2019 Year-End Reserves & Operating
Results
(TSX: AAV)
CALGARY, Feb. 5, 2020 /CNW/ - Advantage Oil & Gas Ltd.
("Advantage" or the "Corporation") is pleased to announce its 2019
year-end reserve evaluation by Sproule Associates Limited
("Sproule"), and a summary of 2019 operating results.
During 2019, Advantage achieved several important milestones in
our liquids-focused transition, as demonstrated by our reserves
additions and operating results. These achievements have
positioned Advantage for a step change in oil and condensate
production in 2020, enhancing our portfolio of investment
opportunities while preserving our low-cost prolific gas
foundation.
Accomplishments in 2019 include an important light oil pool
discovery at Progress (see Advantage press release dated
September 3, 2019), first oil
production at Pipestone/Wembley, and further development of the
condensate-rich middle Montney at
Glacier and Valhalla. These accomplishments increased
reserves in all four assets, with the following highlights:
- Proved developed producing ("PDP") reserves increased by
21%
- PDP finding and development cost ("F&D") of $5.38/boe
- PDP recycle ratio of 2.2
- Proved plus probable ("2P") condensate/light oil reserves
increased by 45%
- Total 2P liquids reserves increased by 15%
During the fourth quarter of 2019, Advantage achieved record
production of 47,370 boe/d, up 5,290 boe/d or 13% above the third
quarter of 2019 by increasing natural gas production to capture
increased AECO prices. Annual production was 44,334 boe/d, up
6% over 2018. Liquids production in the fourth quarter
of 2019 was 3,031 bbls/d, with annual liquids production reaching
2,700 bbls/d, an increase of 81% over 2018.
Advantage achieved adjusted funds flow(a) for 2019
of $155 million or $0.83/share(a). Year-end total
debt-to-adjusted funds flow ratio(a) was 2.0 with bank
debt of $296 million drawn on the
Corporation's $400 million credit
facility.
Low Cost Reserves Additions Continued in 2019 as Liquids
Program Progresses
2019 Reserves
Highlights
|
PDP
|
1P (1)
|
2P
|
2019 Reserves (million
boe)
|
106.0
|
352.8
|
465.7
|
2019 F&D Cost
($/per boe, including FDC(2))
|
$5.38
|
$4.26
|
$5.94
|
2019 Recycle
ratio
|
2.2
|
2.8
|
2.0
|
2019 Reserves Increase
Over 2018
|
20.7%
|
8.5%
|
7.8%
|
|
|
(1)
|
Proved reserves
("1P").
|
(2)
|
Future development
capital ("FDC").
|
a)
|
Non-GAAP Measure
which may not be comparable to similar non-GAAP measures used by
other entities. Please see Advisory for reconciliations to the
nearest measure calculated in accordance with GAAP.
|
Key accomplishments included:
- Replaced 307% of annual production (2P)
- Increased liquids reserves by 11% to 6.6 million bbls (PDP) and
15% to 44.7 million bbls (2P)
- Annual corporate decline rate of 26%
2019 Operating & Financial Information
(References to 2019 operational and financial results are
estimates only and have not been reviewed or audited by our
independent auditor. Advantage is expected to release its fourth
quarter and year-end results after markets close on or about
February 27, 2020)
|
Q4
2019E
|
2019E
|
Production
(boe/d)
|
47,370
|
44,334
|
Natural gas
(mcf/d)
|
266,035
|
249,802
|
Natural gas liquids
(bbls/d)
|
3,031
|
2,700
|
Operating netback
($/boe) (a)
|
$11.79
|
$11.15
|
Cash provided by
operating activities ($ millions)
|
$40
|
$156
|
Adjusted Funds Flow
($ millions) (a)
|
$45
|
$155
|
Cash used in
investing activities ($ millions)
|
$50
|
$174
|
Net Capital
Expenditures ($ millions) (a)
|
$60
|
$185
|
Total Debt ($
millions)(a)
|
$304
|
$304
|
Total Debt to
Adjusted Funds Flow(a)
|
|
2.0
|
- Achieved low annual 2019 royalty costs of $0.29/boe, operating costs of $1.98/boe, transportation expenses of
$3.50/boe, general and administrative
costs of $0.73/boe and finance costs
of $0.84/boe
- Annual 2019 cash provided by operating activities of
$156 million and adjusted funds
flow(a) of $155 million
was supported by market diversification gains and realized gains on
derivatives
- Cash used in investing activities was $174 million and 2019 net capital
expenditures(a) was $185
million
- Capital efficiency(a) was $13,100/boe/d, including $57 million for major facilities projects, and
$9,000/boe/d excluding major
facilities expenditures
a)
|
Non-GAAP Measure
which may not be comparable to similar non-GAAP measures used by
other entities. Please see Advisory for reconciliations to the
nearest measure calculated in accordance with GAAP.
|
RESERVES SUMMARY TABLES
Company Gross (before royalties) Working Interest
Reserves
Summary as at December 31, 2019
|
Light &
Medium
Crude Oil
(mbbl)
|
Conventional
Natural Gas
(mmcf)
|
Natural
Gas
Liquids
(mbbl)
|
Total Oil
Equivalent
(mboe)
|
Proved
|
|
|
|
|
Developed
Producing
|
232
|
595,907
|
6,414
|
105,963
|
Developed
Non-producing
|
2,215
|
35,912
|
1,506
|
9,706
|
Undeveloped
|
4,233
|
1,302,300
|
15,873
|
237,156
|
Total
Proved
|
6,679
|
1,934,120
|
23,792
|
352,824
|
Probable
|
5,973
|
591,922
|
8,254
|
112,880
|
Total Proved +
Probable
|
12,652
|
2,526,042
|
32,046
|
465,705
|
|
|
(1)
|
Table may not add due
to
rounding.
|
Company Net Present Value of Future Net Revenue using Sproule
price forecasts (1)(2)(3)($000)
|
Before Income Taxes
Discounted at
|
|
0%
|
10%
|
15%
|
Proved
|
|
|
|
Developed
Producing
|
1,725,541
|
909,505
|
741,899
|
Developed
Non-producing
|
213,394
|
125,305
|
105,203
|
Undeveloped
|
2,194,028
|
473,956
|
201,754
|
|
|
|
|
Total
Proved
|
4,132,963
|
1,508,766
|
1,048,856
|
|
|
|
|
Probable
|
2,289,288
|
696,966
|
477,451
|
|
|
|
|
Total Proved +
Probable
|
6,422,251
|
2,205,731
|
1,526,307
|
|
|
(1)
|
Advantage's light and
medium oil, conventional natural gas and natural gas liquid
reserves were evaluated using Sproule's product price forecast
effective December 31, 2019 prior to the provision for income
taxes, interests, debt services charges and general and
administrative expenses. It should not be assumed that the
discounted future net revenue estimated by Sproule represents the
fair market value of the reserves.
|
(2)
|
Assumes that
development of reserves will occur, without regard to the likely
availability to the Corporation of funding required for that
development.
|
(3)
|
Future Net Revenue
incorporates Managements' estimates of required abandonment and
reclamation costs, including expected timing such costs will be
incurred, associated with all wells, facilities and
infrastructure.
|
(4)
|
Table may not add due
to rounding.
|
a)
|
Non-GAAP Measure
which may not be comparable to similar non-GAAP measures used by
other entities. Please see Advisory for reconciliations to the
nearest measure calculated in accordance with GAAP.
|
Sproule Price Forecasts
The net present value of future net revenue at December 31, 2019 was based upon oil, natural gas
and natural gas liquids pricing assumptions prepared by Sproule
effective December 31, 2019. These
forecasts are adjusted for reserves quality, transportation charges
and the provision of any applicable sales contracts. The price
assumptions used over the next seven years are summarized in the
table below:
Year
|
Canadian
Light
Sweet
Crude 40o
API
($Cdn/bbl)
|
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)
|
2020
|
73.84
|
2.04
|
2.80
|
25.07
|
37.72
|
76.32
|
0.76
|
2021
|
78.51
|
2.27
|
3.00
|
31.84
|
43.90
|
80.52
|
0.77
|
2022
|
78.73
|
2.81
|
3.25
|
32.43
|
47.74
|
80.00
|
0.80
|
2023
|
80.30
|
2.89
|
3.32
|
33.26
|
48.69
|
81.68
|
0.80
|
2024
|
81.91
|
2.98
|
3.38
|
34.12
|
49.67
|
83.38
|
0.80
|
2025
|
83.54
|
3.06
|
3.45
|
34.99
|
50.66
|
85.13
|
0.80
|
2026
|
85.21
|
3.15
|
3.52
|
35.88
|
51.67
|
86.90
|
0.80
|
Company Gross (before royalties) Working Interest Reserves
Reconciliation (1):
Proved
|
Light &
Medium
Crude Oil
(mbbl)
|
Conventional
Natural Gas
(mmcf)
|
Natural
Gas
Liquids
(mbbl)
|
Total Oil
Equivalent
(mboe)
|
Opening balance Dec.
31, 2018
|
3,011
|
1,777,022
|
25,884
|
325,065
|
Extensions and
improved recovery
|
3,473
|
28,996
|
3,181
|
11,487
|
Technical
revisions(1)
|
215
|
219,310
|
(4,293)
|
32,474
|
Discoveries
|
-
|
-
|
-
|
-
|
Acquisitions
|
-
|
12
|
40
|
42
|
Dispositions
|
-
|
-
|
-
|
-
|
Economic
factors
|
(5)
|
(42)
|
(49)
|
(61)
|
Production
|
(15)
|
(91,178)
|
(970)
|
(16,182)
|
Closing balance at
Dec. 31, 2019
|
6,679
|
1,934,120
|
23,792
|
352,824
|
a)
|
Non-GAAP Measure
which may not be comparable to similar non-GAAP measures used by
other entities. Please see Advisory for reconciliations to the
nearest measure calculated in accordance with GAAP.
|
Proved Plus
Probable
|
Light &
Medium
Crude Oil
(mbbl)
|
Conventional
Natural Gas
(mmcf)
|
Natural
Gas
Liquids
(mbbl)
|
Total Oil
Equivalent
(mboe)
|
Opening balance Dec.
31, 2018
|
4,404
|
2,360,157
|
34,423
|
432,186
|
Extensions and
improved recovery
|
9,390
|
73,771
|
6,019
|
27,704
|
Technical
revisions(1)
|
(1,122)
|
183,318
|
(7,454)
|
21,977
|
Discoveries
|
-
|
-
|
-
|
-
|
Acquisitions
|
-
|
18
|
59
|
62
|
Dispositions
|
-
|
-
|
-
|
-
|
Economic
factors
|
(5)
|
(44)
|
(31)
|
(43)
|
Production
|
(15)
|
(91,178)
|
(970)
|
(16,182)
|
Closing balance at
Dec. 31, 2019
|
12,652
|
2,526,042
|
32,046
|
465,705
|
|
|
(1)
|
Technical revisions
accounted for 74% of the total proved additions and 44% 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 2019 F&D Costs – Gross (before royalties) Working
Interest Reserves including FDC (1)(2)(3)
|
Proved
|
Proved +
Probable
|
Net capital
expenditures ($000)(a)
|
184,922
|
184,922
|
Net change in FDC
($000)
|
2,402
|
110,096
|
Total capital
($000)
|
187,324
|
295,018
|
|
|
|
Total mboe, end of
year
|
352,824
|
465,705
|
Total mboe, beginning
of year
|
325,065
|
432,186
|
Production,
mboe
|
(16,182)
|
(16,182)
|
Reserve additions,
mboe
|
43,941
|
49,701
|
|
|
|
2019 F&D costs
($/boe)
|
$4.26
|
$5.94
|
2018 F&D costs
($/boe)
|
$8.33
|
$8.04
|
Three-year average
F&D costs ($/boe)
|
$5.97
|
$6.03
|
|
|
(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 undeveloped reserves to production
during the applicable period. Reserves additions are 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 undeveloped reserves on
production.
|
(3)
|
The change in FDC is
primarily from incremental undeveloped locations.
|
a)
|
Non-GAAP Measure
which may not be comparable to similar non-GAAP measures used by
other entities. Please see Advisory for reconciliations to the
nearest measure calculated in accordance with GAAP.
|
The reserves by category and year-over-year changes compared to
2018 are indicated below:
Reserve
Category
|
Light &
Medium
Crude Oil Million
bbls
|
Conventional
Natural Gas Tcf
|
Natural Gas
Liquids Million
bbls
|
Total Oil
Equivalent Million
boe
|
%
Change from
2018
|
PDP
|
0.23
|
0.60
|
6.41
|
106.0
|
20.7%
|
1P
|
6.68
|
1.93
|
23.79
|
352.8
|
8.5%
|
2P
|
12.65
|
2.53
|
32.05
|
465.7
|
7.8%
|
The total number of 2P future well locations booked in the
Sproule 2019 Reserves Report are illustrated in the following
table:
Sproule Number of
Gross Horizontal Wells Booked
|
|
Developed
|
Undeveloped
|
Total
|
Upper
|
120
|
121
|
241
|
Middle
|
71
|
139
|
210
|
Lower
|
55
|
87
|
142
|
Total
|
246
|
347
|
593
|
Advantage's 1P reserves life index is 20 years and its 2P
reserves life index is 27 years based on the Corporation's average
fourth quarter 2019 production rate of approximately 47,370
boe/d.
Additional comments pertaining to each of the reserves
categories:
- PDP reserves increased 21% due to the recognition of 24 new
wells that were brought on production through 2019 and upward
technical revisions
- 1P reserves increased 8.5%
- 2P reserves increased 7.8% through the addition of 35 new wells
and locations. A total of 347 undeveloped locations are booked in
the Sproule 2019 Reserves Report
Looking Forward
By the fourth quarter of 2020, Advantage anticipates that
several additional critical milestones in oil development will have
been accomplished, leading to a step change in liquids production
and revenue. Advantage will remain diligent in monitoring
commodity and industry trends and respond accordingly to retain a
strong balance sheet while advancing our multi-year strategy to
increase exposure to high value commodities, while supplementing
our low-cost, resilient natural gas foundation.
a)
|
Non-GAAP Measure
which may not be comparable to similar non-GAAP measures used by
other entities. Please see Advisory for reconciliations to the
nearest measure calculated in accordance with GAAP.
|
Advisory
The information in this press
release contains certain forward-looking statements, including
within the meaning of applicable securities laws. 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 position, strategy and
plans and the benefits to be derived therefrom, market
diversification and low cost structure; the expected timing of
release of Advantage's 2019 fourth quarter and year-end results and
additional reserves information; the number of estimated future
well locations booked; and Advantage's estimated fourth quarter and
full year 2019 financial and operating results including
production, sales, royalties, operating expense, transportation
expense, operating netback, cash provided by operating activities,
adjusted funds flow, cash used in investing activities, net capital
expenditures and total debt. 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;
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 net 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 cost, recycle ratio, 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. F&D cost is calculated based on adding net
capital expenditures and the net change in future development
capital ("FDC"), divided by reserve additions for the year from the
Sproule 2019 Reserves Report. Recycle ratio is calculated by
dividing Advantage's fourth quarter operating netback by the
calculated F&D cost 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.
Sproule was engaged as an independent qualified reserve
evaluator to evaluate Advantage's year-end reserves as of
December 31, 2019 ("Sproule 2019
Reserves 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 about February 27,
2020. 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 undeveloped drilling locations
in two categories: (i) proved locations; and (ii) probable
locations. Proved locations and probable locations are derived from
the Sproule 2019 Reserves Report and account for drilling locations
that have associated proved and/or probable reserves, as
applicable. Of the 347 total undeveloped drilling locations
identified herein, 309 are proved locations with 110 in the Upper
Montney, 116 in the Middle Montney, and 83 in the Lower Montney. Of
the 38 probable locations, 11 are in the Upper Montney, 23 in the
Middle Montney, and 4 in the Lower Montney.
a)
|
Non-GAAP Measure
which may not be comparable to similar non-GAAP measures used by
other entities. Please see Advisory for reconciliations to the
nearest measure calculated in accordance with GAAP.
|
Non-GAAP Measures
The Corporation discloses
several financial and performance measures in this press release
that do not have any standardized meaning prescribed under GAAP.
These financial and performance measures include "net capital
expenditures", "adjusted funds flow", "operating netback", "total
debt," "capital efficiency" and "total debt to adjusted
funds flow" which should not be considered as alternatives to, or
more meaningful than "cash provided by operating activities", "cash
used in investing activities", or "bank indebtedness" presented
within the consolidated financial statements as determined in
accordance with GAAP. Management believes that these measures
provide an indication of the results generated by the Corporation's
principal business activities and provide useful supplemental
information for analysis of the Corporation's operating performance
and liquidity. 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.
Net Capital Expenditures
Net capital expenditures
include total capital expenditures related to property, plant and
equipment and exploration and evaluation assets incurred during the
period. Management considers this measure reflective of actual
capital activity for the period as it excludes changes in working
capital related to other periods. A reconciliation between net
capital expenditures and the nearest measure calculated in
accordance with GAAP, cash used in investing activities, is
provided below:
($000)
|
Three months
ended December 31,
2019
|
|
Year
ended December 31,
2019
|
Cash used in
investing activities
|
|
$
|
50,365
|
|
$
|
173,640
|
Changes in non-cash
working capital
|
|
|
9,244
|
|
|
11,282
|
Net capital
expenditures
|
|
$
|
59,609
|
|
$
|
184,922
|
Adjusted Funds Flow
The Corporation considers
adjusted funds flow to be a useful measure of Advantage's ability
to generate cash from the production of natural gas and liquids,
which may be used to settle outstanding debt and obligations, and
to support future capital expenditures plans. Changes in non-cash
working capital and expenditures on decommissioning
liabilities are excluded from adjusted funds flow as they may vary
significantly between periods and are not considered to be
indicative of the Corporation's operating performance as they are a
function of the timeliness of collecting receivables or paying
payables. Adjusted funds flow has also been presented per basic
share, by dividing by the basic weighted average shares outstanding
of the Corporation.
A reconciliation between adjusted funds flow and the nearest
measure calculated in accordance with GAAP, cash provided by
operating activities, is provided below:
($000)
|
|
Three months
ended
December 31,
2019
|
|
Year
ended
December 31,
2019
|
Cash provided by
operating activities
|
|
|
$
|
40,043
|
|
|
$
|
156,063
|
Expenditures on
decommissioning liability
|
|
|
|
85
|
|
|
|
1,911
|
Changes in non-cash
working capital
|
|
|
|
4,402
|
|
|
|
(2,794)
|
Adjusted funds
flow
|
|
|
$
|
44,530
|
|
|
$
|
155,180
|
a)
|
Non-GAAP Measure
which may not be comparable to similar non-GAAP measures used by
other entities. Please see Advisory for reconciliations to the
nearest measure calculated in accordance with GAAP.
|
Operating Netback
Advantage calculates operating
netback on a total and per boe basis. Operating netback is
comprised of sales revenue, realized gains/losses on derivatives
and net sales of natural gas purchased from third parties, net of
expenses resulting from field operations, including royalty
expense, operating expense and transportation expense. Operating
netback provides Management and users with a measure to compare the
profitability of field operations between companies, development
areas and specific wells.
($/boe)
|
|
Three months
ended
December 31,
2019
|
|
Year
ended
December 31,
2019
|
Sales of natural gas
and liquids from production
|
$
|
17.69
|
$
|
15.53
|
Net sales of natural
gas purchased from third parties
|
|
-
|
|
(0.09)
|
Realized gains
(losses) on derivatives
|
|
(0.04)
|
|
1.48
|
Royalty
expense
|
|
(0.51)
|
|
(0.29)
|
Operating
expense
|
|
(1.89)
|
|
(1.98)
|
Transportation
expense
|
|
(3.46)
|
|
(3.50)
|
Operating
netback
|
$
|
11.79
|
$
|
11.15
|
Net Sales of Natural Gas Purchased from Third Parties
Net sales of natural gas purchased from third parties
represents the revenue or loss generated from the sale of natural
gas volumes purchased from third parties, after deducting the cost
to purchase the volumes. The purchase and sale transactions are
non-routine and are considered by Management to be related for
performance purposes.
Total Debt
Total debt is comprised of bank indebtedness and working
capital deficit. Total debt provides Management and users with a
measure of the Corporation's indebtedness and expected settlement
of net liabilities in the next year. A detailed calculation of
total debt is provided below:
($000)
|
|
December 31
2019
|
Bank
indebtedness
|
|
$
|
295,624
|
Working capital
deficit
|
|
|
7,996
|
Total
debt
|
|
$
|
303,620
|
Total Debt to Adjusted Funds Flow
Total debt to adjusted funds flow is calculated by dividing
total debt by adjusted fund flow for the previous four quarters.
Total debt to adjusted funds flow is a coverage ratio that provides
Management and users the ability to determine how long it would
take the Corporation to repay its debt if it devoted all its
adjusted funds flow to debt repayment.
Capital Efficiency
Three-year and single year capital efficiency is calculated
by dividing net capital development costs for oil and gas
activities including drilling, completion, facilities,
infrastructure, office and capitalized general and administrative
costs (excluding abandonment and reclamation costs, exploration and
evaluation costs, and acquisition and disposition related costs and
proceeds) by the average production additions of the applicable
year to replace base production declines and deliver production
growth targets, expressed in $/boe/d. Capital efficiency is
considered by management to be a useful performance measure as a
common metric used to evaluate the efficiency with which capital
activity is allocated to achieve production additions.
Certain financial and operating results included in this news
release for the fourth quarter and year-ended 2019 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,
2019, 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, 2019 on SEDAR on or about
February 27, 2020.
The following abbreviations used in this press release have
the meanings set forth below:
bbl
|
one
barrel
|
bbls
|
barrels
|
bbls/d
|
barrels per
day
|
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
|
boe/d
|
barrels of oil
equivalent of natural gas per day
|
mbbl
|
thousand
barrels
|
mboe
|
thousand barrels
of oil equivalent of natural gas
|
mcf
|
thousand cubic
feet
|
mcfe
|
thousand cubic
feet equivalent on the basis of six thousand cubic feet of natural
gas for one barrel of oil or NGLs
|
mmcf
|
million cubic
feet
|
mmbtu
|
million British
thermal units
|
mmcf/d
|
million cubic feet
per day
|
mmcfe/d
|
million cubic feet
equivalent per day
|
tcf
|
trillion cubic
feet
|
tcfe
|
trillion cubic
feet equivalent
|
a)
|
Non-GAAP Measure
which may not be comparable to similar non-GAAP measures used by
other entities. Please see Advisory for reconciliations to the
nearest measure calculated in accordance with GAAP.
|
SOURCE Advantage Oil & Gas Ltd.