CALGARY, ALBERTA–(Marketwired – March 3, 2016) – Lightstream Resources Ltd. (the “Company” or “Lightstream”) (TSX:LTS) announces fourth quarter and year-end 2015 financial and operating results. Our audited financial statements and management’s discussion and analysis for the year ended December 31, 2015 will be available on the system for electronic analysis and retrieval at www.sedar.com and on Lightstream’s website at www.lightstreamresources.com.
| Three months ended December 31, | Year ended December 31, | |||||||||||||
| ($000s, except where noted) | 2015 | 2014 | % Change | 2015 | 2014 | % Change | ||||||||
| Financial | ||||||||||||||
| Oil and natural gas sales | 94,421 | 186,861 | (49) | 460,576 | 1,107,824 | (58) | ||||||||
| Funds flow from operations 1 | 30,083 | 89,278 | (66) | 193,623 | 572,232 | (66) | ||||||||
| Per share – basic ($) 1 | 0.15 | 0.45 | (67) | 0.98 | 2.86 | (66) | ||||||||
| – diluted ($) 1,2 | 0.15 | 0.44 | (66) | 0.96 | 2.82 | (66) | ||||||||
| Adjusted Net Income (loss) 1 | 27,847 | 160,386 | (83) | (144,227) | 249,922 | – | ||||||||
| Per share – basic ($) 1 | 0.14 | 0.81 | (83) | (0.73) | 1.25 | – | ||||||||
| – diluted ($)1,2 | 0.14 | 0.80 | (83) | (0.73) | 1.23 | – | ||||||||
| Dividends 1 | – | 19,247 | – | – | 92,266 | – | ||||||||
| Per share ($) 1 | – | 0.10 | – | – | 0.46 | – | ||||||||
| Capital Expenditures 3 | 11,925 | 121,124 | (90) | 106,571 | 471,820 | (77) | ||||||||
| Net capital expenditures 1 | 13,353 | 123,194 | (89) | 95,045 | (240,636) | – | ||||||||
| Total debt 1,4 | 1,627,752 | 1,646,862 | (1) | |||||||||||
| Basic common shares, end of period (000) | 198,322 | 197,304 | 1 | |||||||||||
| Operations | ||||||||||||||
| Average daily production (boe/d) | ||||||||||||||
| Oil and NGL (bbl/d) | 19,662 | 27,299 | (28) | 22,670 | 31,684 | (28) | ||||||||
| Natural gas (mcf/d) | 51,588 | 55,037 | (6) | 52,334 | 52,418 | – | ||||||||
| Total (boe/d) 5 | 28,260 | 36,472 | (23) | 31,392 | 40,420 | (22) | ||||||||
| Average realized prices | ||||||||||||||
| Oil and NGL ($/bbl) | 45.77 | 66.81 | (31) | 49.38 | 88.00 | (44) | ||||||||
| Natural gas ($/mcf) | 2.45 | 3.76 | (35) | 2.72 | 4.71 | (42) | ||||||||
| Total (boe/d) | 36.32 | 55.69 | (35) | 40.20 | 75.09 | (46) | ||||||||
| Operating netback ($/boe except where noted) 1,5 |
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| Oil, NGL and natural gas revenue | 36.32 | 55.69 | (35) | 40.20 | 75.09 | (46) | ||||||||
| Royalties | 4.74 | 8.76 | (46) | 4.50 | 11.06 | (59) | ||||||||
| Production expenses | 12.51 | 13.47 | (7) | 12.59 | 14.14 | (11) | ||||||||
| Transportation expenses | 0.27 | 0.31 | (13) | 0.29 | 0.44 | (34) | ||||||||
| Operating netback | 18.80 | 33.15 | (43) | 22.82 | 49.45 | (54) | ||||||||
| Realized gain on hedging contracts | 8.29 | 4.35 | 91 | 8.19 | 0.65 | – | ||||||||
| Operating netback including hedging1 | 27.09 | 37.50 | (28) | 31.01 | 50.10 | (38) | ||||||||
FOURTH QUARTER 2015 HIGHLIGHTS
- Fourth quarter average production was 28,260 boepd (70% light oil and liquids weighted), a decrease of 7% from the previous quarter.
- Our operating netback was $18.80/boe, prior to commodity hedges, a 15% decrease from the previous quarter, primarily due to lower realized oil prices. Including realized gains on commodity hedging contracts, our netback was $27.09/boe.
- Funds flow from operations was $30 million ($0.15 per basic share), 33% below the third quarter of 2015, primarily due to lower commodity prices and production.
- Capital expenditures for Q4 2015 totaled $12 million (before asset acquisitions and divestitures “A&D”), consistent with our reduced capital program.
- We recorded a non-cash impairment charge to property, plant and equipment of $370 million ($270 million after tax) in the fourth quarter reflecting lower future commodity prices as estimated by our external reserve evaluator and a change in discount rates applicable to future cash flows.
- Our semi-annual borrowing base re-determination was completed during the fourth quarter which resulted in a reduction of the borrowing base from $750 million to $550 million providing us with ~$195 million in available liquidity at year-end. Assuming current economic conditions persist, management anticipates the borrowing base could be further reduced at the next re-determination. Management is pursuing various strategies to mitigate this potential liquidity risk.
YEAR-END 2015 HIGHLIGHTS
- Annual average production was 31,392 boepd (72% light oil and liquids weighted), a decrease of 22% from our average 2014 production level of 40,420 boepd (78% light oil and liquids weighted).
- Our operating netback was $22.82/boe, prior to commodity hedges, a decrease of 54% primarily due to lower realized oil prices but partially offset by lower royalties and production expenses. Including commodity hedging, our netback was $31.01/boe.
- Funds flow from operations decreased to $194 million ($0.98 per basic share) from $572 million in the prior year, 66% lower, due primarily to lower commodity prices and production.
- Capital expenditures of $107 million for 2015 were 77% lower than the previous year. This significant reduction reflects our curtailed capital program and commitment to spend within cash flow to preserve our long-term asset value.
- 2015 capital spending represented 55% of funds flow from operations. The resulting $87 million surplus cash was applied to reduce our total debt.
- In July 2015, we issued a total of US$650 million in second lien notes (“Secured Notes”). US$450 million of the secured notes were issued in exchange for US$546 million of senior unsecured notes (“Unsecured Notes”), which were cancelled resulting in a gain of $103 million. A further US$200 million of Secured Notes were issued for cash proceeds, which were applied to reduce the amount outstanding under our secured termed credit facility (“Credit Facility”).
- We reported a net loss of $946 million ($4.75 per basic share) for the year-ended 2015, which included a non-cash impairment charge of $661 million (after tax), compared to a net loss of $446 million in 2014 which included a non-cash impairment charge of $518 million (after tax). The impairment charges are primarily due to the drop in the forecasts of future commodity prices used by our external reserve evaluator and for 2015, a change in discount rates applicable to future cash flows.
OPERATING SUMMARY
| AVERAGE DAILY PRODUCTION | ||||||||||||||||
| Three months ended December 31, 2015 |
Year ended December 31, 2015 |
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| Business Unit | Oil &NGL (bbl/d) | Gas (Mcf/d) | Total (boe/d) | Oil &NGL (bbl/d) | Gas (Mcf/d) | Total (boe/d) | ||||||||||
| Bakken | 9,579 | 4,934 | 10,401 | 10,859 | 5,439 | 11,765 | ||||||||||
| Cardium | 8,332 | 40,636 | 15,105 | 9,816 | 40,517 | 16,569 | ||||||||||
| Alberta/BC | 1,751 | 6,018 | 2,754 | 1,995 | 6,378 | 3,058 | ||||||||||
| 19,662 | 51,588 | 28,260 | 22,670 | 52,334 | 31,392 | |||||||||||
| Q4 2015 DRILLING ACTIVITY | ||||||||||||||||
| Drilled | Completed | On Production | Inventory 6 | |||||||||||||
| Business Unit | Gross | Net | Gross | Net | Gross | Net | Gross | Net | ||||||||
| Bakken | 1.0 | 0.5 | 1.0 | 0.5 | – | – | 1.0 | 0.5 | ||||||||
| Cardium | 1.0 | 0.3 | 3.0 | 1.8 | 3.0 | 1.8 | 2.0 | 0.8 | ||||||||
| Alberta/BC | – | – | – | – | – | – | – | – | ||||||||
| Total | 2.0 | 0.8 | 4.0 | 2.3 | 3.0 | 1.8 | 3.0 | 1.3 | ||||||||
| 2015 DRILLING ACTIVITY | ||||||||||||||||
| Drilled | Completed | On Production | Inventory 6 | |||||||||||||
| Business Unit | Gross | Net | Gross | Net | Gross | Net | Gross | Net | ||||||||
| Bakken | 14.0 | 7.7 | 17.0 | 10.7 | 21.0 | 14.3 | 1.0 | 0.5 | ||||||||
| Cardium | 14.0 | 10.3 | 21.0 | 15.2 | 21.0 | 16.3 | 2.0 | 0.8 | ||||||||
| Alberta/BC | – | – | – | – | – | – | – | – | ||||||||
| Total | 28.0 | 18.0 | 38.0 | 25.9 | 42.0 | 30.6 | 3.0 | 1.3 | ||||||||
Total production for the three months ended December 31, 2015 decreased 23% from 2014 volumes due to natural well declines exceeding new well production, given our reduced development capital program. The 22% decrease from 2014 volumes was primarily due to the disposition activity at the end of 2014 which represented 6,315 boepd, combined with the reduction in our developmental capital program compared to 2014. Natural gas production has remained largely unchanged from 2014 due to the 3 net liquids-rich Falher gas wells brought on-stream in 2015 in the Cardium business unit.
We brought a total of 14 Bakken wells on production in 2015 compared to 26 wells in 2014. Production in the area averaged 10,401 boepd during the fourth quarter of 2015 representing a 7% decrease from Q3 2015 production and a 26% decrease from Q4 2014 volumes. This was due to continued attenuation of investment in the Bakken given the current challenging economic environment.
In the Cardium business unit, production for the fourth quarter averaged 15,105 boepd, 6% below Q3 2015 production due to third party facility and pipeline restrictions and a 19% decrease from Q4 2014 production volumes due to our conservative capital investment. We brought on two Cardium wells during the fourth quarter of 2015 compared to 13 in Q4 2014 with a total of 16 wells being brought on-stream in the area for the year. Subsequent to year-end, we brought one additional Falher well on production.
In our AB/BC business unit we experienced higher downtime from third party facility restrictions which resulted in production volumes of 2,754 boepd. This represents an 8% decrease from Q3 2015. Fourth quarter 2015 production was 30% lower than fourth quarter 2014 production as a result of limited new well activity in the area.
FINANCIAL SUMMARY
Our strategy for 2015 was to execute a restricted capital program and preserve our long-term asset value until commodity prices and service costs could generate returns that meet or exceed our investment hurdles. Capital spending for the year of $107 million, before A&D, and a drilling program of 18 net wells reflect our 2015 commitment to spend within cash flow and reduce debt, which was achieved even at an average WTI price of US$48.80/bbl.
Funds flow from operations was $194 million, a 66% decrease from 2014 funds flow of $572 million, but exceeded capital spending by $87 million with surplus cash applied to reduce total debt. Our average operating netback was $22.82/boe, a 54% decrease from 2014, mainly attributable to lower commodity prices partially offset by lower royalties and production expenses.
Realized oil and NGL prices were significantly lower in 2015 than 2014 as global oil supply continued to outweigh demand, while a weaker Canadian dollar relative to the U.S. dollar partially offset the impact of these lower prices. Light oil differentials were relatively consistent with 2014 and, while variable, we expect less volatility in the near-term and have hedged a portion of our production to help protect against large swings in the differential in the event current circumstances change.
We recognized a net loss for the year ended 2015 of $946 million due mainly to non-cash impairment charge to property, plant and equipment of $905 million, primarily as a result of reduced commodity prices and a change in discount rates. Impairment losses related to PP&E can be reversed in future periods if the estimated recoverable amount of the asset exceeds the carrying value. The weakening Canadian dollar against the U.S. dollar in 2015 also contributed a $189 million non-cash expense to the net loss which was partially offset by lower depletion and depreciation, lower royalties, lower production expenses, a higher income tax recovery, and a gain on the exchange of our Unsecured Notes.
CURRENT OUTLOOK
Lightstream is committed to preserving the long-term value of our assets through the downturn of this commodity cycle. We are restricting capital spending until the macroeconomic environment supports capital investment and will continue to review our asset base for optimization and EOR opportunities. We had $195 million of available liquidity as of year-end 2015 which is well in excess of our previously announced 2016 first half cash flow from operations deficit of approximately $22 million. Our next borrowing base review is expected to be completed by the end of April 2016. Assuming current economic conditions persist, management anticipates the borrowing base could be reduced at the next re-determination.
Late in 2014 we announced our initiative to sell all or part of our Bakken business unit in order to reduce debt and transform our balance sheet. We are continuing to pursue this initiative, as well as other asset sales and strategies in order to improve our long-term capital structure and liquidity.