CALGARY, ALBERTA–(Marketwired – April 14, 2014) – Lightstream Resources Ltd. (“Lightstream” or the “Company”) (TSX:LTS) is pleased to provide an update on our operations and announce an agreement to sell our southeast Saskatchewan Conventional business unit royalty interest package for gross proceeds of $141 million.
Consistent with our investment profile in 2013, the first quarter of 2014 is projected to be our most active capital quarter for the year. In the first quarter of 2014 we drilled 50 wells, or approximately 55% of our annual program, with the Cardium continuing to be our busiest area. During the quarter we brought 25 wells on production and at March 31, 2014, we had 32 wells in inventory waiting to be brought on-stream. While some completion activities have continued into April, our current focus is on equipping and tie-in activity to get this inventory of drilled wells on production. We expect to have virtually all wells that were in inventory at quarter-end on-stream during the second quarter.
Production for the first quarter of 2014 averaged 44,000 barrels of oil equivalent per day (boepd) based on field estimates (80% light-oil and liquids weighting). This is approximately 3% lower than production for the fourth quarter of 2013. First quarter production was in line with our expectations and reflects dispositions completed during the quarter of 1,700 boepd (66% gas weighted), which was effectively offset through restored production from downtime (associated with cold weather earlier in the quarter) and production additions from new wells.
Q1 2014 Drilling Activity
|Conventional (SE SK)||7||4||7||4||7||5||2||–|
|Cardium (central AB)||31||25||17||15||11||11||26||19|
|(1)||Inventory refers to the number of wells pending completion and/or tie-in at March 31, 2014.|
As we enter the second quarter of 2014, we will remain active in the field bringing new wells on production and advancing a number of facility capital projects, including completing construction of a 3,500 bopd facility in our Swan Hills area. This facility is expected to be operational in May and will allow us to commence production from all 7 wells drilled and completed during our first quarter drilling program. We anticipate that our 2014 second quarter production will remain in line with the first quarter with new well production additions offsetting the impacts of spring break-up and our dispositions announced to-date in 2014. Drilling operations are not scheduled to restart until July.
Throughout the first quarter we continued to experience production restrictions of approximately 800 to 1,000 boepd due to various facility-related issues in several of our Cardium operating areas. We have three projects underway that should help us mitigate these restrictions, and as well manage future production additions. We expect these projects to be completed, and the resulting incremental production to be restored, during the second half of 2014.
Disposition Activity Update
In November 2013, we outlined a plan to sell at least $600 million of non-core assets over two years, which included some of our royalty interest assets in southeast Saskatchewan. Today we have finalized an agreement to sell this royalty package for gross proceeds of $141 million. TD Securities Inc. acted as our exclusive financial advisor on the transaction. The transaction is expected to close in early May and the divested assets include:
- Production(1) net to Lightstream of 315 boepd (99% oil);
- Net operating income of approximately $15 million in 2013; and
- Approximately 200,000 acres of fee title lands, including 129,000 of undeveloped fee title acres and 71,000 leased fee title acres.
|Production||1,700 boepd||315 boepd(1)||2,015 boepd||$125,560/boepd|
|Reserves||3 MMboe||0.8 MMboe||3.8 MMboe||$66.58/boe|
|Cash Flow||$ 10 M||$15 M(2)||$25 M||10.1x|
|Disposition Proceeds||$ 112 M||$ 141M||$253 M|
|(1)||Does not include LTS to LTS royalty barrels of 155 boepd, which are not included in the reported production|
|(2)||$15 million of net operating income includes $10 million of reported third party royalty income plus $5 million of royalties that will be payable on the remaining working interest production retained by LTS|
With the sale of these assets, we are 85% of the way to achieving our 2014 goal of divesting $300 million of assets. In total, we have divested approximately 2,000 boepd of production (56% gas) for $253 million; or 10 times the associated net operating income of $25 million from these assets. With the proceeds of dispositions reducing our debt, the annualized interest savings is approximately $9 million for a net pro-forma impact to funds flow from operations of only $16 million.
Secured Term Credit Facility Update
We are also pleased to announce that our banking syndicate has agreed to extend the term of our covenant-based lending facility by an additional year, to June 2, 2017. As we continue to execute our disposition plan, we are applying all proceeds to repay debt and we will reduce the maximum lending amount (before the optional accordion feature) of our secured term credit facility by $100 million to $1.3 billion upon completion of the royalty transaction. All other terms and conditions remain unchanged.
We have previously updated our guidance based on Q1 2014 disposition activity. With the current disposition of royalty interest assets we have chosen to maintain our latest guidance, which reflects all disposition activity announced to date in 2014.
|Average Production (boe/d)||43,500 – 45,500|
|Exit Production (boe/d)||45,000 – 47,000|
|Oil and Liquids Weighting||80%|
|Funds Flow from Operations (‘000)||$635,000 – $665,000|
|Funds Flow per share(2)||$3.19 – $3.34|
|Dividends per share||$0.48|
|Capital Expenditures(3)||$525,000 – $575,000|
|(1)||Commodity price assumptions include WTI US$95.00/bbl, AECO CDN$4.00/Mcf, foreign exchange rate of US$/CDN$0.90, and corporate oil differential of 10%.|
|(2)||Funds flow per share calculation based on 199 million shares outstanding for 2014.|
|(3)||Projected capital expenditures exclude acquisitions, which are evaluated separately.|
We are entering the second quarter with our production in-line with expectations, an inventory of wells that will be brought on during the coming weeks, and 2014 disposition proceeds of more than $250 million to-date. Our corporate foundation remains strong and we are executing our 2014 business plan. With assets that include approximately 200 MMboe of proved plus probable reserves, which are valued at $4.1 billion (net present value before taxes at December 31, 2013, discounted at 10%), and an inventory of over 2,000 drilling locations, our assets continue to provide a platform to generate long-term funds flow growth and returns for our shareholders. Plans for 2014 continue to be focused on execution of our capital plan and strengthening our balance sheet through asset sales. We are pleased with our progress so far this year and look forward to sharing future results.
Annual General Meeting Notice
Lightstream will host our Annual General Meeting for shareholders on May 14, 2014 at 9:00am (MDT) at the Metropolitan Conference Centre (333 – 4th Ave SW) in Calgary, Alberta. The meeting will also be available via webcast using the following link: www.gowebcasting.com/5213.
Those in attendance or participating in the webcast will have the opportunity to have questions responded to by management of the company.
Lightstream Resources Ltd. is an oil and gas exploration and production company combining light oil Bakken and Cardium resource plays with conventional light oil assets, delivering industry leading operating netbacks, strong cash flows and production growth. Lightstream is applying leading edge technology to a multi-year inventory of Bakken and Cardium light oil development locations, along with other emerging resource play opportunities. Our strategy is to deliver accretive production and reserves growth, along with an attractive dividend yield.
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; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses, reliance on industry partners, risks that asset dispositions cannot be completed, availability of equipment and personnel, uncertainty surrounding timing for drilling and completion activities resulting from weather and other factors, changes in applicable regulatory regimes and health, safety and environmental risks), commodity price and exchange rate fluctuations, general economic conditions and the potential for counterparties to be unable to close dispositions. Certain of these risks are set out in more detail in our Annual Information Form which has been filed on SEDAR and can be accessed at www.sedar.com. Except as may be required by applicable securities laws, Lightstream assumes no obligation to publicly update or revise any forward-looking statements made herein or otherwise, whether as a result of new information, future events or otherwise.
BOEs. Natural gas volumes have been converted to barrels of oil equivalent (“boe“). Six thousand cubic feet (“Mcf“) of natural gas is equal to one barrel of oil equivalent based on an energy equivalency conversion method primarily attributable at the burner tip and does not represent a value equivalency at the wellhead. Boes may be misleading, especially if used in isolation.
Well Counts. All references to well counts are on a net basis.
Lightstream Resources Ltd.
John D. Wright
President and Chief Executive Officer
Lightstream Resources Ltd.
Peter D. Scott
Senior Vice President and Chief Financial Officer
Lightstream Resources Ltd.
William A. Kanters
Vice President, Capital Markets