CALGARY, Nov. 11, 2013 /CNW/ – Legacy Oil + Gas Inc. (“Legacy” or the “Company”) (TSX:LEG) is pleased to announce it has filed on SEDAR its interim financial statements and related Management’s Discussion and Analysis (“MD&A”) for the three and nine months ended September 30, 2013. Selected financial and operational information is outlined below and should be read in conjunction with Legacy’s interim financial statements and the related MD&A which are available for review at www.legacyoilandgas.com or www.sedar.com.
|FINANCIAL + OPERATIONAL HIGHLIGHTS (1)|
|Three Months Ended||Nine Months Ended|
|September 30||September 30|
|Unaudited (Cdn $000’s, except per share amounts)||2013||2012||% change||2013||2012||% change|
|Petroleum and natural gas sales, net of royalties||133,713||91,190||47||348,108||266,983||30|
|Funds generated by operations (2)||79,974||55,347||44||213,363||163,336||31|
|Per share basic||0.51||0.39||31||1.41||1.14||24|
|Per share diluted (3)||0.50||0.38||32||1.38||1.12||23|
|Net income (loss)||(1,866)||2,323||(180)||(4,539)||2,913||(256)|
|Per share basic||(0.01)||0.02||(150)||(0.03)||0.02||(250)|
|Per share diluted (3)||(0.01)||0.02||(150)||(0.03)||0.02||(250)|
|Capital expenditures (excluding net acquisitions)||90,343||76,719||18||268,535||245,143||10|
|Net acquisitions and dispositions (cash consideration) (5)||(1,272)||192||(763)||83,579||5,096||1,540|
|Net debt and working capital surplus (deficit) (2)||(680,626)||(469,691)||45||(680,626)||(469,691)||45|
|Crude oil (Bbls per day)||15,639||12,813||22||14,746||12,187||21|
|Heavy oil (Bbls per day)||117||170||(31)||115||181||(36)|
|Natural gas (Mcf per day)||9,578||15,132||(37)||11,594||13,873||(16)|
|Natural gas liquids (Bbls per day)||2,137||1,221||75||1,582||1,380||15|
|Barrels of oil equivalent (Boe per day) (4)||19,489||16,726||17||18,375||16,060||14|
|Average realized price|
|Crude oil ($ per Bbl)||103.90||83.54||24||94.42||85.53||10|
|Heavy oil ($ per Bbl)||77.29||62.42||24||68.48||69.38||(1)|
|Natural gas ($ per Mcf)||1.70||2.68||(37)||3.23||2.57||26|
|Natural gas liquids ($ per Bbl)||38.42||49.34||(22)||49.03||53.84||(9)|
|Barrels of oil equivalent ($ per Boe) (4)||88.89||70.66||26||82.46||72.53||14|
|Netback ($ per Boe) (2)(4)|
|Petroleum and natural gas sales||88.89||70.66||26||82.46||72.53||14|
|Operating Netback ($ per Boe) (2)||57.25||42.06||36||52.55||43.08||22|
|Undeveloped land holdings (gross acres)||507,616||483,446||5||507,616||483,446||5|
|Common Shares (000’s)|
|Common shares outstanding, end of period||157,212||143,325||10||157,212||143,325||10|
|Weighted average common shares (basic)||157,212||143,325||10||151,834||143,325||6|
|Weighted average common shares (diluted) (3)||159,925||145,149||10||154,360||145,584||6|
|(1)||Consolidated financial and operating highlights for Legacy Oil + Gas Inc. and all of its subsidiaries (“Legacy” or the “Company”)|
|(2)||Management uses funds generated by operations, net debt and working capital surplus (deficit) and operating netback to analyze operating performance and leverage. These terms, as presented, do not have a standardized meaning prescribed by International Financial Reporting Standards and therefore they may not be comparable with the calculation of similar measures for other entities.|
|(3)||In calculating the net income (loss) per share diluted, Legacy excludes the effect of outstanding stock options, stock incentives and share warrants and uses the weighted average common shares (basic) where the Company has a net loss for the period. In calculating funds generated by operations per share diluted, the Company includes the effect of outstanding stock options, stock incentives and share warrants using the treasury stock method.|
|(4)||Boe means barrel of oil equivalent. All Boe conversions in this report are derived by converting natural gas to oil equivalent at a ratio of six thousand cubic feet of natural gas to one barrel of oil equivalent. Boe may be misleading, particularly if used in isolation. A Boe conversion rate of 1 Boe: 6 Mcf 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 of oil compared to natural gas based on currently prevailing prices is significantly different than the energy equivalency ratio of 1 Boe : 6 Mcf, utilizing a conversion ratio of 1 Boe : 6 Mcf may be misleading as an indication of value.|
|(5)||For the three months ended September 30, 2013, the Company issued no common shares as part consideration for net acquisitions and dispositions and assumed no debt and net working capital deficit for these acquisitions and dispositions (2012 – No common shares as part consideration for net acquisitions and assumed $9.4 million debt and working capital deficit). For the nine months ended September 30, 2013, the Company issued 13.9 million common shares valued at $73.1 million as part consideration for the acquisition of Villanova Oil Corp. and assumed $30.3 million debt and working capital deficit (2012 – No common shares as part consideration for net acquisitions and dispositions and assumed $9.4 million debt and working capital deficit).|
- Increased average production from 16,726 Boe per day in the third quarter of 2012 to 19,489 Boe per day in the third quarter of 2013, a 17 percent increase year over year and a 7 percent increase over the second quarter of 2013, leading to an increase of 14 percent year over year for the nine month period of 2013 as compared to the same period in 2012
- Exceeded the Company’s 2013 exit production rate guidance
- Increased funds generated from operations of $55.3 million in the third quarter of 2012 to a record $80.0 million in the third quarter of 2013, a 44 percent increase year over year and a 12 percent increase over the second quarter of 2013, leading to an increase of 31 percent year over year for the nine month period of 2013 as compared to the same period in 2012
- Increased funds generated from operations (fully diluted) of $0.38 per share in the third quarter of 2012 to a record $0.50 per share in the third quarter of 2013, a 32 percent increase year over year and a 11 percent increase over the second quarter of 2013, leading to an increase of 23 percent year over year for the nine month period of 2013 as compared to the same period in 2012
- Legacy’s operating netbacks increased year over year from $42.06 per Boe in the third quarter of 2012 to a record $57.25 per Boe in the third quarter of 2013, a 36 percent increase year over year and a 9 percent increase over the second quarter of 2013, leading to an increase of 22 percent year over year for the nine month period of 2013 as compared to the same period in 2012
- Reduced G&A expenses from $3.25 per Boe in the third quarter of 2012 to $1.97 per Boe in the third quarter of 2013 (39 percent decrease)
- Drilled 39 gross (32.7 net) light oil wells in the third quarter of 2013, with a 100 percent success rate
- Increased the Company’s net undeveloped land position from 377,416 acres in the third quarter of 2012 to 395,329 in the third quarter of 2013 (5 percent increase)
- Increased crude oil hedging program to 3,000 Bbls per day at WTI C$97.19 per Bbl for the second half of 2014. First half of 2014 still stands at 8,000 Bbls per day at WTI C$96.71 per Bbl. The last three months of 2013 remain at 8,000 Bbls per day at WTI C$98.31 per Bbl
- Legacy’s banking syndicate increased the borrowing base from the previous $600 million to $660 million, bringing total borrowing capacity to $860 million
- Restored Company’s operations to near full capacity in Turner Valley by the end of the third quarter after recovering from Southern Alberta’s worst flood in history. The Company has received positive feedback from residents and regulatory bodies on Legacy’s safe, rapid and effective emergency response to this incident
In the third quarter of 2013, the Company drilled 39 gross (32.7 net) light oil wells, with a 100 percent success rate. Production volumes were impacted by the heavy rains and subsequent flooding in southern Alberta. Various portions of the Turner Valley Field were shut-in and third party gas processing was curtailed due to unscheduled maintenance at Quirk Creek and Moose Mountain. Third quarter volumes were reduced by 450 Boe per day but were restored to near full capacity by the end of the quarter. Operating costs for the third quarter 2013 were approximately $0.60 per Boe higher than expected as the Company had a number of one-time repair and maintenance expenditures as a consequence of the flooding.
The Company continues to be on track to meet its previously announced increased full year production and capital expenditure guidance. Based on current field estimates, Legacy has exceeded its exit rate guidance of 21,500 Boe per day.
At Turner Valley, Legacy has continued to evolve drilling and completion practices to optimize both production rates and capital costs. Drilling to-date has targeted infill locations testing areas of varying water cut, reservoir pressure, proximity to water injection and three different stratigraphic horizons. New logging while drilling (LWD) equipment and the 3D seismic shot earlier this year have enabled longer horizontal drilling runs (greater than 90 percent) in the pay zones increasing reservoir exposure in these multi-lateral horizontal wells. In addition, modifications to the completion fluids have resulted in higher initial oil cuts and oil rates. Legacy’s 2013 wells exemplify the successful evolution of the development at Turner Valley and have demonstrated the strongest average production rates seen to-date.
|Initial Rate Period||Boe per Day per Well|
|30 Day Average||265|
|60 Day Average||280|
|90 Day Average||305|
Previously drilled horizontals continue to improve in oil production rates as the wells are consistently drawn down and run times improve. The Little NY#3 well has increased from its initial rate in June 2012 of 20 Boe per day to a peak rate of 135 Boe per day.
Production in Turner Valley has grown by more than 25 percent over the past two years by spending less than cash flow, highlighting the free cash flow generating capability of the area.
Legacy continues to show strong success in Pinto and Taylorton, with four successful wells being put on production in the third quarter of 2013. Average 30 day and 60 day initial production rates from these wells were 200 Boe per day per well and 205 Boe per day per well, respectively.
Additional lands have been acquired as the Company has successfully expanded the boundaries of the Midale play with its drilling activity in 2013. More than 29,000 net undeveloped acres prospective for Midale, Bakken and Torquay were added in the third quarter of 2013. Numerous follow-up locations have been identified in all areas, with additional drilling planned for 2013.
At Wordsworth, another successful Frobisher well was drilled and had an average 30 day initial production rate of 175 Boe per day. A recently drilled follow-up well has early production rates of 185 Boe per day.
At Star Valley, the Company had an active quarter with 10 (7.8 net) Bakken wells brought on production. Average 30 day initial production rates from these wells was 170 Boe per day per well.
At Taylorton, Legacy brought 1 (1.0 net) well on production in the quarter. Average 30 day and 60 day initial production rates were 230 Boe per day and 195 Boe per day, respectively.
At Pierson, Manitoba, results continue to meet the Legacy established historical type curve. The Company drilled 7 (6.5 net) wells in the third quarter 2013. Company operated mile long horizontal wells have outperformed area competitor’s half-mile horizontal wells with respect to recoverable reserves and have lower capital costs.
In North Dakota, the Company has had similar success in the Spearfish with the drilling of 7 (5.5 net) wells in the third quarter 2013. Additional cost savings are being realized, with the most recent wells’ total cost averaging approximately $1.5 million.
At Taylorton, the Company has continued to observe improved waterflood response in the Bakken Formation in both the original and expanded pilot areas. A total of five wells have been converted to water injection, expanding the pilot area to cover portions of four sections.
At Heward, the pilot Bakken waterflood project initiated in December 2011 continues to demonstrate waterflood response as the oil production rate in eight offsetting wells has increased since the commencement of the pilot. The Company is rapidly expanding the waterflood pilot project from three injectors with two additional water injector conversions anticipated in the fourth quarter of 2013 and two additional water injector conversions anticipated in the first quarter 2014.
At Frys/Antler, a pilot waterflood initiated in December 2012 in the Torquay Formation has shown early signs of response. Approval has been received to expand the pilot to the offsetting sections. The analogous field at Sinclair, located immediately east of Frys/Antler now has 34 sections under waterflood and has seen oil production rate increases ranging from 50 to 100 percent after waterflood response.
At Pierson, applications are being prepared for two pilot waterfloods, with anticipated approvals in early 2014. The Spearfish Formation has been successfully waterflooded over the past 20 years in six different project areas that are good analogs to Legacy’s proposed pilot.
Legacy has made application at Steelman for its first water injector and is working on additional water injection conversions. The Midale Formation has been successfully waterflooded for more than 50 years in the offsetting Steelman units.
INCREASE TO BANK BORROWING BASE
Effective October 31, 2013 the Company’s syndicate of Canadian banks increased the Company’s borrowing base to $660 million from the previous $600 million. The borrowing base continues to be subject to semi-annual review, the next of which is scheduled to occur in April 2014.
The following is a summary of financial derivative contracts in place for the Company as at September 30, 2013:
|Crude Oil Commodity Contracts (1)|
|Weighted Average||Weighted Average|
|Oct 2013 – Dec 2013||Swap||8,000||98.31|
|Jan 2014 – Jun 2014||Swap||8,000||96.71|
|Jul 2014 – Dec 2014||Swap||3,000||97.19|
|(1) NYMEX WTI Monthly average converted to Canadian dollars|
Our goal at Legacy is to deliver 10 to 15 percent per share growth per year, spending cash flow plus our growth rate, for the next three to five years. These results have been achieved in the past three years as demonstrated by:
- Three year annualized production growth rate of 47 percent (17 percent per share)
- Three year annualized cash flow growth of 50 percent (19 percent per share)
Our demonstrated improved capital efficiencies, capital allocation and enhanced well production results now show that Legacy is positioned to achieve these growth rates spending cash flow or less, based on WTI US$90.00 per Bbl. This sustainable model is designed to deliver superior returns over the near and long term in a low risk platform and is characterized by:
- More than 2,000 net development locations for light oil
- Low risk, low cost drilling program with average well cost of approximately $2 million per well
- Williston Basin drilling program (96 percent of wells drilled) have cycle times of approximately three weeks or less
- Enhanced production results at Turner Valley with attractive capital efficiencies and low, long-term decline rates
- Fast-tracking waterflood projects in the Bakken, Torquay (Three Forks), Spearfish and Midale to build significant net asset value while moderating corporate declines and providing additional opportunities for value creation
Legacy’s light oil assets, strong financial position and significant oil hedging program not only provide downside mitigation in periods of lower commodity prices or volatility, but also provide upside torque to the continued operational success due to:
- Production that is approximately 90 percent weighted to light oil and NGL’s (oil weighting increasing)
- Record Q3 2013 operating netbacks of $57.25 per Boe
- Low operating costs and top decile G&A costs ($1.97 per Boe)
- Expanded banking facility with surplus capacity
Legacy’s positive operational and financial results and crude oil hedging program, when combined with the current oil price environment, enable a rapid de-levering and improvement of the Company’s balance sheet and its debt to forward cash flow by the end of 2013. Furthermore, in the fourth quarter of 2013 Legacy expects to spend approximately 67 percent of funds generated from operations (based on current commodity prices) on organic capital expenditures. As a result, Legacy is strongly positioned to pursue sustainable growth and shareholder value creation opportunities beyond its historical track record.
CONFERENCE CALL DETAILS
Management will be holding a conference call for investors, financial analysts, media and any interested persons on Tuesday, November 12, 2013 at 9:00 a.m. (MDT) (11:00 a.m. EDT) to discuss the 2013 third quarter results.
The investor conference call details are as follows:
Participant Dial-In Number(s):
- Operator Assisted Toll-Free Dial-In Number: (888) 231-8191
- Local Dial-In #: (403) 451-9838
- Conference ID: 78940715
NOTE: In order to join this conference call, you will be required to provide the Conference ID Number listed above.
Legacy is a uniquely positioned, well‐capitalized, technically driven, intermediate oil and natural gas company with a proven management team committed to aggressive, cost‐effective growth of light oil reserves and production in large hydrocarbon in‐place assets and resource plays. Legacy’s common shares trade on the TSX under the symbol LEG.
This press release shall not constitute an offer to sell, nor the solicitation of an offer to buy, any securities in the United States, nor shall there be any sale of securities mentioned in this press release in any state in the United States in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state.
Forward-Looking Information – This press release contains forward-looking statements. More particularly, it contains forward-looking statements concerning: (i) the meeting of full year production and capital expenditure guidance, (ii) planned drilling, development and waterflood activities, (iii) Legacy’s positioning to achieve potential growth rates in production and cash flow per share, (iv) the potential number of drilling locations, (v) anticipated improvements in Legacy’s balance sheet and debt to forward cash flow ratio by the end of 2013, and (vi) the anticipated percentage of funds generated from operations to be spent on organic capital expenditures in the fourth quarter of 2013.
The forward-looking statements contained in this press release are based on certain key expectations and assumptions made by Legacy, including expectations and assumptions concerning the success of future drilling, development and completion activities, the performance of existing wells, the performance of new wells, the viability of waterflood projects, the availability and performance of facilities and pipelines, the geological characteristics of Legacy’s properties, the successful application of drilling, completion and seismic technology, prevailing weather and break-up conditions, commodity prices, royalty regimes and exchange rates, the application of regulatory and licensing requirements and the availability of capital, labour and services.
Although Legacy believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because Legacy can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), constraint in the availability of services, commodity price and exchange rate fluctuations, adverse weather or break-up conditions and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects, waterflood projects or capital expenditures. These and other risks are set out in more detail in Legacy’s Annual Information Form for the year ended December 31, 2012 dated March 18, 2013.
The forward-looking statements contained in this press release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.
SOURCE Legacy Oil + Gas Inc.
For further information:
Trent J. Yanko, P.Eng.
President + CEO
Legacy Oil + Gas Inc.
4400 Eighth Avenue Place
525 – 8th Avenue SW
Calgary, AB T2P 1G1
Matt Janisch, P.Eng.
Vice-President, Finance + CFO
Legacy Oil + Gas Inc.
4400 Eighth Avenue Place
525 – 8th Avenue SW
Calgary, AB T2P 1G1