CALGARY, Dec. 17, 2013 /CNW/ - Legacy Oil + Gas Inc. ("Legacy" or the
"Company") is pleased to announce its capital and operating budget and
associated public guidance for 2014. Continued success in the
Company's Turner Valley, Midale and Spearfish plays have added
significantly to production volumes and drilling inventory. These
areas, along with expansion of the Company's waterflood pilots, will
play key roles in 2014 organic activity and growth.
Legacy expects to spend $350 million in 2014 focused on light oil
development with the majority of capital (85 percent) directed to
drilling, completions and tie-ins. The capital spending is distributed
as follows: drilling, completions and tie-ins - $297 million;
facilities - $32 million; land and seismic - $16 million and other - $5
million. The majority of the capital spending will be allocated to the
Company's major plays: Taylorton/Pinto - $102 million (29 percent),
Spearfish (Manitoba and North Dakota) - $60 million (17 percent),
Turner Valley - $57 million (16 percent), Steelman/Alameda - $42
million (12 percent) and Manor/Wordsworth - $20 million (6 percent).
Legacy is planning to drill 159 gross (124.2 net) wells in 2014,
targeting high quality light oil. In addition to drilling, the Company
is planning capital expenditures on expansion of the successful pilot
waterfloods at Frys/Antler, Heward and Taylorton/Pinto, as well as
implementation of pilot waterfloods at Pierson, Steelman and Star
Valley. No capital has been budgeted for acquisitions, although the
Company continues to evaluate new opportunities, both within and beyond
its core areas.
Legacy anticipates a 2014 average production rate of 21,350 Boe per day,
representing growth of 12 percent over 2013 expected average
production. This production target includes the tie-in of significant
associated natural gas volumes at the Company's successful Midale
play. Similar to previous years, the Company is planning an active
first quarter program, with capital spending of approximately $140
million, drilling 69 gross wells.
The Company has incorporated a significant reduction in second quarter
volumes to account for the possibility of an extended spring break up
and planned turnarounds in its core areas, particularly the
non-operated gas plant at Quirk Creek which processes Turner Valley
natural gas. Legacy expects to exit 2014 at approximately 23,650 Boe
per day. The operational parameters used in the budget are as follows:
Average Production - 21,350 Boe per day (88 percent light oil and NGL)
Exit Production - 23,650 Boe per day (87 percent light oil and NGL)
Average Crude Quality - 39⁰ API
Royalty Rate - 15.7 percent
Operating Costs - $13.25 per Boe
Transportation Costs - $3.00 per Boe
G&A (expensed) - $2.35 per Boe
Common Shares Outstanding (basic, weighted average) - 157.2 million
Hedging - 9,000 Bbl/day at C$97.47/Bbl WTI first half 2014 and 5,000
Bbl/day at C$98.15/Bbl WTI second half 2014.
At recent strip pricing and 2013 average differentials, this budget is
expected to deliver cash flow in excess of $355 million, or $2.27 per
basic common share, an increase of over 21 percent over 2013 expected
cash flow per share. The Company anticipates crude oil price
differentials to remain volatile but average near 2013 levels. This
cash flow generation results in a 2013 debt to forward cash flow ratio
of approximately 1.8 times, against current borrowing capacity of $860
million. Cash flow sensitivity to changes in oil price, taking into
account the Company's hedging program, is 1 percent per US $1.00 per
barrel change in WTI oil price.
Legacy begins 2014 with an extensive light oil development drilling
inventory of more than 2,000 net locations, which represents over 15
years of development potential, based on expected 2014 activity
levels. This significant opportunity set does not reflect the upside
from the waterflood potential at Frys/Antler, Taylorton,
Heward/Stoughton and the Spearfish, and recognizes only a portion of
the Bottineau County, North Dakota Spearfish drilling potential.
Furthermore, Legacy has material exposure to emerging light oil
resource plays in southern Alberta for Alberta Bakken (through the
Company's investment in LGX Oil + Gas Inc.), which could add
significant value to the Company.
Legacy is a uniquely positioned, technically driven intermediate oil and
natural gas company with a proven management team committed to
aggressive, cost-effective growth of light oil reserves and production
in large hydrocarbon in-place assets and resource plays. Legacy's
common shares trade on the TSX under the symbol LEG.
This press release shall not constitute an offer to sell, nor the
solicitation of an offer to buy, any securities in the United States,
nor shall there be any sale of securities mentioned in this press
release in any state in the United States in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such state.
FORWARD LOOKING STATEMENTS: This press release contains forward-looking
statements. More particularly, this press release contains statements
concerning: (i) the amount of planned capital expenditures for 2014,
(ii) the breakdown of planned capital expenditures by class and area,
(iii) planned drilling, development and waterflood activities, (iv) the
anticipated 2014 average and exit rates of production, (v) anticipated
cash flow and cash flow per share in 2014, (vi) anticipated oil price
differentials, (vii) the anticipated debt to forward cash flow ratio as
at year end 2013 and (viii) the potential number of drilling locations.
The forward-looking statements contained in this press release are based
on certain key expectations and assumptions made by Legacy, including
the operational parameters specifically set out in the press release
and expectations and assumptions concerning: (i) the success of future
drilling, development and waterflood activities, (ii) the performance
of existing wells and facilities, (iii) the performance of new wells
and facilities, (iv) the timely receipt of required regulatory
approvals, (v) prevailing weather conditions, commodity prices, oil
price differentials, royalty regimes and exchange rates and (vi) the
availability 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. 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; 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 of labour and services, commodity price and
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.
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/d means a barrel of oil equivalent per day. 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
SOURCE: Legacy Oil + Gas Inc.
For further information:
Trent J. Yanko, P.Eng.
President + CEO
Legacy Oil + Gas Inc.
4400, Eight Avenue Place
525 - 8th Avenue S.W.
Calgary, AB T2P 1G1
Matt Janisch, P.Eng.
Vice-President, Finance + CFO
Legacy Oil + Gas Inc.
4400, Eight Avenue Place
525 - 8th Avenue S.W.
Calgary, AB T2P 1G1