Kodiak Oil & Gas Corp. Reports Third Quarter 2007 Financial and Operational Results



    DENVER, Nov. 8 /CNW/ -- Kodiak Oil & Gas Corp. (Amex:   KOG), an oil and
gas exploration and production company with assets in the Green River Basin of
southwest Wyoming and the Williston Basin of North Dakota and Montana, today
reported financial and operating results for the three and nine months ended
September 30, 2007.
    
    Third Quarter 2007
    
    The Company reported a net loss for the three months ended September 30,
2007 of approximately $22.0 million, or $0.25 per basic and diluted share, as
compared to a net loss of approximately $389,000, or $0.01 per basic and
diluted share, for the same period in 2006. The third quarter 2007 net loss
included a $20 million non-cash charge related to the impairment of the
carrying value of oil and gas properties.  Excluding the impairment, Kodiak
would have reported a net loss of $1.9 million, or $0.02 per share.  Total
revenues were approximately $2.5 million for the quarter versus approximately
$1.3 million in the third quarter of 2006.  Oil and gas revenues increased
111% to approximately $2.2 million for the third quarter of 2007 on an 89%
increase in production volumes over the third quarter of 2006. Crude oil
revenue accounted for 90% of total third quarter 2007 oil and gas revenue.
    Adjusted EBITDA was $816,000 for third quarter 2007 as compared to
$350,000 for the same period in 2006.  Kodiak defines adjusted EBITDA as net
income before interest, taxes, depreciation, depletion, amortization and
accretion, non-cash stock-based compensation expense, impairment charges and
gains or losses on foreign currency exchange.  A reconciliation of adjusted
EBITDA, a non-GAAP measure, to net income, as well as important disclosures
about the use of this measure, are included in this news release and in the
Company's filings on Form 10-Q.
    
    Nine Months Results
    
    The Company reported a net loss for the nine months ended September 30,
2007 of $36.9 million, or $0.42 per basic and diluted share, as compared to a
net loss of $1.4 million, or $0.02 per basic and diluted share, for the same
period in 2006.  Included in 2007 year to date earnings is a non-cash
impairment of $34.0 million. Excluding the impairment, results for the nine
months ended September 30, 2007 would have been a net loss of $2.9 million or
$0.03 per share. Total revenues were approximately $7.0 million in the first
nine months of 2007 versus $3.4 million in 2006.  Oil and gas sales were $5.6
million for the first nine months of 2007 versus $2.8 million in the same
period in 2006.  The increase in oil and gas revenue was largely attributable
to production volume increases, as gas sales volumes increased 61% and oil
volumes increased 108%.
    For the nine months ended September 30, 2007, Kodiak reported adjusted
EBITDA of $2.1 million.  This compares to approximately $968,000 of adjusted
EBITDA for the same period in 2006.  Net cash provided by operating activities
for the nine-month period in 2007 was $617,000 as compared to $375,000 used in
operating activities during the same period in 2006.
    As of September 30, 2007, Kodiak had $19.4 million in cash and cash
equivalents, $18.6 million of working capital and no long-term debt.
    
    Impairment Charge
    
    Kodiak adheres to the full cost method of accounting for its oil and gas
properties, which requires a quarterly ceiling test to determine whether the
net capitalized costs of its oil and gas properties exceed the present value
of estimated future net revenues from proved reserves under Securities
Exchange Commission (SEC) guidelines.  The SEC guidelines require the use of
current prices and costs without consideration for forecasted price changes,
expected operating efficiencies, or the development of unproved reserves.
Natural gas prices used in the ceiling test calculation at September 30, 2007
were $0.98 per Million British thermal units (MMBtu) for gas production in
Wyoming, where the entire write-down occurred, and $5.63 per MMBtu for gas
produced in North Dakota and Montana.  Crude oil prices were based on the West
Texas Intermediate (WTI) posting of $78.25 less applicable differentials.
Under these parameters, the Company's carrying value of its oil and gas
properties exceeded the present value of estimated future revenues by $20.0
million, and an impairment expense for this amount was recorded for the
quarter.  Also, in the nine-month period Kodiak recorded an impairment expense
of $14.0 million at March 31, 2007.
    Commenting on the impairment charge, Kodiak's President and CEO, Lynn
Peterson said: "The nine-month impairment charge of $34.0 million is generally
attributed to the capital invested in the early-stage exploration of our
Vermillion Basin deep gas play that to date has not yielded production in
commercial quantities nor qualified reserves.  Of course, the continued low
Rocky Mountain gas prices received also factored into the ceiling test
calculation.   Kodiak continues to devote capital expenditures to the
Vermillion Basin project and since inception has drilled only four deep
Vermillion wells.  We continue to refine our geologic model while focusing on
identifying optimal drilling and completion techniques because we firmly
believe a large natural gas resource underlies our leasehold.  We are
constantly looking to lower per-well investment in the basin by decreasing
drilling days and identifying the best completion techniques available to
tight-gas producers, which we believe, regional natural gas prices
notwithstanding, help us as we work to establish production and reserves in
the Vermillion deep play."
    
    Production and Operations Activity
    
    Kodiak increased production 78% to 52.9 million cubic feet (MMcf) of
natural gas in the quarter, compared to 29.8 MMcf for the same period last
year.  Oil production volumes were up 92% to 27,553 barrels for the third
quarter 2007, compared to 14,316 barrels in the third quarter of 2006.  Total
production increased 89% to 36,366 barrels of oil equivalent (BOE) for the
third quarter 2007, compared to 19,280 BOE in the same quarter last year.
    The average gas price received for the quarter decreased 11% to $4.28 per
thousand cubic feet of natural gas (Mcf), as compared to the $4.82 per Mcf
received in 2006.  The average oil price received was up 14% to $71.65 per
barrel for the quarter, as compared to the $62.66 per barrel received in the
second quarter of 2006. For the first nine months of 2007, gas prices averaged
$4.97 per Mcf, down from $5.96 per Mcf in 2006.  Oil prices were up modestly
to $61.44 per barrel versus $58.93 in 2006.  Kodiak's oil and gas production
is currently unhedged.
    During the first nine months of 2007, Kodiak invested $39.9 million for
exploration and development of its leasehold.  The company drilled 11 gross
wells (6.25 net).  Of these, three gross wells (2.0 net) have been completed,
five (2.32 net) were dry holes and three (1.9 net) wells remain in progress.
    
    Williston Basin-Montana and North Dakota
    Tall Bear Project
    
    Kodiak continues to actively lease acreage for prospective oil production
from the Bakken shale in Dunn County, N.D.  This area has experienced
significant drilling activity over the past year, and other operators have
announced some very encouraging results to the north and south of Kodiak's
leasehold position.  Kodiak has acquired 9,369 gross (6,442 net) acres on this
prospect area.  We are presently awaiting approval of a permit to drill from
the Bureau of Land Management and the Bureau of Indian Affairs.
    
    Four Bear Project
    
    Just to the north and northwest of the Tall Bear prospect we are actively
leasing in an area that we refer to as Four Bear.  To further oil and gas
activity here, the Company recently entered into a participation agreement
with a private independent exploration and production company to jointly lease
and develop certain properties where we have a 50% working interest.  Both
parties to the participation agreement expect to spud the first well in the
first half of 2008 as permits are secured.
    Commenting on Williston Basin activities, Peterson said: "Given strong
results by others here, we continue to actively acquire acreage in Dunn
County, N.D.  The acreage is prospective for potentially prolific Bakken shale
oil production in a play concept that has been emerging over the past couple
of years.  Given the unprecedented oil price environment, we have attempted to
reallocate at least some of our capital to try and maximize our exposure to
oil production.  We believe this strategy is especially valid given the
depressed Rocky Mountain natural gas prices in advance of Rockies Express
pipeline.  In assembling a Bakken presence in Dunn County, we were fortunate
to enter a participation agreement with a large, respected, private
exploration and production company where we will divide the leasehold and its
operations on a 50/50 basis.   Together with our partner we can double our
efforts to explore and best recover the hydrocarbons that may be contained in
the leasehold.  We are not changing our overall corporate focus, but rather
are capitalizing on an ideal time to develop one of our core crude oil
operating areas while prices are strong and per-well economics are incredibly
compelling.  It is a strategy that is consistent with our stated philosophy of
maintaining a balance between oil and gas production.  We intend to best
leverage our Bakken exposure in what is our first opportunity to successfully
assemble a meaningful acreage position in a rapidly developing oil play."
    
    Vermillion Basin-Wyoming
    
    During the third quarter 2007, the NT Federal #4-35H-R well (KOG operates
with 100% WI) was re-entered, side-tracked and vertically drilled to the
Baxter, Frontier and Dakota formations to a total depth of 14,434 feet. Kodiak
obtained full cores over 60-foot intervals from the NT Federal #4-35 which are
being evaluated for gas in place, rock properties as well as mechanics and
fracture orientation among other reservoir characteristics.  In October, the
Dakota and Frontier intervals were fracture-stimulated while the uphole Baxter
shale pay is scheduled to be fracture-stimulated in late November 2007.  We
intend to announce results from the well when the fracture stimulation work is
completed.
    Kodiak also drilled the HB #5-3 well (KOG operates with 80% WI) to a
total depth of 13,534 feet to evaluate the Baxter and Frontier zones.   The
well was fracture-stimulated in the Frontier sand in October and the Baxter
shale is currently being stimulated.  We intend to announce results from the
well when the fracture stimulation work is completed.
    During the quarter, Kodiak completed the data acquisition phase of its
43-square mile seismic survey program on the northern block of its acreage.
Processing and interpretation of the data is expected to be completed in the
fourth quarter.  Once the seismic data is fully interpreted and merged into
existing data, the cores from the NT Federal #4-35 are fully evaluated, and
the two aforementioned wells are completed, the Company will be able to best
establish its 2008 Vermillion Basin drilling program.
    Commenting on the Vermillion Basin, Peterson said: "The Vermillion play
continues to progress as we move up the learning curve with respect to the
complex geology and our drilling and completion techniques.  Exploration
during the second half of 2007 has been dedicated to honing our knowledge of
the play and refining our understanding of the hydrocarbon system.  We have
acquired seismic, cored one well which is currently being analyzed, and
focused intently on deconstructing our completion work to employ changes to
our fracture stimulation procedures. Upon thorough evaluation of these
important data points, we can best proceed with well location selection for
the 2008 program.  We are reviewing options to fund our 2008 exploration
program, including joint ventures with industry and financial partners."
    
    Conference Call
    
    In conjunction with Kodiak's release of its third quarter 2007 results,
you are invited to participate in a conference call with management on Friday,
November 9, 2007 at 11:00 a.m. Eastern Standard Time.

    Date:      Friday, November 9, 2007

    
    Time:      11:00 a.m. EST
               10:00 a.m. CST
                9:00 a.m. MST
                8:00 a.m. PST
    

    
    Call:      (877) 257-3168 (US/Canada) and (706) 643-3820 (International)
               Passcode 21928863
    

    
    Internet:  Live and rebroadcast over the Internet:  log on to
               http://www.kodiakog.com
    

    
    Replay:    Available through Sunday, November 11, 2007 at (800) 642-1687
               (US/Canada) and (706) 645-9291 (International) using passcode
               21928863 and for 30 days at http://www.kodiakog.com
    Use of Non-GAAP Financial Measures
    
    This news release includes non-GAAP financial measures entitled "Adjusted
EBITDA."  For a reconciliation of this non-GAAP financial measures to its most
comparable financial measure under GAAP, as well as for a description as to
why management believes that this measure is useful for investors, see the
footnotes following the tables at the end of this press release.
    
    About Kodiak Oil & Gas Corp.
    
    Kodiak Oil & Gas, headquartered in Denver, is an independent energy
exploration and development company focused on exploring, developing and
producing oil and natural gas in the Williston and Green River Basins in the
U.S. Rocky Mountains. For further information, please visit
http://www.kodiakog.com.  The common shares of the Company are listed for
trading on the American Stock Exchange under the symbol "KOG."
    
    Forward-Looking Statements
    
    This press release includes statements that may constitute
"forward-looking" statements, usually containing the words "believe,"
"estimate," "project," "expect" or similar expressions. These statements are
made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements inherently involve
risks and uncertainties that could cause actual results to differ materially
from the forward-looking statements.  Forward-looking statements are
statements that are not historical facts and are generally, but not always,
identified by the words "expects," "plans," "anticipates," "believes,"
"intends," "estimates," 'projects," "potential" and similar expressions, or
that events or conditions "will," "would," "may," "could" or "should" occur.
Information inferred from the interpretation of drilling results may also be
deemed to be forward-looking statements, as it constitutes a prediction of
what might be found to be present when and if a well is actually developed.
Forward-looking statements in this document include statements regarding the
Company's exploration, drilling and development plans, the Company's
expectations regarding the timing and success of such programs, and the
Company's expectations regarding production from its Williston property.
Factors that could cause or contribute to such differences include, but are
not limited to, fluctuations in the prices of oil and gas, uncertainties
inherent in estimating quantities of oil and gas reserves and projecting
future rates of production and timing of development activities, competition,
operating risks, acquisition risks, liquidity and capital requirements, the
effects of governmental regulation, adverse changes in the market for the
Company's oil and gas production, dependence upon third-party vendors, and
other risks detailed in the Company's periodic report filings with the
Securities and Exchange Commission.
    
    For further information, please contact:
    Mr. Lynn A. Peterson, President, Kodiak Oil & Gas Corp., +1-303-592-8075
    [Financial and Operational Tables Accompany this News Release]
    
    The notes accompanying the financial statements are an integral part of
the consolidated financial statements and can be found in Kodiak's filing on
Form
    10-Q for the period ended September 30, 2007.



    
                            KODIAK OIL & GAS CORP.
                         CONSOLIDATED BALANCE SHEETS
    

    
                                           (UNAUDITED)     (AUDITED)
                                          September 30,   December 31,
                  ASSETS                      2007           2006
    

    
    Current Assets:
      Cash and cash equivalents           $19,364,686  $ 58,469,263
      Accounts receivable
         Trade                              1,904,740     1,877,185
         Accrued sales revenues               756,606       666,990
      Prepaid expenses and other              163,343       103,707
    

    Total Current Assets        22,189,375    61,117,145

    
    Property and equipment (full cost
     method), at cost:
    Proved oil and gas properties          63,750,176    27,167,338
       Unproved oil and gas properties     20,132,339    19,607,474
       Wells in progress                    6,318,482     7,700,415
       Less-accumulated depletion,
        depreciation, amortization,
        accretion and asset impairment    (40,193,045)   (2,224,962)
       Net oil and gas properties          50,007,952    52,250,265
       Other property and equipment, net
        of accumulated depreciation
        of $153,622 in 2007 and of $102,231
        in 2006                               324,463       181,752
    Restricted Investments                    253,339       224,452
    

    Total Assets                          $72,775,129  $113,773,614

    
    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current Liabilities:
      Accounts payable and accrued
       liabilities                        $ 3,579,461  $  9,879,104
    

    
    Noncurrent Liabilities:
      Asset retirement obligation             368,280       249,695
             Total Liabilities              3,947,741    10,128,799
    

    
    Commitments and Contingencies -
     Note 4
    Stockholders' Equity:
      Common stock, $0.01 par value:
       authorized-100,000,000
      Issued:  87,931,926 shares in 2007
       and 87,548,426 shares in 2006          879,319       875,484
      Additional paid-in capital          113,452,690   111,384,998
      Accumulated deficit                 (45,504,621)   (8,615,667)
    

    Total Stockholders' Equity   68,827,388   103,644,815

    
    Total Liabilities and Stockholders'
     Equity                               $72,775,129  $113,773,614
    



    
                            KODIAK OIL & GAS CORP.
                    CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (UNAUDITED)
    


    
                           Three months ended         Nine months ended,
                              September 30,              September 30,
                            2007         2006         2007         2006
    

    
    Revenues:
       Gas production $    226,116  $  143,504  $    750,591  $   558,768
       Oil production    1,974,133     897,085     4,896,077    2,252,499
       Interest            305,749     232,446     1,323,987      599,285
            Total
             revenue     2,505,998   1,273,035     6,970,655    3,410,552
    

    
    Cost and expenses:
       Oil and gas
        production         460,867     194,021     1,197,639      543,681
       Depletion,
        depreciation,
        amortization
        and accretion    2,036,384     494,829     4,062,397    1,374,019
       Asset
        impairment      20,000,000          --    34,000,000           --
       General and
        administrative   2,091,145     980,100     5,380,549    3,270,534
       (Gain) on
        currency
         exchange          (97,523)     (6,627)     (780,976)    (374,770)
    

    
            Total
             costs and
             expenses   24,490,873   1,662,323    43,859,609    4,813,464
    

    Net loss          $(21,984,875) $ (389,288) $(36,888,954) $(1,402,912)

    
    Basic & diluted
     weighted-average
     common shares
     outstanding        87,799,774  74,939,654    87,658,770   69,706,082
    

    
    Basic & diluted
     net loss per
     common share     $     (0.250) $   (0.005) $     (0.421) $    (0.020)
    



    
                            KODIAK OIL & GAS CORP.
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (UNAUDITED)
    


    
                                         Nine Months Ended September 30,
                                                2007         2006
    

    
    Cash flows from operating activities:
       Net loss                             $(36,888,954) $(1,402,912)
    Reconciliation of net loss to net cash
     provided by (used in) operating
     activities:
         Depletion, depreciation,
          amortization and accretion           4,062,397    1,374,019
         Asset impairment                     34,000,000           --
         Stock based compensation              1,689,377    1,372,152
      Changes in current assets and
       liabilities:
         Accounts receivable-trade               (27,555)    (678,549)
         Accounts receivable-accrued revenue     (89,616)    (204,253)
         Prepaid expenses and other              (59,636)    (107,462)
         Accounts payable and accrued
          liabilities                         (2,069,346)    (728,440)
    

    
     Net cash provided by (used in)
      operating activities                       616,667     (375,445)
    

    
    Cash flows from investing activities:
         Oil and gas properties              (39,855,687) (22,111,417)
         Equipment                              (218,820)     (23,457)
         Restricted investment                   (28,887)     (64,400)
    

    Net cash (used in) investing activities  (40,103,394) (22,199,274)

    
    Cash flows from financing activity:
         Proceeds from the issuance of shares    382,150   39,631,330
         Stock issuance costs                         --   (2,909,299)
    

    Net cash provided by financing activities    382,150   36,722,031

    Net change in cash and cash equivalents  (39,104,577)  14,147,312

    
    Cash and cash equivalents at beginning
     of the period                            58,469,263    7,285,548
    

    
    Cash and cash equivalents at end of the
     period                                 $ 19,364,686  $21,432,860
    

    
    Supplemental cash flow information
      Oil & gas property accrual included
       in Accounts payable and accrued
       liabilities                          $    375,100  $ 1,726,890
    

    
      Asset retirement obligation           $    100,379  $    85,725
    Use of Non-GAAP Financial Matters
    
    In evaluating its business, Kodiak considers earnings before interest,
taxes, depreciation, depletion, amortization, gain on foreign currency and
stock-based compensation ("Adjusted EBITDA") as a key indicator of financial
operating performance and as a measure of the ability to generate cash for
operational activities and future capital expenditures.  Adjusted EBITDA is
not a Generally Accepted Accounting Principle ("GAAP") measure of performance.
The Company uses this non-GAAP measure primarily to compare its performance
with other companies in the industry that make a similar disclosure and as a
measure of its current liquidity.  The Company believes that this measure may
also be useful to investors for the same purpose and for an indication of the
Company's ability to generate cash flow at a level that can sustain or support
our operations and capital investment program.  Investors should not consider
this measure in isolation or as a substitute for operating income or loss,
cash flow from operations determined under GAAP, or any other measure for
determining the Company's operating performance that is calculated in
accordance with GAAP.  In addition, because EBITDA is not a GAAP measure, it
may not necessarily be comparable to similarly titled measures employed by
other companies.
    Reconciliation between Adjusted EBITDA and net income is provided in the
tables below for the three- and nine-month periods ended September 30.


    
                               Nine Months ending        Three Months ending
                                  September 30,              September 30,
    Reconciliation of
     Adjusted EBITDA:           2007         2006          2007       2006
    

    
    Net Loss               $(36,888,954) $(1,402,912) $(21,984,875) $(389,288)
      Add back:
         Depreciation,
          depletion,
          amortization
          and accretion       4,062,397    1,374,019     2,036,384    494,829
         Asset impairment    34,000,000           --    20,000,000         --
         (Gain) on foreign
          currency exchange    (780,976)    (374,770)      (97,523)    (6,627)
         Stock based
          compensation
          expense             1,689,377    1,372,152       861,583    251,059
    

    Adjusted EBITDA        $  2,081,844  $   968,489  $    815,569  $ 349,973




For further information:

For further information: Mr. Lynn A. Peterson, President of Kodiak Oil &
 Gas Corp., +1-303-592-8075 Web Site: http://www.kodiakog.com

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