SOURCE: Emerald Oil, Inc.

Emerald Oil, Inc. Logo

March 10, 2015 16:30 ET

Emerald Oil Reports Fourth Quarter and Year End 2014 Financial and Operational Results

DENVER, CO--(Marketwired - March 10, 2015) - Emerald Oil, Inc. (NYSE MKT: EOX) ("Emerald" or the "Company") today announced financial and operational results for the quarter and year ended December 31, 2014.

Highlights

  • Increased fourth quarter production to 377,250 BOE, an average of approximately 4,101 BOEPD, an increase of 7% compared to the third quarter of 2014 and 71% compared to the fourth quarter of 2013;
  • Increased annual production to 1,295,230 BOE, an average of 3,549 BOEPD, an increase of 110% compared to 2013;
  • Increased total proved reserves to 26.3 MMBOE, an increase of 99% compared to 2013;
  • Increased oil and natural gas sales to $101.2 million in 2014, an increase of 87% compared to 2013;
  • Adjusted EBITDA of $15.0 million or $0.23 per share (basic) for the fourth quarter of 2014 and $56.8 million or $0.85 per share (basic) for 2014, and;
  • Adjusted Net Income attributable to common shareholders of $2.0 million or $0.03 per share (basic) for the fourth quarter of 2014 and $16.8 million or $0.25 per share (basic) for the year 2014.

McAndrew Rudisill, Emerald's Chief Executive Officer, stated, "2014 was a year of tremendous reserve and production growth at Emerald Oil. We reacted swiftly in the fourth quarter of 2014 to falling oil prices and cut capital spending quickly to put Emerald in a strong financial position if oil prices remain low. We have made great strides in streamlining the efficiency of our entire Bakken production base through the diligent efforts of our operations team. We are seeing the benefits of our rod pump installation across Low Rider with increased enterprise run time and lower operating costs. On the drilling and completion side of the business we've seen meaningful declines in our costs to develop new oil wells and we are in a position to reaccelerate production growth if the oil market permits. We feel comfortable managing the current oil price environment for a prolonged period with our low cost balance sheet and substantial liquidity."

2014 Production

For 2014, Emerald's total production volumes on a BOE basis increased 110% as compared to 2013. Production increased due to the addition of 24.19 net productive operated Bakken/Three Forks wells in 2014. During 2014, Emerald realized an $84.01 average price per Bbl of oil (including settled derivatives) compared to an $87.16 average price per Bbl of oil during 2013. For detailed well performance data see Emerald's corporate presentation (available on its website, www.emeraldoil.com).

    
   Year Ended December 31,
   2014  2013
Sales Volume (Total)        
Oil (Bbls)   1,238,807   580,797
Gas (Mcf)   338,536   211,608
Sales volumes (Boe)   1,295,230   616,065
         
Average Daily Sales        
Oil (Bbls)   3,394   1,591
Gas (Mcf)   927   580
Sales volumes (Boe)   3,549   1,688
         
Average Sales Prices        
Oil, Net of Settled Derivatives (Bbls)  $84.01  $87.16
Gas (Mcf)   7.79   6.48
Barrel of Oil Equivalent with Settled Derivatives (Boe)  $82.39  $84.40
       

2014 Year End Reserves

As of December 31, 2014, Emerald had total proved reserves of approximately 26.3 MMBoe, all of which were located in the Williston Basin. Emerald's proved reserves increased approximately 99% during 2014 primarily as a result of our successful operated well program. The proved reserves total had a pre-tax PV10% value of $535.1 million.

    
   As of December 31,
   2014  2013
Proved Developed Oil Reserves (MBbls)   13,194.1   5,881.0
Proved Undeveloped Oil Reserves (MBbls)   9,632.1   5,764.6
Total Proved Oil Reserves (MBbls)   22,826.3   11,575.6
Proved Developed Gas Reserves (MMcf)   11,670.5   5,770.6
Proved Undeveloped Gas Reserves (MMcf)   9,399.4   4,231.6
Total Proved Gas Reserves (MMcf)   21,069.9   10,002.2
Total Proved Oil Equivalents (MBoe)   26,337.9   13,242.8
Present Value of Estimated Future Net Revenues Before Income Taxes, Discounted at 10% (In thousands)  $

535,086.6
 $237,422.2
       

Financial Results

Revenues from sales of oil and natural gas for the quarter ended December 31, 2014 were $22.1 million compared to $17.9 million for the same period in 2013. Revenues, not considering the effect of derivatives, for the year ended December 31, 2014 were $101.2 million compared to $54.0 million for the same period in 2013. The increase is primarily due to higher production as a result of the Company's well completions and its acquisition of certain properties throughout its core operating areas.

Lease operating expenses for the quarter ended December 31, 2014 were $5.1 million compared to $3.8 million for the same period in 2013. On a per unit basis, lease operating expenses decreased from $17.20 per BOE in 4Q2013 to $13.50 per BOE in 4Q2014. Emerald also incurred non-recurring workover expenses for the quarter ended December 31, 2014 of $2.0 million, or $5.28 per BOE. The workover expense was associated with the completion of rod pump installation throughout the entirety of Emerald's producing acreage position. 

Production taxes for the quarter ended December 31, 2014 were $2.4 million compared to $2.1 million for the same period in 2013. On a per unit basis, production taxes decreased from $9.39 per BOE in 4Q2013 to $6.30 per BOE in 4Q2014.

General and administrative expenses ("G&A"), excluding share based compensation, for the quarter ended December 31, 2014 were $1.6 million compared to $6.6 million for the same period in 2013. On a per unit basis, G&A decreased from $29.88 per BOE in 4Q2013 to $4.28 per BOE in 4Q2014. Share-based compensation expenses totaled $1.9 million in 4Q2014 compared to $6.4 million 4Q2013.

Depreciation, depletion and amortization expenses ("DD&A") for the quarter ended December 31, 2014 were $10.7 million compared to $6.1 million for the same period in 2013. On a per unit basis, DD&A increased from $27.50 per BOE in the fourth quarter of 2013 to $28.43 per BOE in the fourth quarter of 2014. Emerald recognized a $66.4 million non-cash impairment expense for the quarter ended December 31, 2014 due primarily to the substantial declines in commodity prices.

Adjusted EBITDA was $15.0 million for the quarter ended December 31, 2014, as compared to $5.0 million for the same period in 2013. For the year ended December 31, 2014, Adjusted EBITDA was $56.8 million, as compared to $20.2 million for 2013. Adjusted Net Income was $2.0 million for the quarter ended December 31, 2014 as compared to a loss of $1.1 million in the same period in 2013. For the year ended December 31, 2014, Adjusted Net Income was $16.8 million, as compared to $2.4 million for 2013. Adjusted EBITDA and Adjusted Net Income are non-GAAP financial measures. For additional information please refer to the reconciliation of this measure at the end of this news release.

Conference Call

Emerald will host a conference call on Wednesday, March 11, 2015 at 10:00 a.m. Eastern Time (8:00 a.m. Mountain Time) to discuss financial and operational results for the quarter and year end.

 
Emerald Oil, Inc. 4Q and Year End 2014 Financial and Operational Results Conference Call
Date:  Wednesday, March 11, 2015
Time:  
 
 
 
10:00 a.m. Eastern Time
9:00 a.m. Central Time
8:00 a.m. Mountain Time
7:00 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 Wednesday, March 18, 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.

  
EMERALD OIL, INC. 
CONSOLIDATED BALANCE SHEETS 
AS OF DECEMBER 31, 
  
   December 31, 2014   December 31, 2013  
ASSETS           
CURRENT ASSETS           
 Cash and Cash Equivalents  $12,389,230   $144,255,438  
 Restricted Cash   -    15,000,512  
 Accounts Receivable - Oil and Natural Gas Sales   7,203,455    8,715,821  
 Accounts Receivable - Joint Interest Partners   31,842,464    31,523,204  
 Other Receivables   980,317    577,409  
 Prepaid Expenses and Other Current Assets   289,061    206,299  
 Fair Value of Commodity Derivatives   5,044,125    -  
   Total Current Assets   57,748,652    200,278,683  
PROPERTY AND EQUIPMENT           
 Oil and Natural Gas Properties, Full Cost Method, at cost:           
  Proved Oil and Natural Gas Properties   593,472,170    211,015,067  
  Unproved Oil and Natural Gas Properties   166,708,263    57,015,315  
  Equipment and Facilities   6,086,896    1,837,744  
 Other Property and Equipment   2,583,372    890,811  
   Total Property and Equipment   768,850,701    270,758,937  
 Less - Accumulated Depreciation, Depletion and Amortization   (149,703,417 )  (48,176,522 )
   Total Property and Equipment, Net   619,147,284    222,582,415  
Restricted Cash   4,000,000    6,000,000  
Fair Value of Commodity Derivatives   -    68,396  
Debt Issuance Costs, Net of Amortization   5,779,125    475,157  
Deposits on Acquisitions   140,173    125,368  
Deferred Tax Asset, Net   1,813,796    -  
Other Non-Current Assets   430,846    357,644  
   Total Assets  $689,059,876   $429,887,663  
LIABILITIES AND STOCKHOLDERS' EQUITY           
CURRENT LIABILITIES           
 Accounts Payable  $120,136,903   $63,168,422  
 Fair Value of Commodity Derivatives   -    921,401  
 Accrued Expenses   11,267,831    11,821,729  
 Advances from Joint Interest Partners   2,577,247    2,205,538  
 Deferred Tax Liability, Net   1,813,796    -  
   Total Current Liabilities   135,795,777    78,117,090  
LONG-TERM LIABILITIES           
 Revolving Credit Facility   75,000,000    -  
 Convertible Senior Notes   151,500,000    -  
 Asset Retirement Obligations   2,671,975    692,137  
 Warrant Liability   2,199,000    15,703,000  
 Other Non-Current Liabilities   -    56,327  
   Total Liabilities   367,166,752    94,568,554  
            
COMMITMENTS AND CONTINGENCIES           
            
Preferred Stock - Par Value $.001; 20,000,000 Shares Authorized;           
 Series B Voting Preferred Stock - 5,114,633 issued and outstanding at December 31, 2014 and December 31, 2013. Liquidation preference value of $5,115 as of December 31, 2014 and December 31, 2013.   5,000    5,000  
            
STOCKHOLDERS' EQUITY           
 Common Stock, Par Value $.001; 500,000,000 Shares Authorized, 77,828,613 and 65,840,370 Shares Issued and Outstanding, respectively   77,828    65,840  
 Additional Paid-In Capital   455,008,596    416,301,344  
 Accumulated Deficit   (133,198,300 )  (81,053,075 )
   Total Stockholders' Equity   321,888,124    335,314,109  
   Total Liabilities and Stockholders' Equity  $689,059,876   $429,887,663  
         
         
  
EMERALD OIL, INC. 
CONSOLIDATED STATEMENTS OF OPERATIONS 
  
   Year Ended December 31,  
   2014   2013   2012  
REVENUES                
Oil Sales  $98,532,131   $52,609,790   $27,264,526  
Natural Gas Sales   2,636,460    1,371,250    865,459  
Net Gain (Losses) on Commodity Derivatives   11,439,240    (2,656,535 )  (215,439 )
Total Revenues   112,607,831    51,324,505    27,914,546  
OPERATING EXPENSES                
Production Expenses   20,559,423    8,520,414    2,727,133  
Production Taxes   11,010,300    5,702,521    2,955,015  
General and Administrative Expenses   25,186,682    30,507,114    12,903,845  
Depletion of Oil and Natural Gas Properties   34,798,218    17,310,059    12,770,718  
Impairment of Oil and Natural Gas Properties   66,430,000    -    61,900,692  
Depreciation and Amortization   389,551    144,492    53,818  
Accretion of Discount on Asset Retirement Obligations   104,803    32,449    14,988  
Acquisition Costs   409,712    -    -  
Early Rig Termination Expense   4,286,906    -    -  
Gain on Sale of Oil and Natural Gas Properties   -    (7,371,804 )  -  
 Total Operating Expenses   163,175,595    54,845,245    93,326,209  
                 
LOSS FROM OPERATIONS   (50,567,764 )  (3,520,740 )  (65,411,663 )
                 
OTHER INCOME (EXPENSE)                
Interest Expense   (4,675,475 )  (287,934 )  (2,614,240 )
Warrant Revaluation Gain (Expense)   13,504,000    (7,077,000 )  -  
Debt Conversion Expense   (10,438,080 )  -    -  
Gain on Acquisition of Business, Net   -    -    5,758,048  
Other Income (Expense)   32,094    2,779    (28,244 )
Total Other Income (Expense), Net   (1,577,461 )  (7,362,155 )  3,115,564  
                 
LOSS BEFORE INCOME TAXES   (52,145,225 )  (10,882,895 )  (62,296,099 )
                 
INCOME TAX PROVISION   -    -    -  
                 
NET LOSS   (52,145,225 )  (10,882,895 )  (62,296,099 )
Less: Preferred Stock Dividends and Deemed Dividends   -    (20,279,197 )  -  
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS  $(52,145,225 ) $(31,162,092 ) $(62,296,099 )
                 
Net Loss Per Common Share - Basic and Diluted  $(0.78 ) $(0.75 ) $(4.91 )
                 
Weighted Average Shares Outstanding - Basic and Diluted   66,772,458    41,383,277    12,699,544  
             
             
  
EMERALD OIL, INC. 
CONSOLIDATED STATEMENTS OF CASH FLOWS 
  
   Year Ended December 31,  
   2014   2013   2012  
CASH FLOWS FROM OPERATING ACTIVITIES                
Net Loss  $(52,145,225 ) $(10,882,895 ) $(62,296,099 )
Adjustments to Reconcile Net Loss to Net Cash Provided By (Used For) Operating Activities:                
Depletion of Oil and Natural Gas Properties   34,798,218    17,310,059    12,770,718  
Impairment of Oil and Natural Gas Properties   66,430,000    -    61,900,692  
Depreciation and Amortization   389,551    144,492    53,818  
Amortization of Debt Issuance Costs   1,711,171    127,857    1,929,561  
Accretion of Discount on Asset Retirement Obligations   104,803    32,449    14,988  
Net (Gains) Losses on Commodity Derivatives   (11,439,240 )  2,656,535    215,439  
Net Cash Settlements Received (Paid) on Commodity Derivatives   5,542,110    (1,984,778 )  (34,191 )
Gain on Sale of Oil and Natural Gas Properties, Net   -    (7,371,804 )  -  
Gain on Acquisition of Business   -    -    (7,213,835 )
Warrant Revaluation Expense (Gain)   (13,504,000 )  7,077,000    -  
Share-Based Compensation Expense   11,459,431    12,885,209    7,318,690  
Debt Conversion Expense   10,438,080    -    -  
Changes in Assets and Liabilities:                
(Increase) Decrease in Trade Receivables - Oil and Natural Gas Revenues   1,512,366    (200,956 )  (5,267,453 )
Increase in Accounts Receivable - Joint Interest Partners   (319,260 )  (27,464,913 )  (4,058,291 )
(Increase) Decrease in Other Receivables   (402,908 )  556,440    (1,133,849 )
Increase in Prepaid Expenses and Other Current Assets   (82,762 )  (103,126 )  (54,843 )
Increase in Other Non-Current Assets   (73,201 )  (96,869 )  (100,100 )
Increase in Accounts Payable   9,152,337    2,831,342    30,123  
Increase (Decrease) in Accrued Expenses   (7,055,970 )  8,412,533    214,399  
Increase (Decrease) in Other Non-Current Liabilities   (56,327 )  56,327    -  
Increases in Advances from Joint Interest Partners   371,709    2,205,538    -  
Net Cash Provided By Operating Activities   56,830,883    6,190,440    4,289,767  
CASH FLOWS FROM INVESTING ACTIVITIES                
Purchases of Other Property and Equipment   (1,692,561 )  (505,788 )  (172,785 )
Restricted Cash Released   17,000,512    -    -  
Restricted Cash Received   -    (21,000,512 )  -  
Payments of Restricted Cash   (2,648,721 )  -    -  
Increase in Deposits for Acquisitions   (14,805 )  (125,368 )  -  
Use of (Payments for) Prepaid Drilling Costs   -    100,193    (67,030 )
Proceeds from Sale of Oil and Natural Gas Properties, Net of Transaction Costs   36,155,859    129,432,743    -  
Investment in Oil and Natural Gas Properties   (478,068,380 )  (182,901,806 )  (66,212,818 )
Net Cash Used For Investing Activities   (429,268,096 )  (75,000,538 )  (66,452,633 )
CASH FLOWS FROM FINANCING ACTIVITIES                
Proceeds from the Issuance of Convertible Notes, Net of Transactions Costs   166,893,211    -    -  
Proceeds from Issuance of Common Stock, Net of Transaction Costs   -    238,354,687    72,167,012  
Proceeds from Issuance of Preferred Stock, Net of Transaction Costs   -    47,183,994    -  
Payments on Preferred Stock   -    (50,000,000 )  -  
Advances on Revolving Credit Facility and Term Loan   110,000,000    -    56,530,730  
Payments on Revolving Credit Facility   (35,000,000 )  (23,500,000 )  (33,030,730 )
Payments of Senior Secured Promissory Notes   -    -    (15,000,000 )
Payment of Assumed Liabilities   -    -    (20,303,903 )
Cash Paid for Finance Costs   (24,605 )  (333,333 )  (1,935,131 )
Preferred Stock Dividends and Deemed Dividends   -    (8,832,191 )  -  
Cash Paid for Debt Issuance Costs   (1,408,351 )  -    -  
Proceeds from Exercise of Stock Options and Warrants   110,750    -    -  
Net Cash Provided by Financing Activities   240,571,005    202,873,157    58,427,978  
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   (131,866,208 )  134,063,059    (3,734,888 )
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD   144,255,438    10,192,379    13,927,267  
CASH AND CASH EQUIVALENTS - END OF PERIOD  $12,389,230   $144,255,438   $10,192,379  
Supplemental Disclosure of Cash Flow Information                
Cash Paid During the Period for Interest  $2,121,184   $255,776   $1,154,943  
Cash Paid During the Period for Income Taxes  $-   $-   $-  
Non-Cash Financing and Investing Activities:                
Oil and Natural Gas Properties Included in Account Payable  $107,957,324   $60,141,180   $38,973,137  
Stock-Based Compensation Capitalized to Oil and Natural Gas Properties  $2,273,656   $1,193,960   $582,040  
Accretion on Preferred Stock Issuance Discount  $-   $8,626,000   $-  
Accretion of Preferred Stock Issuance Costs  $-   $2,816,000   $-  
Asset Retirement Obligation Costs and Liabilities  $1,966,907   $676,240   $164,967  
Asset Retirement Obligations Associated With Properties Sold  $19,317   $312,625   $-  
Asset Retirement Obligations Settled through P&A  $72,556   $-   $-  
Common Stock Issued for Oil and Natural Gas Properties  $-   $6,736,935   $-  
Debt Extinguished in Conversion of Convertible Notes  $21,000,000   $-   $-  
Purchases through Issuance of Common Stock or Assumption of Liabilities:                
 Oil and Natural Gas Properties  $-   $-   $40,787,238  
 Other Property and Equipment  $-   $-   $36,000  
 Other Non-Current Assets  $-   $-   $75,000  
Non-Cash Acquisition of Business Amounts:                
 Fair Market Value of Common Stock Issued  $-   $-   $13,380,501  
 Debt Assumed  $-   $-   $20,303,903  
             
             
  
EMERALD OIL, INC. 
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) 
FOR THE YEARS ENDED DECEMBER 31, 2014, 2013 AND 2012 
  
   Common Stock            
   Shares  Amount  Additional Paid-in Capital  Accumulated Deficit   Total Stockholders' Equity 
Balance - December 31, 2011  8,264,062  $8,264  $87,007,758  $(7,874,081 ) $79,141,941  
Common Shares Issued as Compensation  910,296   910   3,837,212   -    3,838,122  
Restricted Stock Grants  74,285   74   (74 ) -    -  
Restricted Stock Forfeited  (53,572 ) (53 ) 53   -    -  
Restricted Stock Grant Compensation  -   -   1,178,559   -    1,178,559  
Compensation Related to Stock Option Grants  -   -   1,779,901   -    1,779,901  
Director Fees Related to Stock Option Grants  -   -   1,104,147   -    1,104,147  
Issuance of Common Shares for the Acquisition of Emerald Oil North America, Inc.  1,662,174   1,662   13,378,839   -    13,380,501  
Net Proceeds from Equity Offering  13,877,555   13,878   72,153,134   -    72,167,012  
Reverse Split Reconciliation Due to Fractional Shares  (157 ) -   -   -    -  
Net Loss  -   -   -   (62,296,099 )  (62,296,099 )
Balance - December 31, 2012  24,734,643   24,735   180,439,530   (70,170,180 )  110,294,085  
Common shares issued for oil and natural gas properties  1,165,015   1,165   6,735,770   -    6,736,935  
Stock-based compensation  -   -   13,378,158   -    13,378,158  
Restricted Stock Vesting, Net of Tax Withholding  1,012,260   1,012   (2,288,675 ) -    (2,287,663 )
Equity offering  38,928,452   38,928   238,315,759   -    238,354,687  
Redemption of Preferred Stock and Accretion of Issuance Discount  -   -   (17,697,007 ) -    (17,697,007 )
Preferred Stock Dividends Paid  -   -   (2,582,191 ) -    (2,582,191 )
Net loss  -   -   -   (10,882,895 )  (10,882,895 )
Balance - December 31, 2013  65,840,370   65,840   416,301,344   (81,053,075 )  335,314,109  
Stock-based compensation  -   -   11,283,929   -    11,283,929  
Restricted Stock Vesting, Net of Tax Withholding  -   -   (4,011,910 ) -    (4,011,910 )
Restricted Stock Grants  1,266,419   1,266   (1,266 ) -    -  
Common shares issued to extinguish convertible debt  10,721,824   10,722   31,427,358   -    31,438,080  
Transaction costs related to prior year offering  -   -   33,746   -    33,746  
Stock option exercise  -   -   (24,605 ) -    (24,605 )
Net loss  -   -   -   (52,145,225 )  (52,145,225 )
Balance - December 31, 2014  77,828,613  $77,828  $455,008,596  $(133,198,300 ) $321,888,124  
                       
                 

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, 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 ("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:

      
   Year Ended December 31,  
   2014   2013   2012  
Net loss  $(52,145,225 ) $(10,882,895 ) $(62,296,099 )
Less: Preferred stock dividends and deemed dividends   -    (20,279,197 )  -  
Net loss attributable to common stockholders   (52,145,225 )  (31,162,092 )  (62,296,099 )
Add: Impairment of oil and natural gas properties   66,430,000    -    61,900,692  
Interest expense   4,675,475    287,934    2,614,240  
Accretion of discount on asset retirement obligations   104,803    32,449    14,988  
Depletion, depreciation and amortization   35,187,769    17,454,551    12,824,536  
Stock-based compensation   11,459,431    12,885,236    7,318,690  
Warrant revaluation expense (gain)   (13,504,000 )  7,077,000    -  
Preferred stock dividends   -    2,582,191    -  
Preferred stock redemption premium   -    6,250,000    -  
Accretion of preferred stock issuance discount   -    11,447,006    -  
Debt conversion expense   10,438,080    -    -  
Net (gains) losses on commodity derivatives   (11,439,240 )  2,656,535    215,439  
Gain on sale of oil and natural gas properties, net   -    (7,371,804 )  -  
Gain on acquisition of business, net   -    -    (5,758,048 )
Net cash settlements received (paid) on commodity derivatives   5,542,110    (1,984,778 )  (34,191 )
Adjusted EBITDA  $56,749,203   $20,154,228   $16,800,247  
             
             

In addition to reporting net income as defined under GAAP, Emerald also presents net earnings before the effect of any unrealized gain from mark-to-market on commodity derivatives, mark-to-market on Emerald's warrant liability ("adjusted income"), and share based compensation expense, which is a non-GAAP performance measure. Adjusted income consists of net earnings after adjustment for those items described in the table below. Adjusted income does not represent, and should not be considered an alternative to GAAP measurements, such as net income, and Emerald's calculations thereof may not be comparable to similarly titled measures reported by other companies. By eliminating the items described below, Emerald believes the measure is useful in evaluating Emerald's fundamental core operating performance. The Company also believes that adjusted income 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. Emerald's management uses adjusted income to manage Emerald's business, including in preparing Emerald's annual operating budget and financial projections. Emerald's management does not view adjusted income in isolation and also uses other measurements, such as net income and revenues to measure operating performance. The following table provides a reconciliation of net income, to adjusted income for the period presented:

          
   Three Months Ended December 31, 2014   Year Ended
December 31, 2014
 
Net income  $(62,203,162 )  (52,145,225 )
Net gains on commodity derivatives   (7,716,460 )  (11,439,240 )
Net cash settlements paid on commodity derivatives   8,317,701    5,542,110  
Warrant revaluation income   (15,255,000 )  (13,504,000 )
Stock based compensation expense   1,962,387 )  11,459,431  
Impairment of oil and natural gas properties   66,430,000    66,430,000  
Debt conversion expense   10,438,080    10,438,080  
Adjusted income  $1,973,546   $16,781,156  
            
Adjusted income per share - basic  $0.03   $0.25  
            
Weighted average shares outstanding - basic   68,070,494    66,772,458  
            
         

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