locations
|
PDP's
|
PUD's
|
Locations
|
Locations
|
|
Locations
|
PDP's
|
PUD's
|
Locations
|
Locations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operated Properties
|
198
|
1,300
|
132
|
142
|
998
|
1,140
|
|
925
|
100
|
102
|
685
|
787
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Operated AMI Properties
|
23
|
140
|
16
|
23
|
98
|
121
|
|
67
|
7
|
9
|
46
|
55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Operated and AMI
|
221
|
1,440
|
148
|
165
|
1,096
|
1,261
|
|
992
|
107
|
111
|
731
|
843
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Operated Properties
|
|
|
|
|
|
|
|
119
|
11
|
3
|
104
|
107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
1,111
|
118
|
114
|
836
|
950
|
Fourth Quarter and Full-year 2012 Sales Volumes
Kodiak reported average daily sales volumes of 18,200 barrels of
oil equivalent per day (BOE/d) for the fourth quarter 2012.
This represents a 153% increase over sales volumes of 7,200 BOE/d
for the fourth quarter 2011 and a 15% increase over third quarter
2012 sales volumes of 15,850 BOE/d. Crude oil accounted for
89% of fourth quarter 2012 sales volumes. Kodiak reported
average daily sales volumes of 14,400 BOE/d for the year-ended
December 31, 2012, representing a
267% increase over average daily sales volumes of 3,900 BOE/d
during 2011.
The Company disclosed production, sales volumes and netback
prices received for the periods ended December 31, 2012, as summarized below:
|
Kodiak Oil & Gas Corp.
Net
Production and Sales Volumes Comparison
|
Quarterly Comparisons
|
12-month Period Comparison
|
Three
Months Ended
|
%
Change
|
Year-Ended
|
%
Change
|
Net
Volumes
|
Dec.
31,
2012
|
Sept.
30,
2012
|
Dec.
31, 2
011
|
Sequential
Quarter
|
Qtr.-
over-
Qtr.
|
Dec.
31,
2012
|
Dec.
31,
2011
|
Y-o-Y
|
Crude
Oil (MBbls)
|
1,582
|
1,263
|
612
|
25%
|
158%
|
4,781
|
1,344
|
256%
|
Natural
Gas (MMcf)
|
2,205
|
1,910
|
572
|
15%
|
286%
|
6,613
|
1,329
|
398%
|
Production Volumes: Barrels of Oil
Equivalent (MBOE)
|
1,949
|
1,582
|
707
|
23%
|
176%
|
5,883
|
1,565
|
276%
|
Deduct: Flared Natural Gas
(MMcf)
|
(1,104)
|
(882)
|
(333)
|
25%
|
231%
|
(3,311)
|
(807)
|
310%
|
Sales
Volumes: (MBOE) (1)
|
1,677
|
1,459
|
662
|
15%
|
153%
|
5,254
|
1,432
|
267%
|
Average Daily Volumes
|
|
Daily
Sales (BOE/day)
|
18,228
|
15,855
|
7,195
|
--
|
--
|
14,355
|
3,923
|
--
|
Daily
Production (BOE/day)
|
21,190
|
17,190
|
7,689
|
--
|
--
|
16,074
|
4,288
|
--
|
Product Price Received
|
|
Crude
Oil ($/Bbl)
|
$83.27
|
$82.96
|
$83.35
|
0%
|
-2%
|
$83.00
|
$86.05
|
-4%
|
Natural
Gas ($/Mcf)
|
$5.83
|
$5.20
|
$8.00
|
12%
|
-27%
|
$5.53
|
$8.22
|
-33%
|
(1)Note that sales
volumes exclude natural gas that is currently being flared pending
connection to pipelines or system capacity.
|
Commenting on 2012 results, Mr. Peterson continued: "Last
year was transformational for Kodiak and its shareholders. After
successfully integrating the acquisitions completed during
October 2011 and January 2012, we essentially doubled the size of
our operations while increasing the average daily equivalent sales
from approximately 3,900 BOE/d in 2011 to 14,400 BOE/d in 2012,
representing 267% growth. We are on track to deliver
approximately 100% sales growth in 2013, with projected sales
expected to range from 29,000 to 31,000 BOE/d. This sales
growth expected in 2013 will be the result of our estimated
$775 million capital expenditures
budget for 2013.
"We are in the best financial position in our history. Our
current liquidity of over $400
million comprised of current available borrowings under our
credit facility and cash on hand, taken together with our expected
2013 cash flow stream, should allow us to execute our 2013 drilling
program. With the increase in our announced reserve base as
of December 31, 2012, we anticipate
that the borrowing base of our revolver will also increase at the
time of our next borrowing base re-determination date in
April 2013, thereby providing the
Company additional liquidity. We have driven our
well costs down to a range of approximately $9.5 million to $10.2 million per well, and
expect further well cost improvements through the efficiencies
gained by drilling more wells per pad on our contiguous acreage
blocks.
"Ongoing Williston Basin infrastructure build-out is resulting
in more gas being sold and processed and greater volumes of crude
being hauled by rail to strong pricing points throughout the US and
Canada. Due in part to the proliferation of rail terminals
and their access to premium markets, we are currently experiencing
historically low Williston Basin
differentials. We expect the contracted Williston Basin differential to continue to
the benefit of most operators."
Definition of PV-10 Value and the Standardized
Measure
PV-10 is the estimated future net cash flows from proved
reserves, discounted at an annual rate of 10 percent before giving
effect to income taxes. Standardized Measure is the after-tax
estimated future cash flows from proved reserves, discounted at an
annual rate of 10 percent, determined in accordance with
GAAP. Kodiak uses PV-10 as one measure of the value of the
Company's proved reserves, and to compare relative values of proved
reserves among exploration and production companies without regard
to income taxes. Kodiak believes that securities analysts and
investors use PV-10 in similar ways. Kodiak further believes
PV-10 is a useful measure for comparison of proved reserve values
among companies because, unlike Standardized Measure, it excludes
future income taxes that often depend principally on the
characteristics of the owner reserves rather than on the nature,
location and quality of the reserves themselves.
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 in the Williston and
Green River Basins 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 of future performance,
including production, production interruptions and sales, the
Company's reserve estimates and its expectations regarding growth
in its estimated reserves, the Company's expectations regarding oil
prices, service costs and cash flow stream, the Company's
expectations regarding future increases in its borrowing base under
its credit facility, the Company's expectation regarding the
connection of its wells to pipelines, the Company's
expectations regarding its exploration and development plans
(including the timing and success thereof), the indications
resulting from the Company's test program in the Polar and Smokey
areas, the Company's beliefs about the characteristics of the TFS
Formation, the Company's preliminary financial and operational
results and remaining inventory of drilling locations, the
Company's expectations regarding timing and success of its
completion activity and the Company's ability to execute to its
2013 capital expenditure program. 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, CEO and President, Kodiak Oil & Gas Corp.
+1-303-592-8075
Mr. David P.
Charles, Sierra Partners LLC +1-303-757-2510 x11
SOURCE Kodiak Oil & Gas Corp.