Record Low Proved Developed Producing Reserve
Addition Cost of $0.84/mcfe
($5.04/boe) Underscores
Outperformance In All Reserve Categories
(TSX: AAV, NYSE: AAV)
CALGARY, Feb. 7, 2017 /CNW/ - Advantage Oil & Gas Ltd.
("Advantage" or the "Corporation") is pleased to report that the
Corporation achieved record low reserves addition costs and capital
efficiencies in 2016 which continues to demonstrate the ongoing
strength of its industry leading low cost and profitable natural
gas development at its Glacier Montney property. Year-on-year gains
in well production performance generated significant positive
technical revisions that accounted for 46% of proved plus probable
("2P") reserve additions while Advantage's development and
delineation drilling program at Glacier contributed the balance of
natural gas and liquids reserves additions. 2P reserves grew
13% to 2.2 Tcfe (366.1 million boe) including natural gas liquids
which increased by 17% to 23.5 million
barrels.
During 2016, Advantage brought 15 new wells on-production which
helped increase annual production by 44% over 2015. These
wells and the improved performance of historical
producing wells contributed to a 26% increase in proved developed
producing ("PDP") reserves at a record low finding and development
("F&D") cost of $0.84/mcfe
($5.04/boe) and a PDP recycle ratio
of 3.4. The Corporation's 2P reserve additions replaced 429%
of its 2016 annual production while lower future development
capital combined with significant positive technical revisions
resulted in a negative 2016 F&D cost of -$0.01/mcfe (-$0.06/
boe) and a three year average 2P F&D cost including the change
in future development capital ("FDC") of $0.46/mcfe ($2.76/boe).
As the Corporation continues to advance its Montney growth plan and expand its 100% owned
Glacier gas plant to 400 mmcf/d (66,670 boe/d), we believe
Advantage's Glacier development is and will continue to be an
industry leading and competitive North American low cost natural
gas supply source as demonstrated by record achievements in its
operating, financial and reserve addition results in 2016.
PDP reserves increased 26% to 381 Bcfe
at a F&D cost of $0.84/mcfe
($5.04/boe). PDP reserves
increased due to the recognition of 15 new wells that were brought
on-production in 2016 and higher reserves assignments on historical
producing wells due to shallower longer term declines than
previously assumed.
Proved ("1P") reserves increased 20% to 1.53 Tcfe
(255.1 million boe) at a F&D cost of $0.25/mcfe ($1.49/boe) including the change in
FDC. Reserve increases resulted from technical
revisions which accounted for 60% of the 1P reserves additions and
the conversion of probable locations to the proved reserves
category as a result of Advantage's successful drilling
program.
2P reserves increased 13% to 2.20 Tcfe (366.1
million boe) at a F&D cost including the change in FDC
of -$0.01/mcfe (-$0.06/boe). 2P FDC
decreased by $131 million reflective
of lower future well costs which were partly offset by increases in
facilities costs to include an upsized Glacier gas plant expansion
to 400 mmcf/d and future infrastructure costs including a frac
water supply system, gas gathering system expansions and additional
utilities. This reduction in FDC is due to Advantage's ongoing
achievements in improving capital efficiencies and lowering costs
which has reduced capital requirements to support growth. The
2016 2P reserves include an addition of 24 new Glacier Montney well
locations including 10 undeveloped locations that were added in
2016. A total of 307 undeveloped locations were booked in the
2016 reserve report. Management estimates approximately 1,100
total Montney locations remain
undrilled at Glacier.
The Corporation replaced 429% of its 2016 annual production
on a 2P basis, 438% on a 1P basis and 206% on a PDP basis at
Recycle Ratios of -266.6x (7.0x excluding the change in FDC), 11.4x
and 3.4x, respectively. The strong recycle ratios
reinforces Advantage's industry leading low cost structure which
continues to support strong netbacks and profit margins. These
recycle ratios included the Corporation's hedges and were achieved
in the environment where the AECO daily natural gas price averaged
Cdn $2.16/mcf in 2016.
At year-end 2016, Advantage's 2P reserves grew 13% and 18% on
a debt adjusted basis and 1P reserves grew 20% and 26% on a debt
adjusted per share basis compared to year-end
2015.
Since Advantage's Glacier Montney development
program began in 2008, 2P reserves have grown 3,800%
to 2.2 Tcfe (366.1 million boe) with a 2P reserve Net Present Value
of $2.2 Billion as at December 31, 2016 (10% discount factor on a
pre-tax basis).
The cumulative efficiencies achieved to date have allowed the
Corporation to continue to deliver profitable and sustainable
growth. This is further reflected in our 2017 through 2019
strategic growth plan which is targeted to deliver 52% production
growth per share (16% on an average annual production per share
basis) while reducing estimated year-end total debt to trailing
cash flow to 0.2x in 2019 at an average AECO natural gas price of
Cdn $2.95/mcf ($2.80/GJ) as outlined in Advantage's "2017 Budget
and Development Plan" press release dated November 28, 2016.
Notable 2016 Reserve Changes and
Analysis
Sproule Associates Ltd. ("Sproule") was engaged as an
independent qualified reserve evaluator to evaluate Advantage's
year-end reserves as of December 31,
2016 ("Sproule 2016 reserve report") in accordance with
National Instrument 51-101 ("NI 51-101") and the Canadian Oil and
Gas Evaluation Handbook ("COGE Handbook"). Reserves are
stated on a gross (before royalties) working interest basis unless
otherwise indicated. Additional details are provided in the
accompanying tables to this release and additional reserve
information as required under NI 51-101 will be included in our
Annual Information Form which will be filed on SEDAR on or before
March 31, 2017.
All references to 2016 operational and financial results are
estimates only and have not been reviewed or audited by our
independent auditor. Advantage is expected to release its
fourth quarter and year-end results after markets close on
March 2, 2017.
- The Sproule 2016 reserve report demonstrates the continued and
efficient conversion of identified natural gas and natural gas
liquids resources into 2P reserves. The reserves by category and
year over year changes compared to 2015 are indicated
below:
Reserve
Category
|
Conventional
Natural Gas Tcf
|
NGLs Million bbls
|
Total Gas
Equivalent Tcfe
|
% Change from
2015
|
PDP
|
0.36
|
3.65
|
0.38
|
26%
|
1P
|
1.44
|
15.53
|
1.53
|
20%
|
2P
|
2.06
|
23.54
|
2.20
|
13%
|
- The total number of 2P future well locations booked and the 2P
estimated ultimate recoverable ("EUR") conventional natural gas
volumes per well assigned by Sproule in the Sproule 2016 reserve
report are illustrated in the following table:
|
Sproule
# of Gross
Horizontal
Wells
Booked
|
Sproule
Average
EUR/well
(bcf
raw /well)
|
|
Developed
|
Undeveloped
|
Undeveloped
|
Upper
|
102
|
141
|
5.9
|
Middle
|
22
|
82
|
4.9
|
Lower
|
43
|
84
|
6.4
|
Total
|
167
|
307
|
|
- The Sproule 2016 reserve report average 2P recovery per well
increased for Upper Montney undeveloped locations from 5.5 bcf/well
to 5.9 bcf/well. The average 2P recovery per well increased for
Middle Montney undeveloped locations from 4.6 bcf/well to 4.9
bcf/well reflective of higher initial production rates and lower
declines. The average 2P recovery per well for Lower Montney
undeveloped locations increased from 5.9 bcf/well to 6.4 bcf/well.
Advantage's Management estimates over 1,100 locations remain
undrilled at Glacier based on the five Montney development layers within our 300
meter thick Montney reservoir.
- Advantage's 1P reserve life index is 19 years and its 2P
reserve life index is 27 years based on the Corporation's average
fourth quarter 2016 production rate of approximately 221
mmcfe/d.
- The 2P Reserve Net Present Value determined by Sproule is
approximately $2.2 billion as at
December 31, 2016 (10% discount
factor on a pre-tax basis).
2016 Summary Results
During the fourth quarter of 2016 production increased 42% over
the same period in 2015 to 221 mmcfe/d and Advantage outperformed
its annual 2016 Guidance targets (please refer to Advantage's
Operational Update press release dated January 18, 2017).
Key operational results during the fourth quarter of 2016 and
for calendar 2016 are indicated below:
|
|
Q4
2016E
|
2016E
|
Production
(mmcfe/d)
|
|
221
|
203
|
Royalties
%
|
|
5.6%
|
3.0%
|
Operating Cost
($/mcfe)
|
|
$0.22
|
$0.27
|
Operating netback
($/mcfe)
|
|
$2.83
|
$2.46
|
Capital Expenditures
($ millions)
|
|
$30
|
$128
|
Total Debt including
working capital ($ millions)
|
|
$159
|
$159
|
(References to 2016 operational and financial results are
estimates only and have not been reviewed or audited by our
independent auditor. Advantage is expected to release its
fourth quarter and year-end results after markets close on
March 2, 2017)
Looking Forward
The Sproule 2016 reserve report demonstrates another year of
highly efficient reserve additions at Glacier reaffirming the
exceptional quality of our Montney
asset and the outstanding achievements of our team who accomplished
this in a safe and environmentally responsible manner.
Looking ahead, Advantage remains highly focused on maintaining
operational and financial flexibility in conjunction with growth
plans that generate profitability during lower commodity price
cycles while preserving significant upside torque. We look
forward to reporting on our progress through 2017.
RESERVE SUMMARY TABLES
Company Gross (before royalties) Working Interest
Reserves
Summary as at December
31, 2016
|
Light &
Medium
Oil
(mbbl)
|
Natural
Gas
Liquids
(mbbl)
|
Conventional
Natural Gas
(mmcf)
|
Total Oil
Equivalent
(mboe)
|
Proved
|
|
|
|
|
Developed
Producing
|
8
|
3,645
|
358,980
|
63,484
|
Developed
Non-producing
|
-
|
597
|
50,736
|
9,053
|
Undeveloped
|
-
|
11,281
|
1,027,433
|
182,520
|
Total
Proved
|
8
|
15,524
|
1,437,149
|
255,057
|
Probable
|
3
|
8,005
|
618,249
|
111,049
|
Total Proved +
Probable
|
11
|
23,529
|
2,055,398
|
366,106
|
|
(1) Tables may
not add due to rounding.
|
Company Net Present Value of Future Net Revenue using Sproule
price and cost forecasts
(1)(2)(3)
($000)
|
Before Income Taxes
Discounted at
|
|
0%
|
10%
|
15%
|
Proved
|
|
|
|
Developed
Producing
|
1,084,909
|
720,793
|
616,180
|
Developed
Non-producing
|
186,551
|
90,765
|
72,810
|
Undeveloped
|
2,587,841
|
614,694
|
298,395
|
|
|
|
|
Total
Proved
|
3,859,301
|
1,426,251
|
987,386
|
|
|
|
|
Probable
|
2,384,445
|
787,492
|
546,369
|
|
|
|
|
Total Proved +
Probable
|
6,243,745
|
2,213,743
|
1,533,754
|
|
|
(1)
|
Advantage's light and
medium oil, conventional natural gas and natural gas liquid
reserves were evaluated using Sproule's product price forecast
effective December 31, 2016 prior to the provision for income
taxes, interests, debt services charges and general and
administrative expenses. It should not be assumed that the
discounted future net revenue estimated by Sproule represents the
fair market value of the reserves.
|
(2)
|
Assumes that
development of Glacier will occur, without regard to the likely
availability to the Corporation of funding required for that
development.
|
(3)
|
Future Net Revenue
incorporates Managements' estimates of required abandonment and
reclamation costs, including expected timing such costs will be
incurred, associated with all wells, facilities and infrastructure.
No abandonment and reclamation costs have been excluded.
|
(4)
|
Tables may not add
due to rounding.
|
Sproule Price Forecasts
The net present value of future net revenue at December 31, 2016 was based upon natural gas and
natural gas liquids pricing assumptions prepared by Sproule
effective December 31, 2016. These
forecasts are adjusted for reserve quality, transportation charges
and the provision of any applicable sales contracts. The price
assumptions used over the next seven years are summarized in the
table below:
Year
|
Alberta
AECO-C
Natural
Gas
($Cdn/mmbtu)
|
Henry Hub
Natural
Gas
($US/mmbtu)
|
Edmonton
Propane
($Cdn/bbl)
|
Edmonton
Butane
($Cdn/bbl)
|
Edmonton
Pentanes
Plus
($Cdn/bbl)
|
Exchange
Rate
($US/$Cdn)
|
2017
|
3.44
|
3.50
|
22.74
|
47.60
|
67.95
|
0.78
|
2018
|
3.27
|
3.50
|
28.04
|
55.49
|
75.61
|
0.82
|
2019
|
3.22
|
3.50
|
30.64
|
57.65
|
78.82
|
0.85
|
2020
|
3.91
|
4.00
|
32.27
|
58.80
|
80.47
|
0.85
|
2021
|
4.00
|
4.08
|
33.95
|
59.98
|
82.15
|
0.85
|
2022
|
4.10
|
4.16
|
35.68
|
61.18
|
83.86
|
0.85
|
2023
|
4.19
|
4.24
|
37.46
|
62.40
|
85.61
|
0.85
|
|
|
|
|
|
|
|
Company Gross (before royalties) Working Interest Reserves
Reconciliation (1):
Proved
|
Light &
Medium Oil
(mbbl)
|
Natural
Gas
Liquids
(mbbl)
|
Conventional
Natural
Gas
(mmcf)
|
Total Oil
Equivalent
(mboe)
|
|
|
|
|
|
Opening balance Dec.
31, 2015
|
9.4
|
12,097
|
1,206,484
|
213,187
|
Extensions
|
-
|
3,166
|
142,211
|
26,868
|
Infill
Drilling
|
-
|
-
|
-
|
-
|
Improved
recovery
|
-
|
-
|
-
|
-
|
Technical
revisions
|
0.5
|
846
|
190,852
|
32,655
|
Discoveries
|
-
|
-
|
-
|
-
|
Acquisitions
|
-
|
-
|
-
|
-
|
Royalty
Changes
|
-
|
(166)
|
(20,901)
|
(3,650)
|
Economic
factors
|
(0.1)
|
(86)
|
(9,087)
|
(1,600)
|
Production
|
(1.4)
|
(334)
|
(72,410)
|
(12,404)
|
|
|
|
|
|
Closing balance at
Dec. 31, 2016
|
8.4
|
15,524
|
1,437,149
|
255,057
|
|
|
|
|
|
Proved Plus
Probable
|
Light &
Medium Oil
(mbbl)
|
Natural
Gas
Liquids
(mbbl)
|
Conventional
Natural
Gas
(mmcf)
|
Total Oil
Equivalent
(mboe)
|
|
|
|
|
|
Opening balance Dec.
31, 2015
|
12.2
|
20,121
|
1,831,284
|
325,347
|
Extensions
|
-
|
3,966
|
174,684
|
33,080
|
Infill
Drilling
|
-
|
-
|
-
|
-
|
Improved
recovery
|
-
|
-
|
-
|
-
|
Technical
revisions
|
0.5
|
(225)
|
149,264
|
24,653
|
Discoveries
|
-
|
-
|
-
|
-
|
Acquisitions
|
-
|
-
|
-
|
-
|
Royalty
Changes
|
-
|
106
|
(15,929)
|
(2,549)
|
Economic
factors
|
(0.2)
|
(106)
|
(11,495)
|
(2,022)
|
Production
|
(1.4)
|
(334)
|
(72,410)
|
(12,404)
|
|
|
|
|
|
Closing balance at
Dec. 31, 2016
|
11.1
|
23,529
|
2,055,398
|
366,106
|
|
|
(1)
|
Technical revisions
accounted for 60% of the total proved additions and 46% of the
total proved plus probable additions. Percentage of each category
calculated by dividing the technical revisions in the category by
the total reserve additions in the same category before
production.
|
(2)
|
Tables may not add
due to rounding.
|
Company Finding & Development Costs ("F&D")
Company 2016 F&D Costs – Gross (before royalties) Working
Interest Reserves including Future Development Capital
(1)(2)(3)
|
Proved
|
Proved +
Probable
|
Capital expenditures
($000)
|
128,014
|
128,014
|
Net change in Future
Development Capital ($000)
|
(47,091)
|
(131,400)
|
Total capital
($000)
|
80,923
|
(3,386)
|
|
|
|
Total mboe, end of
year
|
255,057
|
366,106
|
Total mboe, beginning
of year
|
213,187
|
325,347
|
Production,
mboe
|
12,404
|
12,404
|
Reserve additions,
mboe
|
54,274
|
53,163
|
|
|
|
2016 F&D costs
($/boe)
|
$1.49
|
$(0.06)
|
2015 F&D costs
($/boe)
|
$5.22
|
$4.65
|
Three-year average
F&D costs ($/boe)
|
$4.53
|
$2.76
|
|
|
(1)
|
F&D costs are
calculated by dividing total capital by reserve additions during
the applicable period. Total capital includes both capital
expenditures incurred and changes in FDC required to bring the
proved undeveloped and probable reserves to production during the
applicable period. Reserve additions is calculated as the change in
reserves from the beginning to the ending of the applicable period
excluding production.
|
(2)
|
The aggregate of the
exploration and development costs incurred in the most recent
financial year and the change during that year in estimated FDC
generally will not reflect total finding and development costs
related to reserves additions for that year. Changes in forecast
FDC occur annually as a result of development activities,
acquisition and disposition activities and capital cost estimates
that reflect Sproule's best estimate of what it will cost to bring
the proved undeveloped and probable reserves on
production.
|
(3)
|
The change in FDC is
primarily from lower future well costs which were partly offset by
increases in facilities costs to include an upsized Glacier gas
plant expansion to 400 mmcf/d and future infrastructure costs such
as a frac water supply system, gas gathering system expansions and
additional utilities.
|
Advisory
The information in this press release contains certain
forward-looking statements, including within the meaning of the
United States Private Securities Litigation Reform Act of 1995.
These statements relate to future events or our future intentions
or performance. All statements other than statements of historical
fact may be forward-looking statements. Forward-looking statements
are often, but not always, identified by the use of words such as
"seek", "anticipate", "plan", "continue", "estimate",
"demonstrate", "expect", "may", "can", "will", "project",
"predict", "potential", "target", "intend", "could", "might",
"should", "guidance", "believe", "would" and similar expressions
and include statements relating to, among other things, Advantage's
anticipated future production from the Glacier Montney resource play and the expected timing
thereof; Advantage's belief that its Glacier development will
continue to be an industry leading North American low cost natural
gas supply source; Advantage's 2017 through 2019 development plan,
including estimated production per share growth and year-end total
debt to trailing cash flow ratio; the expected timing of release of
Advantage's 2016 financial and operational results; estimated
production from Advantage's wells and the timing of achievement
thereof; estimated number of drilling locations; Advantage's
estimated fourth quarter and full year 2016 financial and operating
results including production, royalties, operating costs, operating
netback, capital expenditures and total debt including working
capital; and Advantage's focus on maintaining operational and
financial flexibility in conjunction with growth plans that
generate profitability during lower commodity price cycles. In
addition, statements relating to "reserves" are by their nature
forward-looking statements, as they involve the implied assessment,
based on certain estimates and assumptions that the reserves
described can be profitably produced in the future. The recovery
and reserve estimates of Advantage's reserves provided herein are
estimates only and there is no guarantee that the estimated
reserves will be recovered. Advantage's actual decisions,
activities, results, performance or achievement could differ
materially from those expressed in, or implied by, such
forward-looking statements and accordingly, no assurances can be
given that any of the events anticipated by the forward-looking
statements will transpire or occur or, if any of them do, what
benefits that Advantage will derive from them.
These statements involve substantial known and unknown risks
and uncertainties, certain of which are beyond Advantage's control,
including, but not limited to: changes in general economic, market
and business conditions; industry conditions; actions by
governmental or regulatory authorities including increasing taxes
and changes in investment or other regulations; changes in tax
laws, royalty regimes and incentive programs relating to the oil
and gas industry; the effect of acquisitions; Advantage's success
at acquisition, exploitation and development of reserves;
unexpected drilling results; changes in commodity prices, currency
exchange rates, capital expenditures, reserves or reserves
estimates and debt service requirements; the occurrence of
unexpected events involved in the exploration for, and the
operation and development of, oil and gas properties, including
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; changes or fluctuations in production levels;
delays in anticipated timing of drilling and completion of wells;
delays in completion of the expansion of the Glacier gas
plant; individual well productivity; competition from other
producers; the lack of availability of qualified personnel or
management; credit risk; changes in laws and regulations including
the adoption of new environmental laws and regulations and changes
in how they are interpreted and enforced; our ability to comply
with current and future environmental or other laws; stock market
volatility and market valuations; liabilities inherent in oil and
natural gas operations; uncertainties associated with estimating
oil and natural gas reserves; competition for, among other things,
capital, acquisitions of reserves, undeveloped lands and skilled
personnel; incorrect assessments of the value of acquisitions;
geological, technical, drilling and processing problems and other
difficulties in producing petroleum reserves; ability to obtain
required approvals of regulatory authorities; and ability to access
sufficient capital from internal and external sources. Many of
these risks and uncertainties and additional risk factors are
described in the Corporation's Annual Information Form which is
available at www.sedar.com ("SEDAR") and www.advantageog.com.
Readers are also referred to risk factors described in other
documents Advantage files with Canadian securities
authorities.
With respect to forward-looking statements contained in this
press release, Advantage has made assumptions regarding, but not
limited to: conditions in general economic and financial markets;
effects of regulation by governmental agencies; current and future
commodity prices and royalty regimes; future exchange rates;
royalty rates; future operating costs; availability of skilled
labor; availability of drilling and related equipment; timing and
amount of capital expenditures; the impact of increasing
competition; the price of crude oil and natural gas; 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; 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 properties in the manner currently
contemplated; current or, where applicable, proposed assumed
industry conditions, laws and regulations will continue in effect
or as anticipated; and the estimates of the Corporation's
production and reserves 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 above and in its
continuous disclosure filings on SEDAR in order to provide
shareholders with a more complete perspective on Advantage's future
operations and such information may not be appropriate for other
purposes. Advantage'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 Advantage 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
news release and Advantage 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.
Barrels of oil equivalent (boe) and thousand cubic feet of
natural gas equivalent (mcfe) may be misleading, particularly if
used in isolation. Boe and mcfe conversion ratios have been
calculated using a conversion rate of six thousand cubic feet of
natural gas equivalent to one barrel of oil. A boe and mcfe
conversion ratio of 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.
This press release contains a number of oil and gas metrics,
including F&D, operating netback, recycle ratio, EUR, reserve
replacement and reserve life index, which do not have standardized
meanings or standard methods of calculation and therefore such
measures may not be comparable to similar measures used by other
companies and should not be used to make comparisons. Such metrics
have been included herein to provide readers with additional
measures to evaluate the Corporation's performance; however, such
measures are not reliable indicators of the future performance of
the Corporation and future performance may not compare to the
performance in previous periods and therefore such metrics should
not be unduly relied upon. Management uses these oil and gas
metrics for its own performance measurements and to provide
securityholders with measures to compare Advantage's operations
over time. Readers are cautioned that the information provided by
these metrics, or that can be derived from the metrics presented in
this news release, should not be relied upon for investment or
other purposes.Operating netback is calculated by adding natural
gas and liquids sales with realized gains on derivatives and
subtracting royalty expense, operating expense and transportation
expense. Recycle ratio is calculated by dividing Advantage's fourth
quarter operating netback by the calculated F&D of the
applicable year and expressed as a ratio. Reserve
replacement is calculated by dividing reserves net volume additions
by the current annual production and expressed as a percentage.
Reserve life index is calculated by dividing the total volume of
reserves by the fourth quarter production rate and expressed in
years. Reserves per share is calculated as the total volume of
reserves divided by the number of common shares issued and
outstanding at year end. Reserves per debt-adjusted share assumes
the issuance of additional common shares at the closing trading
price on the TSX necessary to extinguish outstanding debt at year
end and is calculated as the total volume of reserves divided by
the sum of the number of common shares issued and outstanding at
year end and the debt at year end divided by the Corporation's
closing trading price on the TSX at year end.
The recovery and reserve estimates of reserves provided in
this news release are estimates only, and there is no guarantee
that the estimated reserves will be recovered. Actual reserves may
eventually prove to be greater than, or less than, the estimates
provided herein.
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 Corporation's most recent independent reserves
evaluation as prepared by Sproule as of December 31, 2016 and account for drilling
locations that have associated proved and/or probable reserves, as
applicable. Unbooked locations are internal estimates based on the
Corporation'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 or resources. 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 the Corporation will drill all unbooked drilling
locations and if drilled there is no certainty that such locations
will result in additional oil and gas reserves, resources 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, 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, resources or production.
The Corporation discloses several financial measures that do
not have any standardized meaning prescribed under International
Financial Reporting Standards ("IFRS"). These financial measures
include total debt to trailing cash flow ratio and operating
netback. Total debt to trailing cash flow ratio is calculated as
bank indebtedness under the Corporation's credit facilities plus
working capital deficit divided by funds from operations for the
prior twelve month period. Funds from operations is based on cash
provided by operating activities, before expenditures on
decommissioning liability and changes in non-cash working capital,
reduced for finance expense excluding accretion. Operating netback
is calculated as calculated by adding natural gas and liquids sales
with realized gains on derivatives and subtracting royalty expense,
operating expense and transportation expense. Management believes
that these financial measures are useful supplemental information
to analyze operating performance and provide an indication of the
results generated by the Corporation's principal business
activities. Investors should be cautioned that these measures
should not be construed as an alternative to net income or other
measures of financial performance as determined in accordance with
IFRS. Advantage's method of calculating these measures may differ
from other companies, and accordingly, they may not be comparable
to similar measures used by other companies. Please see the
Corporation's most recent Management's Discussion and Analysis,
which is available at www.sedar.com and www.advantageog.com for
additional information about these financial measures.
This press release and, in particular the information in
respect of the Corporation's expected 2016 operating costs, capital
expenditures, total debt and operating netback, and 2019 total debt
to trailing cash flow ratio, may contain future oriented financial
information ("FOFI") within the meaning of applicable securities
laws. The FOFI has been prepared by management to provide an
outlook of the Corporation's activities and results and may not be
appropriate for other purposes. The FOFI has been prepared based on
a number of assumptions, including the assumptions discussed above,
and assumptions with respect to the costs and expenditures to be
incurred by the Corporation, capital equipment and operating costs,
foreign exchange rates, taxation rates for the Corporation, general
and administrative expenses and the prices to be paid for the
Corporation's production. Management does not have firm commitments
for all of the costs, expenditures, prices or other financial
assumptions used to prepare the FOFI or assurance that such
operating results will be achieved and, accordingly, the complete
financial effects of all of those costs, expenditures, prices and
operating results are not objectively determinable. The actual
results of operations of the Corporation and the resulting
financial results may vary from the amounts set forth herein, and
such variations may be material. The Corporation and management
believe that the FOFI has been prepared on a reasonable basis,
reflecting management's best estimates and judgments. However,
because this information is highly subjective and subject to
numerous risks including the risks discussed above, it should not
be relied on as necessarily indicative of future results. FOFI
contained in this press release was made as of the date of this
press release and the Corporation disclaims any intention or
obligations to update or revise any FOFI contained in this press
release, whether as a result of new information, future events or
otherwise, unless required pursuant to applicable law.
Certain financial and operating results included in this news
release including production, operating costs, operating netback,
capital expenditures and total debt including working capital are
based on unaudited estimated results. These estimated results are
subject to change upon completion of the Corporation's audited
financial statements for the year ended December 31, 2016, and changes could be material.
Advantage anticipates filing its audited financial statements and
related management's discussion and analysis for the year ended
December 31, 2016 on SEDAR on
March 2, 2017.
The following abbreviations used in this press release have
the meanings set forth below:
bbls
|
barrels
|
bcfe
|
bllion cubic feet
equivalent
|
boe
|
barrels of oil
equivalent of natural gas, on the basis of one barrel of oil or
NGLs for six thousand cubic feet of natural gas
|
mcf
|
thousand cubic
feet
|
mmcf
|
million cubic
feet
|
mmcf/d
|
million cubic feet
per day
|
mcfe
|
thousand cubic
feet equivalent on the basis of six thousand cubic feet of natural
gas for one barrel of oil or NGLs
|
mmcfe
|
million cubic feet
equivalent
|
mmcfe/d
|
million cubic feet
equivalent per day
|
tcfe
|
trillion cubic
feet equivalent
|
SOURCE Advantage Oil & Gas Ltd.