LGX Oil + Gas Inc. announces year-end results, 2014 Guidance/Alberta Bakken drilling plans and files annual information form

CALGARY, March 24, 2014 /CNW/ - LGX Oil + Gas Inc. ("LGX" or the "Company") (TSXV:OIL) is pleased to announce it has filed on SEDAR its audited financial statements and related Management's Discussion and Analysis ("MD&A") for the year ended December 31, 2013 as well as its annual information form ("AIF") for the year ended December 31, 2013.  Selected financial and operational information is outlined below and should be read in conjunction with LGX's audited financial statements, the related MD&A and the AIF which are available for review at www.lgxoil.com or www.sedar.com.

FINANCIAL + OPERATIONAL HIGHLIGHTS

    Three Months Ended         Year Ended    
    December 31         December 31    
(Cdn $, except per share amounts)     2013   2012   % change     2013   2012   % change
Financial                          
Petroleum and natural gas sales, net of royalties    4,520,788   2,775,518   63     17,387,700   4,046,322   330
Funds generated by operations (2)   1,125,835   463,043   143     4,432,350   324,598   1,265
  Per share basic    0.01   0.01   -     0.05   0.01   400
  Per share diluted (3)    0.01   0.01   -     0.05   0.01   400
Net income (loss)    (7,775,472)   (7,023,085)   11     (20,326,748)   3,419,269   (694)
  Per share basic    (0.09)   (0.11)   (18)      (0.23)   0.15    (253)
  Per share diluted (3)    (0.09)   (0.11)    (18)     (0.23)   0.15   (253)
Capital expenditures (excluding acquisitions)    12,782,541   7,379,378   73     15,321,445   9,936,095   54
Net acquisitions (cash consideration) (5)    -   42,378,028   (100)     -   42,378,028   (100)
Net debt and working capital surplus (deficit) (2)    (19,635,864)   (9,906,927)   98     (19,635,864)   (9,906,927)   98
Operating                          
Production                          
  Crude oil and natural gas liquids (Bbls per day)    718   430   67     619   146   324
  Natural gas (Mcf per day)    1,482   1,528   (3)     1,673   871   92
  Barrels of oil equivalent (Boe per day) (4)    965   685   41     898   291    209
Average realized price                            
  Crude oil and natural gas liquids ($ per Bbl)    78.26   72.18   8     84.60    74.10   14
  Natural gas ($ per Mcf)    3.46   3.32   4     3.05   2.69   13
  Barrels of oil equivalent ($ per Boe) (4)    63.55   52.71   21     63.99   45.23   42
Netback ($ per Boe) (2)                          
  Petroleum and natural gas sales    63.55   52.71   21     63.99   45.23   41
  Royalties     12.63   8.67   46     10.94   7.24   51
  Operating expenses     29.09   22.41   30     28.52   19.26   48
  Transportation expenses     3.13   2.19   43     2.65   1.80   47
Operating Netback ($ per Boe) (2)    18.70   19.44   (4)     21.88   16.93   29
Undeveloped land holdings (gross acres)    119,668   209,619    (43)     119,668   209,619   (43)
(net acres)     113,541   186,477   (39)     113,541   186,477   (39)
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   65,180   36     88,658   23,143   283
Weighted average common shares (diluted) (3)    88,658   65,180   36     88,658   23,143   283
   
(1)      The reader is cautioned that the Financial + Operational Highlights above present the historic financial position, results of operations and cash flows of Legacy Oil + Gas Inc.'s Southern Alberta Assets ("SA Assets") for all prior periods up to and including July 5, 2012 and the results of operations from July 5, 2012 forward include both the SA Assets and LGX Oil + Gas Inc. (referred to collectively with its subsidiaries as "LGX" or the "Company"), unless otherwise indicated.   Refer to the common-control transaction and reverse acquisition in the Management's Discussion and Analysis "(MD&A") of LGX Oil + Gas Inc. for the fourth quarter of 2013 and audited consolidated financial statements for the year ended December 31, 2013.  For a comparison of the quarter to prior quarters of Bowood Energy Inc., refer to page 15 of the MD&A of LGX Oil + Gas Inc. for the fourth quarter of 2013.
(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)     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.
(5)      For the three months and year ended December 31, 2012, the Company issued 4,069,767 common shares valued at $3,011,628 as part consideration for the acquisition of Manyberries properties in Southeast Alberta on November 7, 2012.  For the year ended December 31, 2012, the Company issued 13,746,669 common shares to former Bowood Energy Inc. shareholders valued at $17,870,670 as part of the SA Assets reverse acquisition of LGX.
   

ACCOMPLISHMENTS

  • Increased average production from 291 Boe per day in 2012 to 898 Boe per day (69 percent light oil and natural gas liquids) in 2013 (209 percent increase);  increased average production from 685 Boe per day in the fourth quarter of 2012 to 965 Boe per day in the fourth quarter of 2013 (41 percent increase)

  • Increased funds generated from operations from $0.3 million in 2012 to $4.4 million in 2013 (1,265 percent increase); increased funds generated from operations from $0.01 per share in 2012 to $0.05 per share in 2013 (400 percent increase)

  • Reduced general and administrative ("G&A") costs from $12.64 per Boe in 2012 to $6.83 per Boe in 2013 (46 percent decrease); reduced G&A from $10.28 per Boe in the fourth quarter of 2012 to $4.67 per Boe in the fourth quarter of 2013 (55 percent decrease)

  • Reduced operating expense from $43.46 per Boe in the third quarter of 2013 to $29.09 per Boe in the fourth quarter of 2013 (33 percent decrease)

  • Increased gross proved plus probable reserves from 4.4 MMBoe at December 31, 2012 to 5.6 MMBoe at December 31, 2013 (27 percent increase); proved plus probable reserve additions replaced 464 percent of production in the year

  • Achieved finding and development costs of $25.57 per Boe (including change in future development capital) for 2013

  • Drilled 2 gross (2.0 net) Big Valley oil wells with a 100 percent success rate in 2013

2014 GUIDANCE

LGX expects to spend $13.4 million in 2014 focused on light oil development with the majority of capital (90 percent) directed to drilling, completions and tie-ins on the Alberta Bakken play. The capital spending is distributed as follows:  drilling, completions and tie‐ins - $11.2 million; re-completions and workovers - $1.9 million and other - $0.3 million.

LGX is planning to drill 2 gross (1.6 net) development wells in 2014, targeting high quality light oil on the Alberta Bakken play. No capital has been budgeted for acquisitions, although the Company continues to evaluate new opportunities, both within and beyond its core areas.

LGX anticipates a 2014 average production rate of 1,100 Boe per day and exit rate of 1,400 Boe per day. The operational parameters used in the budget are as follows:

  • Exit Production - 1,400 Boe per day (83 percent light oil and NGL)
  • Average Production - 1,100 Boe per day (79 percent light oil and NGL)
  • Royalty Rate - 17.5 percent
  • Operating Costs - $22.25 per Boe
  • Transportation Costs - $3.00 per Boe
  • Common Shares Outstanding (basic, weighted average) - 88.7 million

OUTLOOK

Following the success of the 14-2 well (530 Bbl per day of light oil for the first 30 days of production) in the Company's emerging Alberta Bakken play, LGX has identified numerous locations on its 95 square mile 3D seismic program, centred over its lands on the Blood reserve.  LGX has budgeted to drill two development wells, which are expected to spud in the second and third quarters of 2014, along with performing re-completions on the Blood Reserve based on the 2013 drilling success. Analysis of the 3-D seismic has indicated an area of potentially highly fractured reservoir adjacent to a vertical well drilled in 2012.  The Company is evaluating this area further for potential re-entry to drill a horizontal leg that would open up another development area on the Blood Reserve.

The management team at LGX continues to aggressively pursue opportunities that improve the upside potential, sustainability and autonomy of LGX.

ANNUAL GENERAL MEETING

LGX's Annual General Meeting, is scheduled for 3:00 pm on May 29, 2014 at The Petroleum Club, McMurray Room, located at 319 - 5th Avenue SW, Calgary, AB.

To view LGX's audited financial statements, the related MD&A and the AIF for the years ended December 31, 2013, December 31, 2012 and December 31, 2011 please visit our web site at www.lgxoil.com or www.sedar.com.  To the extent investors do not have access to the internet, copies of the audited financials the related MD&A and the AIF can be obtained on request without charge by contacting LGX at 403.441.2300 or at 4400, 525-8th Avenue SW, Calgary, Alberta, T2P 1G1.

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.

Forward-Looking Information - This press release contains forward-looking statements. More particularly, it contains forward-looking statements concerning: (i) the amount of planned capital expenditures for 2014, (ii) the breakdown of planned capital expenditures by class and area, (iii) planned drilling and development activities, and (iv) the anticipated 2014 average and exit rates of production.

The forward-looking statements contained in this press release are based on certain key expectations and assumptions made by LGX, including the operational parameters specifically set out in this press release and expectations and assumptions concerning: (i) the application of the previously announced emergency order for the protection of the Greater Sage-Grouse (the "Emergency Order") and the Species at Risk Act (Canada) to the Corporation's Manyberries property, (ii) the success of future drilling, development and completion activities, (iii) the performance of existing wells, (iv) the performance of new wells, (v) the availability and performance of facilities and pipelines, (vi) the geological characteristics of LGX's properties, (vii) the successful application of drilling, completion and seismic technology, (viii) prevailing weather and break-up conditions, commodity prices, royalty regimes and exchange rates, (ix) the application of regulatory and licensing requirements, and * the availability of capital, labour and services.

Although LGX believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because LGX can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), constraint in the availability of services, constraint in the availability of capital, commodity price and exchange rate fluctuations, adverse weather or break-up conditions and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures, uncertainties as to the application and impact of the Emergency Order and uncertainties as to the outcome of efforts by LGX to quash or amend the Emergency Order or to obtain compensation for losses related to the Emergency Order.  These and other risks are set out in more detail in LGX's Annual Information Form for the year ended December 31, 2013 dated March 24, 2014.

The forward-looking statements contained in this press release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

Meaning of Boe - 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. 

 

SOURCE LGX Oil + Gas Inc.

For further information:

Trent J. Yanko, P.Eng.
President + CEO

Matt Janisch
Vice President, Finance + CFO

4400, 525 - 8th Avenue S.W.
Calgary, AB T2P 1G1

Telephone: 403.441.2300