Northern Oil and Gas, Inc. Announces Third Quarter Earnings, 45% Increase in Record Production Volumes and Provides Operations Update

WAYZATA, Minn., Nov. 8, 2010 /PRNewswire-FirstCall/ -- Northern Oil and Gas, Inc. (NYSE/Amex: NOG) ("Northern Oil") today announced record quarterly production volumes, as well as record quarterly revenues and operating income, excluding the impact of unrealized hedging losses.

THIRD QUARTER 2010 RESULTS

Northern Oil's production volumes for the third quarter of 2010 were a quarterly record of 250,129 barrels of oil equivalent ("BOE"), representing a 45% increase compared to the second quarter of 2010 and a 182% increase compared to the third quarter of 2009.  These results exceeded previous guidance of a 30% to 35% quarter-over-quarter production increase and represents Northern Oil's eleventh consecutive quarterly increase in production.  

Third quarter 2010 production consisted of 96% crude oil and approximately 4% associated natural gas.  Northern Oil exited the third quarter of 2010 with production volumes of approximately 3,406 BOE per day.  During the third quarter of 2010, production was added from approximately 5.75 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.

Revenues from the sale of crude oil and natural gas, including hedge settlements, for the third quarter of 2010 were $16,317,530, which represents a 36% increase compared to the second quarter of 2010 and a 236% increase compared to the third quarter of 2009.  

During the third quarter of 2010, Northern Oil's average realized price for crude oil was $69.64 per barrel, which included a $3.22 per barrel gain due to the settlement of crude oil derivative contracts.  This compares to an average $70.98 per barrel realized price in the second quarter of 2010, which included a $1.83 per barrel gain due to the settlement of crude oil derivative contracts, and an average $58.44 per barrel realized price in the third quarter of 2009, which included a $3.38 per barrel loss due to the settlement of crude oil derivative contracts.

Northern Oil's reported production expenses for the third quarter of 2010 were $1,084,769, or $4.19 per BOE, on an accrued basis, compared to $561,427, or $3.30 per BOE, in the second quarter of 2010 and $236,362, or $2.45 per BOE, in the third quarter of 2009.  The higher production expense is a result of more mature wells utilizing artificial lift and a general aging of Northern Oil's production.

Depletion expense for the third quarter of 2010 was $3,767,712, or $15.06 per BOE, compared to $2,600,836, or $15.06 per BOE, for the second quarter of 2010 and $935,804, or $10.56 per BOE, for the third quarter of 2009.  

General and Administrative (G&A) expenses, net of share based compensation, for the third quarter of 2010 were $899,661, compared to $718,471 in the second quarter 2010.

Northern Oil's net income was $987,226, or $0.02 per diluted share for the third quarter of 2010.  Northern Oil's net income, excluding unrealized mark-to-market hedging losses, was $4,961,803, or $0.10 per diluted share, for the third quarter of 2010, which represents a 42% increase over net income, excluding unrealized mark-to-market hedging losses, of $3,502,667, or $0.07 per diluted share, for the second quarter of 2010.

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.  Northern Oil's Adjusted EBITDA for the third quarter of 2010 was $12,772,433, or $0.24 per diluted share, which represents a 32% increase over Adjusted EBITDA of $9,677,386, or $0.19 per diluted share, for the second 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.  Northern Oil's management believes the use of non-GAAP financial measures provides useful information to investors to gain an overall understanding of current financial performance.  Specifically, management believes the non-GAAP results included herein provide useful information to both management and investors by excluding certain expenses and unrealized commodity gains and losses that management believes are not indicative of Northern Oil's core operating results.  In addition, these non-GAAP financial measures are used by Northern Oil's management for budgeting and forecasting as well as subsequently measuring Northern Oil's performance, and management believes that Northern Oil is providing investors with financial measures that most closely align to its internal measurement processes.  

Northern Oil's capital expenditures relating to exploration and development activities approximated $103 million for the nine months ending September 30, 2010 and are expected to approximate $132 million for the entire 2010 fiscal year based on wells currently drilling and expected to spud by 2010 year-end.

OPERATIONS UPDATE AND INCREASED PRODUCTION GUIDANCE

As of November 5, 2010, Northern Oil is participating in the drilling or completion of 91 gross Bakken or Three Forks wells, for an aggregate of 10.72 net wells drilling, awaiting completion or completing.  Of those wells, 5.05 net wells are drilling but have not reached total depth, an additional 4.99 net wells have been drilled to total depth and are awaiting completion and the remaining 0.68 net wells are undergoing fracture stimulation to commence production.

As of November 5, 2010, Northern Oil has spud approximately 23.68 net wells during 2010.  Management now expects to spud approximately 25 net wells throughout 2010, up from previous guidance of 24 net wells, and expects to increase production volumes further by 30 to 35% in the fourth quarter of 2010 compared to the third quarter of 2010.

RECENT COMPLETION HIGHLIGHTS

The following table illustrates the most recent well completions with updated longer-term rates in which Northern Oil participated with a working interest ("WI").  




                                                        DAYS USED TO
                                                        COMPUTE AVG. AVG.
WELL NAME      OPERATOR   COUNTY/STATE WI     IP/BOEPD* BOEPD        BOEPD***

                          MOUNTRAIL,
GOBLIN #1-26H  SLAWSON    ND           45.54% 1,338     N/A          N/A

ALAMO                     MOUNTRAIL,
#1-19-18H      SLAWSON    ND           29.98% 1,625**   N/A          N/A

                          MOUNTRAIL,
BADGER #1-9H   SLAWSON    ND           28.38% 2,057**   30           799**

DIAMONBACK                MOUNTRAIL,
#1-21H         SLAWSON    ND           25.23% 2,013     30           494**

REVOLVER                  MOUNTRAIL,
#1-35H         SLAWSON    ND           24.58% 1,946     N/A          N/A

STALLION                  MOUNTRAIL,
#1-1-12H       SLAWSON    ND           22.41% 2,753     200          720

RENEGADE                  ROOSEVELT,
#1-10H         SLAWSON    MT           22.07% 662       N/A          N/A

SNIPER FEDERAL            MOUNTRAIL,
#1-6-7H        SLAWSON    ND           21.41% 3,784     150          930

STATE 36-1 #2H
TFS            BRIGHAM    WILLIAMS, ND 20.36% 2,356     7            1,438

AMANDA #21-14H CONOCO     MCKENZIE, ND 18.75% 1,833**   30           562**

ARMADA                    MOUNTRAIL,
#1-14-13H      SLAWSON    ND           14.20% 1,460     N/A          N/A

                          MOUNTRAIL,
NEPTUNE #1-15H SLAWSON    ND           13.37% 2,578**   30           749**

BANKS #5892               MOUNTRAIL,
44-34H         OASIS      ND           13.13% 949       N/A          NA

HOIBY                     MOUNTRAIL,
159-94-4B-3-1H PETRO-HUNT ND           12.81% 831       N/A          N/A

GUSTAFSON
29-32-161-92H  SAMSON     BURKE, ND    12.50% 694       N/A          N/A

MCGAHAN                   MOUNTRAIL,
#1-18-7H       HUNT OIL   ND           8.56%  697**     N/A          N/A

ABELMANN 23-14
#1H            BRIGHAM    MCKENZIE, ND 8.02%  4,169     N/A          N/A

KJORSTAD #5300
24-22H         OASIS      WILLIAMS, ND 6.46%  2,713**   15           1,115**

DOMASKIN                  MOUNTRAIL,
#19-30-29H     FIDELITY   ND           1.94%  2,731**   N/A          N/A

CLIFFORD BAKKE            MOUNTRAIL,
26-35 #1H      BRIGHAM    ND           1.04%  5,061     7            3,657



* Initial production rate (the "IP" rate) is the 24-hour "Peak Production
Rate." Peak Production Rates may be established following the initial day of
production, depending on operator design or well flowback profiles. The IP
rate may be estimated based on other third party estimates or limited data
available at this time.



** The initial BOE production per day ("IP/BOEPD") for each well, the days
used to compute the average BOE per day ("AVG. BOEPD") and the average BOE
produced per day ("AVG. BOEPD") during such computation periods IP/BOEPD and
AVG. BOEPD rates for these wells include only crude oil production because
associated natural gas production was not available.



*** Average barrels of oil equivalents per day ("AVG. BOEPD") exclude any
days a well was down for work/maintenance. All information in the foregoing
table was obtained through operator drilling reports, operator daily
production reports and certain Oil & Gas Division reports publicly available
through North Dakota Industrial Commission.







ACREAGE ACQUISITIONS AND PRODUCTION PROJECTIONS

Year-to-date through September 30, 2010, Northern Oil has acquired approximately 38,864 net acres for an aggregate price of $42.2 million, or an average price of $1,086 per acre.  Northern Oil expects to continue to opportunistically acquire acreage throughout the remainder of 2010 and 2011.  Based on 2010 and anticipated 2011 activity and assuming drilling activity within the Williston Basin continues at its current pace, We expect to average approximately 6,500 BOE per day in production for 2011.

MANAGEMENT COMMENT

Michael Reger, Northern Oil's Chief Executive Officer, commented, "The third quarter was our best ever in terms of production volumes, Adjusted EBITDA, and key acreage acquisition.  The value of our non-operated franchise is best illustrated by the fact that 80% of the acreage we acquired in the third quarter has already been drilled or is currently drilling.  We believe we are well positioned to remain focused on the best areas of this rapidly advancing play and turn our acreage to production quickly and efficiently.  We look forward to further success in 2011 as we continue to gain critical mass and participate with the many skilled operators driving technology and growth in this premier oil play."

THIRD 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, November 8, 2010 at 10:00 a.m. Central Standard Time.  Details for the conference call are as follows:  


Dial-In Number: (866) 837-9779 (US/Canada) and (703) 639-1417 (International)



Conference ID: 1490994, Northern Oil and Gas Third 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: oil and gas prices, our ability to raise capital, 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.  


CONTACT:
Investor Relations
Erik Nerhus
952-476-9800






NORTHERN OIL AND GAS, INC.

CONDENSED BALANCE SHEETS

SEPTEMBER 30, 2010 AND DECEMBER 31, 2009



ASSETS

                                               September 30,

                                               2010           December 31,

                                               (UNAUDITED)    2009

CURRENT ASSETS

 Cash and Cash Equivalents                     $ 39,486,949   $ 6,233,372

 Trade Receivables                             17,841,344     7,025,011

 Prepaid Drilling Costs                        7,052,815      1,454,034

 Prepaid Expenses                              417,913        143,606

 Other Current Assets                          303,848        201,314

 Short - Term Investments                      -              24,903,476

 Deferred Tax Asset                            863,000        2,057,000

    Total Current Assets                       65,965,869     42,017,813



PROPERTY AND EQUIPMENT

 Oil and Natural Gas Properties,
 Full Cost Method (including
 unevaluated costs of

   $105,415,622 at 9/30/2010
   and $53,862,529 at 12/31/2009)              205,430,775    96,801,626

 Other Property and Equipment                  2,395,743      439,656

    Total Property and Equipment               207,826,518    97,241,282

 Less - Accumulated Depreciation and Depletion 13,454,548     5,091,198

    Total Property and Equipment, Net          194,371,970    92,150,084



DEBT ISSUANCE COSTS                            1,446,521      1,427,071





    Total Assets                               $ 261,784,360  $ 135,594,968



LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

 Accounts Payable                              $ 15,086,298   $ 6,419,534

 Line of Credit                                -              834,492

 Accrued Expenses                              2,358,824      316,977

 Derivative Liability                          2,105,190      1,320,679

 Other Liabilities                             18,574         18,574

    Total Current Liabilities                  19,568,886     8,910,256



LONG-TERM LIABILITIES

 Revolving Credit Facility                     -              -

 Derivative Liability                          3,051,982      1,459,374

 Subordinated Notes                            400,000        500,000

 Other Noncurrent Liabilities                  410,316        243,888

    Total Long-Term Liabilities                3,862,298      2,203,262



DEFERRED TAX LIABILITY                         5,931,000      922,000



    Total Liabilities                          29,362,184     12,035,518



STOCKHOLDERS' EQUITY

 Common Stock, Par Value $.001; 100,000,000
 Authorized, 51,596,849

  Outstanding (2009 – 43,911,044 Shares
  Outstanding)                                 51,597         43,912

 Additional Paid-In Capital                    223,847,529    124,884,266

 Retained Earnings                             9,509,614      841,892

 Accumulated Other Comprehensive Income (Loss) (986,564)      (2,210,620)

    Total Stockholders' Equity                 232,422,176    123,559,450



    Total Liabilities and Stockholders' Equity $ 261,784,360  $ 135,594,968








NORTHERN OIL AND GAS, INC.

CONDENSED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009

(UNAUDITED)

                           Three Months Ended         Nine Months Ended

                           September 30,              September 30,

                           2010          2009         2010          2009

REVENUES

 Oil and Gas Sales         $ 15,541,520  $ 5,146,972  $ 35,575,240  $ 8,206,202

 Gain (Loss) on Settled
 Derivatives               776,010       (291,000)    902,946       (416,878)

 Mark-to-Market of
 Derivative Instruments    (6,449,577)   -            (3,189,194)   -

 Other Revenue             15,868        -            48,116        -

                           9,883,821     4,855,972    33,337,108    7,789,324



OPERATING EXPENSES

 Production Expenses       1,084,769     236,362      1,978,526     450,502

 Production Taxes          1,604,608     437,048      3,274,751     684,763

 General and
 Administrative Expense    1,624,071     896,877      5,242,582     2,020,828

 Depletion of Oil and Gas
 Properties                3,767,712     935,804      8,252,153     1,786,130

 Depreciation and
 Amortization              60,300        22,918       111,197       68,374

 Accretion of Discount on
 Asset Retirement
 Obligations               18,025        1,306        30,777        4,777

    Total Expenses         8,159,485     2,530,315    18,889,986    5,015,374



INCOME FROM OPERATIONS     1,724,336     2,325,657    14,447,122    2,773,950



OTHER (EXPENSE) INCOME     (117,110)     321,589      (349,400)     138,819



INCOME BEFORE INCOME
TAXES                      1,607,226     2,647,246    14,097,722    2,912,769



INCOME TAX PROVISION       620,000       1,059,000    5,430,000     1,165,000



NET INCOME                 $ 987,226     $ 1,588,246  $ 8,667,722   $ 1,747,769







Net Income Per Common
Share - Basic              $ 0.02        $ 0.04       $ 0.18        $ 0.05



Net Income Per Common
Share - Diluted            $ 0.02        $ 0.04       $ 0.18        $ 0.05



Weighted Average Shares
Outstanding – Basic      51,519,732    36,769,195   48,544,749    35,201,124



Weighted Average Shares
Outstanding - Diluted      52,145,181    36,941,573   49,127,706    35,312,834








NORTHERN OIL AND GAS, INC.

CONDENSED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009

(UNAUDITED)

                                                     Nine Months Ended

                                                     September 30,

                                                     2010          2009

CASH FLOWS FROM OPERATING ACTIVITIES

 Net Income                                          $ 8,667,722   $ 1,747,769

 Adjustments to Reconcile Net Income to Net Cash
 Provided by

   Operating Activities:

  Depletion of Oil and Gas Properties                8,252,153     1,786,130

  Depreciation and Amortization                      111,197       68,374

  Amortization of Debt Issuance Costs                366,729       312,386

  Accretion of Discount on Asset Retirement
  Obligations                                        30,777        4,777

  Income Tax Provision                               5,430,000     1,165,000

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

  Market Value adjustment of Derivative Instruments  3,189,194     -

  Amortization of Deferred Rent                      (13,930)      (13,930)

  Share - Based Compensation Expense                 2,730,779     324,048

  Changes in Working Capital and Other Items:

    Increase in Trade Receivables                    (10,816,333)  (3,960,249)

    Increase in Prepaid Expenses                     (274,307)     (26,623)

    Increase in Other Current Assets                 (102,534)     -

    Increase in Accounts Payable                     8,666,764     2,952,237

    Decrease in Accrued Expenses                     (123,153)     (17,418)

    Net Cash Provided By Operating Activities        26,312,614    4,342,501



CASH FLOWS FROM INVESTING ACTIVITIES

 Purchases of Other Equipment and Furniture          (1,956,087)   (14,450)

 Increase in Prepaid Drilling Costs                  (5,598,781)   (662)

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

 Proceeds from Sale of Available for Sale Securities 25,890,901    800,000

 Increase in Oil and Gas Properties                  (92,812,276)  (25,804,442)

    Net Cash Used For Investing Activities           (74,238,366)  (25,019,554)



CASH FLOWS FROM FINANCING ACTIVITIES

 Payments on Line of Credit                          (834,492)     (812,323)

 Advances on Revolving Credit Facility               5,300,000     26,000,000

 Payments on Revolving Credit Facility               (5,300,000)   (17,000,000)

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

 Debt Issuance Costs Paid                            (386,179)     (1,190,061)

 Proceeds from Issuance of Common Stock - Net of
 Issuance Costs                                      82,500,000    12,686,763

    Net Cash Provided by Financing Activities        81,179,329    20,184,379



NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 33,253,577    (492,674)



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



CASH AND CASH EQUIVALENTS – END OF PERIOD          $ 39,486,949  $ 288,042



Supplemental Disclosure of Cash Flow Information

 Cash Paid During the Period for Interest            $ 169,232     $ 472,116

 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                           $ 12,679,422  $ 224,879

  Payment of Compensation through Issuance of Common
  Stock                                              $ 5,956,526   $ 324,048

  Capitalized Asset Retirement Obligations           $ 151,009     $ 104,396

  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 GAAP Net Income to Adjusted EBITDA



                                             Three Months Ended

                                             September 30,  June 30,

                                             2010           2010

Net Income                                   $ 987,226      $ 6,120,866



Add Back:



 Income Tax Provision                        620,000        3,833,000



 Depreciation, Depletion, Amortization, and
 Accretion                                   3,931,999      2,766,688



 Share Based Compensation                    724,410        1,193,072



 Mark-to-Market of Derivative Instruments    6,449,577      (4,251,199)



 Interest Expense                            59,221         14,959



           Adjusted EBITDA                   $ 12,772,433   $ 9,677,386



Adjusted EBITDA Per Common Share - Basic     $ 0.25         $ 0.19



Adjusted EBITDA Per Common Share - Diluted   $ 0.24         $ 0.19



Weighted Average Shares Outstanding –
Basic                                        51,519,732     49,934,409



Weighted Average Shares Outstanding -
Diluted                                      52,145,181     50,609,944










Northern Oil and Gas, Inc.

Reconciliation of GAAP Net Income to Net Income Excluding

Unrealized Mark-to-Market Hedging Losses



                                                Three Months Ended

                                                September 30,  June 30,

                                                2010           2010

Net Income                                      $ 987,226      $ 6,120,866



Mark-to-Market of Derivative Instruments        6,449,577      (4,251,199)



Tax Impact                                      (2,475,000)    1,633,000



Net Income without the Effect of Certain Items  $ 4,961,803    $ 3,502,667



Net Income Per Common Share – Basic           $ 0.10         $ 0.07



Net Income Per Common Share – Diluted         $ 0.10         $ 0.07



Weighted Average Shares Outstanding – Basic   51,519,732     49,934,409



Weighted Average Shares Outstanding - Diluted   52,145,181     50,609,944









SOURCE Northern Oil and Gas, Inc.