Legacy Oil + Gas Inc. Announces Record Annual Cash Flow from Operations, Year-End Results and Revised Capital Budget and Guidance

CALGARY, March 25, 2015 /CNW/ - Legacy Oil + Gas Inc. ("Legacy" or the "Company") (TSX:LEG) 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, 2014 as well as its annual information form ("AIF") for the year ended December 31, 2014.  Selected financial and operational information is outlined below and should be read in conjunction with Legacy's audited financial statements, the related MD&A and the AIF, which are available for review at www.legacyoilandgas.com or www.sedar.com.

FINANCIAL + OPERATIONAL HIGHLIGHTS (1)







Three Months Ended



Year Ended



December 31



December 31


(Cdn $000's, except per share amounts) 

2014

2013

% change

2014

2013

% change

Financial 







Petroleum and natural gas sales, net of royalties

133,181

116,804

14

572,701

464,912

23

Funds generated by operations (2)

81,903

63,745

28

334,588

277,108

21


Per share basic

0.41

0.41

-

1.85

1.81

2


Per share diluted (3)

0.40

0.40

-

1.83

1.78

3

Net income (loss)

(163,238)

(7,531)

2,068

(128,270)

(12,070)

963


Per share basic

(0.82)

(0.05)

1,540

(0.71)

(0.08)

788


Per share diluted (3)

(0.82)

(0.05)

1,540

(0.71)

(0.08)

788

Capital expenditures – Exploration and development (4)

58,293

52,647

11

404,231

321,182

26

Capital expenditures – Acquisitions and dispositions (4)

5

53

(91)

467,970

187,096

150

Net debt and working capital surplus (deficit)(2)

(856,965)

(680,106)

26

(856,965)

(680,106)

26

Operating







Production








Crude oil (Bbls per day)

21,294

16,180

32

18,648

15,108

23


Heavy oil (Bbls per day)

63

84

(25)

66

107

(38)


Natural gas (Mcf per day)

22,045

15,625

41

16,987

12,610

35


Natural gas liquids (Bbls per day)

2,444

2,037

20

1,926

1,696

14


Barrels of oil equivalent (Boe per day) (5)

27,475

20,905

31

23,471

19,013

23

Average realized price








Crude oil ($ per Bbl)

73.65

84.72

(13)

91.39

91.80

-


Heavy oil ($ per Bbl)

53.31

57.97

(8)

70.86

66.52

7


Natural gas ($ per Mcf)

3.27

3.68

(11)

4.03

3.37

20


Natural gas liquids ($ per Bbl)

38.14

48.02

(21)

49.25

48.74

1


Barrels of oil equivalent ($ per Boe) (5)

63.22

73.24

(14)

79.77

79.90

-

Netback ($ per Boe)(2)(5)








Petroleum and natural gas sales

63.22

73.24

(14)

79.77

79.90

-


Royalties

10.54

12.50

(16)

12.92

12.91

-


Operating expenses

14.57

14.98

(3)

15.15

14.27

6


Transportation expenses

2.82

2.91

(3)

2.98

2.86

4

Operating Netback ($ per Boe)(2)(5)

35.29

42.85

(18)

48.72

49.86

(2)

Undeveloped land holdings (gross acres)

696,831

502,282

39

696,831

502,282

39

(net acres) 

557,302

388,806

43

557,302

388,806

43

Common Shares (000's)







Common shares outstanding, end of period

199,730

157,241

27

199,730

157,241

27

Weighted average common shares (basic)

199,730

157,241

27

181,346

153,219

18

Weighted average common shares (diluted) (3)

202,771

160,291

27

183,321

155,805

18

(1)

Consolidated financial and operating highlights for Legacy Oil + Gas Inc. and all of its subsidiaries ("Legacy" or the "Company").

(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. Refer to "Non-IFRS Measures" in the MD&A.

(3)

In calculating the net income (loss) per share diluted, Legacy excludes the effect of outstanding stock options, stock incentives and share warrants 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, stock incentives and share warrants using the treasury stock method.

(4)

Refer to Capital Expenditures in the MD&A.

(5)

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.

 

ACCOMPLISHMENTS

  • Demonstrated year over year per share growth in: reserves per share (4 percent increase), production per share (4 percent increase) and cash flow per share (2 percent increase)
  • Increased average production to 23,471 Boe per day in 2014 (23 percent increase) from 19,013 Boe per day in 2013; increased average production to 27,475 Boe per day in the fourth quarter of 2014 (31 percent increase) from 20,905 Boe per day in the fourth quarter of 2013
  • Increased funds generated from operations to a record $334.6 million in 2014 (21 percent increase) from $277.1 million in 2013; increased funds generated from operations to $1.85 per share in 2014 (2 percent increase) from $1.81 per share in 2013
  • Reduced general and administrative ("G&A") costs to $2.06 per Boe in 2014 from $2.44 per Boe in 2013 (16 percent decrease)
  • Reduced operating and transportation costs by $0.50 per Boe (3 percent decrease) quarter over quarter
  • Drilled 159 gross (137.0 net) oil wells with a 99 percent success rate in 2014. Drilled 10 gross (7.4 net) oil wells in the fourth quarter of 2014, with a 100 percent success rate
  • Total capital expenditures on organic opportunities for 2014 were $397.5 million (not including capitalized G&A, corporate fixed assets or net acquisitions and divestitures)
  • Increased gross proved plus probable reserves to 154.1MMBoe at December 31, 2014 from 117.2 MMBoe at December 31, 2013 (31 percent increase); proved plus probable reserve additions replaced 533 percent of production in the year
  • Generated solid 2014 total proved plus probable finding and development ("F&D") costs of $22.10 per Boe (including future development costs), resulting in a 2.2 times recycle ratio based on $48.72 per Boe operating netbacks
  • Completed several strategic acquisitions in the Company's core areas in southeast Saskatchewan and North Dakota for aggregate consideration consisting of $42.4 million in cash and 38,937,870 Common Shares
  • Reduced net debt and working capital deficit quarter over quarter by 2 percent to $857.0 million at December 31, 2014

OPERATIONS OVERVIEW

Legacy drilled 159 (137.0 net) wells in 2014, with a 99 percent success rate. The Company met its 2014 production guidance, averaging 23,471 Boe per day, an increase of 23 percent over 2013 average production of 19,013 Boe per day.  Total capital expenditures on organic opportunities for 2014 were $397.5 million (not including capitalized G&A, corporate fixed assets or net acquisitions and divestitures).

In the fourth quarter of 2014, the Company drilled 10 (7.4 net) wells, all targeting light oil, with a 100 percent success rate, and achieved a production average of 27,475 Boe per day. In the fourth quarter of 2014, Legacy significantly underspent its funds flow from operations for the quarter while commencing a number of key infrastructure projects that are forecast to be completed in the first quarter of 2015.

In the Midale, Legacy drilled 3 (1.9 net) wells in the fourth quarter of 2014. The 8 wells brought on production in the quarter have an average 30 day initial oil rate of 325 Bbl per day per well.  Strong results continue to be demonstrated throughout this Legacy dominated play.  Key gathering infrastructure was constructed in the fourth quarter of 2014 and construction of the 16-21 Pinto battery was commenced, with completion anticipated in late Q1 2015.  This infrastructure will service the planned 2015 Midale drilling activity and enable lower full cycle capital costs and faster cycle times.  Strong well results, when coupled with lower capital costs and a de-risked inventory, have further improved the robust economics of the Midale play to an industry leading level despite low commodity prices.

The Company drilled 2 (1.8 net) Spearfish wells in the fourth quarter of 2014.  The 9 wells brought on production in the quarter have an average 30 day initial oil rate of 83 Bbl per day per well.  The majority of these wells were short (700 m lateral) horizontal wells, drilled with a cost savings of up to $250,000 per well over the long (1,400 m) lateral wells.  A number of the Bottineau County wells continue to produce in excess of 80 Bbls of oil per day after five months.

In the Bakken, the Company drilled 3 (1.7 net) wells at Heward and Star Valley in the fourth quarter of 2014.  The wells have an average 30 day initial rate of 175 Boe per day per well.

The two Turner Valley Rundle horizontal wells brought on production in the quarter have an average 30 day initial rate of 335 Boe per day per well.  One of these, the Hartell #10 triple lateral well was drilled in a record 30 days to a total measured depth of 4,915 m, with 2,395 m of open-hole laterals.  Total cost to drill, complete, equip and tie-in this triple lateral well was a pacesetting $5.5 million. This efficient execution bodes well for further improving the economics of drilling in Turner Valley, even in the current low commodity price environment.

Due to the significant decline in commodity prices, the estimated future cash flows of certain assets dropped below the carrying value of those assets. As a result, Legacy recorded a $148.1 million after tax ($185 miilion before tax) aggregate impairment charge on the exploration and evaluation assets, property, plant and equipment and goodwill assets of the Company in the fourth quarter of 2014.

OUTLOOK AND UPDATED GUIDANCE

With crude oil prices persisting near five year lows, the Company deems it prudent to proactively manage its capital program as stated in its December 17, 2014 news release.  Legacy remains committed to improving its balance sheet while preserving its significant upside during these times of low commodity prices.  The Company is on track to spend funds flow from operations in the first half of 2015 (based on current strip pricing). The Company has run sensitivities on its borrowing base value and stress tested its balance sheet and continues to expect to be within debt covenants down to oil prices averaging US$52 per barrel WTI through 2015.

UPDATED 2015 CAPITAL BUDGET

Legacy now expects to spend $182 million on capital expenditures in 2015, which is equal to the anticipated cash flow that would be generated at average oil pricing of US$53 per barrel WTI and a 0.80 CDN/US dollar average exchange rate for 2015.  Legacy is planning to drill 72 gross (60.2 net) wells in 2015 targeting high quality light oil.  In addition to drilling, the Company is planning capital expenditures on expansion of the successful pilot waterfloods at Frys, Heward, Pierson, Steelman and Taylorton, as well as implementation of pilot waterfloods at Openshaw, Pinto and Star Valley.

The capital spending is distributed as follows:  drilling, completions and tieins - $128.8 million; waterfloods - $10.1 million; facilities - $39.6 million; and land, seismic and other - $3.5 million.  The majority of the capital spending will be allocated to the Company's major plays:  Taylorton/Pinto - $79.2 million (43 percent), Steelman - $29.9 million (16 percent), Turner Valley - $22.5 million (12 percent), and Manor/Wordsworth - $14.1 million (8 percent).

The Company is planning to balance capital expenditures and expected funds flow from operations in each half of 2015.  If oil prices do not improve in the last half of 2015, Legacy will defer or cancel capital investments as necessary to spend cash flow, while generating acceptable returns on investment.

UPDATED 2015 GUIDANCE

Based on the updated capital budget, The Company now expects average production for 2015 of 23,300 Boe per day and an exit rate of production for 2015 of 24,000 Boe per day. Production targets include the tie-in of significant associated natural gas and NGL volumes at the Company's successful Midale play. 

The operational parameters used in the budget are as follows:

  • Average Production – 23,300 Boe per day (85 percent light oil and NGL)
  • Exit Production – 24,000 Boe per day (85 percent light oil and NGL)
  • Average Crude Quality - 39⁰ API
  • Royalty Rate – 14.5 percent
  • Operating Costs - $13.75 per Boe
  • Transportation Costs - $3.10 per Boe
  • G&A (expensed) - $2.50 per Boe
  • Common Shares Outstanding (basic, weighted average) – 199.7 million

Executive Changes

Matt Janisch has stepped down today as Vice-President, Finance and Chief Financial Officer of the Company.   Mr. Janisch had served in that role since the recapitalization of the Company in July 2009.   The Board would like to thank Mr. Janisch for his service to Legacy.

Legacy is pleased to announce that Curt Ziemer has been appointed Vice-President, Finance and Chief Financial Officer of the Company effective today.  Mr. Ziemer has been responsible for all accounting and financial reporting functions of Legacy since 2009, most recently as Vice-President, Accounting. 

ANNUAL GENERAL MEETING

Legacy's Annual General Meeting, is scheduled for 3:00 pm on May 26, 2015 at The Petroleum Club, Devonian Room, located at 319 - 5th Avenue SW, Calgary, AB.

To view Legacy's audited financial statements, the related MD&A and the AIF for the years ended December 31, 2014 and December 31, 2013 please visit our web site at www.legacyoilandgas.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 Legacy at 403.441.2300 or at 4400, 525-8th Avenue SW, Calgary, Alberta, T2P 1G1.

Conference call details

Management will be holding a conference call for investors, financial analysts, media and any interested persons on Thursday, March 26, 2015 at 9:00 a.m. (MDT) (11:00 a.m. EDT) to discuss the 2014 year end results.

The investor conference call details are as follows: 

Participant Dial-In Number(s):

  • Operator Assisted Toll-Free Dial-In Number: (888) 231-8191
  • Local Dial-In Number: (403) 451-9838
  • Conference ID: 82752074

Note:  In order to join this conference call, you will be required to provide the Conference ID Number listed above.

Forward Looking Statements
This press release contains forward-looking statements.  More particularly, this press release contains statements concerning: (i) the impact of Midale infrastructure on capital costs and cycle times; (ii) the Company being on track to spend funds flow from operations in the first half of 2015, (iii) the expectation that the Company will be in compliance with its debt covenants on the pricing scenario set out in the press release; (iv) the amount of planned capital expenditures for 2015, (v) the breakdown of planned capital expenditures by type and area, (vi) planned drilling, development and waterflood activities, (vii) the anticipated 2015 average and exit rates of production; and (viii) the Company's plans to balance capital expenditures and expected funds flow from operations in each half of 2015.

The forward-looking statements contained in this press release are based on certain key expectations and assumptions made by Legacy, including the parameters specifically set out in the press release and expectations and assumptions concerning: (i) prevailing commodity prices, (ii) the success of future drilling, development and waterflood activities, (iii) the performance of existing wells, facilities and waterflood projects, (iv) the performance of new wells, facilities and waterflood projects, (v) the timely receipt of required regulatory approvals, (vi) prevailing weather conditions, oil price differentials, royalty regimes and exchange rates and (vii) the availability and cost of capital, labour and services.

Although Legacy 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 Legacy 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.  Most importantly, all of the forward-looking statements are highly dependent on prevailing commodity prices and significant fluctuations in prevailing commodity prices may impact anticipated cash flows, capital expenditures, production and compliance with debt covenants.  Other factors and risks 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; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses; and health, safety and environmental risks), uncertainty as to the availability and cost of capital, labour and services, exchange rate fluctuations, fluctuations in oil price differentials, unexpected adverse weather conditions and changes to existing laws and regulations. Certain of these risks are set out in more detail in Legacy's Annual Information Form which has been filed on SEDAR and can be accessed at www.sedar.com.

The forward-looking statements contained in this press release are made as of the date hereof and Legacy 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.

Caution Respecting 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. 

Test Results and Initial Production Rates
Any references in this news release to initial, early and/or test production/performance rates are useful in confirming the presence of hydrocarbons, however, such rates are not determinative of the rates at which such wells will continue production and decline thereafter. While encouraging, readers are cautioned not to place reliance on such rates in calculating aggregate production. The initial production rate may be estimated based on other third party estimates or limited data available at this time. Initial production or test rates are not necessarily indicative of long-term performance of the relevant well or fields or of ultimate recovery of hydrocarbons.

SOURCE Legacy Oil + Gas Inc.

For further information: Trent J. Yanko, P.Eng., President + CEO, Legacy Oil + Gas Inc., 4400 Eighth Avenue Place, 525 - 8th Avenue SW, Calgary, AB T2P 1G1, Telephone: 403.441.2300, Fax: 403.441.2017

RELATED LINKS
http://www.legacyoilandgas.com

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