UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
|
T QUARTERLY REPORT UNDER SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the quarterly period ended March 31, 2008
|
£ TRANSITION REPORT UNDER
SECTION 13 OR 15(d) OF THE EXCHANGE
ACT
|
For
the transition period from ____________ to____________
Commission
File No. 000-33999
NORTHERN
OIL AND GAS, INC.
(Exact
name of Registrant as specified in its charter)
Nevada
|
95-3848122
|
(State
or Other Jurisdiction of
Incorporation
or organization)
|
(I.R.S.
Employer I.D. No.)
|
315
Manitoba Avenue – Suite 200
Wayzata,
Minnesota 55391
(Address
of Principal Executive Offices)
(952)
476-9800
(Issuer’s
Telephone Number)
N/A
(Former
name, former address and former fiscal year,
if
changed since last report)
Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes T No £
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a small reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
Large
Accelerated Filer £ Accelerated
Filer £
Non-Accelerated
Filer £ Smaller
Reporting Company T
(Do
not check if a smaller reporting company)
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes £ No T
As of May
14, 2008, there were 31,269,150 shares of our common stock, par value $0.001,
outstanding.
NORTHERN
OIL AND GAS, INC.
FORM
10-Q
March 31,
2008
C
O N T E N T S
|
Page
|
PART
I
|
|
|
|
Item
1. Financial
Statements
|
1
|
Condensed Balance
Sheets
|
1
|
Condensed Statements of
Operations
|
2
|
Condensed Statements of Cash
Flows
|
3
|
Notes to Unaudited Condensed
Financial Statements
|
4
|
|
|
Item
2. Management’s
Discussion and Analysis or Plan of Operation
|
14
|
|
|
Item
4T. Controls
and Procedures
|
22
|
|
|
|
|
PART
II
|
|
|
|
Item
2. Unregistered
Sales of Equity Securities and Use of Proceeds
|
22
|
|
|
Item
6. Exhibits
|
23
|
|
|
Signatures
|
24
|
PART
I - FINANCIAL INFORMATION
Item
1. Financial Statements.
NORTHERN
OIL AND GAS, INC.
|
|
BALANCE
SHEETS
|
|
MARCH
31, 2008 AND DECEMBER 31, 2007
|
|
|
|
ASSETS
|
|
|
|
March
31,
|
|
|
December
31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(UNAUDITED)
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
Cash
and Cash Equivalents
|
|
$ |
1,967,740 |
|
|
$ |
10,112,660 |
|
Short-term
Investments
|
|
|
3,659,450 |
|
|
|
- |
|
Trade
Receivables
|
|
|
220,015 |
|
|
|
- |
|
Other
Current Assets
|
|
|
115,633 |
|
|
|
389,970 |
|
Total
Current Assets
|
|
|
5,962,838 |
|
|
|
10,502,630 |
|
|
|
|
|
|
|
|
|
|
PROPERTY
AND EQUIPMENT, AT COST
|
|
|
|
|
|
|
|
|
Oil
and Natural Gas Properties, Full Cost Method (including unevaluated costs
of
|
|
|
|
|
|
|
|
|
$13,209,500
at 3/31/08 and $7,587,511 at 12/31/2007)
|
|
|
14,752,693 |
|
|
|
7,587,511 |
|
Other
Property and Equipment
|
|
|
247,003 |
|
|
|
44,769 |
|
Total
Property and Equipment
|
|
|
14,999,696 |
|
|
|
7,632,280 |
|
Less
- Accumulated Depreciation and Depletion
|
|
|
52,646 |
|
|
|
3,446 |
|
Total
Property and Equipment, Net
|
|
|
14,947,050 |
|
|
|
7,628,834 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$ |
20,909,888 |
|
|
$ |
18,131,464 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts
Payable
|
|
$ |
481,696 |
|
|
$ |
113,254 |
|
Checks
Issued, not Cashed
|
|
|
177,741 |
|
|
|
- |
|
Accrued
Expenses
|
|
|
15,175 |
|
|
|
110,993 |
|
Short
Term Loan
|
|
|
1,519,487 |
|
|
|
- |
|
Total
Current Liabilities
|
|
|
2,194,099 |
|
|
|
224,247 |
|
|
|
|
|
|
|
|
|
|
LONG-TERM
LIABILITIES
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
|
|
2,194,099 |
|
|
|
224,247 |
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
Common
Stock, Par Value $.001; 100,000,000 Authorized, 28,900,970
|
|
|
|
|
|
|
|
|
Outstanding
(2007 – Par Value $.001; 28,695,922 Shares Outstanding)
|
|
|
28,901 |
|
|
|
28,696 |
|
Additional
Paid-In Capital
|
|
|
23,190,679 |
|
|
|
22,259,921 |
|
Retained
Deficit
|
|
|
(4,568,677 |
) |
|
|
(4,381,400 |
) |
Obligations
to Issue Stock
|
|
|
205,960 |
|
|
|
- |
|
Accumulated
Other Comprehensive Income (Loss)
|
|
|
(141,074 |
) |
|
|
- |
|
Total
Stockholders' Equity
|
|
|
18,715,789 |
|
|
|
17,907,217 |
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Stockholders' Equity
|
|
$ |
20,909,888 |
|
|
$ |
18,131,464 |
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements.
NORTHERN
OIL AND GAS, INC.
|
|
STATEMENTS
OF OPERATIONS
|
|
FOR
THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
|
|
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
|
|
March,
31
|
|
|
|
2008
|
|
|
2007
|
|
REVENUES
|
|
|
|
|
|
|
Oil
and Gas Sales
|
|
$ |
285,729 |
|
|
$ |
- |
|
Gain
on Derivatives
|
|
|
1,300 |
|
|
|
- |
|
|
|
|
287,029 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
Production
Expenses
|
|
|
13,492 |
|
|
|
- |
|
General
and Administrative Expense
|
|
|
507,883 |
|
|
|
297,459 |
|
Depletion
and Depreciation
|
|
|
49,200 |
|
|
|
260 |
|
Total
Expenses
|
|
|
570,575 |
|
|
|
297,719 |
|
|
|
|
|
|
|
|
|
|
LOSS
FROM OPERATIONS
|
|
|
(283,546 |
) |
|
|
(297,719 |
) |
|
|
|
|
|
|
|
|
|
OTHER
INCOME
|
|
|
96,269 |
|
|
|
10,133 |
|
|
|
|
|
|
|
|
|
|
LOSS
BEFORE INCOME TAXES
|
|
|
(187,277 |
) |
|
|
(287,586 |
) |
|
|
|
|
|
|
|
|
|
INCOME
TAX PROVISION (BENEFIT)
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
$ |
(187,277 |
) |
|
$ |
(287,586 |
) |
|
|
|
|
|
|
|
|
|
Net
Loss Per Common Share – Basic and Diluted
|
|
$ |
(0.01 |
) |
|
$ |
(0.01 |
) |
|
|
|
|
|
|
|
|
|
Weighted
Average Shares Outstanding – Basic
|
|
|
28,849,731 |
|
|
|
20,196,836 |
|
|
|
|
|
|
|
|
|
|
Weighted
Average Shares Outstanding - Diluted
|
|
|
28,849,731 |
|
|
|
20,196,836 |
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements.
NORTHERN
OIL AND GAS, INC.
|
|
STATEMENTS
OF CASH FLOWS
|
|
FOR
THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
|
|
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
|
|
March
31,
|
|
|
|
2008
|
|
|
2007
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
Net
Loss
|
|
$ |
(187,277 |
) |
|
$ |
(287,586 |
) |
Adjustments
to Reconcile Net Loss to Net Cash Used for Operating
Activities:
|
|
|
|
|
|
|
|
|
Depletion
and Depreciation
|
|
|
49,200 |
|
|
|
260 |
|
Issuance
of Stock for Consulting Fees
|
|
|
49,875 |
|
|
|
- |
|
Market
Value adjustment of Derivative Instruments
|
|
|
(1,300 |
) |
|
|
- |
|
Share
– Based Compensation Expense
|
|
|
- |
|
|
|
216,986 |
|
Increase
in Trade Receivables
|
|
|
(220,015 |
) |
|
|
|
|
Increase
in Prepaid Expenses
|
|
|
(88,653 |
) |
|
|
(61,528 |
) |
Increase
in Accounts Payable
|
|
|
368,442 |
|
|
|
33,339 |
|
Decrease
in Accrued Expenses
|
|
|
(95,818 |
) |
|
|
- |
|
Net
Cash Used For Operating Activities
|
|
|
(125,546 |
) |
|
|
(98,529 |
) |
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Capital
Expenditures
|
|
|
(202,234 |
) |
|
|
(8,672 |
) |
Prepaid
Drilling Costs
|
|
|
364,290 |
|
|
|
- |
|
Increase
in Short-term Investment, net
|
|
|
(3,800,524 |
) |
|
|
- |
|
Oil
and Gas Properties
|
|
|
(6,118,134 |
) |
|
|
(841,481 |
) |
Net
Cash Used For Investing Activities
|
|
|
(9,756,602 |
) |
|
|
(850,153 |
) |
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Increase
in Checks Issued, not Cashed
|
|
|
177,741 |
|
|
|
- |
|
Increase
in Margin Loan
|
|
|
1,519,487 |
|
|
|
|
|
Repayments
of Convertible Notes Payable (Related Party)
|
|
|
- |
|
|
|
(165,000 |
) |
Cash
Paid for Listing Fee
|
|
|
(65,000 |
) |
|
|
|
|
Proceeds
from the Issuance of Common Stock – Net of Issuance Costs
|
|
|
- |
|
|
|
1,187,895 |
|
Proceeds
from Exercise of Stock Options
|
|
|
105,000 |
|
|
|
- |
|
Net
Cash Provided by Financing Activities
|
|
|
1,737,228 |
|
|
|
1,022,895 |
|
|
|
|
|
|
|
|
|
|
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
(8,144,920 |
) |
|
|
74,213 |
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS – BEGINNING OF PERIOD
|
|
|
10,112,660 |
|
|
|
849,935 |
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS – END OF PERIOD
|
|
$ |
1,967,740 |
|
|
$ |
924,148 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosure of Cash Flow Information
|
|
|
|
|
|
|
|
|
Cash
Paid During the Period for Interest
|
|
$ |
- |
|
|
$ |
- |
|
Cash
Paid During the Period for Income Taxes
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
Non-Cash
Financing and Investing Activities:
|
|
|
|
|
|
|
|
|
Purchase
of Oil and Gas Properties through Issuance of Common Stock
|
|
$ |
1,047,048 |
|
|
$ |
705,012 |
|
Payment
of Consulting Fees through Issuance of Common Stock
|
|
$ |
49,875 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements.
NORTHERN
OIL AND GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
March
31, 2008
NOTE
1 ORGANIZATION AND NATURE
OF BUSINESS
Northern
Oil and Gas, Inc. (the “Company,” “we,” “us,” “our” and words of similar import)
is a growth-oriented independent energy company engaged in the acquisition,
exploration, exploitation and development of oil and natural gas
properties. Prior to March 20, 2007, our name was “Kentex Petroleum,
Inc.” The Company took its present form on March 20, 2007, when
Kentex completed a so-called short-form merger with its wholly-owned subsidiary,
Northern Oil and Gas, Inc. (“NOG”), a Nevada corporation engaged in the
Company’s current business, in which NOG merged into Kentex and Kentex was the
surviving entity. As part of the short-form merger, Kentex changed
its name to “Northern Oil and Gas, Inc.” A more complete description of this
transaction is set forth in Part I, Item 1 under the heading “Business—Overview”
and in Note 1 to the Notes to Consolidated Financial Statements in our Annual
Report on Form 10-K for the fiscal year ended December 31, 2007, filed with the
U.S. Securities and Exchange Commission (the “SEC”) on March 31, 2008. The
Company’s common stock trades on the American Stock Exchange under the symbol
“NOG”.
The
Company will continue to focus on projects in the oil and gas industry primarily
based in the Rocky Mountains and specifically the Williston Basin Bakken Shale
formation. This is based upon a belief that the Company is able to create value
via strategic acreage acquisitions and convert the value or portion thereof into
production by utilizing experienced industry partners specializing in the
specific areas of interest. The Company has targeted specific
prospects and has engaged in the drilling for oil and
gas.
The
Company had four employees as of March 31, 2008. Our land acquisition
and field operations, along with various other services, are outsourced through
the use of consultants and drilling partners. The Company will
continue to retain independent contractors to assist in operating and managing
the prospects as well as to carry out the principal and necessary functions
incidental to the oil and gas business. With the continued
acquisition of oil and natural gas properties, the Company intends to continue
to establish itself with industry partners best suited to the areas of
operation. As the Company continues to establish a revenue base with
cash flow, it may seek more aggressive opportunities.
As an
independent oil and gas producer, the Company’s revenue, profitability and
future rate of growth are substantially dependent on prevailing prices of
natural gas and oil. Historically, the energy markets have been very
volatile and it is likely that oil and gas prices will continue to be subject to
wide fluctuations in the future. A substantial or extended decline in
natural gas and oil prices could have a material adverse effect on the Company’s
financial position, results of operations, cash flows and access to capital, and
on the quantities of natural gas and oil reserves that can be economically
produced.
NOTE
2 BASIS OF
PRESENTATION
The
financial information included herein is unaudited, except the balance sheet as
of December 31, 2007, which has been derived from our audited financial
statements as of December 31, 2007. However, such information
includes all adjustments (consisting solely of normal recurring adjustments),
which are, in the opinion of management, necessary for a fair presentation of
financial position, results of operations and cash flows for the interim
periods. The results of operations for interim periods are not
necessarily indicative of the results to be expected for an entire
year.
Certain
information, accounting policies, and footnote disclosures normally included in
the financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed or
omitted in this Form 10-Q pursuant to certain rules and regulations of the
Securities and Exchange Commission. These financial statements should
be read in conjunction with the audited financial statements and notes for the
year ended December 31, 2007, which are included in our Annual Report on Form
10-K for the fiscal year ended December 31, 2007.
New Accounting
Pronouncements
In
December 2007, the FASB issued Statement of Financial Accounting Standards
(“SFAS”) No. 141(R), “Business Combinations.” SFAS No. 141(R) changes the
accounting for and reporting of business combination transactions in the
following way: Recognition with certain exceptions, of 100% of the fair
values of assets acquired, liabilities assumed, and non controlling interests of
acquired businesses; measurement of all acquirer shares issued in consideration
for a business combination at fair value on the acquisition date; recognition of
contingent consideration arrangements at their acquisition date fair values,
with subsequent changes in fair value generally reflected in earnings;
recognition of pre-acquisition gain and loss contingencies at their acquisition
date fair value; capitalization of in-process research and development
(IPR&D) assets acquired at acquisition date fair value; recognition of
acquisition-related transaction costs as expense when incurred; recognition of
acquisition-related restructuring cost accruals in acquisition accounting only
if the criteria in Statement No. 146 are met as of the acquisition date; and
recognition of changes in the acquirer’s income tax valuation allowance
resulting from the business combination separately from the business combination
as adjustments to income tax expense. SFAS No. 141(R) is effective
for the first annual reporting period beginning on or after December 15, 2008
with earlier adoption prohibited. The adoption of SFAS No. 141(R)
will affect valuation of business acquisitions made in 2009 and
forward.
In
December 2007, the FASB issued SFAS No. 160 "Noncontrolling Interest in
Consolidated Financial Statements – an Amendment of ARB 51" (SFAS
160). SFAS 160 clarifies that a noncontrolling interest in a
subsidiary is an ownership interest in the consolidated entity that should be
reported as equity in the consolidated financial statements. It also
requires consolidated net income to be reported at amounts that include the
amounts attributable to both the parent and the noncontrolling interest, and
requires disclosure, on the face of the consolidated statement of income, of the
amounts of consolidated net income attributable to the parent and to the
noncontrolling interest. SAFS 160 is effective for fiscal years, and
interim periods within those fiscal years, beginning on or after December 15,
2008. Earlier adoption is prohibited. We do not anticipate
a material impact upon adoption.
In March
2008, the FSAB issued FASS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities.” SFAS 161 is intended to improve financial
reporting about derivative instruments and hedging activities by requiring
enhanced disclosures to enable investors to better understand their effects on
an entity's financial position, financial performance, and cash
flows. SFAS 161 is effective for financial statements issued for
fiscal years and interim periods beginning after November 15, 2008, with early
application encouraged. We do not anticipate a material impact upon
adoption.
NOTE
3 SIGNIFICANT ACCOUNTING
PRACTICES
Full Cost
Method
The
Company follows the full cost method of accounting for oil and gas operations
whereby all costs related to the exploration and development of oil and gas
properties are initially capitalized into a single cost center (“full cost
pool”). Such costs include land acquisition costs, geological and
geophysical evaluation expenses, carrying charges on non-producing properties,
costs of drilling directly related to acquisition, and exploration
activities. As of March 31, 2008, we controlled approximately 21,354
net acres of leaseholds in Sheridan County, Montana with primary targets
including the Red River and Mission Canyon formations, 31,000 net acres,
primarily in Mountrail County, North Dakota, targeting the Bakken Shale and
10,000 net acres in Yates County, New York that is prospective for Marcellus
Shale and Trenton-Black River natural gas production. See Note 6 for an
explanation of activities on these properties.
Proceeds
from property sales will generally be credited to the full cost pool, with no
gain or loss recognized, unless such a sale would significantly alter the
relationship between capitalized costs and the proved reserves attributable to
these costs. A significant alteration would typically involve a sale
of 25% or more of the proved reserves related to a single full costs
pool.
Costs
capitalized will be depleted and amortized on the unit-of-production method
based on the estimated gross proved reserves as determined by independent
petroleum engineers. The costs of unproved properties are withheld
from the depletion base until such time as they are either developed or
abandoned. When proved reserves are assigned or the property is
considered to be impaired, the cost of the property or the amount of the
impairment is added to costs subject to depletion calculations.
Capitalized
costs of oil and gas properties (net of related deferred income taxes) may not
exceed an amount equal to the present value, discounted at 10% per annum, of the
estimated future net cash flows from proved oil and gas reserves plus the cost
of unevaluated properties (adjusted for related income tax
effects). Should capitalized costs exceed this ceiling, impairment is
recognized. The present value of estimated future net cash flows is
computed by applying period-end prices of oil and natural gas to estimated
future production of proved oil and gas reserves as of period-end, less
estimated future expenditures to be incurred in developing and producing the
proved reserves and assuming continuation of existing economic
conditions. Such present value of proved reserves’ future net cash
flows excludes future cash outflows associated with settling asset retirement
obligations that have been accrued on the Balance Sheet (following SEC Staff
Accounting Bulletin No. 106). Should this comparison indicate an
excess carrying value, the excess is charged to earnings as an impairment
expense.
Other Property and
Equipment
Property
and equipment that are not oil and gas property are recorded at cost and
depreciated using the straight-line method over their estimated useful lives of
three to five years. Expenditures for replacements, renewals, and
betterments are capitalized. Maintenance and repairs are charged to
operations as incurred. Long-lived assets, other than oil and gas
properties, are evaluated for impairment to determine if current circumstances
and market conditions indicate the carrying amount may not be
recoverable. We have not recognized any impairment losses on non oil
and gas long-lived assets. Depreciation expense was $8,031 for the
three months ended March 31, 2008.
Impairment
SFAS 144,
Accounting for the Impairment and Disposal of Long-Lived Assets, requires that
long-lived assets to be held and used be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Oil and gas properties accounted for using the
full cost method of accounting (which we use) are excluded from this requirement
bud continue to be subject to the full cost method's impairment
rules.
Cash, Cash Equivalents and
Short Term Investments
Our cash
positions represent assets held in Checking, Money Market Accounts and other
short term instruments. These assets are generally available to us on
a daily or weekly basis and are highly liquid in nature. Due to the
balances being greater than $100,000, we do not have FDIC coverage on the entire
amount of bank deposits. The company believes this risk is
minimal.
Derivative Instruments and
Price Risk Management
The
Company uses derivative instruments to manage market risks resulting from
fluctuations in the prices of oil and natural gas. The Company may
periodically enter into derivative contracts, including price swaps, caps and
floors, which require payments to (or receipts from) counterparties based on the
differential between a fixed price and a variable price for a fixed quantity of
oil or natural gas without the exchange of underlying volumes. The
notional amounts of these financial instruments would be based on expected
production from existing wells. The company has, and may continue to use
exchange traded futures contracts to hedge the delivery price of oil at a future
date.
The
Company has elected not to designate any derivative contracts as accounting
hedges under SFAS No. 133. As such, all derivative positions are
carried at their fair value on the balance sheet and are marked-to-market at the
end of each period. Under the mark-to-market accounting method,
realized and unrealized gains or losses are recorded as gain (loss) on
derivatives, net, as an increase or decrease in revenue on the statement of
operations rather than as a component of other comprehensive income or other
income (expense).
Stock-Based
Compensation
The
Company has accounted for stock-based compensation under the provisions of SFAS
No. 123(R), Share Based Payment. This statement requires us to record
an expense associated with the fair value of stock-based
compensation. We currently use the Black-Scholes option valuation
model to calculate stock based compensation at the date of
grant. Option pricing models require the input of highly subjective
assumptions, including the expected
price volatility. Changes in these assumptions can materially affect
the fair value estimate.
The
average risk-free interest rate is determined using the U. S. Treasury rate in
effect as of the date of grant, based on the expected term of the stock
option.
Options
Granted November 1, 2007
On
November 1, 2007, the Board of Directors granted 560,000 options to board
members and one employee. The total fair value of the options was
recognized as compensation in 2007 as the optionees were immediately
vested. In computing the expected volatility, we used the combined
historical volatility of the Company’s common stock for a one month period and
the blended historical volatility for two of our peer companies over a period of
four years and eleven months. In computing the exercise price we used
the average closing/last trade price of the Company’s common stock for the five
highest volume trading days during the 30-day trading period ending on the last
trading day preceding the date of the grants.
The
following assumptions were used for the Black-Scholes model:
|
|
November
1,
|
|
|
2007
|
Risk
free rates
|
|
4.36%
|
Dividend
yield
|
|
0%
|
Expected
volatility
|
|
56%
|
Weighted
average expected stock option life
|
|
5
Years
|
The “fair
market value” at the date of grant for stock options granted using the formula
relied upon for calculating the exercise price is as follows:
Weighted
average fair value per share
|
|
$ |
2.72 |
|
Total
options granted
|
|
|
560,000 |
|
Total
weighted average fair value of options granted
|
|
$ |
1,524,992 |
|
Income
Taxes
The
Company accounts for income taxes under FASB Statement No. 109, Accounting for
Income Taxes. Deferred income tax assets and liabilities are
determined based upon differences between the financial reporting and tax bases
of assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to
reverse. FASB Statement No. 109 requires the consideration of a
valuation allowance for deferred tax assets if it is “more likely than not” that
some component or all of the benefits of deferred tax assets will not be
realized.
Use of
Estimates
The
preparation of financial statements under generally accepted accounting
principles (“GAAP”) in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
Revenue Recognition and Gas
Balancing
We
recognize oil and gas revenues from our interests in producing wells when
production is delivered to, and title has transferred to, the purchaser and to
the extent the selling price is reasonably determinable. We use the
sales method of accounting for gas balancing of gas production and would
recognize a liability if the existing proven reserves were not adequate to cover
the current imbalance situation. As of March 31, 2008 and
December 31, 2007, our gas production was in balance, i.e., our cumulative
portion of gas production taken and sold from wells in which we have an interest
equaled our entitled interest in gas production from those
wells.
Net Income (Loss) Per Common
Share
Net
Income (Loss) per common share is based on the Net Income (Loss) less preferred
dividends divided by weighted average number of common shares
outstanding.
Diluted
earnings per share is computed using weighted average number of common shares
plus dilutive common share equivalents outstanding during the period using the
treasury stock method. As the Company has a loss for the period ended
March 31, 2008 the potentially dilutive shares are anti-dilutive and are thus
not added into the earnings per share calculation.
As of
March 31, 2008 there were 560,000 potentially dilutive shares from stock options
that became exercisable in 2007.
In
addition there are 4,818,183 warrants that were issued in conjunction with the
September 12, 2007 private placement. These warrants are presently
exercisable and represent potentially dilutive shares. These warrants
have a blended exercise price of $5.50. If all warrants were
exercised the Company would receive proceeds of $26,500,006. As of
April 25, 2008, 2,071,817 warrants were exercised resulting in proceeds to the
company of approximately $9,800,000.
NOTE
4 SHORT-TERM
INVESTMENTS
Short-term
investments primarily consist of investment grade securities that either mature
within the next 12 months or have other characteristics of short-term
investments, such as auction dates within at least six months of the prior
auction date or being available to be used for current operations even if some
maturities may extend beyond one year. All auction rate securities
are classified as short-term investments.
All
marketable debt and equity securities that are included in short-term
investments are considered available-for-sale and are carried at fair
value. The unrealized gains and losses related to these securities
are included in accumulated other comprehensive income (loss). Fair
values are based on quoted market prices provided to us by our prime
broker. When securities are sold, their cost is determined based on
the first-in first-out method. The realized gains and losses related
to these securities are included in investment income in the statements of
operations. Although we have elected to mark the value of certain
auction market securities at less than par, we expect to eventually receive full
value as the market returns to a more stable condition. We continue
to earn interest on these securities and our prime broker has allowed us to
borrow up to 100% of their value at a rate less than the interest they
bear.
The
following is a summary of our short-term available-for-sale investments as of
March 31, 2008:
|
|
Cost
at
March
31, 2008
|
|
|
Unrealized
(Loss)
|
|
|
Fair
Market
Value
at
March
31,
2008
|
|
Muncipal
Bonds
|
|
$ |
2,800,000 |
|
|
$ |
(109,650 |
) |
|
$ |
2,690,350 |
|
Auction
Market Securities
|
|
|
1,000,524 |
|
|
|
(31,424
|
) |
|
|
969,100 |
|
Total
Short-Term Investments
|
|
$ |
3,800,524 |
|
|
$ |
(141,074 |
) |
|
$ |
3,659,450 |
|
NOTE
5 PROPERTY AND
EQUIPMENT
Property
and equipment at March 31, 2008, consisted of the following:
|
|
|
|
|
|
|
|
Oil
and Gas Properties, Full Cost Method
|
|
|
|
Unevaluated
Costs, Not Subject to Amortization or Ceiling Test
|
|
$ |
13,209,500 |
|
Evaluated
Costs
|
|
|
1,543,193 |
|
|
|
|
14,752,693 |
|
Office
Equipment, Furniture, and Software
|
|
|
247,003 |
|
|
|
|
14,999,696 |
|
Less:
Accumulated Depreciation, Depletion, and Amortization
|
|
|
(52,646 |
) |
Property
and Equipment
|
|
$ |
14,947,050 |
|
The
following table shows depreciation, depletion, and amortization expense by type
of asset:
|
Three-Month
Period
Ended
March 31,
|
|
|
2008
|
|
2007
|
|
Depletion
of Costs for Evaluated Oil and Gas Properties
|
|
$ |
40,636 |
|
|
$ |
- |
|
Depreciation
of Office Equipment, Furniture, and Software
|
|
|
8,564 |
|
|
|
260 |
|
Total
Depreciation, Depletion, and Amortization Expense
|
|
$ |
49,200 |
|
|
$ |
260 |
|
NOTE
6 OIL AND GAS
PROPERTIES
Acquisition – Related Party
Transactions
In
February 2007, NOG acquired from Montana Oil Properties, Inc. (“MOP”) certain
oil leases in Sheridan County, Montana for a total purchase price of $825,000
and 400,000 shares of NOG restricted common stock, valued at $1.05 per share
based on the current offering price for the security, for approximately 21,354
net acres. The principals of MOP are Mr. Steven Reger and Mr. Tom
Ryan; both are relatives of our Chief Executive Officer, Michael
Reger.
On
February 12, 2007, South Fork Exploration, LLC (“SFE”), a Montana Limited
Liability Company assigned leases covering approximately 3,016 net acres in
Mountrail County, North Dakota to NOG. NOG paid $271,481 in cash and
issued 271,440 shares of restricted common stock, valued at $1.05 per share
based on the current offering price for the security. SFE’s president
is J. R. Reger, brother of our Chief Executive Officer Michael
Reger. J. R. Reger is also a shareholder of the company.
On
September 12, 2007 the Company acquired from MOP leasehold interests on
approximately 4,650 net acres in Mountrail County, North Dakota. The
total consideration paid for this acreage was $2,704,728.50 in cash and 130,048
shares of restricted common stock. The principals of MOP are Mr.
Steven Reger and Mr. Tom Ryan, both are relatives of our Chief Executive
Officer, Michael Reger.
The
Company entered into an agreement with Gallatin Resources, LLC to acquire
certain oil and gas leases on approximately 10,000 net mineral acres in the
Appalachia Basin. The acreage is located in the "Finger Lakes" region
of Yates County, New York. On September 21, 2007 the company closed
on this acquisition. Total consideration for this acreage was
$1,420,000 in cash and 275,000 shares of restricted common stock valued at $4.75
per share based on current market pricing. Carter Stewart, one of the
Company’s directors, owns a 25% interest in Gallatin Resources,
LLC.
In
September 2007, we commenced a continuous lease program with SFE to acquire
approximately 7,500 acres in Burke and Divide Counties of North
Dakota. As of March 31, 2008, the Company has paid SFE $520,600 for
all acreage secured under the program. SFE’s president is J.R. Reger, brother of
Michael Reger, the Company’s Chief Executive Officer. J.R. Reger is
also a shareholder in the Company.
On
October 24, 2007, MOP assigned to the Company leases covering approximately
4,868 net acres in Mountrail County, North Dakota. The total purchase
price for this assignment is $2,434,325 in cash and 153,746 shares of restricted
common stock. As of March 31, 2008, 21,246 of the restricted common
stock has not been issued. The principals of MOP are Mr. Steven Reger
and Mr. Tom Ryan, both are relatives of our Chief Executive Officer, Michael
Reger.
On
January 18, 2008, MOP assigned to the Company leases covering approximately
1,600 net acres in Mountrail County, North Dakota. The total purchase
price for this assignment is $800,000 in cash and 30,000 shares of restricted
common stock. As of March 31, 2008, we paid $200,000 to
MOP. As of March 31, 2008, no accrual was made for the balance amount
pursuant to the optionality of the lease agreement. The principals of
MOP are Mr. Steven Reger and Mr. Tom Ryan, both are relatives of our Chief
Executive Officer, Michael Reger.
The
Company has also completed other miscellaneous acquisitions in North
Dakota.
Brigham Exploration (NASD:
BEXP) Joint Venture
On April
23, 2007 Brigham Exploration announced a Williston Basin joint venture with us
under which Brigham will bear a portion of our costs on a series of wells and
begin a continuous drilling program in 2008.
Approximately
3,000 net acres in Mountrail County, North Dakota and 22,000 net
acres in Sheridan County, Montana are included under the terms of the joint
venture. The Mountrail County, North Dakota acreage is in close
proximity to the high producing EOG wells in the Parshall field. On
640-acre spacing, 4.6 net wells could be drilled by Brigham and the
Company to fully explore and develop this acreage. On the Sheridan
County, Montana acreage, using 160-acre spacing, 137 net wells could be
drilled.
Drilling
under the Brigham joint venture commenced in the early fourth quarter of
2007. On the Mountrail County, North Dakota acreage, we successfully
completed the Bergstrom Family Trust 26 on or around December 27, 2007, a Bakken
well that is producing approximately 120 barrels of oil per day. We
participated for a 6.25% working interest that converts to 24% working interest
at payout. We also completed the Hallingstad 27 on or around February
1, 2008, a Bakken well that is produced at an initial rate of more than 400
barrels of oil per day. We participated for a 8.4% working interest
that converts to 20.5% working interest at payout. On the Sheridan
County, Montana acreage, we successfully completed the Richardson #25 on or
around December 15, 2007, a Red River test well that began production at a rate
of approximately 300 barrels of oil per day. The Company participated
for a 10% working interest that converts to 37% working interest at payout,
which is expected to occur in the second fiscal quarter of 2008. On
April 26, 2008, Brigham commenced the drilling of the Richardson #30, the next
well in the joint venture. The Richardson #30 offsets the productive
Richardson #25. Northern has the option to participate with up to a
25% working interest that will convert to 32% at payout as well as retain a 1%
ORRI. Northern has not yet made its election of working interest in
this well.
NOTE
7 PREFERRED AND COMMON
STOCK
The
Company has neither authorized nor issued any shares of preferred
stock.
In
October 2006, NOG began a private placement offering of a maximum of 4,000,000
shares for sale for $1.05 (the “Offering”). A minimum of 2,000,000
shares was needed to close on the Offering. The Offering was a
private placement made under Rule 506 promulgated under the Securities Act of
1933 (the “Act”), as amended. The securities offered and sold (or
deemed to be offered and sold, in the case of underlying shares of common stock)
in the Offering have been registered for resale under the Act as of October 10,
2007.
On
February 1, 2007, the Offering closed with $2,626,652 being raised and 2,501,573
common shares being issued.
On May 3,
2007, the Company issued 100,000 shares of common stock to Insight Capital
Consultants Corporation pursuant to a consulting agreement with
them. The stock issued was valued at $475,000 and expensed to general
and administrative expense. The shares were valued based on the
market price of the Company’s stock on the date of issuance.
In
September 2007, the Company completed a private placement of 4,545,455 shares of
common stock to accredited investors at a subscription price of $3.30 per share
for total gross proceeds of $15,000,002. In addition to common stock,
investors purchasing shares in the private placement received a warrant to
purchase common stock. For each share of common stock purchased in
this transaction, the purchaser received the right to purchase one-half share of
the Company’s common stock at a price of $5.00 per share for a period of 18
months from the date of closing and the right to purchase one-half share of the
Company’s common stock at a price of $6.00 for a period of 48 months from the
date of closing. FIG Partners, LLC Energy Research and Capital
Partners served as the exclusive placement agent for which it received
consideration in cash and warrants. The total number of shares that
are issuable upon exercise of warrants, including the placement agent's warrant
is 4,818,183. In addition, four of our founders executed restriction
agreements under which they agree not to sell shares of beneficial interest in
the Company for a period of 18 months from the closing of this private
placement, except under certain limited circumstances. Approximately
13,289,000 shares of common stock are subject to the lock-up
agreement.
In
November 2007, the Company issued 73,500 shares of common stock to various
consultants pursuant to consulting agreements. The Company also
issued 75,000 shares of common stock to employee Chad Winter pursuant to a
written employment agreement. The 148,500 shares were valued at
$769,230 at the time and expensed as a general and administrative
expense. The shares were valued at the calculated fair value of the
Company’s stock on the date of the issuance.
In
December 2007, Michael Reger and Ryan Gilbertson, the Company’s Chief Executive
Officer and Chief Financial Officer, respectively, exercised a combined
1,000,000 stock options granted to them in 2006.
In
January 2008, the Company issued 7,500 shares of restricted common stock to
Roepke Communications, Inc. pursuant to a consulting agreement. The
shares were valued at $49,875 and expensed to general and administrative
expense. The shares were valued based on the market price of the
Company’s stock on the date of issuance.
In March
2008, Douglas Polinsky exercised 100,000 stock options granted to him in
2006. The shares related to this exercise were not issued until April
2008.
Restricted Stock
Awards
In March
2008, the Company issued 20,000 shares of restricted common stock to employee
James Sankovitz pursuant to a written employment agreement. The
issuance of restricted stock is intended to retain and motivate the
employee. The fair value of the award was $140,500 or $7.03 per
share, the average market value of a share of Common Stock on the date the stock
was issued. The fair value will be expensed over the one-year term of the
award. Vesting of the shares is contingent on the employee
maintaining employment with the Company and other restrictions included in the
employment agreement.
NOTE
8 RELATED PARTY
TRANSACTIONS
The
Company has purchased leasehold interests from South Fork Exploration, LLC
(SFE). SFE’s president is J.R. Reger, the brother of Michael Reger,
CEO of NOG. J.R. Reger is also a shareholder in NOG. See
Note 6.
The
Company also has purchased leasehold interests from MOP. MOP is
controlled by Mr. Tom Ryan and Mr. Steven Reger, both are relatives of the
Company’s CEO, Michael Reger. See Note 6.
The
Company also has purchased leasehold interests from Gallatin Resources,
LLC. Carter Stewart, one of NOG’s directors, owns a 25% interest in
Gallatin Resources, LLC.
NOTE
9 STOCK OPTIONS/STOCK BASED
COMPENSATION
NOG’s
board of directors approved a stock option plan in October 2006 (“2006 Stock
Option Plan”) to provide incentives to employees, directors, officers, and
consultants and under which 2,000,000 shares of common stock have been reserved
for issuance. The 2006 Stock Option Plan was assumed by the Company
in connection with the merger with NOG in March 2007. The options can
be either incentive stock options or non-statutory stock options and are valued
at the fair market value of the stock on the date of grant. The
exercise price of incentive stock options may not be less than 100% of the fair
market value of the stock subject to the option on the date of the grant and, in
some cases, may not be less than 110% of such fair market value. The
exercise price of non-statutory options may not be less than 100% of the fair
market value of the stock on the date of grant. On December 15, 2006,
1,100,000 options were granted at a price of $1.05 per share. 500,000 options
were granted to each Michael Reger and Ryan Gilbertson, and 100,000 options were
granted to Douglas Polinsky. As stated above, these options have an
exercise price of $1.05 per share. These options became fully vested
on December 15, 2007. In December 2007, Michael Reger and Ryan
Gilbertson, the Company’s Chief Executive Officer and Chief Financial Officer,
respectively, exercised their options under this plan. In March 2008,
Douglas Polinsky exercised his options under this plan.
On
November 1, 2007 the Board of Directors granted an additional 560,000 of options
under the 2006 Stock Option Plan. The Company granted 500,000
options, in aggregate, to members of the board and 60,000 options to one
employee pursuant to an employment agreement. These options were
granted at a price of $5.18 per share and the optionees were fully vested on the
grant date.
The
Company accounts for stock-based compensation under the provisions of SFAS No.
123(R), Share Based Payment. This statement requires us to record an
expense associated with the fair value of stock-based
compensation. We currently use the Black-Scholes option valuation
model to calculate stock based compensation at the date of grant. Option pricing
models require the input of highly subjective assumptions, including the
expected price volatility. Changes in these assumptions can
materially affect the fair value estimate. The total fair value of
the options will be recognized as compensation over the service period (see Note
2 for calculation of fair value). The Company received no cash
consideration for these option grants.
Currently
Outstanding Options:
·
|
100,000
options were exercised in the three months ended March 31,
2008.
|
·
|
No
options were forfeited during the three months ended March 31,
2008.
|
·
|
560,000
options are exercisable as of March 31,
2008.
|
·
|
The
Company recorded compensation expense related to these options of
$2,366,417 for the year ended December 31, 2007. There is no
further compensation expense that will be recognized in future years
relating to an options that had been granted as of March 31, 2008, because
the entire fair value compensation has been
recognized.
|
NOTE
10 DERIVATIVE INSTRUMENTS AND PRICE
RISK MANAGEMENT
The
Company has purchased a commodity swap contract 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.
As of
March 31, 2008, the Company holds one open commodity derivative
contract. The futures contract settlement date is December 2008 for
10,000 barrels of oil at $98.50 per barrel. The fair market value
gain of the contract as of March 31, 2008 is $1,300 based on the NYMEX reference
price.
NOTE
11 FAIR VALUE
Effective
January 1, 2008, the fair values of the Company's derivative financial
instruments also reflect the Company's estimate of the default risk of the
parties in accordance with Statement of Financial Accounting Standards No. 157
"Fair Value Measurements" (SFAS 157). The fair value of the Company's
derivative financial instruments is determined based on counterparties’
valuation models that utilize market-corroborated inputs. The fair value of the
Company's short-term investments are based on either quoted market prices or
counterparties valuation models that utilize market corroborative
inputs. The following schedule summarizes the valuation of financial
instruments measured at fair value on a recurring basis in the balance sheet as
of March 31, 2008. The current asset amounts represent the fair
values expected to be included in the results of operations for the subsequent
year.
|
|
Quoted
Prices
In
Active
Markets
for
Identical
Assets
(Level
1)
|
|
|
Significant
Other
Observable
Inputs
(Level
2)
|
|
|
Significant
Unobservable
Inputs
(Level
3)
|
|
Current
Short-term Investments
|
|
$ |
2,690,350 |
|
|
$ |
969,100 |
|
|
$ |
- |
|
Current
derivative assets
|
|
|
- |
|
|
|
1,300 |
|
|
|
- |
|
Total
|
|
$ |
2,690,350 |
|
|
$ |
970,400 |
|
|
$ |
- |
|
NOTE
12 SUBSEQUENT EVENTS
In April
2008, the Company entered into a land bank arrangement with Deephaven MCF
Acquisition, LLC, an affiliate of Deephaven Capital Management LLC, pursuant to
which the Company may acquire leases having an aggregate value of up to $8.1
million. Under the arrangement, Deephaven will acquire certain
qualifying leases in the Bakken Shale play in Mountrail County, North Dakota,
which leases can then be acquired by the Company at any time during the initial
year that Deephaven owns such leases.
In April
2008, the Company received gross proceeds of $310,800 from the exercise of
outstanding stock options granted on November 1, 2007. The option
exercise resulted in the issuance of 60,000 shares of the Company’s common
stock.
On or
about April 24, 2008 and April 25, 2008 the Company received gross proceeds of
approximately $9.8 million from the exercise of outstanding warrants previously
issued in connection with the Company’s September 2007 institutional private
placement. The warrants resulted in the issuance of an aggregate of
2,071,817 shares of the Company’s common stock. FIG Partners, Energy
Research and Capital Group acted as the agent on the Company’s behalf in
facilitating the early exercise of the warrants for a $0.25 discount off of the
$5.00 exercise price almost one year prior to their expiration date, and
received a commission equal to eight hundred seventy-five one thousandths of one
percent (0.875%) of the gross proceeds in connection with the warrant
exercises. The company believes the issuance of the shares upon
exercise of the warrants was exempt from the registration and prospectus
delivery requirements of the Securities Act of 1933 by virtue of Section 4(2)
and Regulation D, Rule 506.
On May 9,
2008 the Company received gross proceeds of $818,183 from the exercise of
outstanding warrants exercisable for $6.00 per share previously issued in
connection with the Company’s September 2007 institutional private
placement. The warrants resulted in the issuance of an aggregate of
136,363 shares of the Company’s common stock. The company
believes the issuance of the shares upon exercise of the warrants was exempt
from the registration and prospectus delivery requirements of the Securities Act
of 1933 by virtue of Section 4(2) and Regulation D, Rule 506.
Item
2. Management’s Discussion and Analysis or Plan of Operation.
The
following updates information as to our financial condition and plan of
operation provided in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2007. The following also analyzes our results of
operations for three month period ended March 31, 2008 and
March 31, 2007.
Except
as discussed below, a discussion of our past financial results is not pertinent
to the business plan of the Company on a going forward basis, due to the change
in our business which occurred upon consummation of the merger on March 20,
2007.
Overview
and Outlook
We are a
growth-oriented independent energy company engaged in the acquisition,
exploration, exploitation and development of oil and natural gas properties, and
have focused our activities primarily on projects based in the Rocky Mountain
Region of the United States, specifically the Williston Basin. We
have targeted specific prospects and began drilling for oil in the Williston
Basin region in the fourth fiscal quarter of 2007. As of March 31,
2008, we have completed six successful discoveries, consisting of five targeting
the Bakken formation and one targeting a Red River Structure. Subsequent to
March 31, 2008, we are participating in the drilling of six Bakken
wells and one Red River well. We expect to be included in over 40
Gross Bakken wells in 2008 based on permits to drill currently approved on our
acreage.
As an
exploration company, our business strategy is to identify and exploit resources
in and adjacent to existing or indicated producing areas that can be quickly
developed and put in production at low cost based on the activity of larger
drillers in the area. We also intend to take advantage of our
expertise in aggressive land acquisition to develop exploratory projects with
attractive growth potential in focus areas and to participate with other
companies in those areas to explore for oil and natural gas using
state-of-the-art three-dimensional (3-D) seismic technology. We
believe our competitive advantage lies in our ability to acquire property in the
most exciting new plays in a nimble and efficient fashion. We are
focused on low overhead. We believe we are in a position to most
efficiently exploit and identify high production oil and gas
properties. We intend to continue to actively pursue the acquisition
of properties that fit our profile.
We
currently control the rights to mineral leases on approximately 62,000 net acres
of land. Our principal assets are located in
the Williston Basin region of the
northern United States and Yates
County, New York, and
include the following primary positions as of March 31, 2008:
▪
|
Approximately 21,354 net acres located in
Sheridan County, Montana, representing
a stacked pay prospect;
|
▪
|
Approximately 22,000
net acres located in Mountrail County North Dakota, within and surrounding to the
north, south and west the Parshall Field currently being
developed by EOG Resources to target the Bakken Shale;
|
▪
|
Approximately 7,500 net acres located in Burke and
Divide Counties of
North Dakota, in which we are targeting the Winnepegosis Shale
on acreage in close proximity to recent Continental Resources
Discoveries in the
formation;
|
▪
|
Approximately1,500 net acres in and around Marathon Oil
production in Dunn County, North
Dakota; and
|
▪
|
Approximately 10,000 net acres located in the
“Finger Lakes” region of Yates
County, New York, in
which we are targeting natural gas production from the Trenton/Black
River, Marcellus and Queenstown-Medina
formations.
|
We have also completed other miscellaneous acreage
acquisitions in North Dakota.
Our goal
is to explore for and develop hydrocarbons within the mineral leases we control
as well as continue to expand our acreage position. In order to
accomplish our objectives we may need to achieve the following;
|
Raise
the necessary capital required to acquire, explore for and produce oil and
natural gas.
|
|
Assemble
a group of talented and experienced employees, partners and consultants to
execute the Company’s strategic
objectives;
|
|
Create
value by executing an ‘asset roll up’ business plan, subsequently
optimizing the value of each newly acquired property. Executing this phase
of the strategy should in turn provide asset value for the acquisition and
enhancement of additional properties, and create synergies among these
assets, further improving their value;
and
|
|
Identify
and utilize industry partners to mitigate risk and leverage resources and
acreage through joint ventures, farm-out agreements and strategic pooling
of acreage.
|
Results
of Operations for the fiscal year ended December 31, 2007 and the quarter ended
March 31, 2008.
The
Company is in the early stage of developing its properties in Montana, North
Dakota and New York. During the fiscal year ended December 31, 2007,
our operations were limited primarily to technical evaluation of the properties
and the design of development plans to exploit the oil and gas resources on
those properties, as well as seeking opportunities to acquire additional oil and
gas properties. Accordingly, we had minimal production due to our
wells commencing production near the end of the fourth quarter of
2007. We completed drilling of our first wells and began selling
limited quantities of oil and gas in the fourth quarter of
2007. In the first quarter of 2008, we increased production and
expect to continue to grow production consistently throughout 2008.
As of
March 31, 2008, we recognized production revenues from a total four wells, of
which two wells are located in Mountrail County, North Dakota, one well is
located in Dunn County, North Dakota and one well is located in Sheridan County,
Montana. As of March 31, 2008, we intend to participate in the
drilling of approximately 40 gross oil wells in 2008.
We did
not recognize any oil and gas revenues for the twelve months ended December 31,
2007. We realized our first meaningful revenues from production late
in the quarter ended March 31, 2008, as we were able to establish commercial
production in connection with new drilling activities commenced in
2007. Revenues from oil and gas sales were
$285,729. Excluding hedging activities, our average realized
sales price for oil produced during the quarter ended March 31, 2008 was
approximately $92.10/Bbl. We expect that our revenues will continue
to increase quarter-over-quarter during 2008 as we continue to drill new wells
and establish commercial production from our existing and new
wells. In the second quarter of 2008 we will begin to realize
the full revenue benefit of wells put into production late in the first
quarter as well as additional wells currently being drilled or
completed.
Our
expenses through 2007 consisted principally of general and administrative
costs. Our capital expenditures for the quarter ended March 31, 2008
included approximately $1,550,244 relating to drilling and production
activities. We expect these costs to continue to increase as we
proceed with our development plans. In the future we expect to incur
increased geologic, geophysical, and engineering costs. In 2008 we
expect to allocate approximately $11 million in capital to the drilling of
Bakken wells, $1 million to the drilling of conventional targets and
approximately $8 million in continued acreage acquisition, primarily in the
North Dakota Bakken play. This number is an acreage capital increase
of $3mm based on the continued ability of the company to accumulate acreage in
the rapidly growing North Dakota Bakken play. Total expenses for the fiscal year
ended December 31, 2007 were $4,513,189 and for the quarter ended March 31, 2008
were $570,575. We incurred a net loss of $4,305,293 for the fiscal
year ended December 31, 2007 and a net loss of $187,277 for the quarter ended
March 31, 2008. Approximately $500,000 of the loss experienced during
the fiscal year ended December 31, 2007 was a cash expense, and the balance was
related to share issuance costs which are expected to decrease substantially in
2008. Approximately $125,546 of the loss experienced during the
quarter ended March 31, 2008 consisted of cash expenses, and the balance was
related to share issuance costs. We expect the cash general and
administrative expenses to run approximately $400,000 per quarter going forward,
excluding any one-time charges.
Overview
of First Quarter 2008 Operational Results
Mountrail
County, North Dakota
We realized production revenues
totaling $89,564 from two wells in Mountrail County, North Dakota during the
quarter ended March 31, 2008. We began selling meaningful amounts of
oil from these wells only during the last weeks of the first quarter of
2008. As of March 31, 2008, we capitalized approximately $843,422 in
drilling costs for these two wells.
Dunn
County, North Dakota
We
realized production revenues totaling $69,453 from one well in Dunn County,
North Dakota during the quarter ended March 31, 2008. We began selling oil from
this well during November 2007. We began selling minimal quantities
natural gas from this well during January 2008. As of March 31, 2008, we have
capitalized approximately $153,087 in drilling costs for this well.
Sheridan
County, Montana
We
realized production revenues totaling $126,712 from one well in Sheridan County,
Montana during the quarter ended March 31, 2008. As of March 31, 2008, we
capitalized approximately $288,653 in drilling costs for this well.
First
Quarter 2008 Operational Results
Production
Volumes
The following table illustrates our
revenues from the sale of oil and natural gas for the quarter ended March 31,
2008.
|
|
Three
Months Ended March 31, 2008
|
|
Oil
revenue:
|
|
|
|
Oil
revenue
|
|
$ |
285,692 |
|
Unrealized
oil derivative gains (losses)
|
|
$ |
1,300 |
|
Oil
revenue including unrealized oil derivative gains (losses)
|
|
$ |
286,992 |
|
Natural
gas revenue:
|
|
|
|
|
Natural
gas revenue
|
|
$ |
37 |
|
Unrealized
natural gas derivative gains (losses)
|
|
$ |
0 |
|
Natural
gas revenue including unrealized natural gas derivative gains
(losses)
|
|
$ |
37 |
|
Oil
and natural gas revenue:
|
|
|
|
|
Oil
and natural gas revenue
|
|
$ |
285,729 |
|
Unrealized
oil and natural gas derivative gains (losses)
|
|
$ |
1,300 |
|
Oil
and natural gas revenue including unrealized derivative gains
(losses)
|
|
$ |
287,029 |
|
Total
revenue
|
|
$ |
287,029 |
|
The
following table illustrates the average prices at which we sold oil and natural
gas for the quarter ended March 31, 2008.
|
|
Three
Months Ended March 31, 2008
|
|
Average
oil prices:
|
|
|
|
Oil
price (per Bbl)
|
|
$ |
92.10 |
|
Average
natural gas prices:
|
|
|
|
|
Natural
Gas price (per Mcf)
|
|
$ |
10.96 |
|
Depletion
of oil and natural gas properties
Our depletion expense is driven by many
factors including certain exploration costs involved in the development of
producing reserves, production levels and estimates of proved reserve quantities
and future developmental costs at the end of the fiscal quarter.
|
|
Three
Months Ended March 31, 2008
|
|
Depletion
of oil and natural gas properties
|
|
$ |
40,636 |
|
|
|
|
|
|
Operation
Plan
During
the fourth quarter of the fiscal year ended December 31, 2007, we commenced in
earnest the development of our oil and gas properties in conjunction with our
drilling partners. These activities continued to build in the quarter
ended March 31, 2008, and are anticipated to grow throughout
2008. The Company has several projects that are in various stages of
discussions and is continually evaluating oil and gas opportunities in the
Continental United States. We will continue to participate on a
heads-up basis in the continuing development of our substantial Bakken acreage
holdings. We will continue to acquire acreage in the play as it may
become available as well as continually evaluate additional opportunities both
in the Bakken and beyond.
Our
future financial results will depend primarily on the following factors, among
others:
|
Our
ability to continue to source and screen potential
projects;
|
|
Our
ability to discover commercial quantities of oil and
gas;
|
|
The
market price for oil and gas; and
|
|
Our
ability to fully implement our exploration and development program, which
is dependent on the availability of capital
resources.
|
There can
be no assurance that we will be successful in any of these respects, that the
prices of oil and gas prevailing at the time of production will be at a level
allowing for profitable production, or that we will be able to obtain additional
funding to increase our currently limited capital resources.
Drilling
Projects
As of
March 31, 2008, we had completed six successful discoveries. Subsequent to March
31, 2008 we are participating in the drilling of seven additional wells, all of
which are expected to commence production in the second calendar quarter of
2008. Our acreage has been included in approximately 40 proposed
drilling locations as of March 31, 2008. We expect most, if not all,
of these wells and potentially more will be drilled in 2008, although we have no
control over the timing of such wells in our position as a
non-operator.
Brigham
Exploration Joint Venture
We
control approximately 31,000 net acres in the North Dakota Bakken play, with
22,000 of these being located in Mountrail County. Approximately
3,000 of these 31,000 acres are included in a joint venture with Brigham
Exploration. Upon full development of the acreage not exposed to the
joint venture, we anticipate that we will be able to drill up to 44 net wells
based on 640-acre spacing. In the event the Bakken field continues to
be downspaced to 320-acre units, we could control as many as 88 net Bakken
wells. EOG Resources recently announced calculations of 9 million
barrels of oil in place per 640-acre section in the Parshall Field, of which
they believe they will recover 900,000 barrels with a single lateral
well. The Brigham Joint Venture acreage exposes us to up to an
additional two net wells. In 2008, we expect to drill wells with several
operators including Marathon Oil, EOG Resources, Continental Resources, Hess
Corporation, Slawson Exploration, Brigham Exploration, Behm Energy, Murex
Petroleum and Hunt Oil. Based on the numbers referenced by EOG
resources we may be exposed to approximately 40 million barrels of oil based on
640 acre spacing, excluding the Brigham JV acreage. On down spacing
we would be exposed up to a potential 80 million barrels of oil.
Drilling
under the Brigham joint venture commenced in the early fourth quarter of
2007. On the Mountrail County, North Dakota acreage, we successfully
completed the Bergstrom Family Trust 26, a Bakken well that produced at an early
rate of approximately 200 barrels of oil per day. We participated for
a 6.25% working interest that converts to 24% working interest at
payout. We also completed the Hallingstad 27, a Bakken well that
produced at an early rate of approximately 500 barrels of oil per
day. We participated for a 8.4% working interest that converts to
20.5% working interest at payout. On the Sheridan County, Montana
acreage, we successfully completed the Richardson #25, a Red River test well
that went on production at a consistent rate of approximately 300 barrels of oil
per day. The Company participated for a 10% working interest that converts to
37% working interest at payout, which is expected to occur in the second fiscal
quarter of 2008. We did not recognize any revenue from these wells in
2007. Brigham began drilling an offset location to this well on
April 26, 2008.
Commencing
in 2008, Brigham is subject to a 120 day continuous drilling provision requiring
Brigham to drill every 120 days to retain future drilling
opportunity. Under the joint venture acreage in Mountrail County
North Dakota, Brigham expects to operate a third Bakken well expected to be
commenced in mid-2008. On the Sheridan county acreage Brigham has
begun the drilling of the second Red River Test, and offset to the Richardson
#25.
Marathon
Oil Corporation
In the
fourth quarter of 2007, we participated with Marathon Oil for a 3% working
interest in the Reiss 34 20H, a horizontal Bakken well in Dunn County North
Dakota that produced at an early rate of 700 barrels of oil per
day. We have successfully completed a second well with Marathon
and we expect to be included in at least two additional wells with Marathon
during the 2008 calendar year. The MRO program is an excellent
example of how we are able to participate in wells with a small working interest
in order to accumulate data as the completion techniques continue to
evolve.
Continental
Resources and others
We have been included in three permits
to drill wells with Continental resources and expect these wells to be drilled
in 2008. In addition we have been included in permits, and expect to
participate in a number of wells operated by EOG Resources, Hess Corporation,
Whiting Petroleum, Sinclair Oil, and privately held Slawson Exploration in
2008.
Additional
Potential Drilling Projects
In
Sheridan County, Montana our conventional drilling program targeting the Red
River and Mission Canyon foundations has produced a successful Red River
discovery. We commenced drilling of our second Red River well
offsetting our initial discovery on April 26, 2008. We currently
expect to participate in the drilling of up to two additional wells on the
leasehold in 2008, although there can be no assurance we will do
so.
In
addition to the acreage included in the Brigham Exploration joint venture, we
control approximately 50,000 net acres not presently subject to any drilling
agreements. We will continue to evaluate potential partners to
develop those positions, or may choose not to dilute our interest and, instead,
participate in the drilling of wells on those positions along with leaseholders
that share spacing units with the Company. As of March 31, 2008, approximately
40 wells have been permitted on Northern’s acreage, including 31 Bakken well
permits in Mountrail County North Dakota, 3 Bakken well permits in Divide County
North Dakota and 6 Bakken permits in Dunn County North Dakota.
Liquidity
and Capital Resources
Liquidity
is a measure of a company’s ability to meet potential cash
requirements. We have historically met our capital requirements
through the issuance of common stock and by short term borrowings. In
the future, we anticipate we will be able to provide the necessary liquidity by
the revenues generated from the sales of our oil and gas reserves in our
existing properties, however, if we do not generate sufficient sales revenues we
will continue to finance our operations through equity and/or debt
financings.
The
following table summarizes total current assets, total current liabilities and
working capital at March 31, 2008.
|
|
March
31, 2008
(Unaudited)
|
|
|
|
|
|
Current
Assets
|
|
$ |
5,962,838 |
|
|
|
|
|
|
Current
Liabilities
|
|
$ |
2,194,099 |
|
|
|
|
|
|
Working
Capital
|
|
$ |
3,768,739 |
|
Satisfaction
of our cash obligations for the next 12 months.
We
currently are funded to meet our minimum drilling commitments and expected
general and administrative expenses for the next 12 months. However,
we anticipate the continuing acquisition of acreage will require additional
funds which we anticipate obtaining through the expected oil and gas sales
during 2008, from our substantial position in the rapidly developing Parshall
Field as well as our other prospects.
Since
inception, we have financed cash flow requirements through short term debt
financing, our recent land bank arrangement and the issuance of common stock for
cash and services as well as proceeds from the exercise of warrants to purchase
common equity. In the future, if we deem it necessary to raise
capital for continued acreage acquisition or drilling capital, we may access the
debt or equity markets. There can be no assurance this capital will
be available and if it is not, we may be forced to substantially curtail or
cease acreage acquisition and/or drilling expenditures. No assurance
can be made that such financing would be available, and if available it may take
either the form of debt or equity. In either case, the financing
could have a negative impact on our financial condition and our
stockholders.
Over the
next twelve months we believe that existing capital and anticipated funds from
operations will be sufficient to sustain planned expansion, primarily acreage
acquisition.
We may
incur operating losses over the next twelve months. Our lack of
operating history makes predictions of future operating results
difficult. Our prospects must be considered in light of the risks,
expenses and difficulties frequently encountered by companies in their early
stage of operations, particularly companies in the oil and gas exploration
industry. Such risks include, but are not limited to, an evolving and
unpredictable business model and the management of growth. To address
these risks we must, among other things, implement and successfully execute our
business and marketing strategy, continue to develop and upgrade technology and
products, respond to competitive developments, and attract, retain and motivate
qualified personnel. There can be no assurance that we will be
successful in addressing such risks, and the failure to do so can have a
material adverse effect on our business prospects, financial condition and
results of operations.
Significant
financing arrangements following the quarter ended March 31, 2008.
On April
14, 2008, we entered into an Agreement setting forth a land bank
arrangement with Deephaven MCF Acquisition, LLC (“Deephaven”), an affiliate of
Deephaven Capital Management LLC, pursuant to which the Company may acquire
leases having an aggregate value of up to $8.1 million. Under the
arrangement, Deephaven will acquire certain qualifying leases in the Bakken
Shale formation in Mountrail County, North Dakota, which leases can then be
acquired by the Company at any time during the initial year that Deephaven owns
such leases.
The
Company utilized approximately $5.1 million of the potential $8.1 million
facility available under the Agreement upon initiation of the
facility. The Agreement provides that the Company will act as
Deephaven’s agent to continue to identify additional leases for acquisition by
Deephaven until August 1, 2008, and Deephaven will purchase any additional
qualifying leases during that period having an aggregate cost of up to $3.0
million, in addition to those already purchased on April 14, 2008.
On or
about April 24, 2008 and April 25, 2008, we received gross proceeds of
approximately $9.8 million from the exercise of outstanding warrants previously
issued in connection with the Company’s September 2007 institutional private
placement. The warrants resulted in the issuance of an aggregate of
2,071,817 shares of the Company’s common stock, par value $0.001.
Expected
purchase or sale of any significant equipment.
We do not
anticipate the purchase or sale of any plant or significant equipment as such
items are not required by us at this time or anticipated to be needed in the
next twelve months.
Significant changes in the number of
employees.
As of
March 31, 2008, we had four full-time employees. As drilling
production activities commence, we may hire additional technical, operational
and administrative personnel as appropriate. We do not expect a
significant change in the number of full time employees over the next 12
months. We are using, and will continue to use, extensively the
services of independent consultants and contractors to perform various
professional services, particularly in the area of land services, reservoir
engineering, drilling, water hauling, pipeline construction, well design,
well-site monitoring and surveillance, permitting and environmental
assessment. We believe that this use of third-party service providers
may enhance our ability to contain general and administrative
expenses.
Summary
of product research and development that we will perform for the term of our
plan.
We do not
anticipate performing any significant product research and development under our
plan of operation until such time as we can raise adequate working capital to
sustain our operations.
Expected
purchase or sale of any significant equipment.
We do not
anticipate the purchase or sale of any plant or significant equipment as such
items are not required by us at this time or anticipated to be needed in the
next twelve months.
Off-Balance
Sheet Arrangements
We
currently do not have any off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that is material to
investors.
Cautionary
Statement Concerning Forward-Looking Statements
This
Management’s Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements regarding future events and our
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 report regarding our 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 report, 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 our Company’s control) that could cause actual results to
differ materially from those set forth in the forward-looking statements,
including the following, general economic or industry conditions, nationally
and/or in the communities in which our Company conducts business, changes in the
interest rate environment, legislation or regulatory requirements, conditions of
the securities markets, our ability to raise capital, changes in accounting
principles, policies or guidelines, financial or political instability, acts of
war or terrorism, other economic, competitive, governmental, regulatory and
technical factors affecting our Company’s operations, products, services and
prices.
We have
based these forward-looking statements on our current expectations and
assumptions about future events. While our 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 our control. Accordingly, results actually
achieved may differ materially from expected results in these
statements. Forward-looking statements speak only as of the date they
are made. You should consider carefully the statements in the section
entitled “Item 1A. Risk Factors” and other sections of our Annual Report on Form
10-K for the fiscal year ended December 31, 2007, which describe factors that
could cause our actual results to differ from those set forth in the
forward-looking statements. Our Company does not undertake, and
specifically disclaims, any obligation to update any forward-looking statements
to reflect events or circumstances occurring after the date of such
statements.
Item
4T. Controls and Procedures.
Evaluation
of Disclosure Controls and Procedures
We
maintain a system of disclosure controls and procedures that is designed to
ensure that information required to be disclosed in our Exchange Act reports is
recorded, processed, summarized and reported within the time periods specified
in the rules and forms of the SEC, and that such information is accumulated and
communicated to our management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding required
disclosures.
As of
March 31, 2008, our management, including our Chief Executive Officer and Chief
Financial Officer, had evaluated the effectiveness of the design and operation
of our disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) pursuant to Rule 13a-15(b) under the
Exchange Act. Based upon and as of the date of the evaluation, our
Chief Executive Officer and Chief Financial Officer concluded that information
required to be disclosed is recorded, processed, summarized and reported within
the specified periods and is accumulated and communicated to management,
including our Chief Executive Officer and Chief Financial Officer, to allow for
timely decisions regarding required disclosure of material information required
to be included in our periodic SEC reports. Based on the foregoing,
our management determined that our disclosure controls and procedures were
effective as of March 31, 2008.
Changes
in Internal Control over Financial Reporting
There
were no changes in our internal control over financial reporting that occurred
during the three months ended March 31, 2008, that materially affected or are
reasonably likely to materially affect our internal control over financial
reporting.
PART
II - OTHER INFORMATION
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds.
On
January 2, 2008 we issued 7,500 shares of restricted common stock to Roepke
Communications in connection with a consulting agreement. The shares were issued
pursuant to the exemption from registration provided in Section 4(2) of the
Securities Act of 1933, as amended.
On
January 7, 2008, we issued an aggregate of 147,548 shares of restricted common
stock to MOP, of which 132,500 shares were issued as partial consideration for
our acquisition of leases covering approximately 4,197 net mineral acres in
Mountrail County, North Dakota pursuant to an agreement dated October 24, 2007
and the remaining 15,048 shares were issued as partial consideration for our
acquisition of leases covering approximately 4,650 net mineral acres in
Mountrail County, North Dakota pursuant to an agreement dated September 12,
2007. The shares were issued pursuant to the exemption from
registration provided in Section 4(2) of the Securities Act of 1933, as
amended. The principals of MOP are Mr. Steven Reger and Mr. Tom Ryan,
both are uncles of our Chief Executive Officer, Michael Reger.
On March
14, 2008, we issued 20,000 shares of restricted common stock to James Sankovitz
in connection with the initiation of his employment as an in-house legal
counsel. The shares were issued pursuant to the exemption from
registration provided in Section 4(2) of the Securities Act of 1933, as amended,
and are subject to vesting following Mr. Sankovitz’s employment for a period of
time or upon the occurrence of certain events specified in his employment
agreement.
On March
18, 2008, we issued 30,000 shares of restricted common stock to MOP. The shares
were issued as partial consideration for our acquisition of leases covering
approximately 1,600 net mineral acres in Mountrail County, North Dakota pursuant
to an agreement dated January 18, 2008. The shares were issued
pursuant to the exemption from registration provided in Section 4(2) of the
Securities Act of 1933, as amended. The principals of MOP are Mr.
Steven Reger and Mr. Tom Ryan, both are uncles of our Chief Executive Officer,
Michael Reger.
We did not receive any proceed from the
issuance of the foregoing securities.
Item
6. Exhibits.
The
exhibits listed in the accompanying exhibit index are filed as part of this
Quarterly Report on Form 10-Q.
SIGNATURES
In
accordance with the requirements of the Exchange Act, the Registrant has caused
this Quarterly Report to be signed on its behalf by the undersigned, thereunto
duly authorized.
NORTHERN
OIL AND GAS, INC.
Date:
|
May
15, 2008
|
|
By:
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/s/Michael
Reger
|
|
|
|
|
Michael
Reger, Chief Executive Officer and Director
|
|
|
|
|
|
Date:
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May
15, 2008
|
|
By:
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/s/Ryan
Gilbertson
|
|
|
|
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Ryan
Gilbertson, Chief Financial Officer and
Director
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EXHIBIT
INDEX
Exhibit
Number
|
|
Exhibit
Description
|
31.1
|
|
Certification
of the Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a)
under the Securities Exchange Act of 1934, as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
|
31.2
|
|
Certification
of the Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a)
under the Securities Exchange Act of 1934, as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
|
32.1
|
|
Certification
of the Chief Executive Officer and Chief Financial Officer pursuant to 18
U.S. C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|