Canada NewsWire
CALGARY, March 22, 2012
(TSX: AAV, NYSE: AAV)
CALGARY, March 22, 2012 /CNW/ - Advantage Oil & Gas Ltd. ("Advantage" or the "Corporation") is pleased to announce the financial and operating results for the year ended December 31, 2011. The following press release summarizes and discusses the unconsolidated financial and operating highlights for Advantage (excludes Longview Oil Corp).
Three monthsended | Three months ended | |||||||||||||||||||||
December 31,2011 | September 30, 2011 | |||||||||||||||||||||
Financial ($000, except as otherwise indicated) | $000 | per boe | $000 | per boe | ||||||||||||||||||
Petroleum and natural gas sales | $ | 48,293 | $ | 23.24 | $ | 52,090 | $ | 25.09 | ||||||||||||||
Royalties | (4,481) | (2.16) | (5,917) | (2.85) | ||||||||||||||||||
Realized gain on derivatives | 7,262 | 3.49 | 6,598 | 3.18 | ||||||||||||||||||
Operating expense | (10,191) | (4.90) | (12,239) | (5.89) | ||||||||||||||||||
Operating | 40,883 | 19.67 | 40,532 | 19.53 | ||||||||||||||||||
General and administrative(1) | (4,400) | (2.12) | (4,164) | (2.00) | ||||||||||||||||||
Finance expense (2) | (2,984) | (1.44) | (3,926) | (1.89) | ||||||||||||||||||
Miscellaneous income | 88 | 0.04 | 411 | 0.20 | ||||||||||||||||||
Funds from operations | 33,587 | $ | 16.15 | 32,853 | $ | 15.84 | ||||||||||||||||
Dividends from Longview | 4,417 | 4,418 | ||||||||||||||||||||
Total | $ | 38,004 | $ | 37,271 | ||||||||||||||||||
per share (3) | $ | 0.23 | $ | 0.23 | ||||||||||||||||||
Expenditures on property, plant and equipment | $ | 75,572 | $ | 40,627 | ||||||||||||||||||
Working capital deficit (4) | $ | 70,564 | $ | 43,166 | ||||||||||||||||||
Bank indebtedness | $ | 142,548 | $ | 67,695 | ||||||||||||||||||
Convertible debentures (face value) | $ | 86,250 | $ | 148,544 | ||||||||||||||||||
Shares outstanding at end of period (000) | 166,304 | 165,934 | ||||||||||||||||||||
Basic weighted average shares (000) | 166,249 | 165,647 | ||||||||||||||||||||
Operating | ||||||||||||||||||||||
Daily Production | ||||||||||||||||||||||
Natural gas (mcf/d) | 127,265 | 125,250 | ||||||||||||||||||||
Crude oil and NGLs (bbls/d) | 1,378 | 1,693 | ||||||||||||||||||||
Total boe/d @ 6:1 | 22,589 | 22,568 | ||||||||||||||||||||
Average prices (including hedging) | ||||||||||||||||||||||
Natural gas ($/mcf) | $ | 3.78 | $ | 4.17 | ||||||||||||||||||
Crude oil and NGLs ($/bbl) | $ | 89.14 | $ | 68.10 |
(1) | General and administrative expense excludes non-cash G&A and non-cash share-based compensation. | |||
(2) | Finance expense excludes non-cash accretion expense. | |||
(3) | Based on basic weighted average shares outstanding. | |||
(4) |
Working capital deficit includes trade and other receivables, prepaid
expenses and deposits, trade and other accrued liabilities, and the
current portion of other liability |
Production Growth, Reduced Costs & Hedging Deliver Solid Financial & Operating Results
Glacier - Montney Potential Enhanced with Discovery of Natural Gas Liquids & Significant Increase in Reserves & Resource Potential
(refer to Advantage press release dated March 15, 2012 and the Sproule Resource Assessment Table & Definitions attached to this press release)
Looking Forward - Glacier Phase IV Production Ramp-up Deferred Due to Low Natural Gas Prices
Production average | 22,800 boe/d to 23,400 boe/d | ||||||||||||||||||||||||||||||
Royalty rate | 8% to 10% | ||||||||||||||||||||||||||||||
Operating expense | $5.70/boe to $6.00/boe | ||||||||||||||||||||||||||||||
Capital expenditures | $65 million to $75 million | ||||||||||||||||||||||||||||||
Consolidated Financial Statements and MD&A
Appendix A - Resource Assessment
The following three tables summarize the results of Sproule's updated
resource assessment:
Resource Categories (AAV working interest, Raw) (1) | Tcf |
Total Petroleum Initially In Place (TPIIP) | 9.33 |
Discovered Petroleum Initially in Place (DPIIP) (2) | 7.49 |
Undiscovered Petroleum Initially in Place (UPIIP) (3) | 1.84 |
(1) | TPIIP, DPIIP and UPIIP have been estimated using a zero percent porosity cut-off (sandstone log scale). The Montney formation is approximately 300 meters thick at Glacier. Sproule's analysis identified 6 potential layers consisting of 1 layer in the Upper Montney, 3 layers in the Middle Montney and 2 layers in the Lower Montney. With the exception of the lowest layer in the Lower Montney, all other layers exist across the entire Glacier land block. | ||
(2) | There is no certainty that it will be commercially viable to produce any portion of the resources. | ||
(3) | There is no certainty that any portion of the resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources. |
Reserves & Contingent Resources (AAV working interest, Sales) (1) (2) | Low Estimate | Best Estimate | High Estimate |
Natural Gas | |||
Reserves (Tcf) (3) (4) | 0.699 | 1.096 | 1.260 |
Contingent Resources (Tcf) (5) (7) | 1.071 | 1.394 | 2.291 |
Total Reserves Plus Contingent Resources (Tcf) | 1.770 | 2.490 | 3.551 |
Natural Gas Liquids (6) | |||
Reserves (mbbls) | 0.0 | 0.0 | 0.0 |
Contingent Resources (mbbls) (7) | 19,225 | 27,854 | 41,967 |
(1) | All DPIIP other than cumulative production, reserves and contingent resources have been categorized as unrecoverable. | ||
(2) | Recoverable gas volumes were estimated using a 4 well per section development in each of the 6 layers within the Montney formation at Glacier. Recovery factors were assigned to each layer based on the actual production performance of the Upper and Lower Montney as reference and then adjusting the recovery factor for each layer to reflect differing geological characteristics. | ||
(3) | Reserves have only been assigned primarily to the Upper Montney and Lower Montney, with a nominal volume assigned to the Middle Montney for vertical well recompletions. | ||
(4) | For reserves, the Low Estimate are proved reserves, the Best Estimate are 2P reserves and the High Estimate are 2P plus possible reserves. Cumulative production of 52 bcf have been added to the reserves volumes. | ||
(5) | Contingent resources are assigned to the Upper Montney, Middle Montney and Lower Montney. Contingent resources for each section and layer were assigned if there was a sustained gas test within 2 miles of the section, otherwise, the resource was classified as prospective undiscovered resources. | ||
(6) | Liquid yields are unique to each layer and were estimated based on the gas composition of gas samples from each layer. | ||
(7) | The contingencies Sproule identified to convert contingent resource into reserves are specific to each layer and generally include the following : |
Prospective Resources (AAV working interest, Sales) (1) (2) (3) | Low Estimate | Best Estimate | High Estimate |
Natural gas (Tcf) | 0.389 | 0.578 | 0.852 |
Natural gas liquids (mbbls) | 15,616 | 22,960 | 33,526 |
(1) | All UPIIP other than prospective resources have been categorized as unrecoverable | ||
(2) | Recoverable gas volumes were estimated using a 4 well per section development in each of the 6 layers within the Montney formation at Glacier. Recovery factors were assigned to each layer based on the production performance of the Upper and Lower Montney as reference and then adjusting each layer to reflect differing geological characteristics. | ||
(3) | Prospective resources were assigned to the Middle Montney and Lower Montney if there were no sustained gas tests within 2 miles of the section. |
Appendix B — Reserve and Resource Definitions
Reserves are estimated remaining quantities of oil and natural gas and related substances anticipated to be recoverable from known accumulations, as of a given date, based on the analysis of drilling, geological, geophysical and engineering data; the use of established technology; and specified economic conditions, which are generally accepted as being reasonable. Reserves are classified according to the degree of certainty associated with the estimates as follows:
Proved Reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves. | |||||
Probable Reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves. | |||||
Possible Reserves are those additional reserves that are less certain to be recovered than probable reserves. It is unlikely that the actual remaining quantities recovered will exceed the sum of the estimated proved plus probable plus possible reserves. | |||||
Resources encompasses all petroleum quantities that originally existed on or within the earth's crust in naturally occurring accumulations, including Discovered and Undiscovered (recoverable and unrecoverable) plus quantities already produced. "Total resources" is equivalent to "Total Petroleum Initially-In-Place". Resources are classified in the following categories:
Total Petroleum Initially-In-Place ("TPIIP") is that quantity of petroleum that is estimated to exist originally in naturally occurring accumulations. It includes that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations, prior to production, plus those estimated quantities in accumulations yet to be discovered. | |||||
Discovered Petroleum Initially-In-Place ("DPIIP") is that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations prior to production. The recoverable portion of discovered petroleum initially in place includes production, reserves, and contingent resources; the remainder is unrecoverable. | |||||
Contingent Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development but which are not currently considered to be commercially recoverable due to one or more contingencies. | |||||
Undiscovered Petroleum Initially-In-Place ("UPIIP") is that quantity of petroleum that is estimated, on a given date, to be contained in accumulations yet to be discovered. The recoverable portion of undiscovered petroleum initially in place is referred to as "prospective resources" and the remainder as "unrecoverable." | |||||
Prospective Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. | |||||
Unrecoverable is that portion of DPIIP and UPIIP quantities which is estimated, as of a given date, not to be recoverable by future development projects. A portion of these quantities may become recoverable in the future as commercial circumstances change or technological developments occur; the remaining portion may never be recovered due to the physical/chemical constraints represented by subsurface interaction of fluids and reservoir rocks. | |||||
Uncertainty Ranges are described by the Canadian Oil and Gas Evaluation Handbook as low, best, and high estimates for reserves and resources as follows:
Low Estimate: This is considered to be a conservative estimate of the quantity that will actually be recovered. It is likely that the actual remaining quantities recovered will exceed the low estimate. If probabilistic methods are used, there should be at least a 90 percent probability (P90) that the quantities actually recovered will equal or exceed the low estimate. | |||||
Best Estimate: This is considered to be the best estimate of the quantity that will actually be recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. If probabilistic methods are used, there should be at least a 50 percent probability (P50) that the quantities actually recovered will equal or exceed the best estimate. | |||||
High Estimate: This is considered to be an optimistic estimate of the quantity that will actually be recovered. It is unlikely that the actual remaining quantities recovered will exceed the high estimate. If probabilistic methods are used, there should be at least a 10 percent probability (P10) that the quantities actually recovered will equal or exceed the high estimate. |
Advisory
The information in this press release contains certain forward-looking
statements, including within the meaning of the United States Private
Securities Litigation Reform Act of 1995. These statements relate to
future events or our future intentions or performance. All statements
other than statements of historical fact may be forward-looking
statements. Forward-looking statements are often, but not always,
identified by the use of words such as "seek", "anticipate", "plan",
"continue", "estimate", "demonstrate", "expect", "may", "will",
"project", "predict", "potential", "targeting", "intend", "could",
"might", "should", "believe", "would" and similar expressions and
include statements relating to, among other things, future production;
effect of increased production at Glacier on 2011 corporate operating
costs; corporate royalty rates; the focus of capital expenditures;
targeted production at Glacier; timing of drilling, completions and
testing; drilling plans; expected operating costs at Glacier; expected
royalty rate for a new Glacier Montney well; projected cash flows at
Glacier; Advantage's hedging program and strategy; terms of the
transaction with Longview Oil Corp.; Advantage's objectives with
respect to the Glacier property; expected benefits to Advantage as a
result of completion of the expansion at Glacier, Alberta; and effect
on production from completion of the current facilities and
infrastructure expansion work in Glacier, Alberta. In addition,
statements relating to "reserves" or "resources" are deemed to be
forward-looking statements, as they involve the implied assessment,
based on certain estimates and assumptions, that the resources and
reserves described can be profitably produced in the future.
Advantage's actual decisions, activities, results, performance or achievement could differ materially from those expressed in, or implied by, such forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur or, if any of them do, what benefits that Advantage will derive from them.
These statements involve substantial known and unknown risks and uncertainties, certain of which are beyond Advantage's control, including: the impact of general economic conditions; industry conditions; actions by governmental or regulatory authorities including increasing taxes, changes in investment or other regulations; changes in tax laws, royalty regimes and incentive programs relating to the oil and gas industry; Advantage's success at acquisition, exploitation and development of reserves; unexpected drilling results, changes in commodity prices, currency exchange rates, capital expenditures, reserves or reserves estimates and debt service requirements; the occurrence of unexpected events involved in the exploration for, and the operation and development of, oil and gas properties; hazards such as fire, explosion, blowouts, cratering, and spills, each of which could result in substantial damage to wells, production facilities, other property and the environment or in personal injury; changes or fluctuations in production levels; competition from other producers; credit risk; individual well productivity; changes in laws and regulations including the adoption of new environmental laws and regulations and changes in how they are interpreted and enforced; fluctuations in commodity prices and foreign exchange and interest rates; stock market volatility and market valuations; volatility in market prices for oil and natural gas; liabilities inherent in oil and natural gas operations; uncertainties associated with estimating oil and natural gas reserves; competition for, among other things, capital, acquisitions of reserves, undeveloped lands and skilled personnel; incorrect assessments of the value of acquisitions; geological, technical, drilling and processing problems and other difficulties in producing petroleum reserves; obtaining required approvals of regulatory authorities and ability to access sufficient capital from internal and external sources. Many of these risks and uncertainties and additional risk factors are described in the Corporation's Annual Information Form which is available at www.sedar.com and www.advantageog.com. Readers are also referred to risk factors described in other documents Advantage files with Canadian securities authorities.
With respect to forward-looking statements contained in this press release, Advantage has made assumptions regarding: conditions in general economic and financial markets; effects of regulation by governmental agencies; current commodity prices and royalty regimes; future exchange rates; royalty rates; future operating costs; availability of skilled labor; availability of drilling and related equipment; timing and amount of capital expenditures; and the impact of increasing competition.
These forward-looking statements are made as of the date of this press release and Advantage disclaims any intent or obligation to update publicly any forward-looking statements, whether as a result of new information, future events or results or otherwise, other than as required by applicable securities laws.
References in this press release to initial production test rates, initial "productivity", initial "flow" rates, "flush" production rates and "behind pipe production" are useful in confirming the presence of hydrocarbons, however such rates are not determinative of the rates at which such wells will commence production and decline thereafter. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production for Advantage.
Barrels of oil equivalent (boe) may be misleading, particularly if used in isolation. A boe conversion ratio has been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil. A boe conversion ratio of 6 mcf:1 bbls 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 based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.
The Corporation discloses several financial measures that do not have any standardized meaning prescribed under IFRS. These financial measures include funds from operations and cash netbacks. Management believes that these financial measures are useful supplemental information to analyze operating performance and provide an indication of the results generated by the Corporation's principal business activities. Investors should be cautioned that these measures should not be construed as an alternative to net income, cash provided by operating activities or other measures of financial performance as determined in accordance with IFRS. Advantage's method of calculating these measures may differ from other companies, and accordingly, they may not be comparable to similar measures used by other companies.