Northern Blizzard Resources Inc. Announces Revised 2015 Capital Program & Guidance; Maintains Dividend

CALGARY, Dec. 22, 2014 /CNW/ – Northern Blizzard Resources Inc. (“Northern Blizzard” or the “Company”) (TSX: NBZ) announces a revised capital program for 2015 in response to the significant decline in crude oil prices. The capital program for 2015 has been reduced by 40% from $215 million to $130 million, which maintains the Company’s financial strength while supporting estimated 2015 production of 23,000 boe/d and the monthly dividend of $0.08 per share.

Revised 2015 capital program

Northern Blizzard is committed to a sustainable long-term strategy that supports per share growth and an attractive dividend. To achieve this goal in the current commodity price environment, the Company has reduced its 2015 drilling program from 189 to 74 wells, which accounts for the majority of the change in the capital program. Capital spending for the first half of 2015 is budgeted to be less than $50 million and, when combined with the Company’s hedge program, will enable Northern Blizzard to enter the second half of 2015 in a strong financial position.

Northern Blizzard operates and controls approximately 99% of its development program and thereby retains the ability to increase or decrease capital spending as circumstances dictate.

Hedging

Northern Blizzard has a hedging program that is designed to reduce revenue volatility caused by changes in commodity prices. The Company has WTI hedges in place at an average price of C$101/bbl for approximately 55% of estimated oil production for the first half of 2015 and approximately 28% of estimated oil production for the third quarter of 2015. Northern Blizzard estimates the current mark-to-market value of its hedging program to be approximately $70 million. The hedging program contributes over $5/boe to estimated 2015 funds from operations.

Sustainable dividend

Northern Blizzard currently pays a monthly dividend of $0.08 per share. The dividend represents an important part of our corporate strategy and the Company expects to continue paying the dividend despite the challenging commodity price environment. Northern Blizzard has a Stock Dividend Program (“SDP”) where shareholders can elect to receive common shares as payment for their dividends. Shareholders representing approximately 67% of the Company’s outstanding shares currently participate in the SDP. This translates into a total payout ratio for 2015 of 77% including the SDP (111% excluding the SDP).

Shareholders holding more than 1,000 common shares have the choice of taking dividends in the form of cash or stock. More information regarding the Stock Dividend Program can be found on our website at www.northernblizzard.com.

Financial strength

Northern Blizzard has significant financial flexibility supported by a $530 million credit facility of which approximately $470 million is undrawn. In addition, the majority of the Company’s debt is term debt of US$276 million that is due in 2022.

Revised 2015 guidance

As noted above, capital spending for 2015 has been revised to $130 million, $85 million less than the previous guidance of $215 million. As a result, the Company’s estimated 2015 production is now 23,000 boe/d as compared to prior guidance (mid-point) of 25,000 boe/d. Funds from operations (including hedging) for 2015 is expected to be $211 million.

Revised 2015 guidance and assumptions are as follows:

[expand title=”Advisories & Contact”]* Represents the mid-point of the guidance range
The guidance provided in the table above is based on a number of material assumptions and factors set out above and under the heading “Forward-Looking Statements” in this news release.  This financial outlook is included to provide readers with an understanding of the Company’s operations for 2015. Readers are cautioned that the information may not be appropriate for other purposes. The actual results of Northern Blizzard’s operations will likely vary from the amounts set forth in the table above, and such variations may be material. See “Forward-Looking Statements” in this news release for a discussion of the risks that could cause actual results to vary. The foregoing guidance has been approved by management as of the date of this news release.

ADVISORIES

BOE Conversion

In this news release, barrel of equivalent amounts have been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of crude oil or natural gas liquids (6 mcf : 1 bbl), which represents an energy equivalency conversion method applicable at the burner tip and does not represent a value equivalency at the wellhead. While it is useful for comparative measures, it may not accurately reflect individual product values and may be misleading if used in isolation.

Non / Additional IFRS Measures

This news release makes reference to the additional IFRS measure “funds from operations”. Funds from operations is used by the Company to analyze operating performance and its ability to fund capital investments. Funds from operations is calculated as cash flow from operating activities (as determined in accordance with IFRS) before settlement of the Company’s pre-initial public offering option plan, decommissioning costs incurred, purchase of employee options and changes in non-cash operating working capital. Management considers funds from operations to be a key measure of the results generated by its principal business activities before the consideration of how those activities are financed or how the results are taxed and before decommissioning expenditures. Funds from operations should not be considered an alternative to, or more meaningful than, cash flow from operating activities as determined in accordance with IFRS. Funds from operations per boe is calculated using barrels of oil equivalent sales volume for the period.

This news release makes reference to the non-IFRS measure “total payout ratio”. Total payout ratio represents the ratio of the sum of cash dividends declared plus capital expenditures divided by funds from operations. Total payout ratio is a key measure to assess Northern Blizzard’s ability to finance capital expenditures and dividends. There is no IFRS measures that is reasonably comparable to total payout ratio.

Forward-Looking Statements

This news release contains forward-looking statements and forward-looking information (collectively referred to as “forward-looking statements”) within the meaning of applicable Canadian securities laws. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements contain words such as “anticipate”, “believe”, “plan”, “continuous”, “estimate”, “expect”, “may”, “will”, “project”, “should”, or similar words suggesting future outcomes.

In particular, this news release may contain forward-looking statements pertaining to the following:

• Business plans and strategies;
• Capital expenditure and drilling programs;
• Anticipated oil and natural gas production levels;
• Future oil and natural gas prices;
• Future costs including operating, transportation and corporate costs and royalty rates;
• Future funds from operations;
• Future payout ratio; and
• Payment of dividends.

Undue reliance should not be placed on forward-looking statements, which are inherently uncertain, are based on estimates and assumptions, and are subject to known and unknown risks and uncertainties (both general and specific) that contribute to the possibility that the future events or circumstances contemplated by the forward-looking statements will not occur. There can be no assurance that the plans, intentions or expectations upon which forward-looking statements are based will be realized. Actual results will differ, and the difference may be material and adverse to the Company and its shareholders.

With respect to forward-looking statements contained in this news release, management has made assumptions regarding future production levels; future oil and natural gas prices; future operating costs; timing and amount of capital expenditures; methods and ability to finance operations and capital expenditure programs; the ability to obtain financing on acceptable terms; availability of skilled labour and drilling and related equipment; general economic and financial market conditions; continuation of existing tax and regulatory regimes; and the ability to market oil and natural gas successfully to current and new customers.  Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.

By their very nature, forward-looking statements involve inherent risks and uncertainties (both general and specific) and risks that the goals or figures contained in forward-looking statements will not be achieved. These factors include, but are not limited to, risks associated with fluctuations in market prices for crude oil, natural gas and diluent, general economic, market and business conditions, substantial capital requirements, uncertainties inherent in estimating quantities of reserves and resources, extent of, and cost of compliance with, government laws and regulations and the effect of changes in such laws and regulations from time to time, the need to obtain regulatory approvals on projects before development commences, environmental risks and hazards and the cost of compliance with environmental regulations, aboriginal claims, inherent risks and hazards with operations such as fire, explosion, blowouts, mechanical or pipe failure, cratering, oil spills, vandalism and other dangerous conditions, potential cost overruns, variations in foreign exchange rates, diluent supply shortages, competition for capital,  equipment, new leases, pipeline capacity and skilled personnel, credit risks associated with counterparties, the failure of the Company or the holder of licenses, leases and permits to meet requirements of such licenses, leases and permits, reliance on third parties for pipelines and other infrastructure, changes in royalty regimes, failure to accurately estimate decommissioning costs, inaccurate estimates and assumptions by management, effectiveness of internal controls, the potential lack of available drilling equipment and other restrictions, failure to obtain or keep key personnel, title deficiencies with the Company’s assets, geo-political risks, risks that the Company does not have adequate insurance coverage, risk of litigation and risks arising from future acquisition activities. Further, the declaration and payment of dividends is dependent on the satisfaction of the applicable liquidity and solvency tests imposed by the Business Corporations Act (Alberta).  The foregoing risks and other risks are described in more detail in the Company’s final prospectus dated July 31, 2014. Readers are cautioned that these factors and risks are difficult to predict and that the assumptions used in the preparation of such information, although considered reasonably accurate at the time of preparation, may prove to be incorrect. Readers are also cautioned that the foregoing list of factors is not exhaustive. Consequently, there is no representation by the Company that actual results achieved will be the same in whole or in part as those set out in the forward-looking statements. Furthermore, the forward-looking statements contained in this news release are made as of the date hereof, and the Company does not undertake any obligation, except as required by applicable securities legislation, to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained herein are expressly qualified by this cautionary statement.

SOURCE Northern Blizzard Resources Inc.

For further information: about Northern Blizzard Resources Inc., please visit our website at www.northernblizzard.com or contact: Northern Blizzard Resources Inc., Telephone: 403-930-3000; John Rooney, Chairman & Chief Executive Officer;Michael Makinson, Vice President, Finance & Chief Financial Officer[/expand]