CALGARY, March 24, 2015 /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, 2014 as well as
its annual information form ("AIF") for the year ended December 31, 2014. 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)
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Three Months
Ended
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Year
Ended
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December
31
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December
31
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(Cdn $, except per
share amounts)
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2014
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2013
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%
change
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2014
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2013
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%
change
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Financial
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Petroleum and natural
gas sales, net of royalties
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3,854,256
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4,520,788
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(15)
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20,096,137
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17,387,700
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16
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Funds generated by
operations (2)
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467,855
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1,125,835
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(58)
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6,558,707
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4,432,350
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48
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Per share
basic
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0.01
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0.01
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-
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0.07
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0.05
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40
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Per share diluted
(3)
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0.01
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0.01
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-
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0.07
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0.05
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40
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Net loss
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(41,300,437)
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(7,775,472)
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431
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(42,922,011)
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(20,326,748)
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111
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Per share
basic
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(0.47)
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(0.09)
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422
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(0.48)
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(0.23)
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109
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Per share diluted
(3)
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(0.47)
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(0.09)
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422
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(0.48)
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(0.23)
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109
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Capital expenditures
– Exploration and development (4)
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9,179,368
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12,782,541
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(28)
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17,478,051
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15,321,445
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14
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Capital expenditures
– Acquisitions and dispositions (4)
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(220,000)
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-
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n/a
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(220,000)
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-
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n/a
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Net debt and working
capital surplus (deficit)(2)
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(30,332,110)
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(19,635,864)
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54
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(30,332,110)
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(19,635,864)
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54
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Operating
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Production
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Crude oil and natural
gas liquids (Bbls per day)
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628
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718
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(13)
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636
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619
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3
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Natural gas (Mcf per
day)
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1,446
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1,482
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(2)
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1,350
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1,673
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(19)
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Barrels of oil
equivalent (Boe per day) (5)
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869
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965
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(10)
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861
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898
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(4)
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Average realized
price
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Crude oil and natural
gas liquids ($ per Bbl)
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71.00
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78.26
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(9)
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89.79
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84.60
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6
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Natural gas ($ per
Mcf)
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3.75
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3.46
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8
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4.50
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3.05
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48
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Barrels of oil
equivalent ($ per Boe) (5)
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57.55
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63.55
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(9)
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73.38
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63.99
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15
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Netback ($ per
Boe)(2)
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Petroleum and natural
gas sales
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57.55
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63.55
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(9)
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73.38
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63.99
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15
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Royalties
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9.34
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12.63
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(26)
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9.44
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10.94
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(14)
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Operating
expenses
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29.32
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29.09
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1
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27.97
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28.52
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(2)
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Transportation
expenses
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3.67
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3.13
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17
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4.28
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2.65
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62
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Operating Netback ($
per Boe)(2)
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15.22
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18.70
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(19)
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31.69
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21.88
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45
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Undeveloped land
holdings (gross acres)
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115,199
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119,668
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(4)
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115,199
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119,668
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(4)
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(net
acres)
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109,392
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113,541
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(4)
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109,392
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113,541
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(4)
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Common Shares
(000's)
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Common shares
outstanding, end of period
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88,658
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88,658
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-
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88,658
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88,658
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-
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Weighted average
common shares (basic)
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88,658
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88,658
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-
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88,658
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88,658
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-
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Weighted average
common shares (diluted) (3)
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88,658
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88,658
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-
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88,658
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88,658
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-
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(1) Consolidated financial and operating
highlights for LGX Oil + Gas Inc. and all its subsidiaries ("LGX"
or the "Company").
(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 they may not be comparable with
the calculation of similar measures for other entities. Refer to
"Non-IFRS Measures" in MD&A.
(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 operations per
share diluted, the Company includes the effect of outstanding stock
options and share warrants using the treasury stock
method.
(4) Refer to Capital Expenditures in the
MD&A.
(5) 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.
ACCOMPLISHMENTS
- Increased funds generated from operations from $4.4 million in 2013 to $6.6 million in 2014 (48 percent increase);
increased funds generated from operations from $0.05 per share in 2013 to $0.07 per share in 2014 (40 percent
increase)
- Continued to reduce operating expense from $28.52 per Boe in 2013 to $27.97 per Boe in 2014 (2 percent decrease)
- Increased gross proved plus probable reserves from 5.6 MMBoe at
December 31, 2013 to 5.8 MMBoe at
December 31, 2014; proved plus
probable reserve additions replaced 162 percent of production in
the year
- Drilled 2 gross (2.0 net) Big
Valley oil wells with a 100 percent success rate in
2014
2014 OPERATIONS REVIEW
LGX drilled two horizontal wells into the Big Valley (Three Forks) Formation
(12-2-8-24W4 and 6-36-8-24W4). The total capital expenditures
for the two wells came in on budget at approximately $14 million.
The 12-2 well was drilled with a 1,402 m horizontal lateral and
was completed with a 20 stage fracture stimulation. The well was
put on production late November 2014
and averaged 315 Bbl per day of light oil for the first 30 days of
production. LGX has a 100 percent working interest in the
well prior to recovery of 200 percent of the drilling, completion,
equipping and tie-in costs, at which point its interest will revert
to 80 percent.
The 6-36 well was drilled with a 1,134 m horizontal lateral and
was completed with a 20 stage fracture stimulation. The well
was put on production late November
2014 and averaged 185 Bbl per day of light oil for the first
30 days of production. Water cuts are higher than the
offsetting wells, indicating that load fluid is still being
recovered from the well and maximum oil productive capability has
not been achieved to-date. LGX has a 100 percent working
interest in the well prior to recovery of 200 percent of the
drilling, completion, equipping and tie-in costs, at which point
its interest will revert to 80 percent.
The latest two wells, combined with previous production results,
confirm the Big Valley (Three
Forks) Formation continues to be prospective in the area. LGX
believes that 20+ sections of its land are prospective for the Big
Valley. Both wells encountered significant hydrocarbon shows
in the overlying Banff Formation as indicated by drill cuttings,
gas detector readings and strong oil "kicks" while drilling through
the zone. The additional oil shows, as well as further
geological and seismic interpretation and analysis, confirm the
potential for a second play in the shallower Banff Formation.
An operator with lands immediately offsetting LGX acreage to the
north has achieved strong production results in the Banff
Formation. Further drilling is required to confirm the extent
of both plays and to hold lands under LGX's lease of lands on the
Blood Reserve.
Due to the significant decline in commodity prices, the
estimated future cash flows of certain assets dropped below the
carrying value of those assets. As a result, LGX recorded a
$33.8 million aggregate impairment
charge on the exploration and evaluation assets and the property,
plant and equipment assets of the Company in the fourth quarter of
2014.
OUTLOOK AND 2015 GUIDANCE
With cash flows impacted by oil prices at five year lows, LGX is
working proactively to ensure it has the ability to meet its
financial obligations under its credit facilities and satisfy the
2015 drilling commitments under its lease of lands on the Blood
Reserve. The Company is currently evaluating measures,
including but not limited to: asset sales, accessing third
party capital, joint ventures and drilling commitment
extension. At current commodity prices, the Company expects
that it may approach non-compliance with the existing financial
covenants under its credit facilities in the near future and will
continue proactive discussions with its lender regarding the
facility and the covenants.
After anticipated reductions and savings on operating expenses
and G&A and without giving effect to any production additions
from drilling in 2015, LGX expects to average 725 Boe per day of
production in 2015 and generate slightly positive funds flow from
operations at current strip pricing for 2015.
LGX has proven the concept of an over-pressured, oil saturated,
light oil resource play over a broad area on its lands in the Big
Valley Formation. In addition, the potential for a second
exciting light oil play in the shallower Banff Formation has been
confirmed through the drilling of the Big
Valley wells to-date. Capital cost reductions have
been demonstrated through the course of the 2014 program and
additional savings are anticipated in the current low commodity
price environment. The Company has significant exposure to
the upside of both plays and only a small portion of the potential
has been recognized in the Company's reserve report.
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 27,
2015 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,
2014, December 31, 2013 and
December 31, 2012 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.
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in policies of the TSX Venture
Exchange) accepts responsibility for the adequacy or accuracy of
this release.
Forward-Looking Information
This press release contains forward-looking statements. More
particularly, it contains forward-looking statements
concerning: (i) the prospectivity of LGX's properties
with respect to the Big Valley
(Three Forks) and Banff Formations; (ii) the expectation that,
at current commodity prices, LGX may approach non-compliance
with the existing financial covenants under its credit facilities
in the near future; (iii) anticipated savings on operating
expenses, G&A and capital costs; (iv) the anticipated 2015
average rate of production; and (v) LGX's expectation that it
will generate slightly positive funds flow from operations
at current strip pricing for 2015.
The forward-looking statements contained in this press
release are based on certain key expectations and assumptions made
by LGX, including the assumptions specifically set out in this
press release and expectations and assumptions concerning: (i)
prevailing commodity prices; (ii) the availability and cost of
capital, labour and services; (iii) the effectiveness of cost
reduction initiatives; (iv) the performance of existing wells, (v)
the availability and performance of facilities and pipelines, (vi)
the geological characteristics of LGX's properties, (vii)
prevailing weather and break-up conditions, royalty regimes and
exchange rates, (viii) the application of regulatory and licensing
requirements, and (ix) the application of the previously announced
emergency order for the protection of the Greater Sage-Grouse (the
"Emergency Order") and the Species at Risk Act (Canada) at LGX's Manyberries property.
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. Most importantly, certain of the
forward-looking statements are highly dependent on prevailing
commodity prices and significant fluctuations in prevailing
commodity prices may impact anticipated cash flows, production and
compliance with debt covenants. Other factors and risks
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
and cost of capital, labour and services, exchange rate
fluctuations, fluctuations in oil price differentials, unexpected
adverse weather conditions and changes to existing laws and
regulations. These and other risks are set out in more
detail in the AIF.
The forward-looking statements contained in this press
release are made as of the date hereof and the Company 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.
Caution Respecting Boe
Meaning of Boe - 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.
Caution Respecting Initial Production Results
The production results for the two Big Valley (Three Forks) wells disclosed in
this press release are initial results for the first thirty days of
production only and are not determinative of the rates at which
such wells will continue production and decline thereafter.
These results are not necessarily indicative of current
performance, long-term performance or ultimate recovery from the
wells. Readers are cautioned not to place undue reliance on
such rates in considering the long-term performance of the wells or
the aggregate production of the Company.
SOURCE LGX Oil + Gas Inc.