CALGARY, ALBERTA–(Marketwired – March 10, 2016) – Long Run Exploration Ltd. (“Long Run” or the “Company”) (TSX:LRE) announces financial, reserves and operating results for the year ended December 31, 2015.
2015 ANNUAL HIGHLIGHTS
- Entered into an arrangement agreement on December 20, 2015 with Calgary Sinoenergy Investment Corp. (the “Purchaser”) and Qingdao Sinoenergy Capital Corporation, pursuant to which the Purchaser agreed to acquire: i) all of the outstanding common shares of Long Run for cash consideration of $0.52 per share; and ii) all of Long Run’s outstanding 6.40% convertible debentures for cash consideration of $750 per $1,000 principal amount of debentures plus accrued and unpaid interest (the “Arrangement”).
On February 29, 2016, the Arrangement was approved by Long Run securityholders. On March 8, 2016, Long Run was advised by the escrow agent that the Purchaser deposited an additional $10 million into escrow following the receipt of Long Run shareholder approval. The Arrangement is currently expected to close in late April 2016 following the receipt of Canadian regulatory approvals, including under the Investment Canada Act (Canada) and the Competition Act (Canada).
- Generated funds flow from operations of $151.6 million ($0.78/share) compared to $291.9 million ($1.85/share) in 2014, primarily reflecting lower commodity prices and lower oil production, partially offset by a gain on financial derivatives, higher natural gas and NGLs production, lower royalties and lower operating costs. Fourth quarter 2015 funds flow from operations totaled $30.3 million.
- Reduced capital expenditures to $91.0 million from $304.0 million in 2014 in response to the depressed commodity price environment. During 2015, Long Run completed a 23.0 net well drilling program focused on the Redwater Viking, Deep Basin Cardium and Peace River Montney properties. Fourth quarter 2015 capital expenditures of $17.6 million were focused on the Deep Basin core area and included the drilling of 2.0 net wells at Kakwa/Elmworth. Long Run does not expect to drill any new wells prior to the close of the Arrangement.
- Recorded proved plus probable reserves at December 31, 2015 of 147,084 MBoe compared to 170,625 MBoe in 2014. The decrease in reserves was primarily attributable to the lower commodity price forecasts at December 31, 2015 and the Company’s reduced capital program in 2015.
- Advanced the Company’s enhanced oil recovery (“EOR”) projects in the Montney at Normandville and Girouxville and the Viking at Redwater. Both Montney projects have shown signs of reservoir response in the form of stabilizing and increasing fluid and oil rates as well as a downward trend in gas-oil ratios over the second half of 2015. Similar indications of reservoir response have begun to show in the Redwater Viking EOR project in recent months. Successful EOR implementation has the potential to improve recoveries, reduce production declines and improve capital efficiencies.
- Averaged 32,386 Boe/d of production compared to 31,168 Boe/d in 2014. The increase resulted from a full year of production from the Deep Basin properties acquired in 2014 and our successful drilling program in the area, partially offset by the impact of reduced capital spending in 2015. Fourth quarter 2015 production averaged 28,847 Boe/d reflecting the Company’s reduced capital spending.
- Realized an oil price including derivatives of $68.88/Bbl compared to $84.89/Bbl in 2014 as a result of a decrease in West Texas Intermediate benchmark pricing, partially offset by an increase in the U.S. dollar exchange rate and a realized gain on oil financial derivatives.
Average NGLs pricing in 2015 decreased to $22.52/Bbl from $51.24/Bbl in 2014, reflecting lower market prices as well as the change in the Company’s NGLs product mix due to the Deep Basin properties acquired in 2014.
Natural gas prices including derivatives averaged $3.25/Mcf compared to $4.52/Mcf in 2014, primarily attributable to weaker AECO benchmark prices partially offset by a realized gain on natural gas financial derivatives.
- Generated an operating netback of $18.45/Boe and corporate netback of $12.82/Boe compared to $31.38/Boe and $25.65/Boe, respectively, in 2014. The 2015 netbacks reflect weak commodity prices, partially offset by a realized gain on financial derivatives and lower royalties. Operating costs improved to $11.79/Boe from $13.51/Boe in 2014 primarily due to the addition of the lower cost Deep Basin assets in 2014 and lower fuel, maintenance and chemical costs. General and administration expense excluding transaction costs decreased to $2.38/Boe from $2.79/Boe in 2014, reflecting lower employee costs.
- Reported a net loss of $645.0 million compared to $190.4 million in 2014. The 2015 net loss primarily resulted from non-cash impairment charges of $350.0 million and a provision recorded against the Company’s deferred tax asset of $162.0 million, both of which are attributable to the decline in future commodity price forecasts during 2015. The net loss in the fourth quarter of 2015 was $267.0 million.
- Reduced net debt over the year by $64.6 million to $675.0 million, primarily as a result of disposition proceeds and funds flow from operations exceeding capital expenditures. The Company completed $31.0 million in non-core dispositions in 2015.
- Exited 2015 with bank debt of $582.6 million, excluding bank fees. On January 29, 2016, the Company entered into an amending credit facilities agreement with its bank syndicate. The Company’s $620.0 million in total credit facilities terminate six months following the close of the Arrangement, which is consistent with the Purchaser’s plan to repay the credit facilities in due course following completion of the Arrangement. If the Arrangement is not completed, Long Run will be in default under its credit facilities agreement and will be significantly challenged to address its bank indebtedness and to continue as a going concern in the current depressed commodity price environment.
Selected financial and operational information outlined in this news release should be read in conjunction with Long Run’s financial statements and related Management’s Discussion and Analysis for the year ended December 31, 2015, which will be available for review at www.sedar.com and on our website at www.longrunexploration.com.
SUMMARY OF ANNUAL RESULTS
|($000s, except per share amounts or unless otherwise noted)||2015||2014|
|Funds flow from operations1||151,636||291,856|
|Per share, basic 1||0.78||1.85|
|Per share, diluted1||0.78||1.85|
|Net earnings (loss)||(645,032||)||(190,395||)|
|Per share, basic||(3.33||)||(1.21||)|
|Per share, diluted||(3.33||)||(1.21||)|
|Natural Gas (Mcf/d)||113,767||93,008|
|Prices, including derivatives|
|Natural Gas ($/Mcf)||3.25||4.52|
|Revenues, before royalties||311,770||610,896|
|Net acquisitions (divestitures)2||(28,374||)||(28,674||)|
|Net capital expenditures2||62,665||275,357|
|Non-current financial liabilities, excluding bank loan||69,592||68,230|
|1See Non-GAAP Measures section.
2Excludes the two Deep Basin acquisitions.
2015 YEAR END RESERVES
Long Run’s 2015 year end reserves were evaluated by independent reserves evaluator Sproule Associates Limited (“Sproule”). Reserves estimates were prepared in accordance with National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (“NI 51-101”) and the summary below represents Long Run’s gross reserves, which are the Company’s interest before deduction of royalties and without including any of the Company’s royalty interests. The reserves estimates set forth below are based upon the Sproule reserve report dated March 9, 2016.
Additional information with respect to the Company’s reserves as at December 31, 2015 will be contained in the Company’s annual information form for the year ended December 31, 2015 which will be filed on SEDAR at www.sedar.com.
|December 31, 2015 Reserves1|
|Total Proved Plus Probable||34,905||23,006||535,038||147,084|
|1 Amounts may not add due to rounding|
|December 31, 2014||103,544||67,081||170,625|
|December 31, 2015||82,951||64,133||147,084|
|1Amounts may not add due to rounding|
|2019 – 2022||80.00 – 83.65||3.91 – 4.35||90.67 – 98.36||4.76 – 5.36|
|2023 – 2026||84.91 – 88.79||4.43 – 4.67||100.18 – 105.80||5.54 – 5.90|
Forecast prices, inflation, and exchange rates utilized by Sproule in its evaluation were based on rates published by Sproule as at December 31, 2015.
Summary of Before Tax Net Present Values of Future Net Revenue 1
|Before Tax Net Present Value ($000s)|
|Total proved plus probable||1,879,867||1,336,445||978,744||739,667||574,131|
|1 Net present values of future net revenue does not represent fair market value|