Kodiak Reports Financials for Q4, 2009
Kodiak announced its fourth quarter and full year 2009 financial and operational results. The Company also provided an interim operations update and reported estimated quantities of proved reserves as of December 31, 2009.
- Record Proved Reserves Total 4.5 MMBOE
- Record Annual Production Of 219 MBOE
- Current Production ~ 1,500 BOEPD
- Record Annual and Quarterly O&G Sales of $11.3 MM and $4.8 MM, Respectively
- Record 2009 Operating Cash Flow of $9.4 MM
- Strongest Short Lateral Wells Drilled to Date
2009 Financial Results
The Company reported a net loss for the year ended December 31, 2009 of $2.6 million, or $0.02 per basic and diluted share, compared with a net loss of $56.5 million, or $0.62 per basic and diluted share, for the same period in 2008. The 2008 net loss included $47.5 million in non-cash charges related to impairments of the carrying value of oil and gas properties. Net loss before the impairment charge for 2008, a non-GAAP measure, was $9.0 million, or $0.10 per share. Kodiak did not have any asset impairments during 2009.
Kodiak reported net cash provided by operating activities for the full-year 2009 of $9.4 million, a Company-record, as compared to net cash used in operations in 2008 of $2.2 million.
Adjusted EBITDA, a non-GAAP measure, was a company record $4.0 million for the full-year 2009, as compared to a negative $1.2 million in 2008. Kodiak defines Adjusted EBITDA as net income before (i) interest expense, (ii) income taxes, (iii) depreciation, depletion and amortization, (iv) impairment, (v) non-cash expenses relating to share based payments recognized under ASC Topic 718, (vi) pre-tax unrealized gains and losses on foreign currency and (vii) accretion of abandonment liability. Reconciliations of Adjusted EBITDA to net loss are included at the end of this news release.
Oil and gas sales were $11.3 million for the full-year 2009 reporting period, as compared to approximately $6.8 million for the full-year 2008, a 67% increase. Kodiak posted a 123% increase in year-over-year equivalent production volumes. Crude oil revenue accounted for approximately 94% of the total 2009 oil and gas sales, and crude oil constituted 83% of produced volumes in 2009.
The Company's total current assets at year-end 2009 were $37.0 million, its cash and equivalents position was $24.9 million and it had prepaid expenses of $7.6 million. The Company currently has no long-term debt.
General and administrative (G&A) expense was $8.5 million for the year-ended December 31, 2009, as compared to $8.2 million for the same period in 2008. Included in the G&A expense for 2009 is a non-cash stock-based compensation charge of $3.4 million for options issued to officers, directors and employees, as compared to $3.6 million for the same period in 2008.
Kodiak's oil and gas production expense for the full-year 2009 was $2.2 million, as compared to $3.6 million for 2008. The 38% year-over-year decrease is primarily due to $1.7 million in workover expense recorded in 2008, which was partially offset by additional production expense attributable to each new well coming on to production during 2009.
Depletion, depreciation and amortization (DD&A) expense for 2009 was $3.2 million, as compared to $4.2 million for 2008, reflecting a 24% decrease. Kodiak attributes lower DD&A to impairment charges taken in 2008 and the decrease in the depletable base in the full cost pool, offset in part by increased production volumes and the corresponding increased cost on a units-of-production basis.
Fourth Quarter Financial Results
The Company reported breakeven results for the quarter ended December 31, 2009 of $0.00 per basic and diluted share, compared with a net loss of $34.0 million, or $0.37 per basic and diluted share, for the same period in 2008. The 2008 net loss included $32.0 million in non-cash charges related to an impairment of the carrying value of oil and gas properties.
G&A expense was $3.0 million for the fourth quarter 2009, as compared to $1.7 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 $1.3 million for options issued to officers, directors and employees, as compared to $0.809 million for the same period in 2008. Additionally, on December 31, 2009, certain officers and directors voluntarily cancelled stock options issued in 2007. This unamortized, non-cash expense is approximately $0.413 million and is attributed in part to the 75% increase in G&A expense for the fourth quarter 2009, as compared to the year-ago period.
Oil and gas sales for the fourth quarter 2009 were a Company-record $4.8 million, as compared to $1.2 million in the prior-year period, an increase of 304%. Crude oil revenue accounted for approximately 98% of fourth quarter 2009 oil and gas sales, as compared to 75% in the same period in 2008.
For the fourth quarter 2009, Adjusted EBITDA, as previously defined above, was approximately $2.1 million, as compared to approximately negative $0.114 million for the same period in 2008.
Oil and Gas Sales
Record Fourth Quarter Production and Sales
Kodiak's fourth quarter 2009 oil and gas sales volumes were a Company-record 71,954 BOE, as compared to 30,755 BOE in the same period in 2008, a 134% increase, and a 4% increase when compared to third quarter 2009 equivalent volumes of 69,000 BOE. Oil sales volumes were 69,640 barrels for the fourth quarter 2009, as compared to 19,900 barrels in the same period in 2008, a 250% increase and an increase of 14% when compared to the third quarter 2009’s crude oil volumes. By commodity in the fourth quarter of 2009, crude oil constituted 97% of the production base, as compared to 65% in the fourth quarter of 2008. Gas volumes were 13.9 million cubic feet (MMcf) in the fourth quarter 2009, as compared to 65.1 MMcf in the prior-year period, and as compared to 48.0 MMcf in the third quarter of 2009.
On a quarter-over-quarter basis, the average price received for crude oil improved by 51%. The Company sold its oil at an average of $67.39 per barrel during the fourth quarter 2009, as compared to the $44.65 per barrel during the prior-year period. For the fourth quarter 2009, the average gas price received increased 34 % to $6.05 per thousand cubic feet of natural gas (Mcf), as compared to $4.51 per Mcf received in the fourth quarter of 2008. Kodiak did not hedge any of its oil and gas production volumes at anytime during 2009.
Record Annual Production and Sales
For the full-year 2009, oil and gas sales volumes improved by 123% to 219,300 BOE, as compared to 98,560 BOE in 2008. Oil sales volumes grew 187% to 182,560 barrels for 2009, as compared to 63,600 barrels in the same period in 2008. By commodity in 2009, crude oil constituted 83% of the production base, as compared to 65% in the prior-year period. Gas volumes were 220.5 MMcf for 2009, as compared to 209.8 MMcf in the prior-year period, representing a 5% period-over-period increase.
The average price received for crude oil for 2009 was sharply lower, netting 31% less than in the same period in 2008. The Company sold its crude oil for an average price of $58.35 per barrel during 2009, as compared to the average price of $84.86 per barrel received during the prior-year period. For 2009, the average gas price received decreased 57% to $2.84 per Mcf, as compared to the average price of $6.54 per Mcf received in 2008.
The Company's differentials for Williston Basin crude oil vary by geographic area. Generally, the differentials during the full-year 2009 ranged from $9 to $10 per barrel, including trucking costs. In March 2010, the Company's differentials range from $6 to $8 per barrel including trucking costs. At December 31, 2009, the Company’s daily production was approximately 1,000 BOE per day. With the additional two wells completed in the first quarter 2010, the Company’s production has grown to an approximate daily average of 1,500 BOE per day.
During 2009, Kodiak invested $27.4 million primarily for the drilling and completion of wells in its Bakken drilling program in Dunn County, ND, of which $8.5 million was invested during the fourth quarter 2009. For 2009, Kodiak drilled and operated 11 gross wells (6.0 net) and completed nine gross wells (4.8 net) as producers, with two wells waiting on completion at year-end. These wells have since been completed during the first quarter of 2010 as noted below. The Company currently has an inventory of two wells awaiting initial completion operations. Four of the nine completed wells were drilled with horizontal lateral lengths greater than 8,000 feet and five were drilled with horizontal laterals less than 6,600 feet.
2009 Proved Reserves
Kodiak's year-end 2009 estimated total proved reserves were approximately 4.5 million barrels of oil equivalent (MMBoe), or 26.7 billion cubic feet of natural gas equivalents (Bcfe). This compares to 0.5 MMBoe, or 3.3 Bcfe in 2008. The 2009 total, a 709% increase on an equivalent basis from the 2008 estimated quantities, is comprised of 3.8 million barrels of crude oil and 3.8 Bcf of natural gas. The 2009 reserve mix is 86% crude oil and 14% natural gas, as compared to 63% crude oil and 37% natural gas for 2008. Approximately 32% of the 2009 total proved reserves are categorized as proved developed producing and approximately 68% are classified as proved undeveloped. In addition, approximately 31% of the crude oil quantities are proved developed producing.
When booking proved undeveloped locations, Kodiak considered its 2010 Bakken drilling program and the sources and amounts of capital that it has available to it to complete the current year program. All of the wells in the current year program were classified as proved undeveloped as of December 31, 2009 and, if successful, will be converted to proved developed producing when drilled during 2010. Of the 15 proved undeveloped locations recorded at December 31, 2009, two have been drilled and completed; two others have been drilled and are waiting on completion. The Company believes that this is a conservative approach to booking proved undeveloped locations, especially since its primary asset is largely considered a resource play.
Kodiak's proved reserves at December 31, 2009 were computed using the new Securities and Exchange Commission guidelines that went into effect for the reporting of year-end 2009 proved reserves. Commodity prices used in calculating the economic quantities of reserves are based on the average of the first-day-of-the-month price during the 12-month period ending December 31, 2009. For oil volumes, the average Plains Marketing L.P. WTI posted price of $57.65 per barrel is adjusted for quality, transportation fees and local price differentials. For natural gas volumes, the average Platts Gas Daily Henry Hub spot price of $3.87 per million British thermal units (MMBtu) is adjusted by field for energy content, transportation fees and local price differentials. All prices are held constant throughout the lives of the properties. By comparison, average year-end prices used to determine reserves were $3.76 per Mcf of natural gas and $24.09 per barrel of oil for 2008.
For 2009 reserve quantities, Kodiak's standardized measure of discounted future net cash flows (commonly known as the SEC PV-10 figure) for proved reserves at year-end was $39.1 million, as compared to $5.3 million in 2008. Approximately 98% of the Company's proved reserves are associated with its Williston Basin producing properties.
Reserve estimates for 2009 were prepared by Kodiak's independent reservoir engineering consultant, Netherland, Sewell & Associates, Inc. (NSAI) 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. In accordance with SEC guidelines, reserve estimates do not include any probable or possible reserves which may exist for Kodiak's properties. NSAI also prepared Kodiak’s estimated reserves as of December 31, 2008.
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