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Northern Oil Cuts 1Q Spending 59% YOY; Pays Down $33MM in Debt

Share Print Bookmark    |    Tuesday,May 10,2016

Northern Oil and Gas, Inc. announced 2016 first quarter results, as well as a borrowing base redetermination and amendments under its revolving credit facility.

Key Points:

• Paid down an additional $33 million of debt during the quarter.
• Production averaged 13,552 barrels of oil equivalent per day, for a total of 1,233,227 Boe
• Oil and gas sales, including cash from settled derivatives, totaled $53.8 million
• Northern added 41 gross (3.0 net) wells to production during the first quarter
• Capital expenditures totaled $18.1 million during the first quarter, a reduction of 59% compared to the first quarter of 2015
• Free cash flow was used to reduce Northern's credit facility balance by $33 million during the first quarter, to $117 million
• On May 6, 2016, the borrowing base under Northern's revolving credit facility was set at $350 million, providing quarter-end liquidity of $237.4 million, composed of $4.4 million in cash and $233.0 million of revolving credit facility availability

Northern's Chief Executive Officer, Michael Reger said: "Our long standing focus on capital discipline allowed Northern to reduce spending, generate free cash flow and pay down an additional $33 million of debt during the quarter. With our borrowing base redetermination and the improvements to our covenant requirements, we are in a strong liquidity position to continue the execution of our business plan."

Capital Expenditures & Drilling Activity

For the first quarter, the weighted average authorization for expenditure (or AFE) cost for wells that Northern elected to participate in (consented) was $7.1 million.

Guidance

Despite first quarter curtailments that reduced production by approximately 1,600 Boe per day during the quarter, Northern continues to expect 2016 total production to be down approximately 15% compared to 2015 production levels, with full year capital expenditures expected to total between $60 and $70 million.  Management's current expectations for certain 2016 operating metrics are as follows:

Acreage

As of March 31, 2016, Northern controlled 164,894 net acres targeting the Williston Basin Bakken and Three Forks formations.  During the first quarter of 2016, Northern acquired leasehold interests covering an aggregate of approximately 764 net acres, for an average cost of $1,214 per net acre.  As of March 31, 2015, approximately 81% of Northern's North Dakota acreage position, and approximately 74% of Northern's total acreage position, was developed, held by production or held by operations.

Liquidity

At March 31, 2016, Northern had $117 million in outstanding borrowings under its revolving credit facility, down from $150 million at December 31, 2015.  On May 6^th the amended borrowing base was set at $350 million, providing quarter-end liquidity of $237.4 million, composed of $4.4 million in cash and $233.0 million of revolving credit facility availability.

In connection with the borrowing base redetermination, the credit agreement governing the revolving credit facility was amended to (i) reduce the minimum ratio of EBITDAX to interest expense that Northern will be required to maintain in future quarters, (ii) increase the interest rate on borrowings by 50 basis points and (iii) limit Northern's ability to maintain excess cash liquidity without using it to reduce outstanding borrowings under the revolving credit facility.

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 March 31, 2016.

First Quarter 2016 Results

Northern's adjusted net income for the first quarter was $0.5 million, or $0.01 per diluted share.  GAAP net loss for the quarter was $126.6 million, or a loss of $2.08 per diluted share, which was impacted by a combined $127.4 million of non-cash impairment charges, losses on the mark-to-market of derivative instruments and write-off of debt issuance costs.  Adjusted EBITDA for the first quarter was $36.2 million.

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