CALGARY, March 11, 2014 /CNW/ – Advantage Oil & Gas Ltd. (“Advantage” or the “Corporation”) is pleased to report strong year end 2013 reserve additions for its Montney resource property at Glacier, Alberta (“Glacier”). Proven plus probable (“2P”) reserve additions were achieved at a finding and development cost of $1.33/mcfe ($7.99/boe) and a recycle ratio of 2.1. Total 2P reserves are up 20% to 1.7 trillion cubic feet (“Tcfe”). We are also pleased to report Glacier production reached our 135 mmcfe/d Phase VI target ahead of schedule with capital spending below budget.
Advantage’s year-end 2013 corporate reserves which will include the impact of non-core asset divestures during 2013 will be released on March 27, 2014 with its year-end financial and operating results. All references to year end 2013 financial and operating data in this release are estimates and are unaudited.
Glacier 2013 Reserve Report Summary
2013 | 3 Years Ended 2013 | |||||
2P F&D including change in FDC | $1.33/mcfe or $7.99/boe | $1.06/mcfe or $6.36/boe |
(1) | Sproule Associates Ltd. (“Sproule”) was engaged as an independent qualified reserve evaluator to evaluate Glacier’s year-end reserves as of December 31, 2013 (“Sproule 2013 Glacier reserve report”) in accordance with National Instrument 51-101 (“NI 51-101”) and the Canadian Oil and Gas Evaluation Handbook (“COGE Handbook”). Reserves are stated on a gross (before royalties) working interest basis before unless otherwise indicated. |
(2) | Only 12 of our 22 wells in our current Phase VI Glacier drilling program had well test data available for Sproule to utilize in their December 31, 2013 reserve report. The remaining wells were or will be tested after December 31, 2013. |
Q4 2013 Glacier | |
Revenue ($/mcfe) (1) | $3.25 |
Royalties ($/mcfe) | $0.15 |
Operating Cost ($/mcfe) | $0.27 |
Glacier Operating netback ($/mcfe) | $2.83 |
2P Recycle Ratio for 2013 | 2.1x |
2P Recycle Ratio for last 3 years | 2.7x |
(1) | Glacier’s Q4 2013 realized natural gas price is $3.25/mcfe which includes adjustments for transportation costs and heat value. |
Sproule # of Gross Horizontal Wells Booked |
Sproule Average EUR/well |
||||
Developed | Undeveloped | Undeveloped (bcf/well) |
|||
Upper | 83 | 169 | 5.4 | ||
Middle | 12 | 57 | 3.7(1) | ||
Lower | 22 | 72 | 5.1 | ||
Total | 117 | 298 |
(1) | Sproule booked natural gas liquids at an average propane plus liquids yield of 39 bbls/mmcf raw for the Middle Montney. As a result the average reserves/well for a Middle Montney undeveloped location is 4.2 bcfe. |
Glacier Production Reaches 135 mmcfe/d Phase VI Target Ahead of Schedule with Capital Spending Below Budget
Strong Reserve Replacement Efficiencies & Production Performance Reinforces Advantage’s Glacier Three Year Development Plan
Approved Phase VII Budget & Guidance | 12 Months ending March 31, 2015 |
||||||
Average Production | (mmcfe/d) | 134 to 139 | |||||
includes NGLs of 900 to 1,100 bbls/day | |||||||
End of Phase VII Production Rate | (mmcfe/d) | 183 | |||||
Royalty Rate | (%) | 5% to 6% | |||||
Operating Costs | ($/mcfe) | $0.25 to $0.30 | |||||
Capital Expenditures | ($ million) | $260 to $270 | |||||
Wells Drilled (net) | Dry gas | 20 | |||||
Liquids rich gas | 13 | ||||||
Total | 33 |
Glacier Reserve Summary
Advantage engaged our independent qualified reserves evaluator Sproule to evaluate the reserves at Glacier in accordance with NI 51-101 and the COGE Handbook. The following tables incorporate only the reserves assigned to the Company’s property at Glacier, Alberta.
Reserves and production information included herein is stated on a Gross (before royalty)Working Interest basis 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) will be included in Advantage’s Annual Information Form (“AIF”) and will be available at www.advantageog.com and www.sedar.com in the coming weeks.
Glacier Gross (before royalties) Working Interest Reserves
Summary as at December 31, 2013
Natural | |||||||||
Gas Liquids | Natural Gas | Equivalent | |||||||
(mbbl) | (mmcf) | (mboe) | |||||||
Proved | |||||||||
Developed Producing | 731 | 204,220 | 34,767 | ||||||
Developed Non-producing | 243 | 27,648 | 4,851 | ||||||
Undeveloped | 6,084 | 759,424 | 132,655 | ||||||
Total Proved | 7,058 | 991,292 | 172,273 | ||||||
Probable | 5,945 | 626,360 | 110,338 | ||||||
Total Proved + Probable | 13,003 | 1,617,652 | 282,611 |
Glacier 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 | $802,614 | $466,482 | $394,415 | ||||||
Developed Non-producing | 117,124 | 68,895 | 57,977 | ||||||
Undeveloped | 2,585,106 | 682,770 | 391,751 | ||||||
Total Proved | 3,504,844 | 1,218,146 | 844,143 | ||||||
Probable | 3,136,407 | 889,960 | 590,598 | ||||||
Total Proved + Probable | $6,641,251 | $2,108,106 | $1,434,741 |
(1) | Advantage’s crude oil, natural gas and natural gas liquid reserves were evaluated using Sproule’s product price forecast effective December 31, 2013 prior to the provision for income taxes, interests, debt services charges and general and administrative expenses. It should not be assumed that the discounted future net revenue estimated by Sproule represents the fair market value of the reserves. |
(2) | Assumes that development of Glacier will occur, without regard to the likely availability to the Corporation of funding required for that development. |
Sproule Price Forecasts
The present value of future net revenue at December 31, 2013 was based upon natural gas and natural gas liquids pricing assumptions prepared by Sproule effective December 31, 2013. These forecasts are adjusted for reserve quality, transportation charges and the provision of any applicable sales contracts. The price assumptions used over the next seven years are summarized in the table below:
Alberta AECO-C | Henry Hub | Edmonton | Edmonton | Edmonton | Exchange | |||||||||||||
Natural Gas | Natural Gas | Propane | Butane | Pentanes Plus | Rate | |||||||||||||
Year | ($Cdn/mmbtu) | ($US/mmbtu) | ($Cdn/bbl) | ($Cdn/bbl) | ($Cdn/bbl) | ($US/$Cdn) | ||||||||||||
2014 | 4.00 | 4.17 | 45.78 | 69.05 | 103.50 | 0.94 | ||||||||||||
2015 | 3.99 | 4.15 | 44.14 | 66.57 | 99.78 | 0.94 | ||||||||||||
2016 | 4.00 | 4.17 | 44.30 | 66.81 | 100.14 | 0.94 | ||||||||||||
2017 | 4.93 | 5.04 | 50.22 | 75.74 | 113.53 | 0.94 | ||||||||||||
2018 | 5.01 | 5.12 | 50.98 | 76.88 | 115.24 | 0.94 | ||||||||||||
2019 | 5.09 | 5.19 | 51.74 | 78.03 | 116.97 | 0.94 | ||||||||||||
2020 | 5.18 | 5.27 | 52.52 | 79.20 | 118.72 | 0.94 |
Glacier Gross (before royalties) Working Interest Reserves Reconciliation:
Natural Gas | Natural | Oil | |||||||
Liquids | Gas | Equivalent | |||||||
Proved | (mbbl) | (mmcf) | (mboe) | ||||||
Opening balance Dec. 31, 2012 | 1,776 | 876,281 | 147,823 | ||||||
Extensions | 2,927 | 96,420 | 18,997 | ||||||
Improved recovery | – | – | – | ||||||
Infill Drilling | – | – | – | ||||||
Discoveries | – | – | – | ||||||
Economic factors | – | (22) | (4) | ||||||
Technical revisions | 2,385 | 56,738 | 11,842 | ||||||
Acquisitions | – | – | – | ||||||
Dispositions | – | – | – | ||||||
Production | (30) | (38,125) | (6,384) | ||||||
Closing balance at Dec. 31, 2013 | 7,058 | 991,292 | 172,273 | ||||||
Natural Gas | Natural | Oil | |||||||
Liquids | Gas | Equivalent | |||||||
Proved + Probable | (mbbl) | (mmcf) | (mboe) | ||||||
Opening balance Dec. 31, 2012 | 2,637 | 1,396,971 | 235,466 | ||||||
Extensions | 6,598 | 200,043 | 39,939 | ||||||
Improved recovery | – | – | – | ||||||
Infill Drilling | – | – | – | ||||||
Discoveries | – | – | – | ||||||
Economic factors | – | (9) | (2) | ||||||
Technical revisions | 3,798 | 58,772 | 13,594 | ||||||
Acquisitions | – | – | – | ||||||
Dispositions | – | – | – | ||||||
Production | (30) | (38,125) | (6,384) | ||||||
Closing balance at Dec. 31, 2013 | 13,003 | 1,617,652 | 282,612 |
Glacier Finding, Development & Acquisitions Costs (“FD&A”) (1)(2)(3)
2013 FD&A Costs – Gross (before royalties) Working Interest Reserves excluding Future Development Capital
Proved | Proved + Probable | ||||
Capital expenditures ($000) | $155,369 | $155,369 | |||
Acquisitions net of dispositions ($000) | – | – | |||
Total capital ($000) | $155,369 | $155,369 | |||
Total mboe, end of year | 172,273 | 282,611 | |||
Total mboe, beginning of year | 147,823 | 235,466 | |||
Production, mboe | 6,384 | 6,384 | |||
Reserve additions, mboe | 30,835 | 53,530 | |||
2013 FD&A costs ($/boe) | $5.04 | $2.88 | |||
2012 FD&A costs ($/boe) | $3.27 | $2.08 | |||
Three year average FD&A costs ($/boe) | $4.86 | $3.42 | |||
2013 F&D costs ($/boe) | $5.04 | $2.88 | |||
2012 F&D costs ($/boe) | $3.27 | $2.08 | |||
Three year average F&D costs ($/boe) | $4.86 | $3.42 | |||
NI 51-101
2013 FD&A Costs – Gross (before royalties) Working Interest Reserves including Future Development Capital
Proved | Proved + Probable | |||||
Capital expenditures ($000) | $155,369 | $155,369 | ||||
Acquisitions net of dispositions ($000) | – | – | ||||
Net change in Future Development Capital ($000) | 152,889 | 272,189 | ||||
Total capital ($000) | $308,258 | $427,558 | ||||
Reserve additions, mboe | 30,835 | 53,530 | ||||
2013 FD&A costs ($/boe) | $10.00 | $7.99 | ||||
2012 FD&A costs ($/boe) | $6.88 | $4.41 | ||||
Three year average FD&A costs ($/boe) | $8.58 | $6.36 | ||||
2013 F&D costs ($/boe) | $10.00 | $7.99 | ||||
2012 F&D costs ($/boe) | $6.88 | $4.41 | ||||
Three year average F&D costs ($/boe) | $8.58 | $6.36 |
(1) | Under NI 51-101, the methodology to be used to calculate F&D costs includes incorporating changes in 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. Advantage has also presented both F&D (excluding the effects of acquisitions) and FD&A (including the effects of acquisitions) for continuity; however, Advantage’s F&D and FD&A costs in the last three years are the same. |
(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. |
Reserve Definitions
Reserves are 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 classified according to the degree 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.
[expand title=”Advisories & Contact”]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, among other things, expected number of future drilling locations; expectations as to reserves life; expected Q1 2014 Glacier production; expectations as to the number of wells in Advantage’s Phase VI required to provide sufficient production inventory to maintain production at 135 mmcfe/d through to the end of 2014; the expectation that new well completions and tie-ins of Phase VI wells will continue through Q2 2014; forecast total capital expenditures for the Glacier Phase VI; number of wells expected to be spud in March 2014 and that Advantage will continue drilling through spring break-up; anticipation that some of our new Phase VII wells will be brought on production in early 2015; expected timing of achieving Advantage’s Phase VII production target; expectation of increases in production resulting from Advantage’s Glacier three year development plan; expected increases to cash flow per share; expectations of future debt to cash flow ratios; expected timing for commencement of Glacier Phase VII program; and details of Advantage’s Glacier Phase VII capital and operating budget including expectations of average production rates, end of Phase VII production rate, royalty rates, operating costs, capital expenditures and number of wells drilled. 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, including 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; 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; 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 estimates 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.
Barrels of oil equivalent (boe) and thousand cubic feet of natural gas equivalent (mcfe) may be misleading, particularly if used in isolation. Boe and mcfe conversion ratios have been calculated using a conversion rate of six thousand cubic feet of natural gas equivalent to one barrel of oil. A boe and mcfe 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.
The Corporation discloses several financial measures that do not have any standardized meaning prescribed under International Financial Reporting Standards (“IFRS”). These financial measures include operating netbacks and debt to cash flow ratio. 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 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. Please see the Corporation’s most recent Management’s Discussion and Analysis, which is available at www.sedar.com and www.advantageog.com for additional information about these financial measures, including a reconciliation of funds from operations to cash provided by operating activities.
Where any disclosure of reserves data is made in this press release that does not reflect all reserves of Advantage, the reader should note that the estimates of reserves and future net revenue for individual properties or groups of properties may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to the effects of aggregation.
The following abbreviations used in this press release have the meanings set forth below:
bbls | barrels | |
mbbls | thousand barrels | |
mmbbls | million barrels | |
boe | barrels of oil equivalent of natural gas, on the basis of 1 barrel of oil or NGLs for 6 thousand cubic feet of natural gas | |
mboe | thousand barrels of oil equivalent | |
mmboe | million barrels of oil equivalent | |
mcf | thousand cubic feet | |
mmcf | million cubic feet | |
bcf | Billion cubic feet | |
tcf | trillion cubic feet | |
mcfe | thousand cubic feet equivalent on the basis of 6 thousand cubic feet of natural gas for 1 barrel of oil or NGLs | |
mmcfe/d | million cubic feet equivalent per day | |
tcfe | trillion cubic feet equivalent |
SOURCE Advantage Oil & Gas Ltd.
Investor Relations
Toll free: 1-866-393-0393
Advantage Oil & Gas Ltd.
300, 440 -2nd Avenue SW
Calgary, Alberta
T2P 5E9
Phone: (403) 718-8000
Fax: (403) 718-8332
Web Site: www.advantageog.com
E-mail: ir@advantageog.com[/expand]