Longview Announces 2012 Year End Financial Results and Independent Reserve Report

Reserve Additions Replace 118% of Production and Supports Dividend Sustainability

(TSX: LNV)

CALGARY, March 27, 2013 /CNW/ - Longview Oil Corp. ("Longview" or the "Corporation") is pleased to announce the financial and operating results for the year ended December 31, 2012 and the accompanying reserves as of December 31, 2012.

      Three months ended     Year ended
      December 31,       December 31,
      2012     2011     2012     2011 (1)
                         
Financial ($000, except as otherwise indicated)                      
Sales including realized hedging  $ 36,388    $ 43,303    $ 141,186    $ 112,778
  per share (2)  $ 0.78    $ 0.93    $ 3.02    $ 3.37
  per boe  $ 62.70    $ 68.99    $ 61.87    $ 68.60
Funds from operations  $ 15,639    $ 21,047    $ 60,420    $ 53,736
  per share (2)  $ 0.33    $ 0.45    $ 1.29    $ 1.61
  per boe  $ 26.95    $ 33.53    $ 26.47    $ 32.69
Net income (loss) and comprehensive income (loss)  $ (21,466)    $ 4,320    $ (8,268)    $ 20,529
  per share (2)  $ (0.46)    $ 0.09    $ (0.18)    $ 0.61
Dividends declared  $ 7,025    $ 7,012    $ 20,085    $ 18,695
  per share (3)  $ 0.15    $ 0.15    $ 0.60    $ 0.40
Total capital expenditures  $ 11,763    $ 25,645    $ 44,491    $ 55,033
Working capital deficit (4)  $ 11,712    $ 20,074    $ 11,712    $ 20,074
Bank indebtedness  $ 111,895    $ 90,979    $ 111,895    $ 90,979
Shares outstanding at end of period (000)   46,837     46,750     46,837     46,750
Basic weighted average shares (000)   46,837     46,750     46,807     33,459
Operating                      
Daily Production                      
  Crude oil and NGLs (bbls/d)   4,887     5,120     4,745     4,690
  Natural gas (mcf/d)   8,526     10,215     8,938     9,514
  Total boe/d @ 6:1   6,308     6,823     6,235     6,276
Average prices (including hedging)                      
  Crude oil and NGLs ($/bbl)  $ 74.94    $ 85.01    $ 76.47    $ 84.06
  Natural gas ($/mcf)  $ 3.44    $ 3.47    $ 2.56    $ 3.81
Proved plus probable reserves                      
  Crude oil & NGLs (mbbls)               30,204     29,897
  Natural gas (bcf)               48.4     47.7
  Total mboe               38,263     37,853
  Reserve life index (years) (5)               16.6     15.2
                       

(1) Longview's operations commenced on April 14, 2011 and the year ended December 31, 2011 includes
financial and operational results for only 262 days.
(2) Based on basic weighted average shares outstanding.              
(3)  Based on shares outstanding at each dividend record date.              
(4)  Working capital deficit includes trade and other receivables, prepaid expenses and deposits, trade and other
accrued liabilities and due to parent.
(5)  Based on fourth quarter average production rates.              

 

Stable Production and Funds from Operations Sustains Dividends

  • Funds from operations for the fourth quarter of 2012 was $15.6 million or $0.33 per share, an increase of 9% as compared to the third quarter of 2012 due to higher crude oil and liquids production. Funds from operations are primarily supported by crude oil and liquids production that represents 94% of our total sales revenue. Crude oil prices have been challenging during much of 2012 due to weakened WTI pricing and wide differentials between WTI and Canadian realized pricing that resulted in lower funds from operations as compared to the prior year.

  • Production for the fourth quarter of 2012 averaged 6,308 boe/d (77% crude oil and liquids), an increase of 5% from 6,013 boe/d realized in the third quarter of 2012. Production for the year ended December 31, 2012 averaged 6,235 boe/d and was comparable to the prior year. Due to weaker than anticipated commodity prices and higher differentials, we announced a reduction to our capital expenditure program in the second quarter of 2012 to maintain financial discipline and a strong balance sheet. Production additions from our reduced capital expenditure program were sufficient to offset declines due to our drilling success and low decline rate on existing production.

  • Operating expense for the year ended December 31, 2012 was $20.35/boe. Operating expense for 2012 has been impacted by costs associated with the clean-up of two salt water spills resulting from injection pipeline failures at Sunset, Alberta and additional costs for maintenance associated with specific facilities and pipelines throughout the year.

  • Total capital expenditures for the three months and year ended December 31, 2012 amounted to $11.8 million and $44.5 million, respectively. During 2012 we drilled a total of 19.1 net (29 gross) wells at a 100% success rate adding initial 30 day production of approximately 1,591 boe/d weighted 90% to crude oil and natural gas liquids.  This represents an on-stream cost of approximately $28,000 per boe/d.

  • As at December 31, 2012, Longview's bank debt was $112.5 million on a credit facility of $200 million (56% drawn) resulting in an unutilized capacity of approximately $87.5 million. Longview currently pays a monthly dividend of $0.05 per share and has declared and paid $28.1 million of dividends for the year ended December 31, 2012.

Reserve Additions Replace 118% of Production

  • At December 31, 2012 we had Proved plus Probable ("2P") Company interest reserves of 38.3 mmboe with proved reserves representing 56% of the total. Our 2012 capital program replaced 118% of production adding 2.7 mmboe of 2P reserves.

  • Finding, Development & Acquisition ("FD&A") cost was $29.10/boe including the change in Future Development Capital ("FDC").

  • Longview's December 31, 2012 Net Asset Value ("NAV") is $11.40/share at a 10% discount rate on a pre-tax basis. Longview's NAV has decreased from December 31, 2011 due to a reduction in the crude oil and natural gas pricing assumptions utilized by Sproule.

  • The Corporation's 2P Reserve Life Index ("RLI") is 16.6 years using our fourth quarter 2012 average production rate.

Commodity Hedging Program

  • Longview's hedging program for calendar 2013 includes crude oil hedges of 1,000 bbls/d at $90.29/bbl for January to December 2013 and 1,000 bbls/d at $93.00/bbl for February to December 2013.

  • The Corporation will continue to hedge a portion of its production in the future in order to provide stable cash flow to fund dividend payments and our capital expenditure program.

  • Additional details on our hedging program are available at our website at www.longviewoil.com.

Looking Forward

  • Our 2013 budget is designed to maintain production at 2012 levels in a manner that will preserve a strong balance sheet by utilizing funds from operations to maintain our current dividend policy and fund substantially all of our capital expenditures.

  • Longview has a base decline rate of approximately 19% which allows the Company to maintain production with a modest level of capital expenditures, as demonstrated during 2012 and 2011.

  • The following table summarizes operational and financial guidance for Longview for the year ending December 31, 2013:

                Average daily production           6,200 boe/d to 6,300 boe/d
                Oil & liquids %           79%
                Royalty rate           19% to 21%
                Operating expense           $19.00/boe to $20.00/boe
                Capital expenditures           $36 million

  • Our 2013 capital program will be comprised of low-risk crude oil drilling and recompletion activities in areas with high netbacks where Longview operates existing infrastructure. Drilling operations will focus on areas where recent activity has demonstrated strong economics that result in a quick and positive impact on funds from operations while limiting facility and other infrastructure expenditures.

  • The percentage of our total corporate production related to crude oil and NGLs is expected to grow to 79% in 2013 from 76% in 2012 as the 2013 capital budget is entirely focused on oil weighted projects. Approximately 60% of the capital budget is allocated to Southeast Saskatchewan targeting 6 different project areas where Longview has existing infrastructure in place which will result in lower operating costs for new production. These are lower risk locations primarily targeting the Midale formation where successful results will lead to additional drilling in future years.

  • Longview's business strategy is to provide shareholders with attractive long term returns that combine both income and moderate growth by exploiting our assets in a financially disciplined manner and by acquiring additional long-life oil and gas assets of a similar nature.

  • Given the current volatility in crude oil pricing conditions, we will continue to closely monitor our funds from operations as compared to our dividend policy and capital expenditure commitments to ensure they are substantially balanced.

Financial Statements and MD&A

  • Longview's audited financial statements for the year ended December 31, 2012 together with the notes thereto, and Management's Discussion and Analysis for the three months and year ended December 31, 2012 have been prepared in accordance with International Financial Reporting Standards ("IFRS") and posted on our website at www.longviewoil.com and filed under our profile on SEDAR at www.sedar.com.

APPENDIX 1 - Reserves Summary

Longview engaged our independent qualified reserves evaluator Sproule Associates Ltd. ("Sproule") to update the reserves analysis for the Company in accordance with National Instrument 51-101 and the COGE Handbook. Reserves and production information included herein is stated on a Company Interest basis (before royalty burdens and including royalty interests receivable) unless noted otherwise. This summary contains several cautionary statements that are specifically required by NI 51-101. In addition to the detailed information disclosed in this press release, more detailed information on a net interest basis (after royalty burdens and including royalty interests) and on a gross interest basis (before royalty burdens and excluding royalty interests) will be included in Longview's Annual Information Form ("AIF") and will be available at www.longviewoil.com and www.sedar.com.

Highlights - Company Interest Reserves (Working Interests plus Royalty Interests Receivable)

  December 31, 2012  December 31, 2011
     
Proved plus probable reserves (mboe)  38,263  37,853
Present Value of 2P reserves discounted at 10%, before tax ($000)(1)  $609,507  $728,401
Net Asset Value per Share discounted at 10%, before tax (2)  $11.40  $15.12
Reserve Life Index (proved plus probable - years) (3)  16.6  15.2
Reserves per Share (proved plus probable) (2)  0.81  0.80
Bank debt per boe of reserves (4)  $3.29  $3.03

(1)  Assumes that development of each property will occur, without regard to the likely availability to the Company of funding required for that development.
(2) Based on 46.84 million shares outstanding at December 31, 2012 and 46.75 million shares outstanding at December 31, 2011.
(3) Based on Q4 average production and company interest reserves.
(4) Using boe's may be misleading, particularly if used in isolation. In accordance with NI 51-101, a boe conversion ratio for natural gas of 6 mcf: 1 bbl has been used which 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 based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.

Company Interest Reserves (Working Interests plus Royalty Interests Receivable)

Summary as at December 31, 2012




Light & Medium Oil 
(mbbl) 

Heavy Oil
(mbbl) 
Natural  
 Gas Liquids 
(mbbl) 

Natural Gas 
(mmcf) 
Oil
Equivalent
(mboe)
Proved                 
Developed Producing  9,082  1,349 1,181 17,753 14,571
Developed Non-producing  430 136 12 210  613
Undeveloped  3,901 297 416 9,565  6,208
Total Proved  13,413 1,782 1,609 27,529 21,392
Probable  9,490 2,852 1,060 20,825 16,872
Total Proved + Probable  22,902 4,633 2,669 48,354 38,263

Proved plus Probable reserve additions for Company Interest Reserves were 2,693 mboe in 2012 which replaced 118% of annual production of 2,282 mboe.

Gross Working Interest Reserves (Working Interest only)

Summary as at December 31, 2012




Light & Medium Oil 
(mbbl) 

Heavy Oil
(mbbl) 
Natural
 Gas Liquids 
(mbbl) 

Natural Gas 
(mmcf) 
Oil
Equivalent
(mboe)
Proved                 
Developed Producing  8,928 1,341 1,164 17,669 14,378
Developed Non-producing  409 133 7 193 580
Undeveloped  3,901 292 416  9,565 6,204
Total Proved  13,238 1,766 1,587 27,427 21,162
Probable  9,372  2,836 1,045 20,762 16,714
Total Proved + Probable  22,610 4,602 2,632 48,189 37,876

Present Value of Future Net Revenue using Sproule price and cost forecasts (1)(2)
($000)

  Before Income Taxes Discounted at
  0% 10% 15%
Proved      
Developed Producing  $ 458,765  $ 280,167  $ 237,724
Developed Non-producing  21,783  14,436  12,326
Undeveloped  147,088  66,250  45,504
Total Proved  627,636  360,853  295,554
Probable  683,735  248,654 173,426
Total Proved + Probable  $ 1,311,371  $ 609,507  $ 468,980
                   
(1) Longview's crude oil, natural gas and natural gas liquid reserves were evaluated using Sproule's product price forecast effective December 31, 2012 prior to the provision for income taxes, interests, debt services charges and general and administrative expenses. It should not be assumed that the discounted future revenue estimated by Sproule represents the fair market value of the reserves.
(2) Assumes that development of each property will occur, without regard to the likely availability to the Company of funding required for that development.

Sproule Price Forecasts

The present value of future net revenue at December 31, 2012 was based upon crude oil and natural gas pricing assumptions prepared by Sproule effective December 31, 2012. These forecasts are adjusted for reserve quality, transportation charges and the provision of any applicable sales contracts. The price assumptions used over the next seven years are summarized in the table below:



Year
    WTI
Crude Oil
 ($US/bbl)
   Edmonton Light
Crude Oil
 ($Cdn/bbl)
   Alberta AECO-C
 Natural Gas
 ($Cdn/mmbtu)
   Henry Hub
 Natural Gas
 ($US/mmbtu)
   Exchange
 Rate
 ($US/$Cdn)
2013      89.63    84.55    3.31    3.65    1.001
2014      89.93    89.84    3.72    4.06    1.001
2015      88.29    88.21    3.91    4.24    1.001
2016      95.52    95.43    4.70    5.04    1.001
2017     96.96    96.87    5.32    5.66    1.001
2018      98.41    98.32    5.40    5.74    1.001
2019      99.89   99.79    5.49    5.83    1.001

Net Asset Value using Sproule price and cost forecasts (before income taxes)

The following net asset value ("NAV") table shows what is normally referred to as a "produce-out" NAV calculation under which the current value of the Company's reserves would be produced at forecast future prices and costs. The value is a snapshot in time and is based on various assumptions including commodity prices and foreign exchange rates that vary over time.

  Before Income Taxes Discounted at 
         
($000, except per share amounts)   0%   10%   15%
Net asset value per share - December 31, 2011   $ 31.09   $ 15.12   $ 11.84
Present value proved and probable reserves    $ 1,311,371   $ 609,507   $ 468,980
Undeveloped acreage and seismic (2)      48,886     48,886     48,886
Working capital (deficit) and other       (12,764)      (12,764)       (12,764)
Bank debt       (111,895)     (111,895)     (111,895)
Net asset value - December 31, 2012    $ 1,235,598   $  533,734   $  393,207
Net asset value per share (1) - December 31, 2012   $ 26.38   $  11.40   $  8.40
             
(1) Based on 46.84 million shares outstanding at December 31, 2012.
(2) Internal estimate.

Gross Working Interest Reserves Reconciliation


Proved
  Light &
Medium Oil
 (mbbl)
  Heavy
 Oil
 (mbbl)
  Natural Gas
 Liquids
(mbbl)
  Natural
Gas
 (mmcf)
  Oil
 Equivalent
(mboe)
Opening balance Dec. 31, 2011     12,691    2,060    1,495    26,741    20,703
Extensions    120    143    178    4,227    1,145
Improved recovery    -    -    -    -   -
Infill drilling    869    31    65    594    1,064
Discoveries    -    -     -    -    -
Economic factors    2    (1)    (18)    (496)    (100)
Technical revisions    835    (219)    77    (368)    632
Acquisitions    -    -    -    -    -
Dispositions    -    -    -    -    -
Production     (1,279)    (248)    (210)    (3,271)    (2,282)
                     
Closing balance at Dec. 31, 2012    13,238    1,766    1,587    27,427    21,162
                     

Proved + Probable
  Light &
Medium Oil
(mbbl)
  Heavy
Oil
(mbbl)
  Natural Gas
Liquids
(mbbl)
   Natural
Gas
(mmcf)
  Oil
Equivalent
 (mboe)
Opening balance Dec. 31, 2011    22,115    5,055   2,464    47,677    37,580
Extensions    333    300    266    6,342    1,956
Improved recovery    -    -    -    -    -
Infill drilling    1,460    26    99    898    1,736
Discoveries    -    -    -    -    -
Economic factors   37    (1)   (6)    (161)    4
Technical revisions    (56)    (530)    19    (3,296)    (1,118)
Acquisitions    -    -    -    -   -
Dispositions    -    -    -   -    -
Production    (1,279)    (248)    (210)    (3,271)    (2,282)
                     
Closing balance at Dec. 31, 2012    22,610    4,602    2,632    48,189    37,876

Finding, Development & Acquisitions Costs ("FD&A") (1)(2)(3)

2012 FD&A Costs - Gross Working Interest Reserves excluding Future Development Capital

  Proved   Proved + Probable
Capital expenditures ($000 $  44,491   $ 44,491
Acquisitions net of dispositions ($000)          -      -
Total capital ($000 $  44,491   $  44,491
           
Total mboe, end of year     21,162     37,876
Total mboe, beginning of year    20,703      37,580
Production, mboe     2,282      2,282
Reserve additions, mboe     2,741     2,578
           
FD&A costs ($/boe)          
  2012  $  16.23   $  17.26
  2011 $  26.14   $  15.07
  Three year average (4) $  25.08   $  15.21
F&D costs ($/boe)          
  2012 $  16.23   $  17.26
  2011 $  17.40   $  16.48
  Three year average (4) $  16.86   $  16.82

NI 51-101
2012 FD&A Costs - Gross Working Interest Reserves including Future Development Capital

  Proved  Proved + Probable
Capital expenditures ($000 $ 44,491 $  44,491
Acquisitions net of dispositions ($000   -   -
Net change in Future Development Capital ($000   22,455   30,531
Total capital ($000 $  66,946 $ 75,022
Reserve additions, mboe    2,741   2,578
         
FD&A costs ($/boe)        
  2012  $  24.42 $  29.10
  2011 $  27.81 $  16.43
  Three year average (4) $  27.45 $  17.20
F&D costs ($/boe)        
  2012 $  24.42 $  29.10
  2011 $  29.56 $  32.63
  Three year average (4) $  27.18 $ 31.09

(1) Under NI 51-101, the methodology to be used to calculate FD&A costs includes incorporating changes in future development capital ("FDC") required to bring the proved undeveloped and probable reserves to production. For continuity, Longview has presented herein FD&A costs calculated both excluding and including FDC.
(2) The aggregate of the exploration and development costs incurred in the most recent financial year and the change during that year in estimated future development costs generally will not reflect total finding and development costs related to reserves additions for that year. Changes in forecast FDC occur annually as a result of development activities, acquisition and disposition activities and capital cost estimates that reflect Sproule's best estimate of what it will cost to bring the proved undeveloped and probable reserves on production.
(3) In all cases, the FD&A number is calculated by dividing the identified capital expenditures by the applicable reserve additions.  Boes may be misleading, particularly if used in isolation.  A boe conversion ratio of 6 MCF:1 BBL 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 based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.
(4)  Longview commenced operations on April 14, 2011 with the acquisition of certain oil-weighted assets from Advantage Oil & Gas Ltd. Therefore, the three year average figures are calculated beginning April 14, 2011.

Forward-Looking Statements

Certain information regarding Longview set forth in this press release, including management's assessment of the Corporation's future plans and operations, contains forward-looking statements that involve substantial known and unknown risks and uncertainties. The use of any of the words "anticipate", "continue", "estimate", "expect", "may", "will", "project", "should", "believe" and similar expressions are intended to identify forward looking statements. Such statements represent Longview's internal projections, estimates or beliefs concerning, among other things, an outlook on the estimated amounts and timing of capital expenditures or other expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or performance. These statements are only predictions and actual events or results may differ materially. Although Longview believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievement since such expectations are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. Many factors could cause Longview's actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, Longview.

In particular, forward-looking statements included in this press release include, but are not limited to, statements with respect to the Corporation's dividend policy; Longview's anticipated average daily production, product mix, royalty rates, operating expenses and capital expenditures for the year ended December 31, 2013; the Corporation's 2013 capital program; the Corporation's anticipated drilling and recompletion activities; anticipated growth in total corporate production related to crude oil and NGLs in 2013; crude oil and natural gas production levels; Longview's business strategy; and the Corporation's plans to monitor funds from operations, its dividend policy and capital expenditure commitments to ensure that are substantially balanced.  In addition, statements relating to "reserves" are deemed to be forward looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the resources and reserves described can be profitably produced in the future.

These forward-looking statements are subject to numerous risks and uncertainties, certain of which are beyond the Corporation's control, including the impact of general economic conditions; volatility in market prices for crude oil and natural gas; industry conditions; volatility of commodity prices; currency fluctuation; imprecision of reserve estimates; liabilities inherent in crude oil and natural gas operations; environmental risks; incorrect assessments of the value of acquisitions and exploration and development programs; competition from other producers; the lack of availability of qualified personnel or management; changes in tax laws, royalty regimes and incentive programs relating to the oil and gas industry; changes to legislation and regulations and how they are interpreted and enforced; hazards such as fire, explosion, blowouts, cratering, and spills, each of which could result in substantial damage to wells, production facilities, other property and the environment or in personal injury; unexpected drilling results; changes or fluctuations in production levels; delays in anticipated timing of drilling and completion of wells; stock market volatility; ability to access sufficient capital from internal and external sources and the other risks considered under "Risk Factors" in Longview's Annual Information Form, which is available on www.sedar.com and www.longviewoil.com.

With respect to forward-looking statements contained in this press release, Longview has made assumptions regarding: current commodity prices and royalty regimes; availability of skilled labour; timing and amount of capital expenditures; future exchange rates; the price of oil and natural gas; the impact of increasing competition; conditions in general economic and financial markets; availability of drilling and related equipment; effects of regulation by governmental agencies; royalty rates;  future operating costs; that the Corporation will have sufficient cash flow, debt or equity sources or other financial resources required to fund its capital and operating expenditures and requirements as needed; that the Corporation's conduct and results of operations will be consistent with its expectations; that the Corporation will have the ability to develop the Corporation's properties in the manner currently contemplated; current or, where applicable, proposed assumed industry conditions, laws and regulations will continue in effect or as anticipated; and the estimates of the Corporation's production and reserves volumes and the assumptions related thereto (including commodity prices and development costs) are accurate in all material respects.

Management has included the above summary of assumptions and risks related to forward-looking information provided in this press release in order to provide shareholders with a more complete perspective on Longview's future operations and such information may not be appropriate for other purposes. Longview's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits that the Corporation will derive there from. Readers are cautioned that the foregoing lists of factors are not exhaustive. These forward-looking statements are made as of the date of this press release and the Corporation disclaims any intent or obligation to update publicly any forward-looking statements, whether as a result of new information, future events or results or otherwise, other than as required by applicable securities laws.

"boes" may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one barrel of oil equivalent (6 Mcf: 1 bbl) 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 based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.

SOURCE: Longview Oil Corp.

For further information:

Investor Relations
Toll free: 1-855-813-0313

LONGVIEW OIL CORP.
700, 400 -3rd Avenue SW
Calgary, Alberta
T2P 4H2
Phone:  (403) 718-8000
Fax:      (403) 718-8300
Web Site: www.longviewoil.com
E-mail:  ir@longviewoil.com

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