CALGARY, March 5, 2015 /CNW/ - TORC Oil & Gas
Ltd. ("TORC" or the "Company") (TSX: TOG) is pleased to announce
its financial and operating results for the three month periods and
years ending December 31, 2014 and
2013, and to provide its 2014 year-end reserves information as
evaluated by Sproule Associates Limited ("Sproule").
The associated Management's Discussion and Analysis ("MD&A")
dated March 5, 2015 and audited
financial statements as at and for the year ended December 31, 2014 can be found at www.sedar.com
and www.torcoil.com.
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Highlights
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Three months
ended
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Year ended
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(in thousands,
except per share data)
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December
31
2014
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September
30
2014
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December
31
2013
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December
31
2014
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December
31
2013
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Financial
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Funds flow from
operations, including
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transaction related
costs (1)
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$41,710
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$49,005
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$41,458
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$188,577
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$89,536
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Per share
basic
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$0.43
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$0.52
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$0.45
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$2.02
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$1.63
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Per share
diluted
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$0.43
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$0.51
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$0.45
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$1.97
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$1.60
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Funds flow from
operations, excluding
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transaction related
costs (1)
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$41,748
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$49,029
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$40,769
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$188,719
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$96,512
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Per share
basic
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$0.43
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$0.52
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$0.45
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$2.02
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$1.76
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Per share
diluted
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$0.43
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$0.51
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$0.44
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$1.97
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$1.72
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Net income
(loss)
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($30,411)
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$15,146
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($17,841)
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$6,258
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($10,084)
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Per share
basic
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($0.32)
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$0.16
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($0.20)
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$0.07
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($0.18)
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Per share
diluted
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($0.32)
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$0.16
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($0.20)
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$0.07
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($0.18)
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Exploration and
development expenditures
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$35,189
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$49,555
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$60,075
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$135,389
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$153,791
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Property acquisitions
(net of adjustments)
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$44,907
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$21,540
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($4,859)
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$137,037
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$489,954
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Net debt
(2)
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$244,658
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$213,391
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$145,183
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$244,658
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$145,183
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Common
shares
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Shares outstanding,
end of period
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96,765
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94,840
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91,423
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96,765
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91,423
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Weighted average
shares (basic)
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96,087
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93,397
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91,258
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93,320
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54,900
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Weighted average
shares (diluted)
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97,815
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95,794
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92,929
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95,824
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56,121
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Operations
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Production
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Crude oil (Bbls per
day)
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9,690
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9,148
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8,478
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9,051
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4,744
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NGL (Bbls per
day)
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428
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440
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363
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442
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260
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Natural gas (Mcf per
day)
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11,033
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11,085
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7,951
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10,626
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6,702
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Barrels of oil
equivalent (Boepd, 6:1)
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11,957
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11,436
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10,166
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11,264
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6,121
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Average realized
price
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Crude oil ($ per
Bbl)
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$73.31
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$91.94
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$81.73
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$89.25
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$87.11
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NGL ($ per
Bbl)
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$40.99
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$49.32
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$54.50
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$53.06
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$53.92
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Natural gas ($ per
Mcf)
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$3.83
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$4.33
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$3.61
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$4.62
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$3.31
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Barrels of oil
equivalent ($ per Boe, 6:1)
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$64.41
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$79.64
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$72.93
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$78.16
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$73.43
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Operating netback per
Boe (6:1) ($)
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Operating netback
(1)
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$42.01
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$50.15
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$47.00
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$49.79
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$46.98
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Operating netback
(prior to hedging) (1)
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$38.07
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$50.61
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$45.92
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$49.83
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$47.05
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Funds flow netback
per Boe (6:1) ($)
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Including transaction
related costs (1)
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$37.92
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$46.58
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$44.33
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$45.87
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$40.07
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Excluding transaction
related costs (1)
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$37.95
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$46.60
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$43.59
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$45.90
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$43.20
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Wells
drilled:
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Gross
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14
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16
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21
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47
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42
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Net
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8.5
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10.9
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12.8
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30.6
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26.5
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Success
(%)
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100
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100
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100
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100
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100
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(1)
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Management uses these
financial measures to analyze operating performance and
leverage. The definitions of these measures are found in
the
Company's
Management's Discussion and Analysis ("the MD&A") for the three
months and year ended December 31, 2014. These measures
do
not have any
standardized meaning prescribed by International Financial
Reporting Standards and therefore may not be comparable with
the
calculation of
similar measures for other companies.
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(2)
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Net debt is
calculated as current assets (excluding financial derivative
assets) less: i) current liabilities (excluding financial
derivative liabilities),
ii) bank debt, and
iii) non-current deferred lease incentives.
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PRESIDENT'S MESSAGE:
Since inception, TORC has consistently focused on providing
shareholders with disciplined per share growth and 2014 was another
strong year in executing this strategy. TORC was successful
in achieving per share growth in reserves, production and cash flow
along with paying a stable monthly dividend to shareholders
throughout the year.
TORC's focus on high quality, light oil weighted assets along
with disciplined financial management continued to be
rewarded in 2014. Through the execution of a $135 million capital expenditure program, TORC
successfully achieved several strategic objectives, including
growing the Cardium into a long term free cash flow engine,
executing a development and step-out program at Monarch,
maintaining production levels in southeast Saskatchewan while maximizing free cash flow
and delineating the emerging Torquay/Three Forks light oil resource
play. These objectives were accomplished while maintaining
conservative debt levels utilizing a prudent hedging program and
maintaining a disciplined growth profile to operate a sustainable
and growing company.
During the year, free cash flow was used to execute on several
strategic tuck-in acquisitions in TORC's Cardium and southeast
Saskatchewan core areas.
These acquisitions provided additional per share growth in 2014 and
expanded TORC's high quality drilling inventory for growth in
future years. The Company was also able to increase its
capital expenditure program during the year to further delineate
the emerging Torquay/Three Forks
light oil resource play in southeast Saskatchewan.
This integrated approach of organic growth complemented by
strategic lower decline acquisitions helped drive the Company's per
share growth above its targeted growth range of 5-7% while
maintaining a 25% underlying decline profile.
TORC's disciplined approach, focused on an efficient capital
program, prudent financial management and an emphasis on
maintaining a low underlying decline profile, positions TORC to
take advantage of strategic opportunities as they arise. The
benefit of this positioning has been realized in early 2015 through
the strategic acquisition of high quality southeast Saskatchewan conventional light oil assets
which closed on February 25,
2015. The Company will continue to be disciplined and focused
while being proactive to further position and complement the
Company's asset base and business model.
HIGHLIGHTS:
The Company's achievements in the fourth quarter and year ended
2014 include the following:
- Achieved record production of 11,957 boepd in the fourth
quarter of 2014, up from 10,166 boepd in the fourth quarter of 2013
(increase of 12% per share), and averaged 11,264 boepd in 2014, up
from 6,121 boepd in 2013 (increase of 8% per share);
- Achieved significant production growth while maintaining a
corporate decline rate of approximately 25%;
- Generated cash flow of $41.7
million in the fourth quarter and $188.7 million for 2014;
- Cash flow per share was $0.43 per
share in the fourth quarter and $2.02
per share for 2014 relative to $0.45
in the fourth quarter of 2013 and $1.76 in 2013;
- Successfully drilled 14 (8.5 net) wells in the fourth quarter;
for 2014, the Company successfully drilled 47 (30.6 net)
wells;
- Ended 2014 with a strong balance sheet with net debt of
$245 million ($180 million drawn on an available credit
facility of $425 million); net debt
to fourth quarter run rate cash flow was 1.5 times;
- Paid dividends of $0.135 per
share in the fourth quarter; paid dividends of $0.54 per share in 2014;
- Successfully completed several strategic light oil focused
tuck-in acquisitions during 2014 in the Company's Cardium and
southeast Saskatchewan core areas
totaling $138 million;
- Proved Developed Producing reserves increased to 24.4 mmboe
from 21.2 mmboe at year-end 2014, representing growth of 15% (9%
per share);
- Proved reserves increased to 39.1 mmboe from 30.4 mmboe at
year-end 2014, representing growth of 29% (21% per share);
- Proved plus Probable reserves increased to 59.3 mmboe from 47.1
mmboe at year-end 2014, including 1.1 mmboe of positive technical
revisions, representing growth of 26% (19% per share);
- Proved reserved life index increased from 8.2 years to 9.0
years at year-end 2014 based on annualized fourth quarter 2014
production, representing a 9% increase;
- Proved plus probable reserve life index increased from 12.7
years to 13.6 years at year-end 2014, representing a 7%
increase;
- Generated a Proved plus Probable reserve replacement ratio on
production of approximately 250%, excluding the effects of
acquisitions; and
- Subsequent to year-end, announced and closed a strategic
acquisition of complementary conventional southeast Saskatchewan properties producing greater than
1,550 boepd (94% light oil and liquids).
TORC demonstrated cost effective reserves growth while focusing
on a combination of development drilling along with the continued
strategic delineation of the Company's asset base. In
2014, TORC allocated approximately 85% of capital spending to
development operations in the Cardium play, at Monarch and in
southeast Saskatchewan while
approximately 15% of the Company's drilling budget was focused on
exploration and delineation activities in both the emerging
Torquay/Three Forks play in
southeast Saskatchewan and at
Monarch. TORC's capital spending program in 2014 resulted in
the following:
- Proved plus probable F&D (including future development
costs) of $19.71/boe resulting in a
recycle ratio of 2.5x (2014 operating netback); and
- Proved plus Probable FD&A (including future development
costs) of $22.77/boe resulting in a
recycle ratio of 2.2x (2014 operating netback).
RESERVES:
In this press release, all references to reserves are to gross
Company reserves, meaning TORC's working interest reserves before
deductions of royalties and before consideration of TORC's royalty
interests. The reserves were evaluated by Sproule in
accordance with National Instrument 51-101 - Standards of
Disclosure for Oil and Gas Activities ("NI 51-101") effective
December 31, 2014. TORC's
annual information form for the year ended December 31, 2014 (the "AIF") will contain TORC's
reserves data and other oil and natural gas information as mandated
by NI 51-101. TORC expects to file the AIF on SEDAR by
March 31, 2015.
The following tables are a summary of TORC's petroleum and
natural gas reserves, as evaluated by Sproule, effective
December 31, 2014, using Sproule's
forecast prices and costs. It should not be assumed that the
estimates of future net revenues presented in the tables below
represent the fair market value of the reserves. There is no
assurance that the forecast prices and cost assumptions will be
attained and variances could be material. The recovery and reserve
estimates of our crude oil, natural gas liquids and natural gas
reserves provided herein are estimates only and there is no
guarantee that the estimated reserves will be recovered. It
is important to note that the recovery and reserves estimates
provided herein are estimates only. Actual reserves may be
greater or less than the estimates provided herein. Reserves
information may not add due to rounding.
Reserves Summary
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Light
and
Medium
Oil
(mbbl)
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Natural
Gas
(mmcf)
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NGLs
(mbbl)
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Total
Oil
Equivalent
(mboe)
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Proved
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Developed
Producing
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19,198
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23,127
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1,301
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24,354
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Developed
Non-Producing
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1,048
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2,204
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97
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1,513
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Undeveloped
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9,625
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17,488
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701
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13,241
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Total
Proved
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29,871
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42,818
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2,100
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39,107
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Probable
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14,889
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25,195
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1,128
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20,216
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Total Proved plus
Probable
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44,761
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68,013
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3,227
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59,323
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Net Present Value of Future Net Revenue
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Before Future
Income Tax Expenses and Discounted at
|
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0%
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5%
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10%
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15%
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20%
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($000s)
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($000s)
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($000s)
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($000s)
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($000s)
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Proved
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Developed
Producing
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$969,276
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$737,069
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$597,872
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$505,702
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$440,330
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Developed
Non-Producing
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$53,639
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$41,022
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$33,463
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$28,457
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$24,885
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Undeveloped
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$360,790
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$239,377
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$166,412
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$118,723
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$85,638
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Total
Proved
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$1,383,706
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$1,017,469
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$797,747
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$652,882
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$550,854
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Probable
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$866,331
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$516,972
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$354,921
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$264,254
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$207,162
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Total Proved plus
Probable
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$2,250,036
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$1,534,440
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$1,152,668
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$917,136
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$758,016
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Future Development Costs
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Proved
Reserves
($000s)
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Proved Plus
Probable
Reserves
($000s)
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2015
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$101,449
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$120,331
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2016
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$110,200
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$147,929
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2017
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$67,298
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$127,423
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2018
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$6,321
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$10,725
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Total
Undiscounted
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$285,268
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$406,407
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Capital Expenditure and Finding, Development, and Acquisition
Costs
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Reserves
Additions
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F&D and
FD&A
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Excluding Change
in
Future Development
Costs
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Capital
Expenditures
($mm)
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Total
Proved
(mmboe)
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Proved
Plus
Probable
(mmboe)
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Total
Proved
($/boe)
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Proved
Plus
Probable
($/boe)
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Exploration &
Development(1)
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$128.7
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8.3
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9.4
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$15.58
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$13.66
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Acquisitions
(net)(2)
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$145.1
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4.5
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7.0
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$31.96
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$20.86
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Total(3)
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$273.8
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12.8
|
16.4
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$21.39
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$16.72
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Capital
Expenditures
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Reserves
Additions
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F&D and
FD&A
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Including Change
in
Future Development
Costs
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Total
Proved
($mm)
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Proved
Plus
Probable
($mm)
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Total
Proved
(mmboe)
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Proved
Plus
Probable
(mmboe)
|
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Total
Proved
($/boe)
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Proved
Plus
Probable
($/boe)
|
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Exploration &
Development(1)
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$196.1
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$185.6
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8.3
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9.4
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$23.73
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$19.71
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Acquisitions
(net)(2)
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$177.8
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$187.2
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4.5
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7.0
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$39.17
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$26.91
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Total(4)
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$373.9
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$372.8
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12.8
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16.4
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$29.21
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$22.77
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1.
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Excludes Capitalized
G&A of $6.4mm; excludes capital of $6.7mm spent on acquired
properties.
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2.
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Includes $6.7mm of
capital spent on acquired properties from the date of acquisition
to period end.
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3.
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Compared to $29.29
total proved and $21.35 proved plus probable in 2013.
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4.
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Compared to $32.38
total proved and $24.89 proved plus probable in 2013.
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Net Asset Value per Share as at December 31, 2014
($thousands except
share and per share amounts)
|
|
Proved Plus Probable
Reserve Value NPV10 BT
|
$1,153
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Undeveloped Land and
Seismic (1)
|
$175
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Net Debt
|
($245)
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Total Net Assets
(basic)
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$1,083
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Basic Common Share
Outstanding (mm)
|
96.8
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Estimated NAV per
Basic Common Share
|
$11.19
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1.
|
Includes
approximately $150mm attributable to approximately 535,000 net
acres of undeveloped land and $25mm to seismic.
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OPERATIONAL UPDATE:
The operational focus in 2014 continued to balance lower risk
development drilling in TORC's well-established Cardium and
southeast Saskatchewan light oil
plays with TORC's initial development program at Monarch and
delineation drilling in the emerging Torquay/Three Forks play in southeast
Saskatchewan. In 2014, TORC's capital expenditure program
totaled $135 million comprised of
drilling a total of 47 (30.6 net) wells allocated approximately 85
percent to development projects and 15 percent to
exploration/delineation projects.
CARDIUM
TORC has greater than 95 net light oil sections in the Cardium
trend where the Company has identified more than 290 net undrilled
locations. During 2014, the Cardium continued to deliver
solid results in this established light oil resource play.
With a continued focus on well cost efficiencies and completion
optimization, TORC successfully grew production in the Cardium to
exit at more than 5,000 boepd from approximately 4,000 boepd in the
fourth quarter of 2013. Notwithstanding this growth, the
underlying base Cardium production continues to mature resulting in
TORC's decline profile in the Cardium improving from approximately
40% at year-end 2013 to approximately 35% at year-end
2014.
In 2014, TORC drilled a total of 21 (15.4 net) Cardium wells
which includes the Company drilling 7 (5.0 net) Cardium wells in
the fourth quarter.
In 2015, the Company has budgeted to drill 12.8 net Cardium
wells representing less than 5% of identified inventory,
positioning TORC with years of high quality, lower risk drilling
locations on a maturing asset to continue to drive free cash flow
growth inside TORC's disciplined growth plus dividend
model.
MONARCH
TORC has identified an area in the heart of the Monarch play
which was the focus of the Company's development activity in
2014. This initial development program continued to establish
repeatability of results and cost improvements as wells were
drilled, completed and tied-in for an all in cost below
$7 million per well.
In 2014, TORC drilled 3 (3.0 net) development wells and 1 (1.0
net) delineation well. With the execution of the 2014 program
the Company has expanded the development focus area to more than 25
sections of land.
Based on well performance across the development area, Sproule
has assigned proved plus probable reserves per producing well along
with offset locations ranging from 250 to 450 mbbls (100% light
oil). Overall, TORC's proven plus probable reserves in
Monarch grew to 4.5 mmbbls at year-end 2014 from 2.2 mmbbls at
year-end 2013.
TORC has budgeted to drill 3 (3.0 net) development wells at
Monarch in 2015, all scheduled during the second half of the
year.
SOUTHEAST SASKATCHEWAN
TORC's southeast Saskatchewan
conventional core area is characterized by long established assets
with low decline rates and significant light oil infrastructure
which underpin TORC's balanced strategy. With a long term
decline profile of less than 15% and strong operating netbacks, the
southeast Saskatchewan assets are
expected to yield significant free cash flow to fund TORC's
dividend as well as fund the disciplined exploitation of TORC's
large light oil focused growth platform.
TORC drilled 16 (8.1 net) southeast Saskatchewan conventional wells in 2014, with
4 (1.5 net) wells drilled in the fourth quarter. In 2015,
TORC plans to drill 6.0 net conventional wells in southeast
Saskatchewan, representing
approximately 3% of the Company's currently identified conventional
development drilling inventory. These wells are expected to be
characterized by their lower risk nature and high rates of return
in all anticipated commodity price environments driven by their
lower capital costs, relatively high netbacks and the favorable
royalty regime in Saskatchewan.
The focus in TORC's southeast Saskatchewan conventional properties is to
maintain a flat production profile and maximize free cash flow from
the assets.
The Torquay/Three Forks
geological zone has seen industry activity increase significantly
in southeast Saskatchewan
including drilling on lands adjacent to TORC's acreage.
During 2014, TORC drilled 6 (3.5 net) wells testing this concept on
prospective acreage. Based on these initial results, Sproule
assigned gross proved plus probable reserves between 150 and 205
mbbls per well. TORC has continued its delineation drilling
program in the Torquay/Three Forks
play into 2015 with plans to drill 6 (3.5 net) wells. The
Company holds approximately 85 net sections with Torquay/Three Forks potential providing
significant exposure to this emerging play.
SOUTHEAST SASKATCHEWAN
ACQUISITION CLOSED
On February 25, 2015, TORC closed
the previously announced strategic acquisition of high quality,
complementary conventional light oil assets in southeast
Saskatchewan (the
"Acquisition"). The Acquisition added greater than 1,550
boepd (94% light oil and liquids) of operated production, 5.9 mmboe
of P+P reserves and 50 net high quality drilling locations to
TORC. The Acquisition lowered TORC's decline profile to 24%
from 25%, increased TORC's light oil and liquids production
percentage to 86% from 85% and the addition of the high quality
inventory is expected to reduce TORC's go forward capital
efficiency to $38,000 per boe from
$40,000 previously. The
Acquisition was completed using 100% share consideration providing
additional cash flow without the assumption of any additional debt,
further strengthening TORC's financial flexibility. The Acquisition
is consistent with TORC's strategy to capitalize on opportunities
to enhance the quality of its asset base throughout the commodity
price cycle.
DISCIPLINED BUDGET:
TORC continues to maintain the previously announced 2015 budget
of $125 million. Oilfield
service cost savings experienced early in 2015 range between
5-10%. TORC's 2015 budget does not take into account any such
anticipated reductions in service costs. Should a low oil
price environment persist, substantial unbudgeted service cost
reductions are expected. Of TORC's $125 million capital budget, approximately 25% is
expected to be spent in the first quarter with the majority of the
remaining capital to be spent in the second half of 2015. In
addition, the remaining capital expenditures are fully
discretionary, providing significant flexibility to the capital
program.
With the current volatility of commodity prices, TORC continues
to actively monitor 2015 capital expenditure plans in the context
of expected cash flow, potential service cost reductions and
portfolio allocation in order to prudently manage TORC's payout
ratio and maintain financial flexibility. Following the first
quarter, TORC's capital program activity is expected to be minimal
until the third quarter, providing time to assess and react to the
business environment in the second half of 2015 when the majority
of TORC's 2015 capital expenditures are scheduled.
TORC's year-end 2014 net debt was $245
million ($180 million drawn on
a $425 million credit facility)
positioning TORC with financial flexibility and a strong balance
sheet.
TORC currently has an average of 2,600 bbls/d hedged in
2015. A complete list of the Company's hedges can be found in
the updated corporate presentation located at www.torcoil.com.
TORC's 2015 capital budget demonstrates a measured approach to
the current uncertainty in the world oil price environment and
reflects a balance between managing long term organic production
growth, protecting the Company's strong financial position and
sustaining the dividend.
PRODUCTION GUIDANCE
TORC anticipates production will average greater than 13,000
boepd (~86% light oil and liquids) in 2015 with an exit rate of
greater than 13,450 boepd (~86% light oil and liquids) representing
15% year over year growth over 2014 average production.
TORC continues to maintain its outlook of a 24% base decline
profile in 2015. This steady and predictable decline profile
is expected to provide TORC with a solid production base to
achieve disciplined growth while paying a sustainable dividend.
DIVIDEND
TORC's dividend is reviewed regularly with the Board of
Directors and is an important component of TORC's overall
strategy. TORC's current dividend policy is $0.045 per share per month. During the current
volatility in the world oil markets, TORC's priorities are to act
prudently to protect TORC's financial flexibility while positioning
the Company to continue to achieve per share growth over the long
term while paying out a sustainable dividend.
TORC paid dividends of $0.54 per
share in 2014, of which $0.135 was
paid in the fourth quarter of 2014.
The Board of Directors has confirmed a dividend of $0.045 per common share will be paid on
March 16, 2015 to shareholders of
record on February 28, 2015.
TORC's shareholders may receive dividend payments in the form of
cash or may elect to receive dividend payments in the form of
common shares through the Company's Stock Dividend Plan
("SDP"). Participation in the SDP is optional.
Shareholders wherever resident, are encouraged to consult their own
tax advisors regarding the tax consequences to them of receiving
cash or stock dividends.
During 2014 TORC declared dividends of $50.6 million of which $14.7 million was paid under the SDP.
OUTLOOK:
TORC has built a sustainable growth platform of light oil
focused assets. The stability of the high quality, low decline,
light oil assets in southeast Saskatchewan combined with the low risk
Cardium development inventory in central Alberta and exposure to the emerging light oil
resource plays at Monarch in southern Alberta and in the Torquay/Three Forks in southeast Saskatchewan, positions TORC to provide a
sustainable dividend along with value creation through a
disciplined growth strategy. TORC's prudent financial
management and high quality asset base has placed TORC in a
relatively strong position in the current commodity price
cycle. The Acquisition completed on February 25th, 2015 is indicative of
TORC's counter cyclical focus as the Company looks to be
opportunistic and expand and improve its asset base and business
model while maintaining financial flexibility during this stage in
the cycle.
Pro forma the recently closed strategic acquisition, TORC has
the following key operational and financial attributes:
High Netback
Production (1)
|
2015E Avg: greater
than 13,000 boepd
2015E Exit: greater
than 13,450 boepd
|
Reserves
(2)
|
Greater than 65 mmboe
(82% light oil & liquids) Total Proved plus Probable
|
|
|
Cardium Light Oil
Development
Inventory
|
~290 net undrilled
locations
|
|
|
Emerging Light Oil
Resource Exposure
|
25 net development
sections at Monarch
~ 85 net sections of
Torquay/Three Forks exposure
|
|
|
Southeast
Saskatchewan Light Oil
Development
Inventory
|
~190 net undrilled
locations
|
|
|
Sustainability
Assumptions
|
Corporate decline
~24%
Light Oil Full Cycle
Capital Efficiency ~$38,000/boepd (IP 365)
|
2015 Capital
Program
|
$125
million
|
|
|
Annual Dividend (paid
monthly)
|
$0.54 per
share
$61
million
$46 million (net of
25% share dividend participation)
|
|
|
Net Debt & Bank
Line
|
2014 year-end net
debt of $245 million
Bank line of $425
million
|
|
|
Shares
Outstanding
|
113.1 million
(basic)
|
|
|
Tax Pools
|
Greater than $1
billion
|
|
|
Notes:
|
|
1.
|
~86% light oil &
NGLs
|
2.
|
Company gross
reserves being pro forma TORC's working interest share before
deduction of royalties and without including any royalty interests
of pro forma TORC. Based on the independent reserve report,
effective as of December 31, 2014, prepared by Sproule Associates
Limited, and TORC internal evaluation of the reserves acquired
pursuant to the Acquisition, effective November 1, 2014, prepared
by a qualified reserves evaluator in accordance with NI 51-101 and
the COGE Handbook.
|
An updated corporate presentation may be found at
www.torcoil.com.
TORC Oil & Gas Ltd. is a Calgary based company active in the
acquisition, exploration, development and production of crude oil
and natural gas in Western
Canada.
Note regarding forward looking statements:
This press release contains forward-looking statements and
forward-looking information (collectively "forward-looking
information") within the meaning of applicable securities laws
relating to the Company's plans and other aspects of TORC's 2015
capital budget, strategic objectives, anticipated future
operations, dividend payments, financial, operating and production
results, including expected 2015 average production, exit
production, cash flow, netbacks, decline rates, net debt, net debt
to cash flow, capital expenditure program, commodity pricing, the
sources of funding of the capital program and dividend payments,
targeted growth, tax pools and drilling and development plans and
the timing thereof. In addition, and without limiting the
generality of the foregoing, this press release contains
forward-looking information regarding: the Company's long term
objectives; the focus and allocation of TORC's 2015 capital budget,
including a break-down of capital by core area; management's view
of the characteristics and quality of TORC's assets and the assets
acquired pursuant to the Acquisition, including the high quality,
low-risk, light oil, high netback, development nature of these
properties, the magnitude of opportunities available to the Company
on its assets, the production profile and decline rates on the
Company's assets, the drilling inventory available to the Company;
capital efficiencies, netbacks, service cost reductions and payout
ratio guidance for 2015; matters pertaining to the 2015 hedging
plans of TORC; TORC's subjective views of initial well results; the
anticipated benefits from CPPIB's involvement with TORC;
participation in the SDP; anticipated growth and maintenance
capital expenditures in 2015; the contents of and timing of filing
of the AIF; and other matters ancillary or incidental to the
foregoing.
Forward-looking information typically uses words such as
"anticipate", "believe", "project", "target", "guidance", "expect",
"goal", "plan", "intend" or similar words suggesting future
outcomes, statements that actions, events or conditions "may",
"would", "could" or "will" be taken or occur in the future. The
forward-looking information is based on certain key expectations
and assumptions made by TORC's management, including expectations
and assumptions concerning prevailing commodity prices, exchange
rates, interest rates, applicable royalty rates and tax laws;
capital efficiencies; decline rates; future production rates and
estimates of operating costs; performance of existing and future
wells; reserve and resource volumes; anticipated timing and results
of capital expenditures; the success obtained in drilling new
wells; the sufficiency of budgeted capital expenditures in carrying
out planned activities; the timing, location and extent of future
drilling operations; the state of the economy and the exploration
and production business; results of operations; performance;
business prospects and opportunities; the availability and cost of
financing, labour and services; the impact of increasing
competition; ability to market oil and natural gas successfully and
TORC's ability to access capital.
Statements relating to "reserves" are also deemed to be
forward looking statements, as they involve the implied assessment,
based on certain estimates and assumptions, that the reserves
described exist in the quantities predicted or estimated and that
the reserves can be profitably produced in the future.
Although the Company believes that the expectations and
assumptions on which such forward-looking information is based are
reasonable, undue reliance should not be placed on the
forward-looking information because TORC can give no assurance that
they will prove to be correct. Since forward-looking information
addresses future events and conditions, by its very nature they
involve inherent risks and uncertainties. The Company's actual
results, performance or achievement could differ materially from
those expressed in, or implied by, the forward-looking information
and, accordingly, no assurance can be given that any of the events
anticipated by the forward-looking information will transpire or
occur, or if any of them do so, what benefits that the Company will
derive there from. Management has included the above summary of
assumptions and risks related to forward-looking information
provided in this press release in order to provide securityholders
with a more complete perspective on TORC's future operations and
such information may not be appropriate for other purposes.
Dividends:
The payment and the amount of dividends declared in any month
will be subject to the discretion of the board of directors and
will depend on the board of director's assessment of TORC's outlook
for growth, capital expenditure requirements, funds from
operations, potential acquisition opportunities, debt position and
other conditions that the board of directors may consider relevant
at such future time. The amount of future cash dividends, if any,
may also vary depending on a variety of factors, including
fluctuations in commodity prices and differentials, production
levels, capital expenditure requirements, debt service
requirements, operating costs, royalty burdens and foreign exchange
rates.
Non-GAAP Measures:
This document contains the term "cash flow" and "netbacks",
which do not have a standardized meaning prescribed by Canadian
generally accepted accounting principles ("GAAP") and therefore may
not be comparable with the calculation of similar measures by other
companies. TORC uses cash flow and netbacks to analyze financial
and operating performance. TORC feels these benchmarks are key
measures of profitability and overall sustainability for TORC. Both
of these terms are commonly used in the oil and gas industry. Cash
flow and operating netbacks are not intended to represent operating
profits nor should they be viewed as an alternative to cash flow
provided by operating activities, net earnings or other measures of
financial performance calculated in accordance with GAAP. Cash
flows are calculated as cash flows from operating activities less
changes in non-cash working capital. Netbacks are determined by
deducting royalties, production expenses and transportation and
selling expenses from oil and gas revenue. TORC calculates cash
flow per share using the same method and shares outstanding that
are used in the determination of earnings per share.
Information Regarding Disclosure on Oil and Gas Reserves
and Operational Information:
Our oil and gas reserves statement for the year ended
December 31, 2014, which will include
complete disclosure of our oil and gas reserves and other oil and
gas information in accordance with NI 51-101, will be contained
within our Annual Information Form which will be available on our
SEDAR profile by March 31, 2015 at
www.sedar.com. The recovery and reserve estimates contained herein
are estimates only and there is no guarantee that the estimated
reserves will be recovered. In relation to the disclosure of
estimates for individual properties, such estimates may not reflect
the same confidence level as estimates of reserves and future net
revenue for all properties, due to the effects of aggregation. The
Company's belief that it will establish additional reserves over
time with conversion of probable undeveloped reserves into proved
reserves is a forward-looking statement and is based on certain
assumptions and is subject to certain risks, as discussed above
under the heading "Note regarding forward looking
statements".
Drilling Locations
This press release discloses drilling locations in three
categories: (i) proved locations; (ii) probable locations; and
(iii) unbooked locations. Proved locations and probable locations
are derived from the Company's most recent independent reserves
evaluation as prepared by Sproule as of December 31, 2014 and account for drilling
locations that have associated proved and/or probable reserves, as
applicable. Unbooked locations are internal estimates based on
TORC's prospective acreage and an assumption as to the number of
wells that can be drilled per section based on industry practice
and internal review. Unbooked locations do not have attributed
reserves. Of the 480 drilling locations identified herein in the
Company's Cardium and southeast Saskatchewan conventional core areas, 91 are
proved locations, 39 are probable locations and 350 are unbooked
locations. Unbooked locations have been identified by management as
an estimation of our multi-year drilling activities based on
evaluation of applicable geologic, seismic, engineering, production
and reserves information. There is no certainty that TORC will
drill all unbooked drilling locations and if drilled there is no
certainty that such locations will result in additional oil and gas
reserves or production. The drilling locations on which we actually
drill wells will ultimately depend upon the availability of
capital, regulatory approvals, seasonal restrictions, oil and
natural gas prices, costs, actual drilling results, additional
reservoir information that is obtained and other factors. While
certain of the unbooked drilling locations have been derisked by
drilling existing wells in relative close proximity to such
unbooked drilling locations, some of other unbooked drilling
locations are farther away from existing wells where management has
less information about the characteristics of the reservoir and
therefore there is more uncertainty whether wells will be drilled
in such locations and if drilled there is more uncertainty that
such wells will result in additional oil and gas reserves or
production.
Meaning of Boe and Boepd:
The term "BOE" or barrels of oil equivalent 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. Additionally,
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 ratio of 6:1 may
be misleading as an indication of value.
Finding and Development Costs:
NI 51-101 specifies how finding and development costs
("F&D costs") should be calculated if they are reported.
Essentially NI 51-101 requires that the exploration and development
costs incurred in the year along with the change in estimated
F&D costs be aggregated and then divided by the applicable
reserve additions. The calculation specifically excludes the
effects of acquisitions and dispositions on both reserves and
costs. By excluding the effects of acquisitions and dispositions
TORC believes that the provisions of the NI 51-101 do not fully
reflect TORC's ongoing reserve replacement costs. Since
acquisitions can have a significant impact on TORC's annual reserve
replacement costs, excluding these amounts could result in an
inaccurate portrayal of TORC's cost structure. Accordingly, TORC
also provides FD&A costs that incorporate all acquisitions and
dispositions during the year. F&D costs disclosed herein are
based on working interest gross reserves.
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 F&D costs related to reserve additions for that
year.
The net present value of future net revenue of reserves do
not represent fair market value.
Analogous Information:
Certain information in this news release may constitute
"analogous information" as defined in NI 51-101, including, but not
limited to, information relating to the areas in geographical
proximity to lands held or to be to be held by TORC. TORC
believes this information is relevant as it helps to define the
reservoir characteristics in which TORC may hold an interest. TORC
is unable to confirm that the analogous information was prepared by
a qualified reserves evaluator or auditor. Such information is not
an estimate of the reserves or resources attributable to lands held
or to be held by TORC and there is no certainty that the reservoir
data and economics information for the lands held or to be held by
TORC will be similar to the information presented herein. The
reader is cautioned that the data relied upon by TORC may be in
error and/or may not be analogous to such lands to be held by
TORC.
SOURCE TORC Oil & Gas Ltd.