Investor Relations
Toll free: 1-866-393-0393
Advantage Oil & Gas Ltd.
700, 400 – 3rd Avenue SW
Calgary, Alberta
T2P 4H2
Phone: (403) 718-8000
Fax: (403) 718-8300
Web Site: www.advantageog.com
E-mail: ir@advantageog.com
CALGARY, March 27, 2013 /CNW/ – Advantage Oil & Gas Ltd. (“Advantage” or the “Corporation”) is pleased to announce the financial and operating results for the year ended December 31, 2012 and the accompanying Corporate reserves as of December 31, 2012. The following press release summarizes and discusses the unconsolidated financial and operating highlights for Advantage (excludes Longview Oil Corp).
Three months ended | Year ended | |||||||||||
December 31 | December 31 | |||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||
Financial ($000, except as otherwise indicated) | ||||||||||||
Sales including realized hedging | $ | 36,556 | $ | 55,555 | $ | 126,749 | $ | 268,336 | ||||
per share (2) | $ | 0.22 | $ | 0.33 | $ | 0.76 | $ | 1.62 | ||||
per boe | $ | 19.15 | $ | 26.73 | $ | 15.97 | $ | 31.41 | ||||
Funds from operations | $ | 16,890 | $ | 33,587 | $ | 47,046 | $ | 143,295 | ||||
per share (2) | $ | 0.10 | $ | 0.20 | $ | 0.28 | $ | 0.87 | ||||
per boe | $ | 8.85 | $ | 16.15 | $ | 5.94 | $ | 16.77 | ||||
Dividends received from Longview | $ | 3,172 | $ | 4,417 | $ | 14,350 | $ | 11,780 | ||||
per share (2) | $ | 0.02 | $ | 0.03 | $ | 0.09 | $ | 0.07 | ||||
Total capital expenditures | $ | 35,849 | $ | 77,176 | $ | 130,570 | $ | 202,147 | ||||
Working capital deficit (3) | $ | 35,467 | $ | 70,564 | $ | 35,467 | $ | 70,564 | ||||
Bank indebtedness | $ | 161,630 | $ | 142,548 | $ | 161,630 | $ | 142,548 | ||||
Convertible debentures (face value) | $ | 86,250 | $ | 86,250 | $ | 86,250 | $ | 86,250 | ||||
Shares outstanding at end of period (000) | 168,383 | 166,304 | 168,383 | 166,304 | ||||||||
Basic weighted average shares (000) | 168,383 | 166,249 | 167,509 | 165,371 | ||||||||
Operating | ||||||||||||
Daily Production | ||||||||||||
Natural gas (mcf/d) | 116,929 | 127,265 | 122,069 | 123,246 | ||||||||
Crude oil and NGLs (bbls/d) | 1,261 | 1,378 | 1,337 | 2,864 | ||||||||
Total boe/d @ 6:1 | 20,749 | 22,589 | 21,682 | 23,405 | ||||||||
Average prices (including hedging) | ||||||||||||
Natural gas ($/mcf) | $ | 2.70 | $ | 3.78 | $ | 2.09 | $ | 4.19 | ||||
Crude oil and NGLs ($/bbl) | $ | 65.21 | $ | 89.14 | $ | 68.35 | $ | 76.45 | ||||
Proved plus probable reserves | ||||||||||||
Crude oil & NGLs (mbbls) | 8,611 | 6,185 | ||||||||||
Natural gas (bcf) | 1,556.4 | 1,270.0 | ||||||||||
Total mboe | 268,020 | 217,858 | ||||||||||
Reserve life index (years) (4) | 35.4 | 26.4 | ||||||||||
(1) | Non-consolidated financial and operating highlights for Advantage excluding Longview. | |||||||||||
(2) | Based on weighted average shares outstanding | |||||||||||
(3) | Working capital deficit includes trade and other receivables, prepaid expenses and deposits, | |||||||||||
and trade and other accrued liabilities, and the other liability | ||||||||||||
(4) | Based on fourth quarter average production rates | |||||||||||
Solid Production and Successful Well Results at Glacier Drives Strong Operating Netbacks
Corporate Reserve Additions Replace 736% of Production at an FD&A Cost of $4.29/boe
Looking Forward – Glacier Success Drives Development Plan to Double Production to 200 mmcf/d by 2015
Commodity Hedging Program
Average Price | |||||||||||||
Period | Average Volume Hedged | $Cdn. AECO | |||||||||||
2013 Year | 29,224 mcf/d | $3.31/mcf | |||||||||||
2014 Year | 33,174 mcf/d | $3.78/mcf | |||||||||||
2015 Q1 | 33,174 mcf/d | $4.01/mcf | |||||||||||
Strategic Alternatives Review
Consolidated Financial Statements and MD&A
Advantage’s audited consolidated financial statements for the year ended December 31, 2012 together with the notes thereto, and Management’s Discussion and Analysis for the three months and year ended December 31, 2012 have been prepared in accordance with International Financial Reporting Standards (“IFRS”) and posted on our website at www.advantageog.com and filed under our profile on SEDAR at www.sedar.com.
APPENDIX 1 – Reserves
Advantage engaged our independent qualified reserves evaluator Sproule Associates Ltd. (“Sproule”) to update the reserves analysis for the Company (the “Sproule Report”) in accordance with National Instrument 51-101 (“NI 51-101”) and the COGE Handbook.
The Sproule Report includes only Advantage’s “stand-alone” reserves and excludes the assets in Longview Oil Corp.
Reserves and production information included herein is stated on a Company Interest basis (before royalty burdens and including royalty interests receivable) unless noted otherwise. This summary contains several cautionary statements that are specifically required by NI 51-101. In addition to the detailed information disclosed in this press release more detailed information on a net interest basis (after royalty burdens and including royalty interests) and on a gross interest basis (before royalty burdens and excluding royalty interests) is included in Advantage’s Annual Information Form (“AIF”) and is available at www.advantageog.com and www.sedar.com.
Highlights – Company Interest Reserves (Working Interests plus Royalty Interests Receivable)
December 31, 2012 | December 31, 2011 | |
Proved plus probable reserves (mboe) | 268,436 | 218,386 |
Present Value of 2P reserves discounted at 10%, before tax ($000)(1) | $1,694,555 | $1,438,679 |
Net Asset Value per Share discounted at 10%, before tax (2) | $9.26 | $9.35 |
Reserve Life Index (proved plus probable – years) (3) | 35.4 | 26.4 |
Reserves per Share (proved plus probable) (2) | 1.59 | 1.31 |
Bank debt per boe of reserves (4) | $0.60 | $0.66 |
Convertible debentures per boe of reserves (4) | $0.32 | $0.40 |
(1) | Assumes that development of each property will occur, without regard to the likely availability to the Company of funding required for that development. |
(2) | Based on 168.383 million Shares outstanding at December 31, 2012, and 166.304 million Shares outstanding as December 31, 2011. |
(3) | Based on Q4 average production and company interest reserves. |
(4) | Using boe’s may be misleading, particularly if used in isolation. In accordance with NI 51-101, a boe conversion ratio for natural gas of 6 mcf: 1 bbl has been used which is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value. |
Company Interest Reserves (Working Interests plus Royalty Interests Receivable)
Summary as at December 31, 2012
Natural | Oil | ||||
Light & Medium Oil | Heavy Oil | Gas Liquids | Natural Gas | Equivalent | |
(mbbl) | (mbbl) | (mbbl) | (mmcf) | (mboe) | |
Proved | |||||
Developed Producing | 1,339 | 15 | 2,292 | 264,110 | 47,664 |
Developed Non-producing | 39 | – | 242 | 28,993 | 5,113 |
Undeveloped | 47 | – | 1,926 | 694,569 | 117,735 |
Total Proved | 1,425 | 15 | 4,460 | 987,672 | 170,512 |
Probable | 853 | 10 | 1,992 | 570,411 | 97,924 |
Total Proved + Probable | 2,278 | 25 | 6,452 | 1,558,083 | 268,436 |
Gross Working Interest Reserves (Working Interest only)
Summary as at December 31, 2012
Natural | Oil | ||||
Light & Medium Oil | Heavy Oil | Gas Liquids | Natural Gas | Equivalent | |
(mbbl) | (mbbl) | (mbbl) | (mmcf) | (mboe) | |
Proved | |||||
Developed Producing | 1,279 | 3 | 2,262 | 262,925 | 47,365 |
Developed Non-producing | 39 | – | 242 | 28,856 | 5,090 |
Undeveloped | 45 | – | 1,926 | 694,563 | 117,732 |
Total Proved | 1,363 | 3 | 4,430 | 986,344 | 170,187 |
Probable | 827 | 5 | 1,983 | 570,105 | 97,833 |
Total Proved + Probable | 2,190 | 8 | 6,413 | 1,556,449 | 268,020 |
Present Value of Future Net Revenue using Sproule price and cost forecasts (1)(2)
($000)
Before Income Taxes Discounted at | |||
0% | 10% | 15% | |
Proved | |||
Developed Producing | $969,481 | $527,205 | $434,660 |
Developed Non-producing | 102,564 | 61,127 | 50,732 |
Undeveloped | 2,022,373 | 491,560 | 250,204 |
TOTAL PROVED | 3,094,418 | 1,079,892 | 735,596 |
Probable | 2,862,722 | 614,663 | 375,670 |
Total Proved + Probable | 5,957,140 | 1,694,555 | 1,111,266 |
(1) | Advantage’s crude oil, natural gas and natural gas liquid reserves were evaluated using Sproule’s product price forecast effective December 31, 2012 prior to the provision for income taxes, interests, debt services charges and general and administrative expenses. It should not be assumed that the discounted future revenue estimated by Sproule represents the fair market value of the reserves. |
(2) | Assumes that development of each property will occur, without regard to the likely availability to the Company of funding required for that development. |
Sproule Price Forecasts
The present value of future net revenue at December 31, 2012 was based upon crude oil and natural gas pricing assumptions prepared by Sproule effective December 31, 2012. These forecasts are adjusted for reserve quality, transportation charges and the provision of any applicable sales contracts. The price assumptions used over the next seven years are summarized in the table below:
WTI | Edmonton Light | Alberta AECO-C | Henry Hub | Exchange | ||||
Crude Oil | Crude Oil | Natural Gas | Natural Gas | Rate | ||||
Year | ($US/bbl) | ($Cdn/bbl) | ($Cdn/mmbtu) | ($US/mmbtu) | ($US/$Cdn) | |||
2013 | 89.63 | 84.55 | 3.31 | 3.65 | 1.001 | |||
2014 | 89.93 | 89.84 | 3.72 | 4.06 | 1.001 | |||
2015 | 88.29 | 88.21 | 3.91 | 4.24 | 1.001 | |||
2016 | 95.52 | 95.43 | 4.70 | 5.04 | 1.001 | |||
2017 | 96.96 | 96.87 | 5.32 | 5.66 | 1.001 | |||
2018 | 98.41 | 98.32 | 5.40 | 5.74 | 1.001 | |||
2019 | 99.89 | 99.79 | 5.49 | 5.83 | 1.001 | |||
Net Asset Value using Sproule price and cost forecasts (Before Income Taxes)
The following net asset value (“NAV”) table shows what is normally referred to as a “produce-out” NAV calculation under which the current value of the Company’s reserves would be produced at forecast future prices and costs. The value is a snapshot in time and is based on various assumptions including commodity prices and foreign exchange rates that vary over time.
Before Income Taxes Discounted at | |||
($000, except per Share amounts) | 0% | 10% | 15% |
Net asset value per Share (1) – December 31, 2011 | $27.94 | $9.35 | $6.43 |
Present value proved and probable reserves | $5,957,140 | $1,694,555 | $1,111,266 |
Undeveloped acreage and seismic (2) | 31,418 | 31,418 | 31,418 |
Working capital (deficit) and other | (33,326) | (33,326) | (33,326) |
Convertible debentures | (86,250) | (86,250) | (86,250) |
Bank debt | (160,616) | (160,616) | (160,616) |
Longview shares at market value | 113,999 | 113,999 | 113,999 |
Net asset value – December 31, 2012 | $5,822,365 | 1,559,780 | 976,491 |
Net asset value per Share (1) – December 31, 2012 | $34.58 | $9.26 | $5.80 |
(1) | Based on 168.383 million Shares outstanding at December 31, 2012, and 166.304 million Shares outstanding at December 31, 2011. |
(2) | Internal estimate |
Gross Working Interest Reserves Reconciliation
Light & | Heavy | Natural Gas | Natural | Oil | |
Medium Oil | Oil | Liquids | Gas | Equivalent | |
Proved | (mbbl) | (mbbl) | (mbbl) | (mmcf) | (mboe) |
Opening balance Dec. 31, 2011 | 1,461 | 6 | 2,678 | 817,781 | 140,442 |
Extensions | 4 | – | 1,629 | 49,962 | 9,960 |
Improved recovery | – | – | – | – | – |
Infill Drilling | 14 | – | 2 | 22,468 | 3,761 |
Discoveries | 1 | – | 147 | 8,161 | 1,508 |
Economic factors | 6 | (1) | (132) | (2,961) | (621) |
Technical revisions | 183 | (1) | 368 | 136,500 | 23,300 |
Acquisitions | – | – | – | – | – |
Dispositions | (77) | – | (3) | (890) | (228) |
Production | (229) | (1) | (259) | (44,677) | (7,935) |
Closing balance at Dec. 31, 2012 | 1,363 | 3 | 4,430 | 986,344 | 170,187 |
Gross Working Interest Reserves Reconciliation (continued)
Light & | Heavy | Natural Gas | Natural | Oil | |
Medium Oil | Oil | Liquids | Gas | Equivalent | |
Proved + Probable | (mbbl) | (mbbl) | (mbbl) | (mmcf) | (mboe) |
Opening balance Dec. 31, 2011 | 2,331 | 11 | 3,843 | 1,270,043 | 217,858 |
Extensions | 5 | – | 2,214 | 71,803 | 14,186 |
Improved recovery | – | – | – | – | – |
Infill Drilling | 46 | – | 8 | 49 | 62 |
Discoveries | 1 | – | 423 | 14,712 | 2,876 |
Economic factors | (9) | – | (218) | (4,557) | (986) |
Technical revisions | 140 | (1) | 406 | 172,371 | 29,273 |
Acquisitions | – | – | – | 77,760 | 12,960 |
Dispositions | (95) | – | (3) | (1,054) | (274) |
Production | (229) | (1) | (259) | (44,677) | (7,935) |
Closing balance at Dec. 31, 2012 | 2,190 | 9 | 6,413 | 1,556,450 | 268,020 |
Finding, Development & Acquisitions Costs (“FD&A”) (1)(2)(3)
2012 FD&A Costs – Gross Working Interest Reserves excluding Future Development Capital
Proved | Proved + Probable | |
Capital expenditures ($000) | $130,570 | $130,570 |
Acquisitions net of dispositions ($000) | (13,967) | (13,967) |
Total capital ($000) | $116,603 | $116,603 |
Total mboe, end of year | 170,187 | 268,020 |
Total mboe, beginning of year | 140,442 | 217,858 |
Production, mboe | (7,936) | (7,936) |
Reserve additions, mboe | 37,681 | 58,098 |
2012 FD&A costs ($/boe) | 3.09 | 2.01 |
2011 FD&A costs ($/boe) | $(69.42) | $19.27 |
Three year average FD&A costs ($/boe) | $(0.86) | $(1.24) |
2012 F&D costs ($/boe) | $3.44 | $2.24 |
2011 F&D costs ($/boe) | $8.10 | $10.89 |
Three year average F&D costs ($/boe) | $5.00 | $5.38 |
NI 51-101
2012 FD&A Costs – Gross Working Interest Reserves including Future Development Capital
Proved | Proved + Probable | ||
Capital expenditures ($000) | $130,570 | $130,570 | |
Acquisitions net of dispositions ($000) | (13,967) | (13,967) | |
Net change in Future Development Capital ($000) | 131,511 | 132,737 | |
Total capital ($000) | $248,114 | $249,340 | |
Reserve additions, mboe | 37,681 | 58,098 | |
2012 FD&A costs ($/boe) | $6.58 | $4.29 | |
2011 FD&A costs ($/boe) | $(60.95) | $21.38 | |
Three year average FD&A costs ($/boe) | $5.05 | $1.48 | |
2012 F&D costs ($/boe) | $6.91 | $4.51 | |
2011 F&D costs ($/boe) | $9.79 | $8.85 | |
Three year average F&D costs ($/boe) | $9.62 | $6.97 | |
(1) | Under NI 51-101, the methodology to be used to calculate FD&A costs includes incorporating changes in future development capital (“FDC”) required to bring the proved undeveloped and probable reserves to production. For continuity, Advantage has presented herein FD&A costs calculated both excluding and including FDC. |
(2) | The aggregate of the exploration and development costs incurred in the most recent financial year and the change during that year in estimated future development costs generally will not reflect total finding and development costs related to reserves additions for that year. Changes in forecast FDC occur annually as a result of development activities, acquisition and disposition activities and capital cost estimates that reflect Sproule’s best estimate of what it will cost to bring the proved undeveloped and probable reserves on production. |
(3) | In all cases, the FD&A number is calculated by dividing the identified capital expenditures by the applicable reserve additions. Boes may be misleading, particularly if used in isolation. A boe conversion ratio of 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. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value. |
Advisory
The information in this press release contains certain forward-looking statements, including within the meaning of the United States Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future intentions or performance. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as “seek”, “anticipate”, “plan”, “continue”, “estimate”, “demonstrate”, “expect”, “may”, “will”, “project”, “predict”, “potential”, “targeting”, “intend”, “could”, “might”, “should”, “believe”, “would” and similar expressions and include statements relating to, but not limited to, the estimated royalty rate for the life of a Glacier Montney horizontal well; the Corporation’s anticipated drilling and completion plans; estimated production from the remainder of 2013 from the completion of the Corporation’s wells drilled inventory; effect of undrawn credit facility, ownership of Longview shares and cash flow on the Corporation’s financial flexibility and drilling and completion plans; terms of the Transaction, including the anticipated timing of the completion thereof and the use of these proceeds therefrom and the effect on the Corporation’s credit facility; current status and the plans of the Special Committee in relation to the Corporation’s strategic alternatives review process; expected effect of utilizing a variety of alternative fracture stimulation techniques on initial production rates and reserves; the Corporation’s development plan to increase production at Glacier and the anticipated production levels and timing thereof; and the Corporation’s estimated capital expenditure program for the 12 months ending June 30, 2013. 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.
Advantage’s actual decisions, activities, results, performance or achievement could differ materially from those expressed in, or implied by, such forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur or, if any of them do, what benefits that Advantage will derive from them.
These statements involve substantial known and unknown risks and uncertainties, certain of which are beyond Advantage’s control, including, but not limited to: changes in general economic, market and business conditions; industry conditions; actions by governmental or regulatory authorities including increasing taxes and changes in investment or other regulations; changes in tax laws, royalty regimes and incentive programs relating to the oil and gas industry; the effect of acquisitions; Advantage’s success at acquisition, exploitation and development of reserves; unexpected drilling results, changes in commodity prices, currency exchange rates, capital expenditures, reserves or reserves estimates and debt service requirements; the occurrence of unexpected events involved in the exploration for, and the operation and development of, oil and gas properties; 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; changes or fluctuations in production levels; delays in anticipated timing of drilling and completion of wells; individual well productivity; competition from other producers; the lack of availability of qualified personnel or management; credit risk; individual well productivity; changes in laws and regulations including the adoption of new environmental laws and regulations and changes in how they are interpreted and enforced; our ability to comply with current and future environmental or other laws; stock market volatility and market valuations; liabilities inherent in oil and natural gas operations; uncertainties associated with estimating oil and natural gas reserves; competition for, among other things, capital, acquisitions of reserves, undeveloped lands and skilled personnel; incorrect assessments of the value of acquisitions; geological, technical, drilling and processing problems and other difficulties in producing petroleum reserves; risk related to the Transaction, including failure to complete the Transaction on the terms contemplated or at all; failure to realize the anticipated benefits of the sale of the Corporation’s non-core assets; failure to realize the benefits from or complete a transaction pursuant to the strategic alternatives review process; ability to obtain required approvals of regulatory authorities and ability to access sufficient capital from internal and external sources. Many of these risks and uncertainties and additional risk factors are described in the Corporation’s Annual Information Form which is available at www.sedar.com and www.advantageog.com. Readers are also referred to risk factors described in other documents Advantage files with Canadian securities authorities.
With respect to forward-looking statements contained in this press release, Advantage has made assumptions regarding: conditions in general economic and financial markets; effects of regulation by governmental agencies; current commodity prices and royalty regimes; future exchange rates; royalty rates; future operating costs; availability of skilled labor; availability of drilling and related equipment; timing and amount of capital expenditures; the impact of increasing competition; the price of crude oil and natural gas; that the Corporation will have sufficient cash flow, debt or equity sources or other financial resources required to fund its capital and operating expenditures and requirements as needed; that the Corporation’s conduct and results of operations will be consistent with its expectations; that the Corporation will have the ability to develop the Corporation’s crude oil and natural gas properties in the manner currently contemplated; current or, where applicable, proposed assumed industry conditions, laws and regulations will continue in effect or as anticipated; and the extimates of the Corporation’s production and reserves volumes and the assumptions related thereto (including commodity prices and development costs) are accurate in all material respects.
These forward-looking statements are made as of the date of this press release and Advantage 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.
References in this press release to initial production test rates, initial “productivity”, initial “flow” rates, “flush” production rates and “behind pipe production” are useful in confirming the presence of hydrocarbons, however such rates are not determinative of the rates at which such wells will commence production and decline thereafter and are not indicative of long term performance or of ultimate recovery. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production for Advantage.
Barrels of oil equivalent (boe) may be misleading, particularly if used in isolation. A boe conversion ratio has been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil. A boe conversion ratio of 6 mcf:1 bbls is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.
The Corporation discloses several financial measures that do not have any standardized meaning prescribed under IFRS. These financial measures include funds from operations and cash netbacks. Management believes that these financial measures are useful supplemental information to analyze operating performance and provide an indication of the results generated by the Corporation’s principal business activities. Investors should be cautioned that these measures should not be construed as an alternative to net income, cash provided by operating activities or other measures of financial performance as determined in accordance with IFRS. Advantage’s method of calculating these measures may differ from other companies, and accordingly, they may not be comparable to similar measures used by other companies.
SOURCE: Advantage Oil & Gas Ltd.
Investor Relations
Toll free: 1-866-393-0393
Advantage Oil & Gas Ltd.
700, 400 – 3rd Avenue SW
Calgary, Alberta
T2P 4H2
Phone: (403) 718-8000
Fax: (403) 718-8300
Web Site: www.advantageog.com
E-mail: ir@advantageog.com