CALGARY, Nov. 10, 2014 /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, 2014. 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 $000’s, except per share amounts)||2014||2013||% change||2014||2013||% change|
|Petroleum and natural gas sales, net of royalties||157,691||133,713||18||439,520||348,108||26|
|Funds generated by operations (2)||95,162||79,974||19||252,685||213,363||18|
|Per share basic||0.48||0.51||(6)||1.44||1.41||2|
|Per share diluted (3)||0.47||0.50||(6)||1.43||1.38||4|
|Net income (loss)||13,709||(1,866)||(835)||34,968||(4,539)||(870)|
|Per share basic||0.07||(0.01)||(800)||0.20||(0.03)||(767)|
|Per share diluted (3)||0.07||(0.01)||(800)||0.20||(0.03)||(767)|
|Capital expenditures – Exploration and development (4)||131,385||90,343||45||345,938||268,535||29|
|Capital expenditures – Acquisitions and dispositions (4)||227,829||(1,272)||(18,011)||467,965||187,042||150|
|Net debt and working capital surplus (deficit) (2)||(878,935)||(680,626)||29||(878,935)||(680,626)||29|
|Crude oil (Bbls per day)||20,193||15,639||29||17,756||14,746||20|
|Heavy oil (Bbls per day)||76||117||(35)||67||115||(42)|
|Natural gas (Mcf per day)||17,632||9,578||84||15,282||11,594||32|
|Natural gas liquids (Bbls per day)||1,796||2,137||(16)||1,751||1,582||11|
|Barrels of oil equivalent (Boe per day) (5)||25,004||19,489||28||22,121||18,375||20|
|Average realized price|
|Crude oil ($ per Bbl)||94.65||103.90||(9)||98.56||94.42||4|
|Heavy oil ($ per Bbl)||71.94||77.29||(7)||76.43||68.48||12|
|Natural gas ($ per Mcf)||3.62||1.70||113||4.40||3.23||36|
|Natural gas liquids ($ per Bbl)||41.71||38.42||9||54.48||49.03||11|
|Barrels of oil equivalent ($ per Boe) (5)||82.20||88.89||(8)||86.70||82.46||5|
|Netback ($ per Boe) (2)(5)|
|Petroleum and natural gas sales||82.20||88.89||(8)||86.70||82.46||5|
|Operating Netback ($ per Boe) (2)(5)||50.46||57.25||(12)||54.34||52.55||3|
|Undeveloped land holdings (gross acres)||718,117||507,616||41||718,117||507,616||41|
|Common Shares (000’s)|
|Common shares outstanding, end of period||199,730||157,212||27||199,730||157,212||27|
|Weighted average common shares (basic)||199,511||157,212||27||175,151||151,834||15|
|Weighted average common shares (diluted) (3)||201,147||159,925||26||176,572||154,360||14|
|(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)||Refer to Capital Expenditures in the Management Discussion and Analysis for the three and nine months ended September 30, 2014.|
|(5)||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.|
- Drilled 59 gross (51.6 net) light oil wells in the third quarter of 2014, with a 100 percent success rate
- Strong production results continued in the third quarter from activity in the Midale, Turner Valley and Spearfish
- Increased average production from 19,489 Boe per day in the third quarter of 2013 and 20,224 Boe per day in the second quarter of 2014 to a record 25,004 Boe per day in the third quarter of 2014 (28 percent and 24 percent increase, respectively)
- Increased funds generated by operations of $80.0 million in the third quarter of 2013 and $75.2 million in the second quarter of 2014 to a record $95.2 million in the third quarter of 2014 (19 percent and 27 percent increase, respectively)
- Increased net income from a net loss of $1.9 million ($0.01 per share) in the third quarter of 2013 to net income of $13.7 million ($0.07 per share) in the third quarter of 2014 (835 percent increase on an absolute basis and 800 percent on a per share basis)
- Closed the acquisition of Corinthian Exploration Corp. (“Corinthian”), comprised of 2,800 Boe per day (86 percent high netback light oil), for total consideration of 20.1 million Legacy common shares and assumed net debt of approximately $37.8 million (including the fair value of unrealized derivatives)
- Reduced operating expenses from $15.60 per Boe in the second quarter of 2014 to $14.88 per Boe in the third quarter of 2014 (5 percent reduction)
- Reduced general and administrative cost from $1.97 per Boe in the third quarter of 2013 and $2.77 per Boe in the second quarter of 2014 to $1.83 per Boe in the third quarter of 2014 (7 percent and 34 percent reduction, respectively)
In the third quarter of 2014, the Company drilled 59 gross (51.6 net) oil wells, with a 100 percent success rate. Activity in the third quarter included the drilling of 15 gross (14.2 net) Midale horizontal wells in the Company’s Pinto and Steelman areas and 20 gross (17.7 net) Spearfish horizontal wells in the Company’s Pierson and North Dakota areas.
Production averaged a record 25,004 Boe per day in the third quarter despite the persistent heavy rainfall in portions of southeast Saskatchewan, Manitoba and North Dakota. The Company was successful in navigating the wet lease conditions while delivering expected production growth and improved capital efficiencies.
Legacy has recently exceeded its 2014 exit rate guidance of 27,350 Boe per day and is positioned to be on track to meet its full year production and capital expenditure guidance.
Legacy had an active quarter developing the Midale Formation with the drilling of 15 (14.2 net) wells in the Taylorton, Pinto and Steelman areas. This drilling included successful development, step out and exploration wells. Production results have continued to exceed the Company’s type curve. Overall, the average 30 day initial production rates from the 19 wells with 30 days of production history was 250 Boe per day per well. Well costs have been reduced over the course of 2014 by $150,000 per well and additional cost savings are anticipated.
The Steelman waterflood pilot continues to show positive response, as the two wells offsetting the injector have shown a 500 percent increase in oil production. Additionally, wells outside the initial pilot area have demonstrated increasing oil production. The Company has commenced water injection in two other Midale waterflood pilot projects at Steelman.
Legacy was the first mover in the Midale play more than three years ago and has utilized its leading horizontal completion expertise to generate these tremendous results.
At Turner Valley, Legacy has continued to evolve drilling and completion practices to both optimize production rate and reduce capital costs. Through the application of unique logging while drilling (LWD) tools, longer laterals in the best pay, integration of the 3D seismic interpretation and selective completion techniques, the last 14 wells drilled by Legacy have demonstrated a significant step-change in initial oil rate and water cut.
Legacy drilled 3 (2.5 net) wells in the third quarter 2014: Hartell # 9, Iceton #1 and Hartell #10. The Lansdell #2, Hartell #9 and Iceton #1 wells, brought on production in the third quarter, had an average 30 day initial production rate of 275 Boe per day per well. The Iceton #1 well has continued to dramatically improve, having recently achieved peak production rates in excess of 800 Boe per day, making it the most prolific well drilled in Turner Valley since the 1940’s. The Hartell #10 well was brought on production in early November, after swabbing strong quantities of low water cut light oil.
Spearfish – Pierson and Bottineau
The Company drilled 20 (17.7 net) Spearfish wells in the third quarter of 2014. The six wells brought on production at Pierson continue to meet type curve with average 30 day initial production of 95 Bbls of oil per day per well. The 10 wells brought on production at Bottineau continue to meet type curve with average 30 day initial production of 90 Bbls of oil per day per well, even though these wells were lower capital cost short lateral horizontals.
The last number of long (1,400 m lateral) wells drilled have demonstrated drill, complete, equip and tie-in costs of less than $1.5 million and the short (700 m lateral) wells are approximately $1.2 million. The Company is moving to drill proportionately more short lateral horizontal wells in the Spearfish as the strong initial rates and lower capital costs have resulted in robust economic returns.
The Company drilled 4 (3.4 net) Bakken wells in the third quarter of 2014. The two extended reach horizontal wells drilled at Taylorton have average 30 day initial production of 225 Boe per day per well, while exhibiting minimal production decline in the first two months of production.
At Star Valley, the two wells brought on production met type curve with average 30 day initial production of 185 Boe per day per well.
Additional source water has been tied-in at Taylorton, enabling waterflood expansion to occur at a more rapid pace in 2015, as all Taylorton produced Bakken water is currently being injected through the existing water injection wells.
EVENTS AFTER THE REPORTING PERIOD
Legacy’s banking syndicate increased the borrowing base from the previous $700 million to $800 million, resulting in total borrowing capacity in excess of $1 Billion. The increase is a result of the Company’s high netback light oil reserves, long reserve life and increased production over the past year and continues to provide Legacy with significant financial flexibility with which to conduct its operations. The borrowing base continues to be subject to semi-annual review, next scheduled to occur in April 2015.
Legacy is well on its way to demonstrating another successful year of operational and financial results. Strong production rates continue to be achieved in all plays while capital costs remain in-line with budget. Furthermore, Legacy has exceeded its 2014 exit rate guidance of 27,350 Boe per day.
Operating expenses have been reduced, with sequential operating expense reductions occurring since the first quarter of 2014 (6 percent reduction year to date) and expectations of this trend continuing in the fourth quarter of 2014 and into 2015.
At the beginning of 2014, Legacy set the goal of reducing the 2014 year end net debt to year end annualized funds flow from operations to 1.5 times. This goal was achieved in June 2014, based on the then prevailing strip prices, through the completion of two under levered corporate acquisitions and organic funds flow growth. This was a solid first step; however, the Company continues to pursue additional initiatives to enhance the balance sheet, including budgeting annual capital spending equal to or less than annual cash flow.
In the fourth quarter of 2014, Legacy plans to direct approximately 60 percent of funds flow from operations to capital expenditures. The resulting free cash flow, when combined with proceeds from the anticipated sale of the non-core Elmworth property, will reduce Legacy’s estimated 2014 year end net debt to estimated fourth quarter 2014 annualized funds flow from operations to approximately 1.9 times, based on current strip prices (approximately US$80 per Bbl WTI). Any and all initiatives are under consideration to further improve the Company’s financial position.
An enhanced balance sheet and the demonstrated strong production growth improves the visibility of the significant value potential on Legacy’s substantial, high netback light oil development and waterflood inventory. Legacy’s track record of technical innovation and execution excellence, when combined with its high quality asset base, reinforces the optionality for surfacing value in the near term and differentiates the Company from its peers.
Conference call details
Management will be holding a conference call for investors, financial analysts, media and any interested persons on Tuesday, November 11, 2014 at 7:00 a.m. (MST) (9:00 a.m. EST) to discuss the 2014 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: 25766808
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 Statements
Forward-Looking Statements – This press release contains forward-looking statements. More particularly, it contains forward-looking statements concerning: (i) Legacy being on track to meet its full year production and capital expenditure guidance, (ii) anticipated additional per well costs savings in Legacy’s Midale play, (iii) expected continuing reductions in operating costs, (iv) planned capital expenditures relative to funds flow from operations in the fourth quarter of 2014, (v) the anticipated sale of Legacy’s Elmworth property; and (vi) Legacy’s estimated 2014 year end net debt to Q4 2014 annualized funds flow from operations ratio.
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, the availability and cost of capital, labour and services, the creditworthiness of industry partners and the completion of a sale of the Elmworth property and the potential proceeds that may be realized therefrom.
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, uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects, waterflood projects or capital expenditures and the risk that Legacy may not be able to conclude a sale of the Elmworth asset on favorable terms or at all. These and other risks are set out in more detail in Legacy’s Annual Information Form for the year ended December 31, 2013 dated March 25, 2014.
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.
Meaning of Boe – 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.
Any references in this news release to initial production rates are useful in confirming the presence of hydrocarbons, however, such rates are not determinative of the rates at which such wells will continue to produce and decline thereafter. Additionally, such rates may also include recovered fluids used in well completion stimulation. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production for the Company. Initial production or test are not necessarily indicative of long-term performance of the relevant well or fields or of ultimate recovery of hydrocarbons.
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