UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported)

November 4, 2015 (November 4, 2015)

 

 

 

EMERALD OIL, INC.

(Exact name of registrant as specified in its charter)

 

Delaware   1-35097   77-0639000
(State or other jurisdiction of
incorporation)
  (Commission File Number)   (IRS Employer
Identification No.)

 

200 Columbine Street, Suite 500
Denver, CO 80206

(Address of principal executive offices, including zip code)

 

(303) 595-5600

(Registrant’s telephone number, including area code)

 

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

  

 

 

Item 2.02.Results of Operations and Financial Conditions

 

On November 4, 2015, Emerald Oil, Inc. (the “Company”) issued a press release announcing results for the fiscal quarter ended September 30, 2015. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated herein by reference.

 

The Company’s press release announcing its financial results for the fiscal quarter ended September 30, 2015 contains non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with United States generally accepted accounting principles, or GAAP. Pursuant to the requirements of Regulation G, the Company has provided quantitative reconciliations within the press release of the non-GAAP financial measures to the most directly comparable GAAP financial measures.

 

In accordance with General Instruction B.2 of Form 8-K, the information in this report, including the exhibit attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (“the Exchange Act”), nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

 

Item 9.01.Financial Statements and Exhibits.

 

(d) Exhibits.

 

The following exhibits are filed in accordance with the provisions of Item 601 of Regulation S-K:

 

Exhibit No.   Description
     
99.1  

Press Release of Emerald Oil, Inc., dated November 4, 2015.

 

 2 

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report on Form 8-K to be signed on its behalf by the undersigned hereunto duly authorized.

 

    EMERALD OIL, INC.
     
Date: November 4, 2015 By: /s/ Ryan Smith
    Ryan Smith
    Chief Financial Officer

 

 3 

 

 

EXHIBIT INDEX

 

Exhibit No.   Description
     
99.1  

Press Release of Emerald Oil, Inc., dated November 4, 2015.

 

 4 

 



 

Exhibit 99.1

 

 

 

Emerald Oil Reports Third Quarter 2015 Financial and Operational Results and Guidance Increase

 

DENVER, CO – November 4, 2015 --- Emerald Oil, Inc. (NYSE MKT: EOX) (“Emerald” or the “Company”) today announced financial and operational results for the quarter ended September 30, 2015.

 

Highlights

 

·Third quarter production of 523,202 BOE increased 49% as compared to 351,755 BOE in the third quarter of 2014. Daily production averaged 5,687 BOEPD, 17% above the midpoint and 14% above the high end of Emerald’s third quarter 2015 guidance range;
·2015 fourth quarter production guidance raised 500 Boe/d to 4,700 – 5,000 Boe/d;
·Reduction of per unit LOE costs during the third quarter of 2015 to approximately $12.96 per BOE, a decrease of 31% compared to the second quarter of 2015;
·Third quarter oil and natural gas revenue of $17.8 million, not including effect of settled derivatives;
·Third quarter Adjusted EBITDA of $5.9 million

 

Third Quarter 2015 Production

 

For the third quarter of 2015, Emerald’s total production volumes on a BOE basis increased 49% as compared to the third quarter of 2014. During the third quarter of 2015, Emerald realized a $37.65 average price per Bbl of oil (including settled derivatives) compared to an $82.61 average price per Bbl of oil during the third quarter of 2014.

 

   Quarter Ended September 30, 
   2015   2014 
Sales Volume (Total)          
Oil (Bbls)   496,829    338,352 
Gas (Mcf)   158,240    80,417 
Sales volumes (Boe)   523,202    351,755 
           
Average Daily Sales          
Oil (Bbls)   5,400    3,678 
Gas (Mcf)   1,720    874 
Sales volumes (Boe)   5,687    3,823 
           
Average Sales Prices          
Oil (Bbl)  $34.92   $83.54 
Effect of Settled Oil Derivatives   2.73    (0.93)
Oil Net of Settled Derivatives (Bbl)  $37.65   $82.61 
Gas (Mcf)  $3.13   $5.73 
Barrel of Oil Equivalent with Settled Derivatives  $36.70   $80.78 

 

Financial Results

 

Revenues from sales of oil and natural gas for the third quarter of 2015 were $17.8 million compared to $28.7 million for the same period in 2014. The decrease was due to lower realized crude oil prices during the third quarter of 2015. Crude oil revenue accounted for approximately 97% of oil and natural gas sales.

 

Lease operating expenses for the third quarter of 2015 were $6.8 million compared to $4.5 million for the same period in 2014. On a per unit basis, lease operating expenses were $12.96 per BOE in the third quarter of 2015 compared to $12.70 per BOE in the third quarter of 2014. Emerald also incurred workover expenses for the third quarter of 2015 of $1.4 million, or $2.71 per BOE.

 

General and administrative expenses for the third quarter of 2015 were $3.8 million compared to $5.5 million for the same period in 2014. On a per unit basis, G&A expenses (excluding non-cash stock-based compensation) were $6.50 per BOE in the third quarter of 2015 compared to $7.58 per BOE in the third quarter of 2014. Share-based compensation expenses, which are included in G&A expense, totaled $0.4 million in the third quarter of 2015 compared to $2.8 million for the same period in 2014.

 

   

 

 

Adjusted EBITDA was $5.9 million for the third quarter of 2015, as compared to $15.3 million for the same period in 2014. Adjusted Net Income (Loss) was $(12.1) million for the third quarter of 2015. Emerald recognized a $158.3 million non-cash impairment expense for the quarter ended September 30, 2015 due primarily to the substantial declines in commodity prices. Adjusted EBITDA and Adjusted Net Income (Loss) are non-GAAP financial measures. For additional information please refer to the reconciliation of these measures at the end of this news release.

 

Revolving Credit Facility Update

 

The Company and its advisors are continuing to work with the bank group regarding a payment schedule for the previously announced borrowing base deficiency of $19.6 million. Additionally, Emerald and its advisors are working with a group of second lien term providers for a term debt solution to address both the borrowing base and working capital.

 

 

Conference Call

 

Emerald will host a conference call on Thursday, November 5, 2015 at 9:30 a.m. Eastern Time (7:30 a.m. Mountain Time) to discuss financial and operational results for the quarter end.

 

Emerald Oil, Inc. 3Q2015 Financial and Operational Results Conference Call
Date:   Thursday, November 5, 2015
Time:   9:30 a.m. Eastern Time
  8:30 a.m. Central Time
  7:30 a.m. Mountain Time
  6:30 a.m. Pacific Time
Webcast:   Live and rebroadcast over the Internet at the Emerald Oil website
Website:   www.emeraldoil.com
Telephone Dial-In:   877-407-8831 (toll-free) and 201-493-6736 (international)
 
Telephone Replay:   Available through Thursday, November 12, 2015
  877-660-6853 (toll-free) and 201-612-7415 (international)
  Passcode: 413333

 

About Emerald

 

Emerald is an independent exploration and production operator that is focused on acquiring acreage and developing wells in the Williston Basin of North Dakota and Montana, targeting the Bakken and Three Forks shale oil formations and Pronghorn sand oil formation. Emerald is based in Denver, Colorado. More information about Emerald can be found at www.emeraldoil.com.

 

Forward-Looking Statements

 

This press release may include “forward-looking statements” within the meaning of the securities laws. All statements other than statements of historical facts included herein may constitute forward-looking statements. Forward-looking statements in this document may include statements regarding the Company’s expectations regarding the Company’s operational, exploration and development plans; expectations regarding the nature and amount of the Company’s reserves; and expectations regarding production, revenues, cash flows and recoveries. When used in this press release, the words "will," "potential," "believe," "estimate," "intend," "expect," "may," "should," "anticipate," "could," "plan," "predict," "project," "profile," "model," or their negatives, other similar expressions or the statements that include those words, are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, fluctuations in oil and natural gas prices, uncertainties inherent in estimating quantities of oil and natural 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 natural gas production, dependence upon third-party vendors, and other risks detailed in the Company’s periodic report filings with the Securities and Exchange Commission.

 

   

 

 

Corporate Contact:

 

Emerald Oil, Inc.

Mitch Ayer

Vice President - Finance & Investor Relations

(303) 595-5600

info@emeraldoil.com

www.emeraldoil.com

 

   

 

 

EMERALD OIL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

   September 30, 2015   December 31, 2014 
ASSETS          
CURRENT ASSETS          
Cash and Cash Equivalents  $5,068,320   $12,389,230 
Accounts Receivable – Oil and Natural Gas Sales   4,002,942    7,203,455 
Accounts Receivable – Joint Interest Partners   8,370,512    31,842,464 
Other Receivables   860,980    980,317 
Prepaid Expenses and Other Current Assets   681,581    289,061 
Fair Value of Commodity Derivatives   6,336,057    5,044,125 
Total Current Assets   25,320,392    57,748,652 
PROPERTY AND EQUIPMENT          
Oil and Natural Gas Properties, Full Cost Method, at cost:          
Proved Oil and Natural Gas Properties   697,814,220    593,472,170 
Unproved Oil and Natural Gas Properties   141,768,220    166,708,263 
    Equipment and Facilities   15,220,754    6,086,896 
Other Property and Equipment   4,266,762    2,583,372 
Total Property and Equipment   859,069,956    768,850,701 
Less – Accumulated Depreciation, Depletion and Amortization   (486,650,786)   (149,703,417)
Total Property and Equipment, Net   372,419,170    619,147,284 
Restricted Cash       4,000,000 
Fair Value of Commodity Derivatives   1,375,070     
Debt Issuance Costs, Net of Amortization   4,183,174    5,779,125 
Deposits on Acquisitions       140,173 
Deferred Tax Assets, Net   1,813,561    1,813,796 
Other Non-Current Assets   329,572    430,846 
Total Assets  $405,440,939   $689,059,876 
LIABILITIES AND STOCKHOLDERS’ EQUITY          
CURRENT LIABILITIES          
Accounts Payable  $38,762,753   $120,136,903 
Revolving Credit Facility   159,683,000     
Convertible Senior Notes   151,500,000     
Accrued Expenses   5,073,975    11,267,831 
    Advances from Joint Interest Partners   802,119    2,577,247 
    Deferred Tax Liability, Net   1,813,561    1,813,796 
Total Current Liabilities   357,635,408    135,795,777 
LONG-TERM LIABILITIES          
    Revolving Credit Facility       75,000,000 
Convertible Senior Notes       151,500,000 
Asset Retirement Obligations   3,265,518    2,671,975 
Warrant Liability   187,000    2,199,000 
Fair Value of Commodity Derivatives        
Total Liabilities   361,087,926    367,166,752 
           
COMMITMENTS AND CONTINGENCIES          
           
Preferred Stock – Par Value $.001; 20,000,000 Shares Authorized;          
Series B Voting Preferred Stock – 255,732 issued and outstanding at September 30, 2015 and December 31, 2014. Liquidation preference value of $256 as of September 30, 2015 and December 31, 2014.   256    256 
           
STOCKHOLDERS’ EQUITY          
Common Stock, Par Value $.001; 500,000,000 Shares Authorized, 8,708,499 and 3,891,431 Shares Issued and Outstanding, respectively   8,709    3,891 
Additional Paid-In Capital   507,612,218    455,087,277 
Accumulated Deficit   (463,268,170)   (133,198,300)
Total Stockholders’ Equity   44,352,757    321,892,868 
Total Liabilities and Stockholders’ Equity  $405,440,939   $689,059,876 

 

   

 

 

EMERALD OIL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited) 

 

  

Three Months Ended

September 30, 

  

Nine Months Ended

September 30,

 
   2015   2014   2015   2014 
REVENUES                    
Oil Sales  $17,350,524   $28,266,332   $52,981,871   $76,989,268 
Natural Gas Sales   494,804    460,857    1,224,667    2,061,201 
Net Gains on Commodity Derivatives   12,699,147    11,184,716    8,148,386    3,722,780 
Total Revenues   30,544,475    39,911,905    62,354,924    82,773,249 
OPERATING EXPENSES                    
Production Expenses   8,201,949    6,962,450    25,972,453    13,477,176 
Production Taxes   1,653,989    3,142,998    5,488,364    8,632,608 
General and Administrative Expenses   3,821,473    5,483,655    12,495,471    21,609,218 
Depletion of Oil and Natural Gas Properties   11,242,324    9,193,566    31,622,386    24,071,676 
Impairment of Oil and Natural Gas Properties   158,278,000        304,903,000     
Depreciation and Amortization   232,350    104,465    559,139    251,722 
Accretion of Discount on Asset Retirement Obligations   52,500    28,037    153,007    63,837 
Standby Rig Expense   3,800,446        6,173,111     
Total Operating Expenses   187,283,031    24,915,171    387,366,931    68,106,237 
INCOME (LOSS) FROM OPERATIONS   (156,738,556)   14,996,734    (325,012,007)   14,667,012 
                     
OTHER INCOME (EXPENSE)                    
Interest Expense   (2,735,348)   (1,206,571)   (7,044,901)   (2,515,034)
Warrant Revaluation Gain (Expense)   221,000    216,000    2,012,000    (1,751,000)
Other Income (Expense)   281    (347,088)   539    (343,041)
Total Other Expense, Net   (2,514,067)   (1,337,659)   (5,032,362)   (4,609,075)
                     
INCOME (LOSS) BEFORE INCOME TAXES   (159,252,623)   13,659,075    (330,044,369)   10,057,937 
                     
INCOME TAX PROVISION                
                     
NET INCOME (LOSS)  $(159,252,623)  $13,659,075   $(330,044,369)  $10,057,937 
                     
Net Income (Loss) Per Common Share – Basic  $(19.85)  $4.11   $(52.10)  $3.03 
                     
Net Income (Loss) Per Common Share - Diluted  $(19.85)  $3.29   $(52.10)  $2.89 
                     
Weight Average Shares Outstanding – Basic   8,021,992    3,324,970    6,334,549    3,316,751 
                     
Weighted Average Shares Outstanding –Diluted   8,021,992    4,419,020    6,334,549    4,093,377 

 

   

 

 

EMERALD OIL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) 

 

   Nine Months Ended September 30, 
   2015   2014 
CASH FLOWS FROM OPERATING ACTIVITIES          
Net Loss  $(330,044,369)  $10,057,937 
Adjustments to Reconcile Net Loss to Net Cash Provided By Operating Activities:          
Depletion of Oil and Natural Gas Properties   31,622,386    24,071,676 
Impairment of Oil and Natural Gas Properties   304,903,000     
Depreciation and Amortization   559,138    251,722 
Amortization of Debt Issuance Costs   2,145,832    727,997 
Accretion of Discount on Asset Retirement Obligations   153,007    63,837 
Net Gains on Commodity Derivatives   (8,148,386)   (3,722,780)
Net Cash Settlements Received (Paid) on Commodity Derivatives   5,481,384    (2,775,591)
Warrant Revaluation (Gain) Expense   (2,012,000)   1,751,000 
Share-Based Compensation Expense   2,710,683    9,497,044 
Changes in Assets and Liabilities:          
Decrease (Increase) in Trade Receivables – Oil and Natural Gas Revenues   3,200,513    (1,390,582)
Decrease (Increase) in Accounts Receivable – Joint Interest Partners   23,471,952    (1,224,056)
Decrease (Increase) in Other Receivables   119,337    (1,132,418)
Increase in Prepaid Expenses and Other Current Assets   (392,520)   (223,875)
(Increase) Decrease in Other Non-Current Assets   (35,882)   67,463 
(Decrease) Increase in Accounts Payable   6,585,510    2,364,168 
Decrease in Accrued Expenses   (4,867,351)   (7,813,470)
Increase in Other Non-Current Liabilities       198,551 
(Decrease) Increase in Advances from Joint Interest Partners   (1,775,128)   200,434 
Net Cash Provided By Operating Activities   33,677,105    30,969,057 
CASH FLOWS FROM INVESTING ACTIVITIES          
Purchases of Other Property and Equipment   (1,683,390)   (1,015,677)
Restricted Cash Released   4,000,000    11,000,512 
Payments of Restricted Cash       (2,648,721)
Decrease (Increase) in Deposits for Acquisitions   140,173    (648,441)
Proceeds from Sale of Oil and Natural Gas Properties, Net of Transaction Costs       36,155,859 
Investment in Oil and Natural Gas Properties   (175,371,888)   (391,368,324)
Net Cash Used For Investing Activities   (172,915,105)   (348,524,792)
CASH FLOWS FROM FINANCING ACTIVITIES          
Proceeds from Issuance of Convertible Senior Notes, Net of Transaction Costs       166,893,211 
Proceeds from Issuance of Common Stock, Net of Transaction Costs   48,049,115     
Advances on Revolving Credit Facility   100,000,000    55,000,000 
Payments on Revolving Credit Facility   (15,317,000)   (35,000,000)
Cash Paid for Finance Costs   (265,144)   (24,605)
Cash Paid for Debt Issuance Costs   (549,881)   (1,117,871)
Proceeds from Exercise of Stock Options and Warrants       110,750 
Net Cash Provided by Financing Activities   131,917,090    185,861,485 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   (7,320,910)   (131,694,250)
CASH AND CASH EQUIVALENTS – BEGINNING OF PERIOD   12,389,230    144,255,438 
CASH AND CASH EQUIVALENTS – END OF PERIOD  $5,068,320   $12,561,188 
Supplemental Disclosure of Cash Flow Information          
Cash Paid During the Period for Interest  $4,124,010   $1,867,433 
Cash Paid During the Period for Income Taxes  $   $ 
Non-Cash Financing and Investing Activities:          
Oil and Natural Gas Properties Included in Accounts Payable  $19,997,664   $92,963,874 
Stock-Based Compensation Capitalized to Oil and Natural Gas Properties  $708,600   $2,020,992 
Asset Retirement Obligation Costs and Liabilities  $440,536   $1,669,757 

 

   

 

 

In addition to reporting net income (loss) as defined under GAAP, we also present net earnings before interest, income taxes, depletion, depreciation, and amortization, accretion of discount on asset retirement obligations, impairment of oil and natural gas properties, warrant revaluation (gains) and expenses, net gain (loss) from mark-to-market on commodity derivatives, cash settlements received (paid), standby rig expenses and non-cash expenses relating to share based payments recognized under ASC Topic 718 (“Adjusted EBITDA”), which is a non-GAAP performance measure. Adjusted EBITDA consists of net earnings after adjustment for those items described in the table below. Adjusted EBITDA does not represent, and should not be considered an alternative to GAAP measurements, such as net income (loss) (its most directly comparable GAAP measure), and our calculations thereof may not be comparable to similarly titled measures reported by other companies. By eliminating the items described below, we believe the measure is useful in evaluating its fundamental core operating performance. We also believe that Adjusted EBITDA is useful to investors because similar measures are frequently used by securities analysts, investors, and other interested parties in their evaluation of companies in similar industries. Our management uses Adjusted EBITDA to manage our business, including in preparing our annual operating budget and financial projections. Our management does not view Adjusted EBITDA in isolation and also uses other measurements, such as net income (loss) and revenues to measure operating performance. The following table provides a reconciliation of net loss to Adjusted EBITDA for the periods presented:

 

   Three Months Ended September 30,   Nine Months Ended September 30, 
   2015   2014   2015   2014 
Net loss  $(159,252,623)  $13,659,075   $(330,044,369)  $10,057,937 
Impairment of oil and natural gas properties   158,278,000        304,903,000     
Interest expense   2,735,348    1,206,571    7,044,901    2,515,034 
Accretion of discount on asset retirement obligations   52,500    28,037    153,007    63,837 
Depletion, depreciation and amortization   11,474,674    9,298,031    32,181,525    24,323,398 
Stock-based compensation   423,145    2,818,161    2,586,898    9,497,044 
Warrant revaluation (gain) expense   (221,000)   (216,000)   (2,012,000)   1,751,000 
Net gains on commodity derivatives   (12,699,147)   (11,184,716)   (8,148,386)   (3,722,780)
Net cash settlements received (paid) on commodity derivatives   1,354,804    (313,451)   5,481,384    (2,775,591)
Standby rig expense   3,800,446        6,173,111     
Adjusted EBITDA  $5,946,147   $15,295,708   $18,319,071   $41,709,879 

 

In addition to reporting net income (loss) as defined under GAAP, we also present “adjusted income (loss)”, which we define as net earnings before the effect of any impairment of oil and natural gas properties, unrealized gain (loss) from mark-to-market on commodity derivatives, mark-to-market on our warrant liability, share-based compensation expense and the other items described in the table below. Adjusted income (loss) is a non-GAAP performance measure. Adjusted income (loss) does not represent, and should not be considered an alternative to GAAP measurements, such as net income (loss), and our calculations thereof may not be comparable to similarly titled measures reported by other companies. By eliminating the items described below, we believe the measure is useful in evaluating our fundamental core operating performance. We also believe that adjusted income (loss) is useful to investors because similar measures are frequently used by securities analysts, investors, and other interested parties in their evaluation of companies in similar industries. Our management uses adjusted income to manage our business, including in preparing our annual operating budget and financial projections. Our management does not view adjusted income (loss) in isolation and also uses other measurements, such as net income (loss) and revenues to measure operating performance. The following table provides a reconciliation of net income (loss), to adjusted income (loss) for the periods presented:

 

   Three Months Ended September 30,   Nine Months Ended September 30, 
   2015   2014   2015   2014 
Net loss  $(159,252,623)  $13,659,075   $(330,044,369)  $10,057,937 
Impairment of oil and natural gas properties   158,278,000        304,903,000     
Stock-based compensation   423,145    2,818,161    2,586,898    9,497,044 
Warrant revaluation (gain) expense   (221,000)   (216,000)   (2,012,000)   1,751,000 
Net gains on commodity derivatives   (12,699,147)   (11,184,716)   (8,148,386)   (3,722,780)
Net cash settlements received (paid) on commodity derivatives   1,354,804    (313,451)   5,481,384    (2,775,591)
Adjusted net income (loss)  $(12,116,821)  $4,763,069   $(27,233,473)  $14,807,610 
                     
Net Adjusted Income (Loss) Per Common Share – Basic  $(1.51)  $1.43   $(4.30)  $4.46 
                     
Weighted Average Shares Outstanding – Basic   8,021,992    3,324,970    6,334,549    3,316,751