Emerald Oil Reports Second Quarter 2014 Financial and Operational Results; Announces Acquisition of Core Williston Basin Properties

DENVER, CO--(Marketwired - August 04, 2014) - Emerald Oil, Inc. (NYSE MKT: EOX) ("Emerald" or the "Company") today announced financial and operational results for the quarter ended June 30, 2014 and that it has entered into a definitive agreement to acquire core Williston Basin properties.

Highlights

• Second quarter production of 340,320 BOE, an average of approximately 3,781 BOEPD, an increase of 51% compared to the first quarter quarter of 2014 and 168% compared to the second quarter of 2013;
• Second quarter oil and gas revenue of $31.3 million, an increase of 64% compared to the first quarter of 2014 and 196% compared to the second quarter of 2013;
• Second quarter per unit LOE costs of $11.45 per BOE, a decrease of 1% compared to the first quarter of 2014 and 9% compared to the second quarter of 2013;
• Adjusted 2Q14 EBITDA of $17.4 million;
• Adjusted net income attributable to common stockholders of $7.6 million or $0.11 per share (basic) for 2Q14 and net loss attributable to common stockholders of $1.9 million or $0.03 per share loss (basic); and
• Entered into a definitive agreement with Liberty Resources II, LLC to acquire 31,500 net acres and 400 BOEPD of production in conjunction with divesting 4,175 net acres in Williams County, North Dakota. The transaction is expected to close in the third quarter of 2014.

Second Quarter 2014 Production

For the second quarter of 2014, Emerald's total production volumes on a BOE basis increased 168% as compared to the second quarter of 2013. Production increased due to the addition of 7.73 net productive operated Bakken/Three Forks wells in the second quarter of 2014. During the second quarter of 2014, Emerald realized an $87.42 average price per Bbl of oil (including settled derivatives) compared to an $83.56 average price per Bbl of oil during the first quarter of 2014. For detailed well performance data see Emerald's corporate presentation (available on its website, www.emeraldoil.com).

Financial Results

Revenues from sales of oil and natural gas for the second quarter of 2014 were $31.3 million compared to $10.6 million for the same period in 2013. The increase is primarily due to higher production as a result of the Company's well completions. Crude oil revenue accounted for approximately 97% of oil and natural gas sales recorded during the second quarter of 2014.

Production expenses for the second quarter of 2014 were $3.9 million, or $11.45 per BOE, compared to $1.6 million, or $12.59 per BOE, for the same period in 2013. The decrease on a per unit basis is primarily due to continued efficiency gains as the Company further develops wells and associated production infrastructure in the Low Rider area.

General and administrative expenses for the second quarter of 2014 were $7.6 million compared to $6.0 million for the same period in 2013. Share-based compensation expenses, which are included in G&A expense, totaled $3.0 million in the second quarter of 2014 compared to $1.1 million for the same period in 2013. The increase in G&A expense is attributed primarily to the hiring of new personnel as the Company continues to expand operations.

Adjusted EBITDA was $17.4 million for the second quarter of 2014, as compared to $2.8 million for the same period in 2013, reflecting a 521% increase. Adjusted Net Income was $7.6 million for the second quarter of 2014, as compared to Adjusted Net Loss of $7.6 million for the same period in 2013. Adjusted EBITDA and Adjusted Net Income are non-GAAP financial measures. For additional information please refer to the reconciliation of these measures at the end of this news release.

Acquisition of Williston Basin Properties

• Approximately 31,500 net acres highly contiguous to Emerald's Low Rider and Lewis & Clark operating areas in McKenzie, Billings and Dunn Counties, North Dakota; 13,325 net acres in Low Rider and 18,227 net acres in Lewis & Clark;
• Approximately 400 Boe/d of estimated current net production;
• 2.0 Mmboe of proved reserves and $51.5 million of PV-10;
• 23 new operated Drilling Spacing Units; 6 DSUs in Low Rider and 17 DSUs in Lewis & Clark;
• Increased working interests in 13 Drilling Spacing Units; 12 DSUs in Low Rider and 1 DSU in Lewis & Clark;
• 157 drilling locations; 72 drilling locations in Low Rider and 85 drilling locations in Lewis & Clark;
• Approximately 95% of acreage is held by production and 75% is operated;
• Transaction valued at approximately $110 million, subject to customary adjustments to reflect the operation of the properties prior to closing; Emerald will transfer approximately 4,175 net acres in Williams County, North Dakota and pay approximately $78.4 million in cash on hand;
• No external capital required; and
• No material change to 2014 financial or operational guidance.

¹ Approximately $174 million of the 2014 budgeted amount has been spent year to date
² Liquidity calculated as cash on hand and available borrowing capacity

Increase to Senior Credit Facility and Update to Hedging Activity

In conjunction with the closing of the transaction, Emerald and its lending syndicate will enter into an amendment to the Company's credit facility to increase the borrowing base under the credit facility from $100 million to $200 million. This redetermination will reflect both Emerald's year-to-date completion activities and the transaction. The facility is currently undrawn. Emerald expects the next borrowing base redetermination to take place in October 2014.

Oil volume hedges were increased for the balance of 2014 and early 2015 due to the rise in oil prices during the quarter. Emerald is currently hedged through the first quarter of 2015 at the maximum capacity allowed under the revised borrowing base.

Management Comments

McAndrew Rudisill, Emerald's Chief Executive Officer, stated, "Emerald posted its strongest quarter since inception. Production exceeded guidance by 8% while costs were maintained at expected levels as we continue to build out infrastructure in the area. The transaction with Liberty Resources II further solidifies our strategic position in both our Low Rider and Lewis & Clark focus areas, bringing our net acreage position in this core operating area to more than 108,000 net acres. This deal allows us to reduce our projected land budget for 2015 while keeping our current 2014 drilling and completion constant due to nearly all of the acquired acreage being held by production. Our borrowing base will be increased by $100 million in connection with the closing of the transaction primarily due to the increase in Emerald operated proved reserves. We expect subsequent borrowing bases increases in the third and fourth quarters of 2014. We are excited about bringing our first Pronghorn wells online during the third quarter and we plan to test a slick water, cemented liner completion in our Low Rider area during the Fall of 2014."

Conference Call

Emerald will host a conference call on Tuesday, August 5, 2014 at 10:00 a.m. Eastern Time (8:00 a.m. Mountain Time) to discuss financial and operational results for the quarter end.

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.

In addition to reporting net income (loss) as defined under GAAP, we also present Adjusted EBITDA, which we define as net earnings before interest, income taxes, depletion, depreciation, and amortization, accretion of discount on asset retirement obligations, impairment of oil and natural gas properties, net gain on acquisition of business, net gain on sale of oil and natural gas properties, net gain (loss) from mark-to-market on commodity derivatives, less cash settlements received (paid) and non-cash expenses relating to share-based payments recognized under ASC Topic 718 and the other items described in the table below. Adjusted EBITDA is a non-GAAP performance measure. 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 our 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:

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 unrealized gain (loss) from mark-to-market on commodity derivatives, mark-to-market on ourwarrant 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: