LGX Oil + Gas Inc. Announces Year-end Results, 2015 Guidance and Filing of Annual Information Form

CALGARY, March 24, 2015 /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, 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 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 (1)









Three Months Ended



Year Ended




December 31



December 31


(Cdn $, except per share amounts) 

2014

2013

% change

2014

2013

% change

Financial 







Petroleum and natural gas sales, net of royalties

3,854,256

4,520,788

(15)

20,096,137

17,387,700

16

Funds generated by operations (2)

467,855

1,125,835

(58)

6,558,707

4,432,350

48

Per share basic

0.01

0.01

-

0.07

0.05

40

Per share diluted (3)

0.01

0.01

-

0.07

0.05

40

Net loss

(41,300,437)

(7,775,472)

431

(42,922,011)

(20,326,748)

111


Per share basic

(0.47)

(0.09)

422

(0.48)

(0.23)

109



Per share diluted (3)

(0.47)

(0.09)

422

(0.48)

(0.23)

109

Capital expenditures – Exploration and development (4)

9,179,368

12,782,541

(28)

17,478,051

15,321,445

14

Capital expenditures – Acquisitions and dispositions (4)

(220,000)

-

 n/a 

(220,000)

-

 n/a 

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

(30,332,110)

(19,635,864)

54

(30,332,110)

(19,635,864)

54

Operating







Production








Crude oil and natural gas liquids (Bbls per day)

628

718

(13)

636

619

3


Natural gas (Mcf per day)

1,446

1,482

(2)

1,350

1,673

(19)


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

869

965

(10)

861

898

(4)

Average realized price








Crude oil and natural gas liquids ($ per Bbl)

71.00

78.26

(9)

89.79

84.60

6


Natural gas ($ per Mcf)

3.75

3.46

8

4.50

3.05

48


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

57.55

63.55

(9)

73.38

63.99

15

Netback ($ per Boe)(2)








Petroleum and natural gas sales

57.55

63.55

(9)

73.38

63.99

15


Royalties

9.34

12.63

(26)

9.44

10.94

(14)


Operating expenses

29.32

29.09

1

27.97

28.52

(2)


Transportation expenses

3.67

3.13

17

4.28

2.65

62

Operating Netback ($ per Boe)(2)

15.22

18.70

(19)

31.69

21.88

45

Undeveloped land holdings (gross acres)

115,199

119,668

(4)

115,199

119,668

(4)


(net acres)

109,392

113,541

(4)

109,392

113,541

(4)

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

88,658

-

88,658

88,658

-

Weighted average common shares (diluted) (3)

88,658

88,658

-

88,658

88,658

-

(1)    Consolidated financial and operating highlights for LGX Oil + Gas Inc. and all its subsidiaries ("LGX" 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 MD&A.
(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)    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

  • Increased funds generated from operations from $4.4 million in 2013 to $6.6 million in 2014 (48 percent increase); increased funds generated from operations from $0.05 per share in 2013 to $0.07 per share in 2014 (40 percent increase)
  • Continued to reduce operating expense from $28.52 per Boe in 2013 to $27.97 per Boe in 2014 (2 percent decrease)
  • Increased gross proved plus probable reserves from 5.6 MMBoe at December 31, 2013 to 5.8 MMBoe at December 31, 2014; proved plus probable reserve additions replaced 162 percent of production in the year
  • Drilled 2 gross (2.0 net) Big Valley oil wells with a 100 percent success rate in 2014


2014 OPERATIONS REVIEW

LGX drilled two horizontal wells into the Big Valley (Three Forks) Formation (12-2-8-24W4 and 6-36-8-24W4).  The total capital expenditures for the two wells came in on budget at approximately $14 million

The 12-2 well was drilled with a 1,402 m horizontal lateral and was completed with a 20 stage fracture stimulation. The well was put on production late November 2014 and averaged 315 Bbl per day of light oil for the first 30 days of production.  LGX has a 100 percent working interest in the well prior to recovery of 200 percent of the drilling, completion, equipping and tie-in costs, at which point its interest will revert to 80 percent.

The 6-36 well was drilled with a 1,134 m horizontal lateral and was completed with a 20 stage fracture stimulation.  The well was put on production late November 2014 and averaged 185 Bbl per day of light oil for the first 30 days of production.  Water cuts are higher than the offsetting wells, indicating that load fluid is still being recovered from the well and maximum oil productive capability has not been achieved to-date.  LGX has a 100 percent working interest in the well prior to recovery of 200 percent of the drilling, completion, equipping and tie-in costs, at which point its interest will revert to 80 percent.

The latest two wells, combined with previous production results, confirm the Big Valley (Three Forks) Formation continues to be prospective in the area.  LGX believes that 20+ sections of its land are prospective for the Big Valley.  Both wells encountered significant hydrocarbon shows in the overlying Banff Formation as indicated by drill cuttings, gas detector readings and strong oil "kicks" while drilling through the zone.  The additional oil shows, as well as further geological and seismic interpretation and analysis, confirm the potential for a second play in the shallower Banff Formation.  An operator with lands immediately offsetting LGX acreage to the north has achieved strong production results in the Banff Formation.  Further drilling is required to confirm the extent of both plays and to hold lands under LGX's lease of lands on the Blood Reserve.

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, LGX recorded a $33.8 million aggregate impairment charge on the exploration and evaluation assets and the property, plant and equipment assets of the Company in the fourth quarter of 2014.

OUTLOOK AND 2015 GUIDANCE

With cash flows impacted by oil prices at five year lows, LGX is working proactively to ensure it has the ability to meet its financial obligations under its credit facilities and satisfy the 2015 drilling commitments under its lease of lands on the Blood Reserve.  The Company is currently evaluating measures, including but not limited to:  asset sales, accessing third party capital, joint ventures and drilling commitment extension.  At current commodity prices, the Company expects that it may approach non-compliance with the existing financial covenants under its credit facilities in the near future and will continue proactive discussions with its lender regarding the facility and the covenants.

After anticipated reductions and savings on operating expenses and G&A and without giving effect to any production additions from drilling in 2015, LGX expects to average 725 Boe per day of production in 2015 and generate slightly positive funds flow from operations at current strip pricing for 2015.

LGX has proven the concept of an over-pressured, oil saturated, light oil resource play over a broad area on its lands in the Big Valley Formation.  In addition, the potential for a second exciting light oil play in the shallower Banff Formation has been confirmed through the drilling of the Big Valley wells to-date.  Capital cost reductions have been demonstrated through the course of the 2014 program and additional savings are anticipated in the current low commodity price environment.  The Company has significant exposure to the upside of both plays and only a small portion of the potential has been recognized in the Company's reserve report.

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 27, 2015 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, 2014, December 31, 2013 and December 31, 2012 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.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Forward-Looking Information

This press release contains forward-looking statements. More particularly, it contains forward-looking statements concerning: (i) the prospectivity of LGX's properties with respect to the Big Valley (Three Forks) and Banff Formations; (ii) the expectation that, at current commodity prices, LGX may approach non-compliance with the existing financial covenants under its credit facilities in the near future; (iii) anticipated savings on operating expenses, G&A and capital costs; (iv) the anticipated 2015 average rate of production; and (v) LGX's expectation that it will generate slightly positive funds flow from operations at current strip pricing for 2015.

The forward-looking statements contained in this press release are based on certain key expectations and assumptions made by LGX, including the assumptions specifically set out in this press release and expectations and assumptions concerning: (i) prevailing commodity prices; (ii) the availability and cost of capital, labour and services; (iii) the effectiveness of cost reduction initiatives; (iv) the performance of existing wells, (v) the availability and performance of facilities and pipelines, (vi) the geological characteristics of LGX's properties, (vii) prevailing weather and break-up conditions, royalty regimes and exchange rates, (viii) the application of regulatory and licensing requirements, and (ix) 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) at LGX's Manyberries property.

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.  Most importantly, certain of the forward-looking statements are highly dependent on prevailing commodity prices and significant fluctuations in prevailing commodity prices may impact anticipated cash flows, 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.  These and other risks are set out in more detail in the AIF.

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.

Caution Respecting Boe

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.

Caution Respecting Initial Production Results 

The production results for the two Big Valley (Three Forks) wells disclosed in this press release are initial results for the first thirty days of production only and are not determinative of the rates at which such wells will continue production and decline thereafter.  These results are not necessarily indicative of current performance, long-term performance or ultimate recovery from the wells.  Readers are cautioned not to place undue reliance on such rates in considering the long-term performance of the wells or the aggregate production of the Company.

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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