Longview Oil Corp. is pleased to announce that the Board of Directors has approved operational guidance and a capital budget of $36 million for the year ending December 31, 2013 .
Consistent with our business strategy, we have developed a sustainable and balanced 2013 budget that will preserve a strong balance sheet while utilizing funds from operations to maintain our current dividend policy and fund substantially all of our capital expenditures while maintaining production at 2012 levels. Longview has a base decline rate of approximately 19% which allows the Company to maintain production with a modest level of capital expenditures.
Budget and Guidance
The following table summarizes operational and financial guidance for Longview for the year ending December 31, 2013 as compared to the first 3 quarters of 2012:
|2013 Guidance||Q1 – Q3 2012|
|Production||6,200 boe/d to 6,300 boe/d||6,211 boe/d|
|Royalty rate||19% to 21%||19.3%|
|Operating expenses||$19.00 /boe to $20.00 /boe||$20.11 /boe|
|Capital expenditures||$36 million||$32.7 million|
- Although production levels are forecast to remain consistent with Q1 – Q3 2012 the percentage related to crude oil is expected to grow by 7% to 71% of total production as the 2013 capital budget is entirely focused on oil weighted projects. Production from crude oil and NGLs are expected to increase to 79% of total production in 2013 up from 75% in 2012.
- Based on the mid-range of guidance, funds from operations for 2013 are estimated at approximately $59 million . Commodity price assumptions include: WTI crude oil price of $89.50 US/bbl, a crude oil price differential (WTI to Edmonton light) of $7.50 /bbl, a Cdn/U.S. exchange rate of $1.00 and a Nymex natural gas price of $3.98 US/mmbtu ( $3.58 /mcf Cdn @ AECO).
- Given the current volatility in crude oil pricing conditions, we will continue to closely monitor our funds from operations as compared to our dividend policy and capital expenditure commitments to ensure they are substantially balanced.
2013 Capital Program
- Our 2013 capital program will be comprised of low-risk crude oil drilling and recompletion activities in areas with high netbacks where Longview operates existing infrastructure. Drilling operations will focus on areas where recent activity has demonstrated strong economics that result in a quick and positive impact on funds from operations while limiting facility and other infrastructure expenditures to a minimum.
- Longview’s 2013 capital drilling program is primarily focused on further development of our Midale and Frobisher plays within S.E. Saskatchewan where we have an extensive undeveloped land base of 106 gross (87 net) sections, high working interests, fee title ownership and existing infrastructure. Our drilling activities in S.E. Saskatchewan were limited in 2011 due to extremely wet weather conditions but drilling results through 2012 have demonstrated strong results with potential for scalability in six different project areas.
- Our recent horizontal drilling programs in the Mississippian Midale and Frobisher formations have yielded 30 day initial oil production rates ranging between 60 and 160 bbls/d with all in well costs of $1.1 to $1.4 million .
- Approximately 60% of the capital budget is allocated to SE Saskatchewan targeting 6 different project areas where Longview has existing infrastructure in place which will result in lower operating costs for new production. These are lower risk locations primarily targeting the Midale formation which are offset by nearby production where successful results will lead to additional drilling in future years.
- Our existing waterflood projects have demonstrated positive results due to capital expenditures incurred in the last several years which were undertaken to enhance water injection rates and flood patterns.
- Funds will be allocated in 2013 to further enhance existing waterflood projects at Nevis, Sunset and Pembina in Alberta and Eyehill in Saskatchewan. These enhancements will set up future drilling opportunities as voidage replacement and reservoir pressures reach certain levels in each property. In addition horizontal wells are planned for each of Nevis and Sunset in areas of these pools where pressure has been increased to levels sufficient to warrant offset drilling. Successful results in these programs may lead to additional drilling in future years.
- Our 2013 capital budget is focused entirely on crude oil projects in the following areas:
|# of Wells|
|Montney water injector||Vt||1||0.7|
- Longview has typically hedged production in order to stabilize cash flow and enhance our ability to fund dividend payments and capital expenditures during periods of commodity price volatility.
- Although Longview currently has no commodity price hedging positions for 2013, we plan on adding additional hedges should the market present suitable opportunities.
Certain information regarding Longview set forth in this press release, including management’s assessment of the Company’s future plans and operations, contains forward-looking statements that involve substantial known and unknown risks and uncertainties. The use of any of the words “anticipate”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “should”, “believe” and similar expressions are intended to identify forward looking statements. Such statements represent Longview’s internal projections, estimates or beliefs concerning, among other things, an outlook on the estimated amounts and timing of capital expenditures or other expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or performance. These statements are only predictions and actual events or results may differ materially. Although Longview believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievement since such expectations are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. Many factors could cause Longview’s actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, Longview.
In particular, forward-looking statements included in this press release include, but are not limited to, statements with respect to targeted average production; expected operating expenses for the year ended December 31, 2013 ; future royalty rates; projected capital expenditures for the year ended December 31, 2013 ; focus of capital budget; the focus of and timing of capital expenditures; drilling plans; timing of drilling of rigs; and crude oil and natural gas production levels. The payment and the amount of dividends declared in any month will be subject to the discretion of the board of directors and may vary depending on a variety of factors, including fluctuations in commodity prices, production levels, capital expenditure requirements, debt service requirements, operating costs, royalty burdens and foreign exchange rates. In addition, statements relating to “reserves” or “resources” are deemed to be forward looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the resources and reserves described can be profitably produced in the future.
These forward-looking statements are subject to numerous risks and uncertainties, certain of which are beyond the Company’s control, including the impact of general economic conditions; volatility in market prices for crude oil and natural gas; industry conditions; volatility of commodity prices; currency fluctuation; imprecision of reserve estimates; liabilities inherent in crude oil and natural gas operations; environmental risks; incorrect assessments of the value of acquisitions and exploration and development programs; competition from other producers; the lack of availability of qualified personnel or management; changes in income tax laws or changes in tax laws and incentive programs relating to the oil and gas industry; hazards such as fire, explosion, blowouts, cratering, and spills, each of which could result in substantial damage to wells, production facilities, other property and the environment or in personal injury; stock market volatility; ability to access sufficient capital from internal and external sources and the other risks considered under “Risk Factors” in Longview’s Annual Information Form dated April 27, 2011 , which is available on www.sedar.com.
With respect to forward-looking statements contained in this press release, Longview has made assumptions regarding: current commodity prices and royalty regimes; availability of skilled labour; timing and amount of capital expenditures; future exchange rates; the price of oil and natural gas; the impact of increasing competition; conditions in general economic and financial markets; availability of drilling and related equipment; effects of regulation by governmental agencies; royalty rates and future operating costs.
Management has included the above summary of assumptions and risks related to forward-looking information provided in this press release in order to provide shareholders with a more complete perspective on Longview’s future operations and such information may not be appropriate for other purposes. Longview’s actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits that the Company will derive there from. Readers are cautioned that the foregoing lists of factors are not exhaustive. These forward-looking statements are made as of the date of this press release and the Company disclaims any intent or obligation to update publicly any forward-looking statements, whether as a result of new information, future events or results or otherwise, other than as required by applicable securities laws.
Any references in this news release to initial production (IP) rates are useful in confirming the presence of hydrocarbons, however, such rates are not determinative of long-term performance or of ultimate recovery or the rates at which such wells will continue production and decline thereafter. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production for the Company.
“boes” may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one barrel of oil equivalent (6 Mcf: 1 bbl) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
SOURCE: Longview Oil Corp.