LGX Oil + Gas Inc. Announces Third Quarter 2014 Results

CALGARY, Nov. 10, 2014 /CNW/ – LGX Oil + Gas Inc. (“LGX” or the “Company”) (TSXV:OIL) is pleased to announce it has filed on SEDAR its unaudited 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 LGX’s unaudited financial statements and the related MD&A which are available for review at www.lgxoil.com or www.sedar.com.

FINANCIAL + OPERATIONAL HIGHLIGHTS (1)
			Three Months Ended			Nine Months Ended
			September 30			September 30
Unaudited (Cdn $, except per share amounts)		2014	2013	% change	2014	2013	% change
Financial
Petroleum and natural gas sales, net of royalties		4,331,707	4,819,532	(10)	16,241,881	12,866,912	26
Funds generated by operations (2)		1,148,432	581,632	97	6,090,852	3,306,515	84
	Per share basic	0.01	0.01	–	0.07	0.04	75
	Per share diluted (3)	0.01	0.01	–	0.07	0.04	75
Net income (loss)		(1,074,202)	(8,270,280)	(87)	(1,621,574)	(12,551,276)	(87)
	Per share basic	(0.01)	(0.09)	(89)	(0.02)	(0.14)	(86)
	Per share diluted (3)	(0.01)	(0.09)	(89)	(0.02)	(0.14)	(86)
Capital expenditures – Exploration and development (4)		5,872,876	1,696,828	246	8,298,683	2,538,904	227
Net debt and working capital surplus (deficit) (2)		(21,840,956)	(9,189,958)	138	(21,840,956)	(9,189,958)	138
Operating
Production
	Crude oil and natural gas liquids (Bbls per day)	537	567	(5)	638	586	9
	Natural gas (Mcf per day)	1,360	1,677	(19)	1,318	1,736	(24)
	Barrels of oil equivalent (Boe per day) (5)	764	847	(10)	858	875	(2)
Average realized price
	Crude oil and natural gas liquids ($ per Bbl)	92.22	102.23	(10)	94.57	87.17	8
	Natural gas ($ per Mcf)	4.03	2.37	70	4.77	2.93	63
	Barrels of oil equivalent ($ per Boe) (5)	71.99	73.13	(2)	78.81	64.19	23
Netback ($ per Boe) (2)(5)
	Petroleum and natural gas sales	71.99	73.13	(2)	78.81	64.19	23
	Royalties	10.36	11.28	(8)	9.47	10.32	(8)
	Operating expenses	29.30	43.46	(33)	27.51	28.32	(3)
	Transportation expenses	4.35	2.63	65	4.49	2.48	81
Operating Netback ($ per Boe) (2)(5)		27.98	15.76	78	37.34	23.07	62
Undeveloped land holdings (gross acres)		116,479	129,724	(10)	116,479	129,724	(10)
(net acres)		110,672	123,185	(10)	110,672	123,185	(10)
Common Shares (000’s)
Common shares outstanding, end of period		88,658	88,658	–	88,658	88,658	–
Weighted average common shares (basic)		88,658	88,658	–	88,658	88,658	–
Weighted average common shares (diluted) (3)		88,658	88,658	–	88,658	88,658	–

(1)	Consolidated financial and operating highlights for LGX Oil + Gas Inc. and all of its subsidiaries (“LGX” 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, the Company excludes the effect of outstanding stock options and share warrants outstanding 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 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.

ACCOMPLISHMENTS

• Increased funds generated from operations of $0.6 million ($0.01 per share) in the third quarter of 2013 to $1.1 million ($0.01 per share) in the third quarter of 2014 (97 percent increase on an absolute basis)
• Increased operating netbacks from $15.76 per Boe in the third quarter of 2013 to $36.43 per Boe in the third quarter of 2014 (78 percent increase)
• Reduced operating expenses from $43.46 per Boe in the third quarter of 2013 to $29.30 per Boe in the third quarter of 2014 (33 percent decrease)
• Reduced net loss from $8.3 million ($0.09 per share) in the third quarter of 2013 to $1.1 million ($0.01 per share) in the third quarter of 2014 (87 percent decrease)
• Entered into a new banking facility with the Alberta Treasury Branch consisting of a $20 million revolving demand credit facility and a $10 million non-revolving term credit facility. The features of the term credit facility include a two year committed term (subject to extension upon mutual consent) available in two tranches with full payment of the principle on maturity
• Drilled 2 gross (2.0 net) wells for a 100 percent success rate

OPERATIONS REVIEW

Big Valley and Banff

The Company spud both wells of its two well commitment on the Blood Reserve in the quarter. The 15-25-8-24W4M horizontal well spud mid-way through the quarter and was rig released near the end of the quarter, while the 13-2-9-24W4M horizontal well was spud at the end of the quarter and was rig released early in the fourth quarter. Both wells encountered over-pressured, oil saturated, fractured Big Valley (Three Forks) and Banff sections.

Subsequent to the third quarter, both wells were completed in the Big Valley Formation with multi-stage fracture stimulations and are in various stages of flowback and pressure build-up.  The Company did not plan for an extended flowback test, choosing to test the wells through the nearly complete oil battery to reduce capital and operating costs.  LGX’s average and exit production guidance is dependent on the results from these wells and production results will be released as they are available.

Work is nearly complete on a multi-well battery that will treat the production from the two new wells and the 14-2 well drilled in 2013.  The battery will enable more consistent well run times and reduced operating expenses.

Manyberries

The Company continued to complete workovers in the Manyberries field during the third quarter in accordance with the provisions of the previously announced order for the protection of the Greater Sage-Grouse (the “Emergency Order”) and LGX is continuing to work with Environment Canada to get additional clarity on the practical application of the Emergency Order.

LGX is a uniquely positioned, technically driven, junior oil and natural gas company with a proven management team committed to aggressive, cost-effective growth of light oil reserves and production combined with high impact exploration potential in southern Alberta.  LGX’s common shares trade on the TSX Venture Exchange under the symbol OIL.

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