Northern Oil and Gas, Inc. Announces Record Second Quarter Earnings, Record Production Volumes Exceeding Previous Guidance and Provides Operations Update

WAYZATA, Minn., Aug. 9 /PRNewswire-FirstCall/ -- Northern Oil and Gas, Inc. (NYSE/Amex: NOG) ("Northern Oil") today reported net income of $6,120,866, or $0.12 per share, on total revenues of $16,231,773 for the quarter ended June 30, 2010.  Second quarter 2010 production volumes increased by 38% from the first quarter of 2010, exceeding previous expectations of 20% to 30% quarter-over-quarter production increases.

SECOND QUARTER 2010 RESULTS

Revenues from the sale of crude oil and natural gas, including hedge settlements, for the second quarter were $11,968,792, which represents a 46% increase compared to the first quarter of 2010 and a 426% increase compared to the second quarter of 2009. Total revenue, including the mark-to-market value of hedge instruments, for the second quarter were $16,231,773, which represents a 125% increase compared to the first quarter of 2010 and a 613% increase compared to the second quarter of 2009.

During the second quarter of 2010, Northern Oil's average realized price for crude oil was $70.98 per barrel, which included a $1.83 per barrel gain due to the settlement of crude oil derivative contracts.  This compares to an average $68.70 per barrel realized price in the first quarter of 2010, which included a $1.48 per barrel loss due to the settlement of crude oil derivative contracts, and an average $52.36 per barrel realized price in the second quarter of 2009, which included a $2.85 per barrel loss due to the settlement of our crude derivative contracts.

Northern Oil's production volumes for the second quarter 2010 were a quarterly record of 172,663 barrels of oil equivalent ("BOE"), representing a 38% increase compared to the first quarter 2010 and a 235% increase compared to the second quarter 2009.  This increase represents Northern Oil's tenth consecutive quarterly increase in production.  Second quarter 2010 production consisted of 96% crude oil and approximately 4% associated natural gas.  Northern Oil exited the second quarter of 2010 with production volumes of approximately 2,703 BOE per day.  During the second quarter of 2010, production was added from approximately 3.89 net wells.  Northern Oil has maintained a 100% drilling success rate in the Williston Basin Bakken and Three Forks trends since the company's inception.

Northern Oil's reported production expenses for the second quarter of 2010 were $561,427, or $3.30 per BOE on an accrued basis, compared to $332,330, or $3.15 per BOE, in the first quarter 2010 and $119,751, or $2.41 per BOE, in the second quarter 2009.

Depletion expense for the second quarter of 2010 was $2,600,836, or $15.06 per BOE, compared to $1,883,605, or $15.06 per BOE, from the first quarter 2010 and $548,124, or $10.64 per BOE, from the second quarter 2009.  

Cash general and administrative (G&A) expenses for the second quarter of 2010 were $718,471, representing a 20% decrease compared to $893,671 in the first quarter 2010.

Northern Oil's reported net income for the second quarter of 2010 was $6,120,866, or $0.12 per diluted share, compared to net income of $1,559,630, or $0.04 per diluted share, for the first quarter 2010 and net income of $418,396, or $0.01 per diluted share, for the second quarter 2009.

Northern Oil's net income for the second quarter of 2010, excluding unrealized mark-to-market hedging gains, was $3,502,667, or $0.07 per diluted share, compared to net income in the first quarter 2010 excluding unrealized mark-to-market hedging losses of $2,172,446, or $0.05 per diluted share.

Northern Oil defines Adjusted EBITDA as net income before (i) interest expense, (ii) income taxes, (iii) depreciation, depletion and amortization, (iv) accretion of abandonment liability, (v) pre-tax unrealized gain and losses on commodity risk and (vii) non-cash expenses relating to share based payments recognized under ASC Topic 718.  Adjusted EBITDA for the second quarter of 2010 was $9,677,386, or $0.19 per diluted share, which represents a 51% increase over adjusted EBITDA of $6,417,708, or $0.14 per diluted share, for the first quarter of 2010.

Net income excluding unrealized mark-to-market hedging gains and adjusted EBITDA are non-GAAP measures.  A reconciliation of these measures to GAAP is included in our accompanying financial tables found later in this release.

In the six months ending June 30, 2010, Northern Oil's capital expenditures relating to exploration and development activities approximated $54 million.

OPERATIONS UPDATE AND INCREASED PRODUCTION GUIDANCE

Northern Oil is currently participating in the drilling or completion of an additional 63 gross Bakken or Three Forks wells and one gross Red River well, for an aggregate of 7.24 net wells currently drilling or awaiting completion.  

As of August 9, 2010, Northern Oil has spud approximately 13.85 net wells in 2010.  Management reaffirms its previously announced guidance to spud approximately 18 net wells throughout 2010 and expects to increase production volumes by 30 to 35% in the third quarter of 2010 compared to previous guidance of 20 to 30% in the second quarter of 2010.

RECENT COMPLETION HIGHLIGHTS

The following table illustrates the most recent well completions in which Northern Oil participated.


                                                                  DAYS
                                                                  USED TO
                                                       INITIAL    COMPUTE
                                  COUNTY/              PRODUCTION AVG.    AVG.
WELL NAME           OPERATOR      STATE         WI     BOEPD      BOEPD   BOEPD

SUMMERFIELD 15-15H  AMERICAN      DUNN, ND      5.10%  2,799      37      974

KUBIK TRUST
#1-18-19H           ANSCHUTZ      DUNN, ND      3.20%  2,441      60      861

JACK CVANCARA 19-18
#1H                 BRIGHAM       MOUNTRAIL, ND 3.16%  5,035      30      1,800

LIFFRIG #29-20 1-H
TFS                 BRIGHAM       MOUNTRAIL, ND 6.25%  2,477      84      654

GILLUND #1-32H      CONTINENTAL   DIVIDE, ND    9.62%  623        N/A     N/A

JOANNE #1-7H        CONTINENTAL   DIVIDE, ND    37.58% 452        N/A     N/A

SHONNA #2-15H       CONTINENTAL   DIVIDE, ND    14.84% 402        N/A     N/A

UXBRIDGE #1-9H      CONTINENTAL   DIVIDE, ND    9.04%  795        N/A     N/A

VAN HOOK #100-15H
TFS                 EOG RESOURCES MOUNTRAIL, ND 10.00% 1,585      100     931

RS-NELSON FARMS
2829H-1             HESS CORP     MOUNTRAIL, ND 45.55% 751        N/A     N/A

EDWARDS #5992 44-10 OASIS         BURKE, ND     21.00% 612        88      315

BADGER #1-9H        SLAWSON       MOUNTRAIL, ND 28.38% 2,518      N/A     N/A

COUGAR FEDERAL
#1-30H              SLAWSON       MOUNTRAIL, ND 3.81%  1,493      90      706

LUNKER FEDERAL
#1-30-4H            SLAWSON       MOUNTRAIL, ND 6.40%  2,186      N/A     N/A

MACHETE #1-19H      SLAWSON       MOUNTRAIL, ND 14.74% 1,303      60      705

MINX #1-29H         SLAWSON       MOUNTRAIL, ND 22.00% 1,475      90      473

SNIPER FEDERAL
#1-6-7H             SLAWSON       MOUNTRAIL, ND 21.41% 3,784      24      1,426

STALLION #1-1-12H   SLAWSON       MOUNTRAIL, ND 22.41% 2,753      125     953

VANDAL #1-16H       SLAWSON       RICHLAND, MT  20.00% 478        57      271

SCHILKE #2-24H      PEAK          MCKENZIE, ND  5.24%  1,679      N/A     N/A





UPDATED HEDGING ACTIVITY

The following table reflects the weighted average price of Northern Oil's open commodity derivative contracts as of July 31, 2010, by year with associated volumes.


Weighted Average Price
Of Open Commodity Contracts

      Volumes    Weighted
Year  (Barrels)  Average Price

2010  315,000    $ 80.36

2011  372,500    $ 80.32

2012  141,000    $ 79.39





MANAGEMENT COMMENT

Michael Reger, Northern Oil's Chief Executive Officer, commented, "Our strong production growth has been a result of continued improvement in well results, increased core acreage additions, robust drilling activity and growing efficiencies in this premier oil resource play.  We continue to be impressed by the expanding size and scope of the Bakken and Three Forks trend as well as the evolution in completion techniques.  We would like to thank all of the operators with whom we have been fortunate enough to work for all of their efforts in advancing the collective success of all participants in this exciting and high return oil play.  We remain well capitalized and positioned to continue to execute on our strategy of acquiring high quality non-operated interests and developing our substantial core Bakken position.  Northern Oil would like to reaffirm its focus on the Williston Basin Bakken play as we continue to exploit our leasing advantage and turn our high quality acreage to production."

SECOND QUARTER EARNINGS RELEASE TELECONFERENCE CALL

In conjunction with Northern Oil's release of its financial and operating  results, investors, analysts and other interested parties are invited to listen to a conference call with management on Monday, August 9, 2010 at 10:00 a.m. Central Daylight Time.  Details for the conference call are as follows:  


Dial-In Number: (866) 261-2650 (US/Canada) and (703) 639-1221 (International)



Conference ID: 1474933, Northern Oil and Gas Second Quarter Earnings Release





ABOUT NORTHERN OIL AND GAS

Northern Oil and Gas, Inc. is an exploration and production company based in Wayzata, Minnesota.  Northern Oil's core area of focus is the Williston Basin Bakken and Three Forks trend in North Dakota and Montana.

More information about Northern Oil and Gas, Inc. can be found at www.NorthernOil.com.

SAFE HARBOR

This press release 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.  


FINANCIAL INFORMATION

ASSETS

                                                  June 30,

                                                  2010           December 31,

                                                  (UNAUDITED)    2009

CURRENT ASSETS

Cash and Cash Equivalents                         $ 70,167,911   $ 6,233,372

Trade Receivables                                 11,311,742     7,025,011

Prepaid Drilling Costs                            6,431,446      1,454,034

Prepaid Expenses                                  481,371        143,606

Other Current Assets                              272,392        201,314

Short - Term Investments                          -              24,903,476

Derivative Asset                                  1,068,924      -

Deferred Tax Asset                                863,000        2,057,000

Total Current Assets                              90,596,786     42,017,813



PROPERTY AND EQUIPMENT

Oil and Natural Gas Properties, Full Cost Method
(including unevaluated cost
of $86,422,227 at 6/30/2010 and $53,862,529 at
12/31/2009)                                       156,185,056    96,801,626

Other Property and Equipment                      2,193,447      439,656

Total Property and Equipment                      158,378,503    97,241,282

Less - Accumulated Depreciation and Depletion     9,626,536      5,091,198

Total Property and Equipment, Net                 148,751,967    92,150,084



DEBT ISSUANCE COSTS                               1,525,703      1,427,071





Total Assets                                      $ 240,874,456  $ 135,594,968








LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts Payable                              $ 9,987,487    $ 6,419,534

Line of Credit                                -              834,492

Accrued Expenses                              1,938,696      316,977

Derivative Liability                          -              1,320,679

Other Liabilities                             18,574         18,574

Total Current Liabilities                     11,944,757     8,910,256



LONG-TERM LIABILITIES

Revolving Credit Facility                     -              -

Derivative Liability                          85,544         1,459,374

Subordinated Notes                            400,000        500,000

Other Noncurrent Liabilities                  315,727        243,888

Total Long-Term Liabilities                   801,271        2,203,262



DEFERRED TAX LIABILITY                        5,192,000      922,000



Total Liabilities                             17,938,028     12,035,518



STOCKHOLDERS' EQUITY

Common Stock, Par Value $.001; 100,000,000
Authorized, 51,079,143
Outstanding (2009 – 43,911,044 Shares
Outstanding)                                  51,080         43,912

Additional Paid-In Capital                    215,539,549    124,884,266

Retained Earnings                             8,522,388      841,892

Accumulated Other Comprehensive Income (Loss) (1,176,589)    (2,210,620)

Total Stockholders' Equity                    222,936,428    123,559,450



Total Liabilities and Stockholders' Equity    $ 240,874,456  $ 135,594,968






NORTHERN OIL AND GAS, INC.

CONDENSED STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009

(UNAUDITED)



                           Three Months Ended         Six Months Ended

                           June 30,                   June 30,

                                         2009                       2009

                           2010          Adjusted *   2010          Adjusted *

REVENUES

Oil and Gas Sales          $ 11,664,873  $ 2,418,496  $ 20,033,720  $ 3,059,230

Gain (Loss) on Settled
Derivatives                303,919       (143,412)    126,936       (125,878)

Mark-to-Market of
Derivative Instruments     4,251,199     -            3,260,383     -

Other Revenue              11,782        -            32,248        -

                           16,231,773    2,275,084    23,453,287    2,933,352



OPERATING EXPENSES

Production Expenses        561,427       119,751      893,757       214,140

Production Taxes           1,024,277     189,400      1,670,143     247,715

General and Administrative
Expense                    718,471       519,014      1,612,142     910,674

Share Based Compensation   1,193,072     36,302       2,006,369     213,277

Depletion of Oil and Gas
Properties                 2,600,836     548,124      4,484,441     850,326

Depreciation and
Amortization               26,267        22,777       50,897        45,456

Accretion of Discount on
Asset Retirement
Obligations                9,215         2,077        12,752        3,471

Total Expenses             6,133,565     1,437,445    10,730,501    2,485,059



INCOME FROM OPERATIONS     10,098,208    837,639      12,722,786    448,293



OTHER EXPENSE              (144,342)     (139,243)    (232,290)     (182,770)



                           9,953,866     698,396      12,490,496    265,523

INCOME BEFORE INCOME TAXES

INCOME TAX PROVISION       3,833,000     280,000      4,810,000     106,000



NET INCOME                 $ 6,120,866   $ 418,396    $ 7,680,496   $ 159,523







Net Income Per Common
Share - Basic              $ 0.12        $ 0.01       $ 0.16        $ 0.00



Net Income Per Common
Share - Diluted            $ 0.12        $ 0.01       $ 0.16        $ 0.00



Weighted Average Shares
Outstanding – Basic      49,934,409    34,582,282   47,032,602    34,404,093



Weighted Average Shares
Outstanding - Diluted      50,609,944    34,741,036   47,593,962    34,484,966








NORTHERN OIL AND GAS, INC.

CONDENSED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009

(UNAUDITED)



                                                    Six Months Ended

                                                    June 30,

                                                                  2009

                                                    2010          Adjusted *

CASH FLOWS FROM OPERATING ACTIVITIES

Net Income                                          $ 7,680,496   $ 159,523

Adjustments to Reconcile Net Income to Net Cash
Provided by

Operating Activities:

Depletion of Oil and Gas Properties                 4,484,441     850,326

Depreciation and Amortization                       50,897        45,456

Amortization of Debt Issuance Costs                 280,768       168,790

Accretion of Discount on Asset Retirement
Obligations                                         12,752        3,471

Income Tax Provision                                4,810,000     106,000

Loss on Sale of Available for Sale Securities       197,556       -

Market Value adjustment of Derivative Instruments   (3,260,383)   -

Amortization of Deferred Rent                       (9,287)       (9,286)

Share - Based Compensation Expense                  2,006,369     213,277

Changes in Working Capital and Other Items:

Increase in Trade Receivables                       (4,286,731)   (775,192)

Increase in Prepaid Expenses                        (337,765)     (44,892)

Decrease (Increase) in Other Current Assets         (71,078)      -

Increase in Accounts Payable                        3,567,953     2,585,014

Decrease in Accrued Expenses                        (138,281)     (934,162)

Net Cash Provided By Operating Activities           14,987,707    2,368,325



CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of Other Equipment and Furniture          (1,753,791)   (6,943)

Decrease (Increase) in Prepaid Drilling Costs       (4,977,412)   19

Proceeds from Sale of Oil and Gas Properties        237,877       -

Proceeds from Sale of Available for Sale Securities 25,890,901    -

Increase in Oil and Gas Properties                  (51,636,851)  (17,506,249)

Net Cash Used For Investing Activities              (32,239,276)  (17,513,173)



CASH FLOWS FROM FINANCING ACTIVITIES

Payments on Line of Credit                          (834,492)     (12,338)

Advances on Revolving Credit Facility               5,300,000     16,000,000

Payments on Revolving Credit Facility               (5,300,000)   -

Increase (Decrease) in Subordinated Notes, net      (100,000)     500,000

Debt Issuance Costs Paid                            (379,400)     (1,190,061)

Proceeds from Issuance of Common Stock - Net of
Issuance Costs                                      82,500,000    12,701,049

Net Cash Provided by Financing Activities           81,186,108    27,998,650



NET INCREASE IN CASH AND CASH EQUIVALENTS           63,934,539    12,853,802



CASH AND CASH EQUIVALENTS – BEGINNING OF PERIOD   6,233,372     780,716



CASH AND CASH EQUIVALENTS – END OF PERIOD         $ 70,167,911  $ 13,634,518





Supplemental Disclosure of Cash Flow Information

Cash Paid During the Period for Interest            $ 125,135     $ 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                                     $ 5,698,337   $ 224,879

Payment of Compensation through Issuance of Common
Stock                                               $ 4,224,114   $ 261,280

Capitalized Asset Retirement Obligations            $ 69,802      $ 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






USE OF NON GAAP FINANCIAL MEASURES

Northern Oil and Gas, Inc.

Reconciliation of Adjusted EBITDA



                                              Three Months Ended

                                              March 31,    June 30,

                                              2010         2010

Net Income                                    $ 1,559,630  $ 6,120,866



Add Back:



Income Tax Provision                          977,000      3,833,000



Depreciation, Depletion, Amortization,
and Accretion                                 2,062,170    2,766,688



Share Based Compensation                      813,297      1,193,072



Unrealized Gain on Commodity
Price Risk Management Activities              990,816      (4,251,199)



Interest Expense                              14,795       14,959



Adjusted EBITDA                               $ 6,417,708  $ 9,677,386







EBITDA Per Common Share - Basic               $ 0.15       $ 0.19



EBITDA Per Common Share - Diluted             $ 0.14       $ 0.19



Weighted Average Shares Outstanding – Basic 44,098,553   49,934,409



Weighted Average Shares Outstanding - Diluted 44,544,469   50,609,944






Northern Oil and Gas, Inc.
Reconciliation of GAAP Net Income to Earnings Without
the Effect of Certain Items



                                              Three Months Ended

                                              March 31,    June 30,

                                              2010         2010

Net Income, as Reported                       $ 1,559,630  $ 6,120,866



Unrealized Derivative Gains                   990,816      (4,251,199)



Tax Impact                                    (378,000)    1,633,000



Earnings without the Effect
of Certain Items                              $ 2,172,446  $ 3,502,667



Net Income Per Common Share - Basic           $ 0.05       $ 0.07



Net Income Per Common Share - Diluted         $ 0.05       $ 0.07



Weighted Average Shares Outstanding – Basic 44,098,553   49,934,409



Weighted Average Shares Outstanding - Diluted 44,544,469   50,609,944






CONTACT:



Investor Relations

772-219-7525





SOURCE Northern Oil and Gas, Inc.