|
T QUARTERLY REPORT UNDER SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
|
£ TRANSITION REPORT UNDER
SECTION 13 OR 15(d) OF THE EXCHANGE
ACT
|
Nevada
|
95-3848122
|
(State
or Other Jurisdiction of
Incorporation
or organization)
|
(I.R.S.
Employer Identification No.)
|
Page
|
|
PART
I
|
|
Item
1. Financial
Statements
|
3
|
Condensed Balance
Sheets
|
3
|
Condensed Statements of
Operations
|
5
|
Condensed Statements of Cash
Flows
|
6
|
Notes to Unaudited Condensed
Financial Statements
|
8
|
Item
2. Management’s
Discussion and Analysis of Financial Condition and Results of
Operation
|
23
|
Item
3. Quantitative
and Qualitative Disclosures about Market Risk
|
28
|
Item
4. Controls
and Procedures
|
29
|
PART
II
|
|
Item
1. Legal
Proceedings
|
29
|
Item
1A. Risk
Factors
|
29
|
Item
6. Exhibits
|
31
|
Signatures
|
32
|
NORTHERN
OIL AND GAS, INC.
|
||||||||
CONDENSED
BALANCE SHEETS
|
||||||||
JUNE
30, 2009 AND DECEMBER 31, 2008
|
||||||||
ASSETS
|
||||||||
June
30,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
(UNAUDITED)
|
||||||||
CURRENT
ASSETS
|
||||||||
Cash
and Cash Equivalents
|
$ | 13,634,518 | $ | 780,716 | ||||
Trade
Receivables
|
2,804,133 | 2,028,941 | ||||||
Other
Receivables
|
874,453 | 874,453 | ||||||
Prepaid
Drilling Costs
|
4,530 | 4,549 | ||||||
Prepaid
Expenses
|
116,446 | 71,554 | ||||||
Short
- Term Investments
|
2,574,935 | - | ||||||
Deferred
Tax Asset
|
1,867,000 | 1,433,000 | ||||||
Total
Current Assets
|
21,876,015 | 5,193,213 | ||||||
PROPERTY
AND EQUIPMENT, AT COST
|
||||||||
Oil
and Natural Gas Properties, Full Cost Method (including unevaluated costs
of
|
||||||||
$44,259,384
at 6/30/09 and $42,621,297 at 12/31/2008)
|
73,425,388 | 55,680,567 | ||||||
Other
Property and Equipment
|
415,343 | 408,400 | ||||||
Total
Property and Equipment
|
73,840,731 | 56,088,967 | ||||||
Less
- Accumulated Depreciation and Depletion
|
2,002,716 | 856,010 | ||||||
Total
Property and Equipment, Net
|
71,838,015 | 55,232,957 | ||||||
LONG
- TERM INVESTMENTS
|
- | 2,416,369 | ||||||
DEBT
ISSUANCE COSTS
|
1,717,624 | - | ||||||
DEFERRED
TAX ASSET
|
658,000 | 33,000 | ||||||
Total
Assets
|
$ | 96,089,654 | $ | 62,875,539 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
CURRENT
LIABILITIES
|
||||||||
Accounts
Payable
|
$ | 4,519,824 | $ | 1,934,810 | ||||
Line
of Credit
|
1,638,382 | 1,650,720 | ||||||
Accrued
Expenses
|
335,913 | 1,270,075 | ||||||
Accrued
Drilling Costs
|
8,237,829 | 8,419,729 | ||||||
Derivative
Liability
|
1,271,808 | - | ||||||
Other
Liabilities
|
18,574 | 135,731 | ||||||
Total
Current Liabilities
|
16,022,330 | 13,411,065 |
LONG-TERM
LIABILITIES
|
||||||||
Revolving
Line of Credit
|
16,000,000 | - | ||||||
Derivative
Liability
|
1,561,515 | - | ||||||
Subordinated
Notes
|
500,000 | - | ||||||
Other
Noncurrent Liabilities
|
172,745 | - | ||||||
Total
Long-Term Liabilities
|
18,234,260 | - | ||||||
Total
Liabilities
|
34,256,590 | 13,411,065 | ||||||
STOCKHOLDERS'
EQUITY
|
||||||||
Common
Stock, Par Value $.001; 100,000,000 Authorized, 36,691,195
|
||||||||
Outstanding
(2008 – 34,120,103 Shares Outstanding)
|
36,692 | 34,121 | ||||||
Additional
Paid-In Capital
|
65,659,953 | 51,692,776 | ||||||
Accumulated
Deficit
|
(2,013,050 | ) | (2,021,649 | ) | ||||
Accumulated
Other Comprehensive Income (Loss)
|
(1,850,531 | ) | (240,774 | ) | ||||
Total
Stockholders' Equity
|
61,833,064 | 49,464,474 | ||||||
Total
Liabilities and Stockholders' Equity
|
$ | 96,089,654 | $ | 62,875,539 |
NORTHERN
OIL AND GAS, INC.
|
||||||||||||||||
CONDENSED
STATEMENTS OF OPERATIONS
|
||||||||||||||||
FOR
THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008
|
||||||||||||||||
(UNAUDITED)
|
||||||||||||||||
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
30,
|
June
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
REVENUES
|
||||||||||||||||
Oil
and Gas Sales
|
$ | 2,418,496 | $ | 764,528 | $ | 3,059,230 | $ | 1,050,257 | ||||||||
Gain
(Loss) on Derivatives
|
(143,412 | ) | - | (125,878 | ) | 1,300 | ||||||||||
2,275,084 | 764,528 | 2,933,352 | 1,051,557 | |||||||||||||
OPERATING
EXPENSES
|
||||||||||||||||
Production
Expenses
|
119,751 | 8,020 | 214,140 | 9,418 | ||||||||||||
Severance
Taxes
|
189,400 | 38,242 | 247,715 | 50,336 | ||||||||||||
General
and Administrative Expense
|
555,316 | 410,736 | 1,123,951 | 918,619 | ||||||||||||
Depletion
of Oil and Gas Properties
|
719,596 | 106,942 | 1,101,250 | 147,578 | ||||||||||||
Depreciation
and Amortization
|
22,777 | 12,547 | 45,456 | 21,111 | ||||||||||||
Accretion
of Discount on Asset Retirement Obligations
|
2,077 | - | 3,471 | - | ||||||||||||
Total
Expenses
|
1,608,917 | 576,487 | 2,735,983 | 1,147,062 | ||||||||||||
INCOME
(LOSS) FROM OPERATIONS
|
666,167 | 188,041 | 197,369 | (95,505 | ) | |||||||||||
OTHER
INCOME (EXPENSE)
|
(139,243 | ) | 95,424 | (182,770 | ) | 191,693 | ||||||||||
INCOME
BEFORE INCOME TAXES
|
526,924 | 283,465 | 14,599 | 96,188 | ||||||||||||
INCOME
TAX PROVISION
|
211,000 | - | 6,000 | - | ||||||||||||
NET
INCOME
|
$ | 315,924 | $ | 283,465 | $ | 8,599 | $ | 96,188 | ||||||||
Net
Income Per Common Share – Basic and Diluted
|
$ | 0.01 | $ | 0.01 | $ | 0.00 | $ | 0.00 | ||||||||
Weighted
Average Shares Outstanding – Basic
|
34,582,282 | 30,864,339 | 34,404,093 | 29,856,199 | ||||||||||||
Weighted
Average Shares Outstanding - Diluted
|
34,741,036 | 32,548,454 | 34,484,966 | 31,185,054 |
NORTHERN
OIL AND GAS, INC.
|
||||||||
CONDENSED
STATEMENTS OF CASH FLOWS
|
||||||||
FOR
THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008
|
||||||||
(UNAUDITED)
|
||||||||
Six
Months Ended
|
||||||||
June
30,
|
||||||||
2009
|
2008
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net
Income
|
$ 8,599
|
$ 96,188
|
||||||
Adjustments
to Reconcile Net Income to Net Cash Provided by (Used for) Operating
Activities:
|
||||||||
Depletion
of Oil and Gas Properties
|
1,101,250
|
147,578
|
||||||
Depreciation
and Amortization
|
214,246
|
21,111
|
||||||
Accretion
of Discount on Asset Retirement Obligations
|
3,471
|
-
|
||||||
Income
Tax Expense
|
6,000
|
-
|
||||||
Issuance
of Stock for Consulting Fees
|
-
|
49,875
|
||||||
Issuance
of Stock for Compensation
|
127,090
|
-
|
||||||
Market
Value adjustment of Derivative Instruments
|
-
|
10,052
|
||||||
Amortization
of Deferred Rent
|
(9,286)
|
-
|
||||||
Share
- Based Compensation Expense
|
86,187
|
35,125
|
||||||
Changes
in Working Capital and Other Items:
|
|
|
||||||
Increase
in Trade Receivables
|
(775,192)
|
(916,770)
|
||||||
Increase
in Prepaid Expenses
|
(44,892)
|
(101,770)
|
||||||
Increase
in Accounts Payable
|
2,585,014
|
313,053
|
||||||
Decrease
in Accrued Expenses
|
(934,162)
|
(107,108)
|
||||||
Net
Cash Provided By (Used For) Operating Activities
|
2,368,325
|
(452,666)
|
||||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Purchases
of Office Equipment and Furniture
|
(6,943)
|
(202,234)
|
||||||
Decrease
(Increase) in Prepaid Drilling Costs
|
19
|
(440,053)
|
||||||
Increase
(Decrease) in Accrued Drilling Costs
|
(181,900)
|
1,048,458
|
||||||
Increase
in Short-term Investment, net
|
-
|
(3,550,524)
|
||||||
Increase
in Oil and Gas Properties
|
(17,324,349)
|
(11,779,327)
|
||||||
Net
Cash Used For Investing Activities
|
(17,513,173)
|
(14,923,680)
|
||||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Increase
in Margin Loan
|
-
|
999,907
|
||||||
Payments
on Line of Credit
|
(12,338)
|
-
|
||||||
Advances
on Revolving Credit Facility
|
16,000,000
|
-
|
||||||
Cash
Paid for Listing Fee
|
-
|
(65,000)
|
||||||
Sale
of Calls
|
-
|
95,148
|
Increase
in Subordinated Notes, net
|
500,000
|
-
|
||||||
Debt
Issuance Costs Paid
|
(1,190,061)
|
-
|
||||||
Proceeds
from Issuance of Common Stock - Net of Issuance Costs
|
12,701,049
|
15,667,004
|
||||||
Proceeds
from Exercise of Stock Options
|
-
|
933,800
|
||||||
Net
Cash Provided by Financing Activities
|
27,998,650
|
17,630,859
|
||||||
|
||||||||
NET
INCREASE IN CASH AND CASH EQUIVALENTS
|
12,853,802
|
2,254,513
|
||||||
CASH
AND CASH EQUIVALENTS – BEGINNING OF PERIOD
|
780,716
|
10,112,660
|
||||||
|
||||||||
CASH
AND CASH EQUIVALENTS – END OF PERIOD
|
$
13,634,518
|
$
12,367,173
|
||||||
Supplemental
Disclosure of Cash Flow Information
|
||||||||
Cash
Paid During the Period for Interest
|
$ 189,128
|
$ -
|
||||||
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
|
$
224,879
|
$
1,286,936
|
||||||
Payment
of Consulting Fees through Issuance of Common Stock
|
$ -
|
$ 49,875
|
||||||
Payment
of Compensation through Issuance of Common Stock
|
$ 261,280
|
$
-
|
||||||
Capitalized
Asset Retirement Obligations
|
$
61,403
|
$
-
|
||||||
Fair
Value of Warrants Issued for Debt Issuance Costs
|
$
221,153
|
$
-
|
||||||
Payment
of Debt Issuance Costs through Issuance of Common Stock
|
$
475,200
|
$ -
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||
June
30,
|
June
30,
|
|||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||
Weighted
average common shares outstanding - basic
|
34,582,282
|
30,864,339
|
34,404,093
|
29,856,199
|
||||||||
Plus:
Potential common shares
|
||||||||||||
Stock
options, warrants, and restricted stock.
|
158,754
|
1,684,115
|
80,873
|
1,328,855
|
||||||||
Weighted
average common shares outstanding - diluted
|
34,741,036
|
32,548,454
|
34,484,966
|
31,185,054
|
||||||||
Stock
options and warrants excluded from EPS due to the anti-dilutive
effect
|
-
|
-
|
62,529
|
-
|
||||||||
Cost
at June 30, 2009
|
Unrealized (Loss)
|
Fair
Market Value at June 30, 2009
|
||||||||||
Auction
Rate Municipal Bonds
|
$
|
2,550,000
|
$
|
(239,458
|
)
|
$
|
2,310,542
|
|||||
Auction
Rate Preferred Stock
|
275,143
|
(10,750
|
)
|
264,393
|
||||||||
Total
Short-Term Investments
|
$
|
2,825,143
|
$
|
(250,208
|
)
|
$
|
2,574,935
|
June
30, 2009
|
||||
Oil
and Gas Properties, Full Cost Method
|
||||
Unevaluated
Costs, Not Subject to Amortization or Ceiling Test
|
$
|
44,259,384
|
||
Evaluated
Costs
|
29,166,004
|
|||
73,425,388
|
||||
Office
Equipment, Furniture, Leasehold Improvements and Software
|
415,343
|
|||
73,840,731
|
||||
Less: Accumulated
Depreciation, Depletion, and Amortization
|
||||
Property
and Equipment
|
2,002,716
|
|||
Total
|
$
|
71,838,015
|
Six
Month Period Ended
June
30,
|
||||||||
2009
|
2008
|
|||||||
Depletion
of Costs for Evaluated Oil and Gas Properties
|
$
|
1,101,250
|
147,578
|
|||||
Depreciation
of Office Equipment, Furniture, and Software
|
45,456
|
21,111
|
||||||
Total
Depreciation, Depletion, and Amortization Expense
|
$
|
1,146,706
|
$
|
168,689
|
|
No
options were exercised in the six months ended June 30,
2009.
|
|
No
options were forfeited or granted during the six months ended June 30,
2009.
|
|
400,000
options are exercisable and outstanding as of June 30,
2009.
|
|
There
is no further compensation expense that will be recognized in future
years, relating to all options that have been granted as of June 30, 2009,
since the entire fair value compensation has been
recognized.
|
$
|
61,437
|
|||
Liabilities
Incurred for New Wells Placed in Production
|
61,403
|
|||
Accretion
of Discount on Asset Retirement Obligations
|
3,471
|
|||
Ending
Asset Retirement Obligation
|
$
|
126,311
|
Six
Months Ended
June
30,
|
||||||||
2009
|
2008
|
|||||||
Current
Income Taxes
|
$
|
-
|
$
|
-
|
||||
Deferred
Income Taxes
|
||||||||
Federal
|
5,000
|
-
|
||||||
State
|
1,000
|
-
|
||||||
Total
Expense
|
$
|
6,000
|
$
|
-
|
|
Quoted Prices In Active Markets
for Identical Assets (Level 1)
|
Significant Other Observable
Inputs (Level
2)
|
Significant Unobservable Inputs
(Level
3)
|
|||||||||
Current
Derivative Liabilities
|
$
|
-
|
$
|
(1,271,808)
|
$
|
-
|
||||||
Non-Current
Derivative Liabilities
|
-
|
(1,561,515)
|
-
|
|||||||||
Short-Term
Investments (See Note 3)
|
-
|
-
|
2,574,935
|
|||||||||
Total
|
$
|
-
|
$
|
(2,833,323)
|
$
|
2,574,935
|
|
Fair Value Measurements at Reporting
Date Using Significant
Unobservable Inputs (Level
3)
Level
3 Financial Assets
|
|||
Balance
at January 1, 2009
|
|
$
|
2,416,369
|
|
Unrealized
Gain Included in Other Comprehensive Income (Loss)
|
|
158,566
|
||
Balance
at June 30, 2009
|
|
2,574,935
|
Settlement
Period
|
Oil
(Barrels)
|
Fixed
Price
|
Weighted
Avg
NYMEX Reference
Price
|
|||
Oil
Swaps
|
||||||
07/01/09
– 02/29/12
|
96,000
|
51.25
|
76.15
|
|||
07/01/09
– 12/31/11
|
45,000
|
66.15
|
75.99
|
Type
of Contract
|
Balance
Sheet Location
|
Estimated
Fair Value
|
|||
Derivatives
Designated as Hedging Instruments
|
|||||
Derivative
Liabilities:
|
|||||
Oil
Contracts
|
Other
Current Liabilities
|
$
1,271,808
|
|||
Oil
Contracts
|
Other
Non-Current Liabilities
|
$
1,561,515
|
|||
Total
Derivative Liabilities
|
$
2,833,323
|
Six
Month Period Ended June 30,
|
||||||||
2009
|
2008
|
|||||||
Net
Income (Loss)
|
$
|
8,599
|
$
|
(96,188
|
)
|
|||
Unrealized
Gains on Marketable Securities (net of tax of
$68,000)
|
90,566
|
-
|
||||||
Unrealized
Loss on Derivative Liabilities (net of tax of $1,133,000)
|
(1,700,323
|
)
|
-
|
|||||
Comprehensive
Income (Loss) Net
|
$
|
(1,601,198
|
)
|
$
|
(187,277
|
)
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
||||||||||
2009
|
%
Change
|
2008
|
2009
|
%
Change
|
2008
|
||||||
Net
Production:
|
|||||||||||
Oil
(Bbl)
|
50,396
|
693
|
6,354
|
77,956
|
721
|
9,497
|
|||||
Natural
Gas (Mcf)
|
6,604
|
5,693
|
114
|
8,647
|
7,228
|
118
|
|||||
Barrel
of Oil Equivalent (Boe)
|
51,497
|
708
|
6,373
|
79,397
|
734
|
9,517
|
|||||
Average
Sales Prices:
|
|||||||||||
Oil
(per Bbl)
|
55.21
|
(54)
|
120.04
|
48.95
|
(56)
|
110.42
|
|||||
Effect
of oil hedges on average price (per Bbl)
|
(2.85)
|
-
|
0.00
|
(1.61)
|
(1,250)
|
0.14
|
|||||
Oil
net of hedging (per Bbl)
|
52.36
|
(56)
|
120.04
|
47.34
|
(57)
|
110.56
|
|||||
Natural
Gas (per Mcf)
|
5.05
|
(67)
|
15.48
|
5.26
|
(66)
|
15.27
|
|||||
Effect
of natural gas hedges on average price (per Mcf)
|
0.00
|
-
|
0.00
|
0.00
|
-
|
0.00
|
|||||
Natural
gas net of hedging (per Mcf)
|
5.05
|
(67)
|
15.48
|
5.26
|
(66)
|
15.27
|
|||||
Average
Production Costs:
|
|||||||||||
Oil
(per Bbl)
|
2.43
|
94
|
1.25
|
2.78
|
182
|
0.99
|
|||||
Natural
Gas (per Mcf)
|
0.24
|
(46)
|
0.45
|
0.26
|
(42)
|
0.45
|
|||||
Barrel
of Oil Equivalent (Boe)
|
2.41
|
91
|
1.26
|
2.76
|
179
|
0.99
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
||||||
2009
|
2008
|
2009
|
2008
|
||||
Depletion
of oil and natural gas properties
|
$719,596
|
$106,942
|
$1,101,250
|
$147,578
|
June
30,
|
|||||||
2009
|
2008
|
||||||
Gross
|
Net
|
Gross
|
Net
|
||||
North
Dakota
|
97
|
4.16
|
7
|
0.43
|
|||
Montana
|
7
|
0.81
|
2
|
0.50
|
|||
Total:
|
104
|
4.97
|
9
|
0.93
|
Period
|
Notional
Monthly Volume
(Barrels)
|
Swap
Price
|
||
July
2009 through December 2009
|
5,500
|
$
51.25
|
||
July
2009 through December 2009
|
1,500
|
$
66.15
|
||
January
2010 through December 2010
|
3,000
|
$
51.25
|
||
January
2010 through December 2010
|
1,500
|
$
66.15
|
||
January
2011 through December 2011
|
2,000
|
$
51.25
|
||
January
2011 through December 2011
|
1,500
|
$
66.15
|
||
January
2012 through February 2012
|
1,500
|
$
51.25
|
|
Item
1A. Risk
Factors.
|
Votes
For
|
Votes
Withheld
|
|||
Ryan
R. Gilbertson
|
19,931,902
|
84,925
|
||
Robert
Grabb
|
19,931,902
|
84,925
|
||
Jack
King
|
19,931,902
|
84,925
|
||
Lisa
Bromiley Meier
|
19,931,902
|
84,925
|
||
Loren
J. O’Toole
|
19,931,902
|
84,925
|
||
Michael
L. Reger
|
19,931,902
|
84,925
|
||
Carter
Stewart
|
19,931,902
|
84,925
|
Votes
For
|
19,960,807
|
Votes
Against
|
29,185
|
Votes
Abstaining
|
26,835
|
Broker
No Votes
|
----
|
Votes
For
|
19,405,395
|
Votes
Against
|
566,111
|
Votes
Abstaining
|
45,321
|
Broker
No Votes
|
----
|
Date:
|
July
30, 2009
|
By:
|
/s/
Michael L. Reger
|
|
Michael
L. Reger, Chief Executive Officer and Director
|
||||
Date:
|
July
30, 2009
|
By:
|
/s/
Ryan R. Gilbertson
|
|
Ryan
R. Gilbertson, Chief Financial Officer and
Director
|
Exhibit
Number
|
Exhibit
Description
|
|
3.1
|
Composite
Articles of Incorporation of Northern Oil and Gas, Inc. (Incorporated by
reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K/A
(Amendment No. 3) filed with the SEC on June 24, 2009.)
|
|
3.2
|
Bylaws
of Northern Oil and Gas, Inc., as amended. (Incorporated by reference to
Exhibit 99.2 to the Company’s Current Report on Form 8-K filed with the
SEC on December 6, 2007.)
|
|
10.1
|
Northern
Oil and Gas, Inc. 2009 Equity Incentive Plan. (Incorporated by
reference to Exhibit 10.1 to the Company’s Registration Statement on Form
S-8 filed with the SEC on July 16, 2009.)
|
|
10.2
|
Exploration
and Development Agreement dated effective as of April 1, 2009 by and
between Slawson Exploration Company, Inc. and Northern Oil and Gas,
Inc. (Incorporated by reference to Exhibit 2.1 to the Company’s
Current Report on Form 8-K filed with the SEC on May 29,
2009.)
|
|
10.3
|
First
Amendment to Credit Agreement dated as of May 22, 2009 among Northern Oil
and Gas, Inc., CIT Capital USA Inc., and the Lenders party
thereto. (Incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K filed with the SEC on May 29,
2009.)
|
|
31.1
|
Certification
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
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
|