LGX Oil + Gas Inc. announces 2014 year-end reserves

CALGARY, March 10, 2015 /CNW/ - LGX Oil + Gas Inc. ("LGX" or the "Company") (TSXV: OIL) is pleased to announce its 2014 year-end reserves. 

The financial and operational information contained below is based on the Company's unaudited expected results for the year ended December 31, 2014 and final audited results may vary.

RESERVES

In this press release, all references to reserves are to gross company reserves, meaning LGX's working interest reserves before deductions of royalties and before consideration of LGX's royalty interests.  The reserves were evaluated by GLJ Petroleum Consultants Ltd. ("GLJ") in accordance with National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities ("NI 51-101") effective December 31, 2014.  LGX's annual information form for the year ended December 31, 2014 (the "AIF") will contain LGX's reserves data and other oil and natural gas information as mandated by NI 51-101.  LGX is required to file the AIF on SEDAR on or before March 31, 2015. A copy of the AIF will be available under LGX's profile at www.sedar.com or at www.lgxoil.com.  The summary information provided below should be read in conjunction with the detailed information in the AIF.

As of December 31, 2014, LGX's total gross proved plus probable reserves base was 5,798 MBoe, an increase of 3 percent year over year.  Total proved plus probable reserves additions were 508 MBoe.  These additions represent 162 percent of the 314 MBoe produced during 2014.  Light and medium oil and NGL's accounted for 81 percent of the proved plus probable reserves base.

LGX's gross total proved reserves base was 2,834 MBoe.  Total proved reserves represent 49 percent of the total proved plus probable reserves.  Proved producing reserves represent 69 percent of the total proved reserves base.  Total proved reserves additions were 376 MBoe.  These additions represent 120 percent of the 314 MBoe produced during 2014.  Light and medium oil and NGL's accounted for 81 percent of the total proved reserves base.

The following table is a summary, as at December 31, 2014, of LGX's petroleum and natural gas reserves as evaluated by GLJ.  It is important to note that the recovery and reserves estimates provided herein are estimates only. Actual reserves may be greater or less then the estimates provided herein. Reserves information may not add due to rounding.


Gross Company Reserves Summary (1)





Using GLJ December 31, 2014 Forecast Prices and Costs





As at December 31, 2014






Light and



Total Oil


Medium Oil

Natural Gas

NGL's

Equivalent


(MBbl)

(MMcf)

(MBbl)

   (MBoe)

Proved Producing

1,558

2,333

7

1,954

Proved Developed Non-Producing

78

154

2

106

Proved Undeveloped 

645

748

4

774

Total Proved 

2,282

3,234

14

2,834

Total Probable 

2,403

3,284

14

2,964

Total Proved plus Probable

4,685

6,518

27

5,798

(1)

Gross Company Reserves means the Company's working interest reserves before calculations of royalties and before consideration of the Company's royalty interests.

 

Net Present Value of Future Net Revenue – Forecast Prices and Costs


Before Future Income Tax Expenses and Discounted at


0%


5%


10%


15%


20%






(M$)


(M$)


(M$)


(M$)


(M$)

Proved











Developed Producing

51,642


38,160


30,191


25,012


21,404


Developed Non-Producing

3,857


2,989


2,396


1,973


1,658


Undeveloped

21,818


11,422


5,778


2,400


237

Total Proved

77,317


52,571


38,366


29,385


23,299

Probable

115,361


57,853


33,328


20,521


13,003

Total Proved plus Probable

192,678


110,424


71,694


49,907


36,302

 


After Future Income Tax Expenses and Discounted at


0%


5%


10%


15%


20%






(M$)


(M$)


(M$)


(M$)


(M$)

Proved











Developed Producing

51,642


38,160


30,191


25,012


21,404


Developed Non-Producing

3,857


2,989


2,396


1,973


1,658


Undeveloped

21,818


11,422


5,778


2,400


237

Total Proved

77,317


52,571


38,366


29,385


23,299

Probable

100,032


52,207


30,896


19,365


12,415

Total Proved plus Probable

177,349


104,778


69,261


48,750


35,714

 

Pricing Assumptions – Forecast Prices and Costs

GLJ employed the following pricing, exchange rate and inflation rate assumptions as of December 31, 2014 in the GLJ Report in estimating reserves data using forecast prices and costs.  For the year ended December 31, 2014, LGX's average realized sales prices were $4.50/Mcf for natural gas and $89.82/Bbl for crude oil and NGLs. 


Medium and Light Crude Oil

Natural Gas

NGL

Year

WTI

Cushing

Oklahoma

40° API

(US$/Bbl)

Canadian

 Light Sweet

40° API

($/Bbl)

Cromer

Medium

29.3º API
($/Bbl)

AECO - C Spot

($/MMBtu)

Pentanes
Plus
($/Bbl)

Exchange

Rate

($US/$Cdn)

2014
(Actual)

93.00

94.18

89.86

4.50

88.61

0.905

2015

62.50

64.71

61.47

3.31

69.24

0.850

2016

75.00

80.00

76.00

3.77

85.60

0.875

2017

80.00

85.71

81.43

4.02

91.71

0.875

2018

85.00

91.43

86.86

4.27

97.83

0.875

2019

90.00

97.14

92.29

4.53

103.94

0.875

2020

95.00

102.86

97.71

4.78

110.06

0.875

2021

98.54

106.18

100.87

5.03

113.62

0.875

2022

100.51

108.31

102.89

5.28

115.89

0.875

2023

102.52

110.47

104.95

5.53

118.20

0.875

2024

104.57

112.67

107.04

5.71

120.56

0.875










 

Reconciliation of Changes in Reserves

The following table sets forth a reconciliation of LGX's gross reserves as at December 31, 2014, derived from the GLJ Report using forecast prices and cost estimates, reconciled to the gross reserves of LGX as at December 31, 2013. 



Light and

Medium Crude

Oil

Natural Gas

 Liquids

Natural Gas

Total Oil

 Equivalent

Proved

(MBbls)

(MBbls)

(MMcf)

(MBOE)


Balance at December 31, 2013

2,184

14

3,446

2,772


Extensions and Improved Recovery

376

-

494

459


Technical Revisions

(10)

2

1

(8)


Discoveries

-

-

-

-


Acquisitions

-

-

-

-


Dispositions

-

-

-

-


Economic Factors

(35)

(1)

(232)

(75)


Production

(233)

(2)

(475)

(314)


Balance at December 31, 2014

2,282

14

3,234

2,834

                                                                                                                                                                                                           



Light and

Medium Crude

 Oil

Natural Gas

 Liquids

Natural Gas

Total Oil

Equivalent

Probable

(MBbls)

(MBbls)

(MMcf)

(MBOE)


Balance at December 31, 2013

2,359

13

2,754

2,832


Extensions and Improved Recovery

72

-

529

160


Technical Revisions

(25)

2

59

(14)


Discoveries

-

-

-

-


Acquisitions

-

-

-

-


Dispositions

-

-

-

-


Economic Factors

(2)

(1)

(59)

(13)


Production

-

-

-

-


Balance at December 31, 2014

2,404

14

3,284

2,965

                                                                                                                                                                                                           



Light and

Medium Crude

 Oil

Natural Gas

 Liquids

Natural Gas

Total Oil

Equivalent

Proved + Probable

(MBbls)

(MBbls)

(MMcf)

(MBOE)


Balance at December 31, 2013

4,543

28

6,200

5,604


Extensions and Improved Recovery

448

-

1,024

619


Technical Revisions

(36)

4

60

(22)


Discoveries

-

-

-

-


Acquisitions

-

-

-

-


Dispositions

-

-

-

-


Economic Factors

(37)

(2)

(291)

(88)


Production

(233)

(2)

(475)

(314)


Balance at December 31, 2014

4,686

27

6,518

5,799

 

Future Development Costs

The table below sets out the total development costs deducted in the estimation in the GLJ Report of future net revenue attributable to proved reserves and proved plus probable reserves (using forecast prices and costs).



Forecast Prices and Costs



Proved Reserves


Proved Plus

Probable Reserves






(M$)


(M$)

2015


11,484


11,880

2016


1,995


17,208

2017


3,810


10,868

2018


3,948


11,584

2019


598


834

Remaining Years


980


1,373

Total Undiscounted


22,815


53,747

 

CAPITAL EXPENDITURES AND FINDING AND DEVELOPMENT COSTS

LGX incurred capital expenditures of $17.0 million in 2014, all of which was dedicated to organic growth.  The Corporation did not complete any acquisitions in 2014. The Company's total proved plus probable finding and development costs for 2014 were $32.87 per Boe (including change in Future Development Costs ("FDC")).




2014 Capital Expenditures                                                

Total Proved plus Probable (1)

Total Proved (1)

Capital costs ($ thousands)



  Exploration & development drilling & associated costs

17,345

17,345

  Land & Seismic

(356)

(356)




  Change in FDC   

(290)

(278)

2014 Reserve Additions (MBoe) (2)



Exploration & development

508

376

Finding & Development Costs ($ per Boe) (3)

 



2014 excluding change in FDC

33.44

45.18

2014 including change in FDC

32.87

44.44




2013 excluding change in FDC

10.17

23.94

2013 including change in FDC

25.57

44.09




2-year weighted average cost, excluding change in FDC

16.03

31.80

2-year weighted average cost, including change in FDC

27.41

44.22

 

The Company is only disclosing two years of finding and developments costs as LGX feels the previous years are not comparable due to the reverse takeover completed in 2012.


(1)

The aggregate of the exploration and development costs incurred in the most recent financial period and the change during that period in estimated future development costs generally will not reflect total finding and development costs related to reserve additions for that period.


(2)

Boes may be misleading, particularly if used in isolation.  A Boe conversion ratio of 1 Boe: 6 Mcf  natural gas has been used, which is based on an energy equivalency conversion method primarily applicable at the burner tip and does not necessarily represent a value equivalency at the wellhead.


(3)

Includes revisions. Determined by dividing the sum of exploration, development, land & seismic costs and, where indicated, changes to FDC by additions to reserves, other than additions through net acquisitions.

 

Net asset value ("NAV") per share

The following table outlines LGX's NAV per Basic Common Share using the Proved plus Probable reserve value at December 31, 2014, before taxes and discounted at 10%, and forecast pricing and costs:

($MM except share and per share amounts)


Proved Plus Probable Reserve Value NPV10 BT(incl. future capital)

$71.7

Undeveloped Land (109,393 acres @ $225/acre)

$24.6

Net Debt 

($30.3)

Total Net Assets (basic)

$66.0

Basic Common Shares Outstanding (MM)

88.7

Estimated NAV per Basic Common Share

$0.74

 

LGX expects to release its 2014 year end operational and financial results Tuesday, March 24, 2015. 

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.

Reader Advisories

Reserves Data

The determination of oil and natural gas reserves involves the preparation of estimates that have an inherent degree of associated uncertainty. Categories of proved and probable reserves have been established to reflect the level of these uncertainties and to provide an indication of the probability of recovery.  The estimation and classification of reserves requires the application of professional judgment combined with geological and engineering knowledge to assess whether or not specific reserves classification criteria have been satisfied. Knowledge of concepts including uncertainty and risk, probability and statistics, and deterministic and probabilistic estimation methods is required to properly use and apply reserves definitions.

The recovery and reserve estimates of oil, NGL and natural gas reserves provided herein are estimates only.  Actual reserves may be greater than or less than the estimates provided herein. The estimated future net revenue from the production of LGX's natural gas and petroleum reserves does not represent the fair market value of LGX's reserves.

The reserve data provided in this news release presents only a portion of the disclosure required under NI 51-101.  All of the required information will be contained in LGX's AIF, which will be filed on SEDAR on or before March 31, 2015.

 Caution Respecting BOE

In this press release, the abbreviation BOE means barrel of oil equivalent on the basis of 1 BOE to 6 Mcf of natural gas when converting natural gas to BOEs.  BOEs may be misleading, particularly if used in isolation.  A BOE conversion ratio of 6 Mcf to 1 BOE 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 conversion ratio of 6 Mcf to 1 BOE, utilizing a conversion ratio of 6 Mcf to 1 BOE may be misleading as an indication of value.

Calculation of Netbacks

Netbacks are calculated by deducting royalties paid and operating costs, including transportation costs, from prices received, excluding the effects of hedging.

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

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