Long Run Exploration Ltd. Provides Operational Update, Announces Management Changes, and Resource Assessment Findings

CALGARY, ALBERTA–(Marketwired – July 2, 2013) – Long Run Exploration Ltd. (“Long Run” or “the Company“) (TSX:LRE) is pleased to provide an update on the Company’s operations, an addition to the Long Run management team, and details of a recently completed resource assessment.

Operational Update

Long Run’s current production is approximately 24,250 boe per day, including approximately 10,750 barrels per day of crude oil, 1,550 barrels per day of NGLs, and 71.7 million cubic feet of gas per day, based on field estimates. In May, planned facility maintenance and turnarounds were completed including a major facility turnaround at Kaybob. This facility returned to full operation during the first week of June, per internal forecasts. The Bruderheim South field northeast of Edmonton at Redwater resumed production in mid-June after a third party planned turnaround that lasted one week. These turnarounds were included in production forecasts and Long Run anticipates no additional major impacts to production or to project development plans in key play areas.

Factoring in downtime due to scheduled maintenance and turnarounds, Long Run anticipates second quarter average production of approximately 24,300 boed, an increase of nearly 3% over first quarter average volumes of 23,611 boe per day. Long Run continues to be on-track to achieve full-year guidance of 25,000 boe per day.

After spring breakup, Long Run resumed field activity with two rigs in the Peace Area of central Alberta targeting Montney oil, one rig in the Redwater area targeting Viking oil and one rig at Provost targeting a new Viking horizontal development project.

Wet weather in late May and June has impacted drilling, however Long Run’s drilling program remains on-target for 2013.

Long Run anticipates a total of 12 gross wells (11 net) will be drilled during the second quarter with 4 net wells in the Montney, 5 net wells at Redwater, and 2 net wells at Provost.

Executive Appointment

Long Run is pleased to announce the appointment of Jana King as Vice President, Exploration. Ms. King is a graduate of the University of Calgary and is a Professional Geologist with extensive experience in the Western Canadian Sedimentary Basin, most recently at a senior independent oil and gas exploration company.

Montney Resource Assessment

Long Run is pleased to announce the results of an independent resource assessment on its Montney oil play at Normandville and Girouxville. At Long Run’s request, Sproule Associates Limited (“Sproule”) has provided an independent assessment of the Discovered Petroleum Initially In-Place (DPIIP) on a portion of Long Run’s lands covering the Montney formation at Normandville and Girouxville. The assessed portion (the “Evaluated Areas”) of Long Run’s interest in the Normandville area comprises 21,600 gross (21,600 net) acres and in the Girouxville area is comprised of 39,039 gross (37,183 net) acres. Undeveloped acreage in the Evaluated Areas total 16,800 gross (16,560 net) acres, and in respect of which no reserves have been attributed. The Evaluated Areas constitute approximately 48 percent of lands to which Long Run holds Montney rights in the Normandville / Girouxville areas. The Resource Assessment was recently completed and is effective as of December 31, 2012. This assessment was based on development work as at December 31, 2012 and extensive well-control in the areas being evaluated.

(1) That portion of DPIIP not produced to-date, and not included in the reserve component is currently deemed unrecoverable as per NI-51-101 definitions. DPIIP currently cannot be further subcategorized as it is not possible at this time to define the enhanced recovery project for this DPIIP. Management believes that current delineation, in-fill drilling, and secondary recovery including, but not limited to, waterflood, will add to the total recoverable volume.

Please Note:

1. Production is defined as production to December 31, 2012, the effective date of the Resource Assessment. Proved and probable reserves are as at December 31, 2012 as evaluated by Sproule in its independent reserve evaluation prepared effective December 31, 2012 utilizing forecast prices and costs at January 1, 2013 (the “Sproule Year-End Reserve Evaluation”).

2. Reserves for the low case are proved reserves as evaluated in the Sproule Year-End Reserve Evaluation. Reserves for the best case are proved plus probable reserves as evaluated in the Sproule Year-End Reserve Evaluation. Reserves for the high case are proved plus probable reserves as evaluated in the Sproule Year-End Reserve Evaluation plus possible reserves as evaluated in the Resource Assessment. Reference is made to the Company’s statement of reserves data for the year ended December 31, 2012, which includes detailed disclosure of the Company’s oil and gas reserves and other oil and gas information in accordance with National Instrument 51-101 (“NI 51-101”), including the Sproule Year-End Reserve Evaluation, as contained in our Annual Information Form for the year ended December 31, 2012, which is available on our SEDAR profile at www.sedar.com.

3. Production and reserves reflected in the above table are included in the Discovered Initial In-Place numbers also in the table.

A best case estimate of the oil portion of DPIIP on Long Run’s Montney lands in the Evaluated Area yields a total of 301.2 million barrels, with cumulative production of 1.9 million barrels and corresponds to booked remaining proved + probable reserves of 13.6 million barrels. While early in the development of this asset as an oil project, Long Run is able to leverage previous natural gas development work to provide extensive reservoir data through well-control and therefore partially mitigate geologic risk.

Long Run is currently in the process of generating production and injection predictions for various operating scenarios including full-field peripheral water injection and varied well density configurations. Approvals have been received from the Alberta Energy Regulator (“AER”) to initiate water injection as part of the commercial phase of Long Run’s developing EOR program in the Montney. Water injection commenced during the second quarter of 2013 at Normandville. Through the commercial application of waterflood technologies and increased drilling density, Long Run intends to increase recoveries of crude oil volumes and grow the value of this asset.

Long Run believes that this resource assessment, combined with development success to-date, demonstrates the significant value of this play as a highly economic and profitable project.

While water-flood technologies have been used in what Long Run believes to be analogous pools, the effectiveness of such techniques in the Evaluated Areas covered by the Resource Assessment has not been established. There is no certainty that enhanced recovery techniques, and additional infill drilling which is planned, will increase recoveries. Enhanced recovery projects have historically been developed sequentially over a number of drilling seasons and are subject to annual budget constraints. Long Run’s policy of orderly development on a staged basis, the short and long-term view of Long Run on commodity prices, the results of exploration development activities of Long Run and others in the area and possible infrastructure capital constraints will determine the pace of development. Given the uncertainties associated with the development of the project there could be additional risks which are difficult to quantify given the early stage of this project. As with any resource estimates, the evaluation will change over time as new information becomes available. There is no certainty that it will be commercially viable to produce any portion of the resources.

Definitions, Preparation and Other Information Related to Reserves and Resource Assessment

The Resource Assessment was prepared by Sproule in accordance with the definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook (the “COGE Handbook”) and National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (“NI 51-101”).

The following definitions from NI-51-101 and COGE Handbook are used in this press release:

“Production” means the cumulative quantity of petroleum that has been recovered at a given date.

“Discovered Petroleum-Initially-in-Place” or “DPIIP” means that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations prior to production. The recoverable portion of Petroleum-Initially-In-Place includes cumulative production, reserves, and contingent resources; the remainder is categorized as unrecoverable.

“Reserves” means estimated remaining quantities of oil and natural gas and related substances anticipated to be recoverable from known accumulations, as of a given date, based on the analysis of drilling, geological, geophysical, and engineering data; the use of established technology; and specified economic conditions, which are generally accepted as being reasonable. Reserves are further classified according to the level of certainty associated with the estimates as follows:

• Proved Reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves.
• Probable Reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves.
• Possible Reserves are those additional reserves that are less certain to be recovered than probable reserves. It is unlikely that the actual remaining quantities recovered will exceed the sum of the estimated proved plus probable plus possible reserves.

“Unrecoverable” is that portion of DPIIP quantities which is estimated, as of a given date, not to be recoverable by future development projects. A portion of these quantities may become recoverable in the future as commercial circumstances change or technological developments occur; the remaining portion may never be recovered due to the physical/chemical constraints represented by subsurface interaction of fluids and reservoir rocks.

All estimates of DPIIP, including reserves and production, represent gross resources, meaning the company’s working interest share in the resources before deducting royalties and without including any royalty interests of the Company.

Sproule’s estimates of DPIIP were determined using probabilistic methods. Probabilistic aggregation of the low and high property estimates shown in the table might produce different total volumes than the arithmetic sums shown in the table.

Uncertainty ranges are described in the COGE Handbook as, low, best and high as for reserves and resources as follows:

• Low estimate is considered to be a conservative estimate of the quantity of resources that will actually be recovered. It is likely that the actual remaining quantities recovered will exceed the low estimate. Those resources at the low end of the estimate range have the highest degree of certainty – a 90 percent confidence level – that the actual quantities recovered will equal or exceed the estimate. In the case of reserves, the low estimate is proved reserves.
• Best estimate is considered to be the best estimate of the quantity of resources that will actually be recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. Those resources that fall within the best estimate have a 50 percent confidence level that the actual quantities recovered will equal or exceed the estimate. In the case of reserves, the best estimate is proved plus probable reserves.
• High estimate is considered to be an optimistic estimate of the quantity of resources that will actually be recovered. It is unlikely that the actual remaining quantities of resources recovered will meet or exceed the high estimate. Those resources at the high end of the estimate range have a lower degree of certainty – a 10 percent confidence level – that the actual quantities recovered will equal or exceed the estimate. In the case of reserves, the high estimate is proved plus probable plus possible reserves.

The Discovered Petroleum-Initially-In-Place estimates include unrecoverable volumes and are not an estimate of the volume of the substances that will ultimately be recovered.

Advisories

Forward Looking Statements – This news release contains certain forward-looking information and statements within the meaning of applicable securities laws. The use of any of the words “expect”, “anticipate”, “continue”, “estimate”, “may”, “will”, “project”, “should”, “believe”, “plans”, “intends”, “forecast”, and similar expressions are intended to identify forward-looking information or statements. In particular, but without limiting the foregoing, this news release contains forward-looking information and statements pertaining to the following: anticipation that there will be no major impact to production or to project development plans in major areas as a result of plant turnarounds, anticipated second quarter average production and 2013 average production, timing of resumption of rig activity, planned use of enhanced recovery techniques and additional drilling density to increase recoveries, expectations that the drilling program for 2013 remains on-target and wells to be drilled and the timing thereof. There is no certainty the proposed waterflood described in the Resource Assessment section of this press release will be commercially viable to produce any portion of the resources, other than reserves.

Forward-looking statements or information are based on a number of material factors, expectations or assumptions of Long Run which have been used to develop such statements and information but which may prove to be incorrect. Although Long Run believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because Long Run can give no assurance that such expectation will prove to be correct. In addition to other factors and assumptions which may be identified herein, assumptions have been made regarding, among other things: the impact of increasing competition; the general stability of the economic and political environment in which Long Run operates; the timely receipt of any required regulatory approvals; the ability of Long Run to obtain qualified staff, equipment and services in a timely and cost efficient manner; drilling results; the ability of the operator of the projects in which Long Run has an interest in to operate the field in a safe, efficient and effective manner; the ability of Long Run to obtain financing on acceptable terms; field production rates and decline rates; the ability to replace and expand oil and natural gas reserves through acquisition, development and exploration; the timing and cost of pipeline, storage and facility construction and expansion and the ability of Long Run to secure adequate product transportation; future commodity prices; currency, exchange and interest rates; regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which Long Run operates; the ability of Long Run to successfully market its oil and natural gas products. There are a number of assumptions associated with the potential resource volumes assigned to the Evaluated Areas including the quality of the Montney reservoir, future drilling programs, continued performance from existing wells and performance of new wells, the growth of infrastructure, well density per section, the viability, application and effects of water-flood and other enhanced recovery techniques, and recovery factors and discovery and development necessarily involves known and unknown risks and uncertainties, including those identified in this press release.

The forward-looking information and statements included in this news release are not guarantees of future performance and should not be unduly relied upon. Such information and statements, including the assumptions made in respect thereof, involve known and unknown risks, uncertainties and other factors that may cause actual results or events to defer materially from those anticipated in such forward-looking information or statements including, without limitation: changes in commodity prices; the early stage of development of some areas in the evaluated areas; the potential for variation in the quality of the Montney formation; changes in the demand for or supply of Long Run’s products; unanticipated operating results or production declines; changes in tax or environmental laws, royalty rates or other regulatory matters; changes in development plans of Long Run or by third party operators of Long Run’s properties, increased debt levels or debt service requirements; inaccurate estimation of Long Run’s oil and gas reserve and resource volumes; limited, unfavourable or lack of access to capital markets; increased costs; a lack of adequate insurance coverage; the impact of competitors; and certain other risks detailed from time-to-time in Long Run’s public disclosure documents (including, without limitation, those risks identified in this news release and Long Run’s Annual Information Form).

The forward-looking information and statements contained in this news release speak only as of the date of this news release, and Long Run does not assume any obligation to publicly update or revise any of the included forward-looking statements or information, whether as a result of new information, future events or otherwise, expect as may be required by applicable securities laws.

BOES – Disclosure provided herein in respect of barrels of oil equivalent (boe) 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.

Reserve Disclosure – The estimates for reserves for individual properties may not reflect the same confidence level as estimates of reserves for all properties, due to the effects of aggregation.

Long Run is a Calgary-based intermediate oil company focused on light-oil development and exploration in western Canada. For further information about Long Run, visit the Company’s website at www.longrunexploration.com.