LGX Oil + Gas Inc. Announces Year-end Results, Reserve Information, 2013 Guidance and Files Annual Information Form

CALGARY, March 18, 2013 /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, 2012 as well as its annual information form ("AIF") for the year ended December 31, 2012. 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)

Financial + Operational Highlights below 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 to include both the SA Assets and LGX Oil + Gas Inc. (referred to collectively with its subsidiaries as "LGX" or the "Company"), unless otherwise indicated. This accounting treatment is consistent with the acquisition of the SA Assets by Bowood Energy Inc. being classified as a reverse takeover acquisition under International Financial Reporting Standards ("IFRS").  Refer to page 14 of the Management's Discussion and Analysis of LGX Oil + Gas Inc. for the fourth quarter of 2012 for a comparison against prior quarters of Bowood Energy Inc.

  Three Months Ended    Year Ended   
  December 31    December 31   
(Cdn $, except per share amounts)   2012  2011   % change  2012    2011   % change
Financial            
Petroleum and natural gas sales, net of royalties  2,775,518  87,925  3,057  4,046,322  87,925   4,502
Funds generated by (used in) operations (2)  463,043  26,666  1,636   324,598   (25,929)  1,352
  Per share basic  0.01  n/a  n/a   0.01  n/a  n/a
  Per share diluted (3)  0.01  n/a  n/a  0.01   n/a  n/a
Net income (loss)  (7,023,085)  (66,089)  10,527  3,419,269  (2,043,981)  267
  Per share basic  (0.11)   n/a   n/a   0.15  n/a  n/a
  Per share diluted (3)  (0.11)  n/a  n/a   0.15  n/a  n/a
Capital expenditures (excluding acquisitions)  7,379,378   6,061,591  22  9,936,095  23,476,065   (58)
Net Acquisitions (cash consideration) (5)  42,378,028   n/a  42,378,028  n/a
Net debt and working capital surplus (deficit) (2)  (9,906,927)  (3,466,967)  186  (9,906,927)  (3,466,967)  186
Operating            
Production            
  Crude oil and natural gas liquids (Bbls per day)  430  12  3,483  146  4,767
Natural gas (Mcf per day)  1,528  n/a  871  n/a
  Barrels of oil equivalent (Boe per day) (4)  685  12  5,608  291  9,600
Average realized price            
  Crude oil and natural gas liquids ($ per Bbl)  72.18  94.26   (23)  74.10  95.03   (22)
  Natural gas ($ per Mcf)  3.32  n/a  2.69  n/a
  Barrels of oil equivalent ($ per Boe) (4)  52.71  94.26  (44)   45.23  95.03   (52)
Netback ($ per Boe) (2)            
  Petroleum and natural gas sales  52.71  94.26   (46)   45.23  95.03  (54)
  Royalties   8.67  14.62  (43)   7.24  14.74  (52)
  Operating expenses   22.41  42.48  (49)  19.26  62.76  (70)
  Transportation expenses   2.19  3.11  (32)  1.80  3.13   (44)
Operating Netback ($ per Boe) (2)  19.44  34.05  (45)  16.93  14.40  14
Undeveloped land holdings (gross acres)  209,619  107,944  94   209,619  107,944  94
  (net acres)   186,477  68,581  172   186,477  68,581  172
Common Shares (000's)            
Common shares outstanding, end of period  88,658  n/a  88,658  n/a
Weighted average common shares (basic)  65,180   -  n/a  23,143  n/a
Weighted average common shares (diluted) (3)  65,180  n/a  23,143  n/a

(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 2012 and audited consolidated financial statements for the year ended December 31, 2012.  For a comparison of the quarter to prior quarters of Bowood Energy Inc., refer to page 14 of the MD&A of LGX Oil + Gas Inc. for the fourth quarter of 2012.
(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 it 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 (used in) 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 13,746,669 common to former Bowood Energy Inc. shareholders valued at $17,870,670 as part of the SA Assets reverse acquisition of LGX.

ACCOMPLISHMENTS

  • Closed the purchase from Legacy Oil + Gas Inc. ("Legacy") of the SA Assets, comprised of 68,581 net acres of undeveloped land in southern Alberta for 10,000,000 post-consolidation common shares.  In conjunction with the asset purchase, the Company's management team was replaced with members from Legacy and the board of directors was reconstituted.
  • Closed the acquisition of highly focused, high working interest, operated producing oil assets in southeast Alberta, consisting of light oil production, reserves and undeveloped land in the Manyberries area with attractive transaction metrics of $76,667 per Boe/d and $15.78/Boe Proved plus Probable.

  • Issued 120,000,000 (6,000,000 post consolidation) units at a price of $0.05 per unit pursuant to a brokered private placement for net proceeds of approximately $5.7 million.   Each unit was comprised of one pre-consolidation common share and one share purchase warrant entitling the holder to purchase one pre-consolidation common share at a price of $0.065 per share for a period of three years.

  • Completed a rights offering to its shareholders resulting in the issuance of an additional 10,639,827 pre-consolidation common shares for net proceeds of approximately $532,000.  Legacy was not entitled to participate in the rights offering with respect to the shares held by it.

  • Shareholders approved a proposed name change to LGX Oil + Gas Inc. from Bowood Energy Inc. and a consolidation of outstanding common shares on a 20 to 1 basis.   This name change and consolidation of shares were completed effective as of August 20, 2012.

  • Closed a $20 million revolving term demand credit facility plus a $5 million acquisition line with a syndicate of banks.

  • Averaged production of 685 Boe per day in the fourth quarter of 2012.

Operations Overview

Alberta Bakken

LGX drilled a vertical exploration well at 6-16-7-23 W4M to a total depth of 2,205 m.  The 6-16 well encountered oil shows through the Big Valley Formation and other horizons and has been cored, logged and cased.  Completion operations on the vertical well confirmed the producibility of over-pressured light oil.  The well is currently suspended to gather additional pressure build-up data.

LGX completed a 95 square mile 3D seismic program, centred over the Company's lands on the Blood reserve.  Interpretation of the 3D seismic has led to the identification of a number of anomalies in the Big Valley and shallower horizons.  The Company is currently finalizing a minimum of two locations that are anticipated to be spud in the fall of 2013.

Manyberries

A number of optimization projects have been completed including oil well restarts and water injection re-configuration and workovers.  Work continues on high-grading Sunburst development drilling locations and further evaluating the horizontal drilling potential in the Swift formation.

RESERVES

In accordance with National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities ("NI 51-101"), GLJ Petroleum Consultants ("GLJ") evaluated, as at December 31, 2012, materially all of LGX's oil, natural gas liquids and natural gas reserves. LGX's annual information form for the year ended December 31, 2012 (the "AIF") contains LGX's reserves data and other oil and natural gas information for the period ended December 31, 2012 as mandated by NI 51-101.  A copy of the AIF can be obtained 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, 2012, LGX's total gross proved plus probable reserves base was 4,422 MBoe, an increase of 153% year over year.  Total proved plus probable reserves additions were 2,899 MBoe.  These additions represent 1,288 percent of the 225 MBoe produced during 2012.  Light and medium oil and NGL's accounted for 84 percent of the proved plus probable reserves base.

LGX's gross total proved reserves base was 2,458 MBoe.  Total proved reserves represent 56 percent of the total proved plus probable reserves.  Proved producing reserves represent 77 percent of the total proved reserves base.  Total proved reserves additions were 1,519 MBoe.  These additions represent 675 percent of the 225 MBoe produced during 2012.  Light and medium oil and NGL's accounted for 67 percent of the total proved reserves base.

The following table is a summary, as at December 31, 2012, 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 than the estimates provided herein. Reserves information may not add due to rounding.

Gross Company Reserves Summary (1)
Using GLJ December 31, 2012 Forecast Prices and Costs
As at December 31, 2012


Light and
Medium Oil
(MBbl)
 
Natural Gas
(MMcf)

NGL's
 (MBbl)
Total Oil
 Equivalent
(MBoe)
Proved Producing  1,325 3,278 17 1,894
Proved Developed Non-Producing  49 524  2  139
Proved Undeveloped  264  943 3  424
Total Proved  1,638 4,745 23 2,458
Total Proved plus Probable  3,138 7,432 38  4,422
(1)  Gross Company Reserves means the Company's working interest reserves before
calculations of royalties and before consideration of the Company's royalty interest.

.

Net asset value per share

The following table outlines LGX's NAV per Basic Common Share using the Proved plus Probable reserve value at December 31, 2012 and forecast pricing and costs:

($MM except share and per share amounts)  
Proved Plus Probable Reserve Value NPV10 BT (incl. future capital) $75.8
Undeveloped Land (186,477 acres @ $200/acre) $37.3
Net Debt  ($9.9)
Total Net Assets (basic) $103.2
Basic Common Shares Outstanding (MM) 88.7
Estimated NAV per Basic Common Share $1.16

2013 GUIDANCE

LGX expects to spend $7.6 million in 2013 focused on light oil development with the majority of capital (78 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 - $5.4 million; re-completions - $1.5 million; land and seismic - $0.5 million and other - $0.2 million.

LGX is planning to drill 2 gross (1.6 net) wells in 2013, 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 2013 average production rate and exit rate of 900 Boe per day. The operational parameters used in the budget are as follows:

  • Exit Production - 900 Boe per day (72 percent light oil and NGL)
  • Average Production - 900 Boe per day (69 percent light oil and NGL)
  • Royalty Rate - 17 percent
  • Operating Costs - $19.50 per Boe
  • Transportation Costs - $2.25 per Boe
  • Common Shares Outstanding (basic, weighted average) - 88.7 million

The reader is cautioned that the above production estimates include risked production additions resulting from exploration drilling.  When the results of this drilling are known with greater certainty, the production estimates above will be revised accordingly.

OUTLOOK

A strategic imperative exists to aggressively grow the Company to a size that, when combined with high-netback oil production, strong balance sheet and substantial exposure to the high impact southern Alberta Bakken play, will differentiate LGX from our peer-group competitors.  The Manyberries transaction, associated financing and subsequent significant bank line increase are evidence of LGX's strategy in action.

Manyberries brings the Company high quality light oil assets that can deliver significant development drilling and exploitation opportunities through the application of new technology while contemporaneously building a sustainable, predictable production base that provides internally generated free cash flow to fund LGX's extensive light oil exploration drilling inventory on its dominant land holdings in the Southern Alberta Bakken play.

The company has identified a number of low cost optimization initiatives at Manyberries for 2013 that include oil well restarts, workovers and water injection reconfiguration, anticipated to have a positive effect on both production and reserves.  Work continues on high-grading Sunburst development drilling locations and further evaluating the horizontal drilling potential in the Swift Formation.

Positive results from the interpretation of the 95 square mile 3D seismic survey shot over LGX lands and the strong production results from the Big Valley and Banff formations recently announced from wells immediately offsetting LGX lands, have improved the confidence in the Banff and Big Valley as potential emerging light oil resource plays in Southern Alberta.  The Company is currently finalizing a minimum of two locations that are anticipated to be spud in the fall of 2013.  LGX has more than 167,000 net undeveloped acres in the Alberta Bakken fairway.

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 28, 2013 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, 2012, December 31, 2011 and December 31, 2010 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.

Reader Advisories

Forward-Looking Information - This press release contains forward-looking statements.  More particularly, it contains forward-looking statements concerning LGX's planned capital expenditures, planned exploration, development and optimization activities and forecast average and exit rates of production for 2013.

The forward-looking statements contained in this press release are based on certain key expectations and assumptions made by LGX, including expectations and assumptions concerning the success of future drilling, development and completion activities, the performance of existing wells, the performance of new wells, the availability and performance of facilities and pipelines, the geological characteristics of LGX's properties, the successful application of drilling, completion and seismic technology, prevailing weather conditions, commodity prices, royalty regimes and exchange rates, 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, commodity price and exchange rate fluctuations, adverse weather conditions and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects, or capital expenditures.  These and other risks are set out in more detail in LGX's Annual Information Form for the year ended December 31, 2012 dated March 18, 2013. 

The forward-looking statements contained in this press release are made as of the date hereof and LGX 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: When used in this press release, Boe means a barrel of oil equivalent on the basis of 1 Boe to 6 thousand cubic feet of natural gas. Boe per day means a barrel of oil equivalent per day. Boe's may be misleading, particularly if used in isolation. A Boe conversion ratio of 1 Boe for 6 thousand cubic feet of natural gas 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:

please contact:

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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