In c7101 disseminated today at 06:30 ET, an error occurred in the 2nd paragraph under the heading "EVENTS AFTER THE REPORTING PERIOD", which should read ".....in exchange for 200,000 000 common shares..." not "... in exchange for 194,000,000 common shares". Corrected copy follows:
Legacy Oil + Gas Inc. Announces First Quarter 2012 Results
CALGARY, May 14, 2012 /CNW/ - Legacy Oil + Gas Inc. ("Legacy" or the "Company") (TSX:LEG) is pleased to announce it has filed on SEDAR its audited financial statements and related Management's Discussion and Analysis ("MD&A") for the quarter ended March 31, 2012. Selected financial and operational information is outlined below and should be read in conjunction with Legacy's audited financial statements, the related MD&A and the AIF which are available for review at www.legacyoilandgas.com or www.sedar.com.
FINANCIAL + OPERATIONAL HIGHLIGHTS
|Three Months Ended March 31|
|Unaudited (Cdn $000's, except per share amounts)||2012||2011||% change|
|Petroleum and natural gas sales, net of royalties||94,975||69,309||37|
|Funds generated by operations (1)||60,565||43,884||38|
|Per share basic||0.42||0.33||27|
|Per share diluted (2)||0.42||0.32||31|
|Net income (loss)||1,277||(2,854)||145|
|Per share basic||0.01||(0.02)||150|
|Per share diluted (2)||0.01||(0.02)||150|
|Capital expenditures (excluding acquisitions)||115,210||75,136||53|
|Acquisitions (cash consideration) (4)||30||98,371||(100)|
|Net debt and working capital surplus (deficit) (1)||(430,696)||(256,175)||68|
|Crude oil (Bbls per day)||12,370||8,794||41|
|Heavy oil (Bbls per day)||175||326||(46)|
|Natural gas (Mcf per day)||12,927||14,751||(12)|
|Natural gas liquids (Bbls per day)||1,670||1,275||31|
|Barrels of oil equivalent (Boe per day) (3)||16,370||12,854||27|
|Average realized price|
|Crude oil ($ per Bbl)||90.48||86.50||5|
|Heavy oil ($ per Bbl)||82.26||64.47||28|
|Natural gas ($ per Mcf)||2.72||4.17||(35)|
|Natural gas liquids ($ per Bbl)||52.87||64.30||(18)|
|Barrels of oil equivalent ($ per Boe) (3)||76.79||71.67||7|
|Netback ($ per Boe) (1)|
|Petroleum and natural gas sales||76.79||71.67||7|
|Operating Netback ($ per Boe) (1)||45.92||43.45||6|
|Undeveloped land holdings(gross acres)||625,916||666,467||(6)|
|Common Shares (000's)|
|Common shares outstanding, end of period||143,313||142,852||-|
|Weighted average common shares (basic)||143,313||133,292||8|
|Weighted average common shares (diluted) (2)||145,658||138,098||6|
|(1)||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.|
|(2)||In calculating the net income (loss) per share diluted, Legacy Oil + Gas Inc. ("Legacy" or 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.|
|(3)||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.|
|(4)||For the three months ended March 31, 2012, the Company issued no common shares as part consideration for acquisitions (2011 - 6.2 million common shares valued at $102.7 million).|
- Drilled 49 gross (35.1 net) light oil wells in the first quarter of 2012, with a 100 percent success rate
- Increased average production from 12,854 Boe per day in the first quarter of 2011 to 16,370 Boe per day in the first quarter of 2012 (27 percent increase); increased average production 10 percent over the fourth quarter of 2011 rate of 14,880 Boe per day; increased crude oil and natural gas liquids weighting of production from 81 percent in the first quarter of 2011 to 87 percent in the first quarter of 2012
- Spearfish production results significantly above previous operator results and 2011 independent engineering report type curve due to the Company's drilling, completion design and production practices
- Turner Valley production rates are above the type curve used by the independent reserve evaluator in the most recent engineering report and continue to improve
- Continued to improve the Company's leading fracture stimulation design resulting in better production results in the Bakken at Taylorton and Star Valley
- Demonstrated positive Bakken waterflood response at pilot projects in both Taylorton and Heward
- Generated superior production results in conventional Mississippian plays at Alameda/Steelman, Edenvale and Manor
- Increased funds generated from operations from $43.9 million in the first quarter of 2011 to $60.6 million in the first quarter of 2012 (38 percent increase)
- Increased funds generated from operations per share (diluted) from $0.32 in the first quarter of 2011 to $0.42 in the first quarter of 2012 (31 percent increase)
- Increased earnings from a net loss of $2.9 million in the first quarter of 2011 to net earnings of $1.3 million in the first quarter of 2012 (145 percent increase)
- Increased earnings from a net loss of $0.02 per share (diluted) in the first quarter of 2011 to net earnings of $0.01 per share in the first quarter of 2012 (150 percent increase)
- Reduced operating costs from $16.40 per Boe in the fourth quarter of 2011 to $15.36 per Boe for the first quarter of 2012 (6 percent decrease); reduced total operating costs (operating plus transportation costs) from $18.96 in the fourth quarter of 2011 to $17.83 for the first quarter of 2012 (6 percent decrease)
- Reduced general and administrative expense from $3.09 per Boe in the first quarter of 2011 to $2.68 per Boe in the first quarter of 2012 (13 percent decrease)
- Increased operating netback from $43.45 per Boe in the first quarter of 2011 to $45.92 per Boe in the first quarter of 2012 (6 percent increase)
In the first quarter of 2012, the Company drilled 49 (35.1 net) wells, all targeting light oil, with a 100 percent success rate. This total included 13 (10.2 net) horizontal wells in its Spearfish play at Pierson and Bottineau County, North Dakota.
Legacy provided a detailed operations update in its April 2, 2012 news release that incorporated well and production results to the end of the first quarter 2012. Spring break-up began mid-March, limiting activity in the last two weeks of the quarter. However, the Company continues to be on track to meet its full year production guidance
At Pierson, Manitoba, the Company's drilling, completion design and production practices have demonstrated superior results in the Spearfish compared to both the previous operator's production results and the type curve used in the 2011 year-end independent engineering report. Production up to the end of the first quarter 2012 from Legacy drilled wells had a 90 day average of 95 Bbls oil per day per well.
Legacy has achieved these rates while constraining production to maximize ultimate recovery, leading to superior long term performance, higher per well reserve bookings plus additional locations booked. A production graph depicting these results is included in the Company's latest corporate presentation available at www.legacyoilandgas.com. Legacy has identified 210 net locations on its lands at Pierson, approximately 77 percent unbooked in the most recent independent reserves report.
Installation of a central oil battery with treating capacity of 15,000 Bbls fluid per day and 5,000 Bbls oil per day was completed in the quarter and 29 wells were tied-in to this facility. With the reduction of the number of single well batteries, field operating costs are anticipated to improve significantly.
At North Dakota, the Company has had similar success in the Spearfish. Legacy lands in Bottineau County represent a significant light oil development opportunity that has been essentially unbooked in the recent independent reserves report. Production up to the end of the first quarter 2012 from Legacy drilled wells had a 90 day average of 98 Bbls oil per day per well.
Legacy has achieved these rates while constraining production to maximize ultimate recovery, leading to superior long term performance, higher per well reserve bookings plus additional locations booked. A production graph depicting these results is included in the Company's latest corporate presentation available at www.legacyoilandgas.com.
The Company converted one well to salt water disposal and began construction of a central oil battery. The majority of the remaining 2012 drilling program will be from pads located along a central gathering line corridor enabling faster on-production cycle times and the reduction of field operating costs.
The Company has also drilled two stratigraphic wells on the northern portion of its lands and final core analysis now confirms net pay of approximately 11.4 m, porosity of 14.7 percent and original oil in-place of greater than 12 MMBbl per section. Legacy has identified 230 net locations on the northern portion only of its lands in Bottineau County, approximately 97 percent unbooked in the most recent independent reserves report. This location count could grow significantly as Legacy de-risks the opportunity on the southern portion of its lands over the coming years.
The total Spearfish play development drilling inventory of 440 net potential locations (88 percent unbooked) is based on eight wells per section. Based on other operators' results in the play, Legacy's location count could increase by 50 percent through downspacing. In addition, the Company is evaluating the waterflood potential in the play and anticipates recovery factors of up to 14 percent, based on analogous pools.
At Taylorton, the pilot waterflood project has shown signs of waterflood response, with a flatter decline profile and increased bottom-hole pressure in the two offsetting producing wells. This pilot waterflood could lead to incremental reserve bookings and lower production decline rates and will be expanded later in 2012.
At Heward, the pilot waterflood project initiated in November 2011 has already demonstrated waterflood response as the oil production rate in one offsetting well has increased 500 percent since the commencement of the pilot. Plans are underway for expansion of the pilot waterflood project in the later part of 2012.
Legacy has remained active drilling conventional Mississippian horizontal wells throughout its SE Saskatchewan properties. These wells typically cost approximately $1 million to drill, complete, equip and tie-in as they generally are not fracture stimulated and have excellent rates of returns and quick payouts. Success has been achieved in the Midale, Frobisher, Alida, Tilston and Souris Valley formations.
At Turner Valley, Legacy's first Rundle light oil horizontal well at Hartell #6 has stabilized and the recently completed horizontal wells continue to demonstrate decreasing water cuts and increasing oil rates, as expected.
Two of the recently completed wells had productive capability in excess of the existing artificial lift equipment necessitating upgrades to optimize the fluid withdrawal rates from the wells and these upgrades have led to a corresponding increase in oil rates. The Company is reviewing the artificial lift options on the remaining wells to improve production run times and maximize production rates. On average production rates are above the type curve used by the independent reserve evaluator in the most recent engineering report and continue to improve.
Legacy has drilled two more wells in the Turner Valley area and completion operations are underway. With an ongoing program, refinement of mud programs and bit selection, Legacy continues to improve its drilling performance in Turner Valley, leading to reduced capital costs. Legacy expects further drilling efficiency gains can be achieved in Turner Valley through ongoing operational refinements and implementation of fit for purpose rigs and equipment.
EVENTS AFTER THE REPORTING PERIOD
On May 4, 2012 Legacy's banking syndicate, led by BMO Capital Markets and including National Bank, the Bank of Nova Scotia, ATB Financial, Canadian Imperial Bank of Commerce, JP Morgan Chase Bank NA and The Toronto-Dominion Bank, increased the borrowing base from the previous $450 million to $525 million. The increase is a result of the Company's high netback light oil reserves, long reserve life and increased production over the past year and continues to provide Legacy with significant financial flexibility with which to conduct its operations.
Legacy announced on May 14, 2012, the Company entered into an agreement to sell certain undeveloped lands and minor production in southern Alberta to Bowood Energy Inc. ("Bowood") in exchange for 200,000,000 common shares of Bowood. The agreement stipulates, among other things, that Bowood's management team would be replaced by Trent Yanko as President + CEO and Matt Janisch as Vice President, Finance + CFO and that Bowood would be managed by Legacy under a services agreement.
Over the past 12 quarters, Legacy has grown production per share 63 percent or 18 percent per year. Our producing assets have performed favourably and our new production additions have met or exceeded our expectations.
Our goal at Legacy is to deliver 10 to 15 percent per share growth per year, spending cash flow plus our growth rate, for the next three to five years. This sustainable model is designed to deliver superior returns over the near and long term in a low risk platform and is characterized by:
- More than 1,200 net development locations for light oil
- 2012 production is forecast to grow 29 percent year over year compared to 2011
- Development drilling focused capital program for 2012 (83 percent to drilling, completion, equipping, tie-in)
- Fast-tracking waterflood projects in the Bakken, Torquay (Three Forks) and the Spearfish to build significant net asset value while moderating corporate declines and providing additional opportunity creation
The operational momentum and success that started in the latter part of 2011 has continued into 2012, with Legacy having drilled 49 gross (35.1 net) wells to-date, with a 100 percent success rate. Continuous refinement of mapping, completion programs and production strategies has provided a number of positive results:
- Spearfish production has outperformed the independent reserve evaluators proved plus probable type curve
- More than 385 net locations are unbooked in the Spearfish which could grow to nearly 600 net locations with inclusion of all Spearfish lands held in North Dakota
- The infill horizontal multi-stage fracture stimulation program in Turner Valley has generated positive early results
- Bakken pilot waterflood projects at Taylorton and Heward are demonstrating waterflood response
- Downspaced drilling underway for waterflood implementation in the Torquay at Frys
- Success in conventional Mississippian at Alameda, Edenvale, Manor and Steelman
In 2012, we are demonstrating better capital efficiencies compared to 2011 which will further improve economics and provide risk protection to the capital program:
- Weather has been more typical compared to 2011
- Contracted fit for purpose horizontal drilling rigs and equipment (top drives, larger pumps)
- Moved to more manufacturing-type development in some of our emerging plays such as the Spearfish
- Costs have stabilized for key services
Legacy's light oil assets and strong financial position not only provide downside mitigation in periods of lower commodity prices or volatility, as seen in the first quarter of 2012 where oil price differentials experienced higher than normal volatility and went through a period of rapid widening and contraction, but also provide upside torque to the continued operational success achieved in the past nine months due to:
- Production that is 87 percent weighted to light oil and NGL's
- Q1 2012 operating netbacks of $45.92 per Boe
- Operating costs have decreased and the expectation is that this trend will to continue throughout 2012
- Expanded banking facility with surplus capacity
A significant portion of the oil price differential widening can be attributed to pipeline and short term seasonal issues such as refinery maintenance coupled with supply and demand factors in the US PADD II market. Current differentials have returned to more normal levels, although Legacy expects that near term price volatility will continue.
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.
FORWARD LOOKING STATEMENTS:
This press release contains forward-looking statements. More particularly, this press release contains forward-looking statements concerning Legacy being on track to meet its full year production guidance, the effect of constraining initial production of wells at Pierson and Bottineau County on long-term well performance and future reserves bookings, the anticipated improvement in field operating costs at Pierson resulting from the installation of a central oil battery, the potential number of drilling locations associated with Legacy's Spearfish properties, the potential recovery rates achievable through waterflood of Legacy's Spearfish properties, the potential of waterflood at Taylorton to increase reserves and lower production decline rates, anticipated gains in drilling efficiency at Turner Valley, anticipated annual production growth in 2012, the sufficiency of internally generated cash flow, combined with available credit facilities, to fund planned capital expenditures, expected decreases in operating costs in 2012 and expected continuing volatility in price differentials.
The forward-looking statements contained in this press release are based on certain key expectations and assumptions made by Legacy, 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 viability of waterflood projects, the availability and performance of facilities and pipelines, the geological characteristics of Legacy'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 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; 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, waterflood projects or capital expenditures. Certain of these risks are set out in more detail in Legacy's Annual Information Form for the year ended December 31, 2011 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.
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.
For further information:
Trent J. Yanko, P.Eng.
President + CEO
Legacy Oil + Gas Inc.
4400 Eighth Avenue Place
525 - 8th Avenue SW
Calgary, AB T2P 1G1
Matt Janisch, P.Eng.
Vice-President, Finance + CFO
Legacy Oil + Gas Inc.
4400 Eighth Avenue Place
525 - 8th Avenue SW
Calgary, AB T2P 1G1