BILLINGS, MT — (Marketwire) — 08/06/12 — Voyager Oil & Gas, Inc. (NYSE MKT: VOG) (“Voyager,” the “Company” or “we”) announces Company record oil production, revenue and Adjusted EBITDA* for the second quarter ended June 30, 2012. The final unaudited Quarterly Report will be released and filed on or about August 6, 2012.
Record quarterly oil production of 85,363 barrels of oil equivalent (BOE), or an average of 938 barrels of oil equivalent per day (BOEPD). Second quarter production was up 50% from 56,865 BOE (625 BOEPD) in the previous quarter ended March 31, 2012;
Record oil and natural gas sales of $6,763,429 (99% of which is attributable to the sale of crude oil), up 33% from $5,098,333 in the first quarter ending March 31, 2012;
Adjusted EBITDA* of $4,811,883, up 38% from $3,483,733 in the quarter ended March 31, 2012; and
Adjusted income* of $1,067,351 or $0.02 per share (basic and diluted) for the three months ended June 30, 2012.
* Non-GAAP financial measure. Please see Adjusted EBITDA and Adjusted Income tables later in this earnings release for a reconciliation of these measures to their nearest comparable GAAP measure.
During the quarter ended June 30, 2012, Voyager reports oil and natural gas sales of $6,763,429, which represents an increase of 33% from $5,098,333 during the first quarter ending March 31, 2012 and an increase of 306% from $1,666,535 in the year ago quarter ended June 30, 2011. This increase in revenue is due primarily to production from 150 gross (6.56 net) wells producing in the Bakken and Three Forks formations as of June 30, 2012, compared to 118 gross (5.03 net) wells and 24 gross (1.13 net) wells producing in the same formations as of March 31, 2012 and June 30, 2011, respectively. Production accelerated throughout the quarter with 35% of the quarterly production (29,721 BOE or about 991 BOEPD) during the month of June. Crude oil represented 99% of revenue and 95% of production during the second quarter 2012.
As of June 30, 2012, Voyager had interests in a total of 180 gross (7.66 net) wells in the Bakken and Three Forks formations, of which 150 gross (6.56 net) wells were producing and 30 gross (1.10 net) wells were in the process of being drilled or completed. Permits continue to be issued for drilling units in which Voyager has acreage interests within North Dakota and Montana, and activity in the Williston Basin remains strong.
Adjusted EBITDA for the second quarter 2012 was a record $4,811,883, up 38% from $3,483,733 during the first quarter ended March 31, 2012 and up 530% from $763,866 during the second quarter ended June 30, 2011. The increase in adjusted EBITDA was driven by increased production and improved operating leverage as production scale increased. Adjusted EBITDA per BOE for the quarter ended June 30, 2012 was $56.37, compared to $61.26 during the first quarter ended March 31, 2012 and $42.76 during the year ago quarter ended June 30, 2011. Adjusted EBITDA per BOE during the second quarter 2012 was lower than first quarter 2012 due mostly to a nearly $8 decrease in realized crude oil prices during the quarter as the average crude oil price of NYMEX West Texas Intermediate (NYMEX) was about $103 per barrel during first quarter 2012 and about $93 per barrel during second quarter 2012.
Realized commodity derivative gains were $88,568 and $61,025, for the three and six months ended June 30, 2012, respectively. Unrealized commodity derivative gains were $2,162,975 and $1,278,083, for the three and six months ended June 30, 2012, respectively. There were no commodity derivatives losses during the three and six months ended June 30, 2011. Our derivatives are not designated for hedge accounting and are accounted for using the mark-to-market accounting method whereby gains and losses from changes in the fair value of derivative instruments are recognized immediately into earnings. Mark-to-market accounting treatment creates volatility in our revenues as unrealized gains and losses from derivatives are included in total revenues and are not included in accumulated other comprehensive income in the accompanying balance sheets. As commodity prices increase or decrease, such changes will have an opposite effect on the mark-to-market value of our derivatives. Future derivative gains will be offset by lower future wellhead revenues. Conversely, future derivative losses will be offset by higher future wellhead revenues based on the value at the settlement date. At June 30, 2012, all of our derivative contracts are recorded at their fair value, which was a net asset of $1,278,083. We did not incur any net asset or liability with respect to derivative contracts prior to January 1, 2012.
As of June 30, 2012, Voyager had $4,113,794 in cash and total debt outstanding of $18,030,730. Voyager has a credit facility with Macquarie Bank Ltd. (“Macquarie Bank”) that provides up to a maximum of $150 million in principal amount of borrowings to be used as working capital for exploration and production operations. As of June 30, 2012, $15,000,000 was outstanding under Voyager–s Tranche A credit facility and $3,030,730 was outstanding under our Tranche B facility. As of June 30, 2012, $7.7 million was undrawn and available pursuant to an approved development plan.
On July 26, 2012, Voyager entered into an amended and restated credit agreement with Macquarie Bank to expand the existing availability and outstanding balance under its existing credit facility. In addition to the $20.2 million of debt obligations related to the July 26, 2012 acquisition of Emerald Oil Inc. (“Emerald Oil”) that remain outstanding through existing agreements, the Company obtained additional availability from its credit facility and drew $15 million of additional debt on a new third tranche at an initial rate of 9% above the applicable London Interbank Borrowing Rate (LIBOR) and has the potential to draw a maximum of $20 million. The $15 million drawn was used for existing development activities. The new tranche matures on November 15, 2012 while Tranche A and Tranche B maintain the original maturity date of February 10, 2015. Tranche B is uncommitted; however, Macquarie Bank may, in its sole discretion and subject to an approved revised development plan and the satisfaction of certain conditions, commit additional funds under Tranche B.
We follow the full cost method of accounting for oil and natural gas operations whereby all costs related to the exploration and development of oil and natural gas properties are initially capitalized into a single cost center (“full cost pool”). Capitalized costs (net of related deferred income taxes) are limited to a ceiling based on the present value of future net revenues using the 12-month unweighted average of first-day-of-the-month price (the “12-month average price”), discounted at 10%, plus the lower of cost or fair market value of unproved properties. If the ceiling is not greater than or equal to the total capitalized costs, then we are required to write down capitalized costs to the ceiling. We perform this ceiling test calculation each quarter. Any required write downs are included in the condensed statements of operations as an impairment charge. We recognized an impairment expense in the three- and six-month periods ended June 30, 2012 in the amount of $10,191,234. Included in the full cost pool at June 30, 2012 were costs incurred in 2010 and 2011 associated with the Company–s interest in the Niobrara development program in the Denver-Julesburg Basin. We incurred approximately $23.6 million in development costs to acquire acreage and develop the program, with insufficient oil and natural gas reserves established as a result of the development in the third-party reserve engineer–s reserve report to offset the costs of the development program. While the costs were incurred in 2010 and 2011, we did not fail the ceiling test until June 30, 2012. The failure was primarily due to a decrease in the 12-month average commodity price and an increase in the local differential to NYMEX West Texas Intermediate on Williston Basin properties on the June 30, 2012 reserve report compared to March 31, 2012 and December 31, 2011 reserve reports. We did not recognize any impairment expense in the three- and six-month periods ended June 30, 2011.
The following table illustrates certain recent well completions in which Voyager has participated with a working interest during the second quarter of 2012, listing all wells added to production with a working interest of at least 1.5%:
The following table illustrates the 30 gross (1.10 net) wells in the Bakken or Three Forks formations drilling, awaiting completion or completing in which Voyager is participating with a working interest as of June 30, 2012:
Adjusted EBITDA
In addition to reporting net income (loss) as defined under GAAP, we also present net earnings before interest, income taxes, depreciation, depletion, and amortization, accretion of discount on asset retirement obligations, impairment of oil and natural gas properties, unrealized gain (loss) from mark-to-market on commodity derivatives and non-cash expenses relating to share based payments recognized under ASC Topic 718 (“adjusted EBITDA”), which is a non-GAAP performance measure. Adjusted EBITDA consists of net earnings after adjustment for those items described in the table below. Adjusted EBITDA does not represent, and should not be considered an alternative to GAAP measurements, such as net income (loss) (its most directly comparable GAAP measure), and our calculations thereof may not be comparable to similarly titled measures reported by other companies. By eliminating the items described below, we believe the measure is useful in evaluating its fundamental core operating performance. We also believe that adjusted EBITDA is useful to investors because similar measures are frequently used by securities analysts, investors, and other interested parties in their evaluation of companies in similar industries. Our management uses adjusted EBITDA to manage our business, including in preparing our annual operating budget and financial projections. Our management does not view adjusted EBITDA in isolation and also uses other measurements, such as net income (loss) and revenues to measure operating performance. The following table provides a reconciliation of net income (loss) to Adjusted EBITDA for the periods presented:
Adjusted Income
In addition to reporting net income (loss) as defined under GAAP, we also present net earnings before the impairment of oil and natural gas properties and the effect of unrealized gain (loss) from mark-to-market on commodity derivatives (“adjusted income”), which is a non-GAAP performance measure. Adjusted income consists of net earnings after adjustment for those items described in the table below. Adjusted income does not represent, and should not be considered an alternative to GAAP measurements, such as net income (loss), and our calculations thereof may not be comparable to similarly titled measures reported by other companies. By eliminating the items described below, we believe the measure is useful in evaluating our fundamental core operating performance. We also believe that adjusted income is useful to investors because similar measures are frequently used by securities analysts, investors, and other interested parties in their evaluation of companies in similar industries. Our management uses adjusted income to manage our business, including in preparing our annual operating budget and financial projections. Our management does not view adjusted income in isolation and also uses other measurements, such as net income (loss) and revenues to measure operating performance. The following table provides a reconciliation of net income (loss), to adjusted income for the periods presented:
The Company utilizes commodity costless collars (purchased put options and written call options) to (i) reduce the effects of volatility in price changes on the oil commodities it produces and sells, (ii) reduce commodity price risk and (iii) provide a base level of cash flow in order to assure it can execute at least a portion of its capital spending.
All derivative positions are carried at their fair value on the condensed balance sheet and are marked-to-market at the end of each period. Both the unrealized and realized gains and losses resulting from the contract settlement of derivatives are recorded in the loss on derivatives line on the condensed statement of operations.
Costless collars are used to establish floor and ceiling prices on anticipated oil and natural gas production. There were no premiums paid to or received by the Company related to the costless collar agreements. The following table reflects open costless collar agreements as of June 30, 2012.
On July 26, 2012, in conjunction with the closing of the amended and restated credit agreement with MBL, the Company executed a NYMEX West Texas Intermediate crude oil derivative swap contract. The following table reflects the opened commodity swap contract with the associated volumes and fixed price.
Voyager is an exploration and production company focused primarily on acquiring acreage and developing wells in prospective shale oil plays in the continental United States. The Company–s primary business is focused on properties in North Dakota and Montana targeting the Bakken and Three Forks shale oil formations. Voyager on a combined company basis following the acquisition of Emerald Oil owns an interest in approximately 200,000 net acres in the following areas:
approximately 43,600 core net acres targeting the Bakken and Three Forks shale oil formations in North Dakota and Montana;
approximately 45,000 net acres in a joint venture in the Sandwash Basin Niobrara shale oil play, located in Mofatt and Routt Counties, Colorado and Carbon County, Wyoming;
approximately 33,500 net acres in a joint venture targeting the Heath shale oil formation in Musselshell, Petroleum, Garfield and Fergus Counties of Montana;
approximately 2,400 net acres in the Denver-Julesburg Basin targeting the Niobrara shale oil formation in Colorado and Wyoming; and
approximately 74,700 net acres in a joint venture in and around the Tiger Ridge natural gas field in Blaine, Hill and Chouteau Counties of Montana.
For additional information, visit Voyager–s website at: . Sign up for email alerts at: to be notified when news items are released by Voyager.
Certain statements included in this news release contain “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934. We caution you that assumptions, expectations, projections, intentions, plans, beliefs or similar expressions used to identify forward-looking statements about future events may, and often do, vary from actual results and the differences can be material from those expressed or implied in such forward looking statements. Some of the key factors that could cause actual results to vary from those we expect include, without limitation, volatility in commodity prices for crude oil and natural gas, access to capital markets and the condition of the capital markets generally, as well as ability to access them, the timing of planned capital expenditures, unanticipated cash flow restrictions, uncertainties in estimating reserves and forecasting production results, operational factors affecting the commencement or maintenance of producing wells and uncertainties regarding environmental regulations or litigation and other legal or regulatory developments affecting our business. We assume no obligation and expressly disclaim any duty to update the information contained herein except as required by law.
Voyager Oil & Gas, Inc.
Marty Beskow
Vice President of Finance / Capital Markets
406-245-4901