Stable Production and Funds from Operations Sustains Dividends
CALGARY, Nov. 8, 2012 /CNW/ - Longview Oil Corp. ("Longview" or the "Corporation") is pleased to announce the financial and operating results for the quarter ended September 30, 2012.
|Three months ended|
|September 30, 2012||September 30, 2011|
|Financial ($000, except as otherwise indicated)|
|Sales including realized hedging||$||33,396||$||37,109|
|per share (1)||$||0.71||$||0.79|
|Funds from operations||$||14,360||$||17,255|
|per share (1)||$||0.31||$||0.37|
|Net income and comprehensive income||$||1,473||$||7,148|
|per share (1)||$||0.03||$||0.15|
|per share (2)||$||0.15||$||0.15|
|Expenditures on property, plant and equipment||$||8,822||$||21,589|
|Working capital deficit (3)||$||5,784||$||13,914|
|Shares outstanding at end of period (000)||46,837||46,750|
|Basic weighted average shares (000)||46,831||46,745|
|Crude oil and NGLs (bbls/d)||4,489||4,554|
|Natural gas (mcf/d)||9,144||9,103|
|Total boe/d @ 6:1||6,013||6,071|
|Average prices (including hedging)|
|Crude oil and NGLs ($/bbl)||$||75.73||$||80.76|
|Natural gas ($/mcf)||$||2.52||$||3.91|
|(1)||Based on basic weighted average shares outstanding.|
|(2)||Based on shares outstanding at each dividend record date.|
|(3)||Working capital deficit includes trade and other receivables, prepaid expenses and deposits, trade and other accrued liabilities and due to parent.|
Stable Production and Funds from Operations Sustains Dividends
- Funds from operations for the third quarter of 2012 was $14.4 million or $0.31 per share, an increase of 32% as compared to the second quarter of 2012 and a decrease of 17% as compared to the third quarter of 2011. Although funds from operations has improved due to an increase in realized commodity prices during this current quarter, commodity prices have generally decreased during 2012 as compared to the prior year thereby reducing funds from operations.
- Crude oil prices have been lower during much of 2012 due to weakened WTI pricing and wide differentials between WTI and Canadian realized pricing. Natural gas prices have also decreased during this year due to decreased demand caused by the mild 2011/2012 winter and increasing U.S. domestic natural gas production.
- Production for the third quarter of 2012 averaged 6,013 boe/d (74% crude oil and liquids), a 2% increase from the 5,881 boe/d realized during the immediate prior quarter and comparable to the third quarter of 2011. Production for the third quarter was challenged by prolonged spring break-up conditions which caused road bans and lease access restrictions, delaying drilling operations, reactivations and scheduled tie-ins into the third quarter. Production is approximately 6,300 boe/d at present with additional wells awaiting completion.
- Operating expense for the third quarter of 2012 was $20.44/boe, an 11% increase from $18.47/boe realized in the same period of the prior year. Operating expense per boe for 2012 has been impacted by lower daily production levels, costs associated with the clean-up of salt water spills resulting from injection pipeline failures at Sunset, and additional costs for maintenance associated with specific facilities and pipelines.
- Capital expenditures for the three months ended September 30, 2012 amounted to $8.8 million. Capital expenditures were delayed during the third quarter of 2012 from prolonged spring break-up conditions causing road bans and lease access restrictions. During the third quarter of 2012 we completed and brought on-stream production from 3.0 net oil wells (6 gross) primarily in Saskatchewan that were drilled in prior quarters and will contribute to offset declines. Our current drilling program resumed in September with the drilling of 4 net oil wells (4 gross) in Southeast Saskatchewan and 1 net oil well (1 gross) in Alberta at an 80% success rate. For the nine months ended September 30, 2012, we have drilled a total of 16.6 net oil wells (24 gross) at an 88% success rate with overall results that are in-line with expectations.
- As at September 30, 2012, Longview's bank debt was $115.3 million on a credit facility of $200 million (58% drawn) resulting in an unutilized capacity of $84.7 million. Our strategy of maintaining a conservative financial structure has positioned Longview to execute a capital program that provides growth potential while paying a stable dividend to shareholders.
- Longview currently pays a monthly dividend of $0.05 per share and has declared and paid $7.0 million of dividends for the third quarter of 2012.
Commodity Hedging Program
- Longview's hedging program for calendar 2012 includes crude oil hedges of 1,000 bbls/d at $97.10/bbl and 1,000 bbls/d at a floor price of $90.00/bbl. We plan on adding additional hedges for 2013 should the market present suitable opportunities.
- Additional details on our hedging program are available at our website at www.longviewoil.com.
- Our 2012 capital program has focused on lower cost wells that are anticipated to have higher return economics, including additional drilling in Southeast Saskatchewan where lower cost horizontal wells are being targeted within our extensive land base. Longview has a large inventory of drilling prospects but will defer spending on higher cost areas and infrastructure until commodity prices and differentials have improved.
- We continue to execute our capital program, focusing on operational and cost efficiencies to increase returns and produce stable cash flows while maintaining a conservative financial structure. Longview continues to high grade its inventory of drilling locations and invest in opportunities that we believe provide strong economics during low commodity price cycles.
- The following table summarizes the operational guidance for Longview for the year ending December 31, 2012:
|Average Production||6,200 boe/d|
|% oil & liquids||76%|
|Royalty rate||19% to 20%|
|Operating expenses||$19.00/boe to $20.00/boe|
|Capital expenditures||$46 million|
- We are currently working on our 2013 operating and capital budget. The Corporation intends to continue executing a balanced approach to capital expenditures by focusing on low risk oil targets while maintaining a balance between total capital, dividends and cash flows. We are also actively pursuing acquisitions that are consistent with that strategy.
- Longview was incorporated on March 4, 2010 and completed its initial public offering (the "Offering") on April 14, 2011 at a price of $10 per common share issuing 17,250,000 shares and raising gross proceeds of $172.5 million (including full exercise of the over-allotment option on April 28, 2011).
- Concurrent with the closing of the Offering, Longview purchased certain oil-weighted assets from Advantage Oil & Gas Ltd. ("Advantage") for total consideration of $546.9 million, comprised of 29,450,000 common shares of Longview and $252.4 million in cash (the "Acquisition"). The Acquisition had an effective date of January 1, 2011 and a closing date of April 14, 2011.
- On May 22, 2012, Advantage sold 8,300,000 Longview common shares owned by Advantage to a syndicate of underwriters. Longview did not receive any proceeds or incur any costs related to the sale of the common shares. Advantage owns 21,150,010 common shares of Longview, representing an interest of approximately 45.2% in Longview.
Interim Financial Statements and MD&A
- Longview's unaudited interim financial statements for the three and nine months ended September 30, 2012 together with the notes thereto, and Management's Discussion and Analysis for the three and nine months ended September 30, 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.
Certain information regarding Longview set forth in this press release contains forward-looking statements, which are based on the Corporation's current internal expectations, estimates, projections, assumptions and beliefs. These statements relate to future events or Longview's future performance. All statements other than statements of historical fact may be forward-looking statements. 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. 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, Longview's dividend policy; Longview's hedging program for 2012; anticipated effect of operating costs on Q3 2012; focus of the Corporation's 2012 capital program and the anticipated effect on returns, cash flows and financial structure; Longview's plans to high grade its inventory of drilling locations and to invest in opportunities that it believes provides strong economics; and anticipated average production, percentage of production attributable to oil and liquids, exit production rate, royalty rate, operating expenses and capital expenditures for 2012.
These forward-looking statements are subject to numerous risks and uncertainties, certain of which are beyond the Corporation's control, including, but not limited to, the impact of general economic, market and business conditions; industry conditions; stock market volatility, including volatility of commodity prices and currency fluctuations; unexpected drilling results; imprecision of reserve estimates; changes or fluctuations in production levels; 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 income tax laws or changes in tax laws and incentive programs relating to the oil and gas industry; liabilities inherent in crude oil and natural gas operations; 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; ability to access sufficient capital from internal and external sources; and the other risks considered under "Risk Factors" in Longview's annual information form dated March 22, 2012, 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, among other things: 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; availability of funds for the payment of dividends and Longview's capital program; 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 oil and gas properties in the manner currently contemplated; and the estimates of the Corporation's production 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.
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