(TSX: AAV)
CALGARY, Feb. 27, 2020 /CNW/ - Advantage Oil & Gas
Ltd. ("Advantage" or the "Corporation") is pleased to announce its
2019 results, including considerable progress on liquids growth,
continued operational excellence of our low-cost natural gas
foundation, and solid performance on our 2019 objectives.
With modern, low emissions-intensity assets and our Glacier
Carbon Sequestration project, the Corporation continues to proudly
deliver clean and sustainable energy, contributing to a reduction
in global emissions by displacing high-carbon fuels.
We are proud of our Team's 2019 achievements and thank
Advantage's Board of Directors and our shareholders for their
support. We look forward to reporting on our progress as the Team
continues to execute on our liquids-focused development plan.
Accomplishments during 2019 included:
- Record annual production of 44,334 boe/d, an increase of 6%
(250 mmcf/d natural gas and 2,700 bbls/d liquids).
- Record quarterly natural gas production of 266 mmcf/d in the
fourth quarter of 2019 during a period of elevated AECO
prices.
- Increased liquids production by 81% to average 2,700 bbls/d in
the fourth quarter of 2019. Liquids comprised 18% of total
revenue.
- Discovery of a light oil pool at Progress, elevating the asset
to a top tier investment priority. Production began in the first
quarter of 2020 above management expectations.
- Commissioned a 40 mmcf/d and 2,000 bbls/d liquids hub at our
Valhalla asset, which alleviated a
facility restriction.
- Initial production from our first well at Pipestone/Wembley in the fourth quarter of 2019.
- Achieved hedging and market diversification gains of
$32 million.
- Increased CO2e sequestration credits by 59% to
90,500 tonnes.
- Achieved operating costs of $1.98/boe.
- Delivered on 2019 plan with capital spending reduced from
$225 million to $185 million.
2019 Operating and Financial Results Summary
- Annual 2019 cash provided by operating activities of
$156 million and adjusted funds
flow(a) of $155 million or
$0.83/share.
- Year-end net debt(a) was $304
million on a $400 million bank
credit facility, resulting in a net debt to adjusted funds
flow(a) ratio of 2.0.
Financial
Highlights
|
|
Three months
ended
December
31
|
|
Year
ended
December
31
|
($000, except as
otherwise indicated)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Financial
Statement Highlights
|
|
|
|
|
|
|
|
|
Sales including
realized derivatives (3)
|
$
|
76,921
|
$
|
73,979
|
$
|
275,237
|
$
|
250,604
|
Net income (loss) and
comprehensive income (loss)
|
$
|
(1,844)
|
$
|
25,162
|
$
|
(24,654)
|
$
|
11,119
|
per basic share
(2)
|
$
|
(0.01)
|
$
|
0.14
|
$
|
(0.13)
|
$
|
0.06
|
Cash provided by
operating activities (4)
|
$
|
39,965
|
$
|
41,627
|
$
|
156,063
|
$
|
149,240
|
Cash provided by
financing activities (4)
|
$
|
20,037
|
$
|
11,739
|
$
|
24,317
|
$
|
63,937
|
Cash used in
investing activities
|
$
|
50,365
|
$
|
50,723
|
$
|
173,640
|
$
|
213,734
|
Basic weighted
average shares (000)
|
|
186,911
|
|
185,942
|
|
186,659
|
|
186,040
|
Other Financial
Highlights
|
|
|
|
|
|
|
|
|
Adjusted funds flow
(1)
|
$
|
44,452
|
$
|
46,301
|
$
|
155,180
|
$
|
150,378
|
per boe
(1)
|
$
|
10.20
|
$
|
11.02
|
$
|
9.59
|
$
|
9.89
|
per basic share
(1)(2)
|
$
|
0.23
|
$
|
0.25
|
$
|
0.83
|
$
|
0.81
|
Net capital
expenditures (1)
|
$
|
59,609
|
$
|
51,187
|
$
|
184,922
|
$
|
201,086
|
Working capital
deficit (1)
|
$
|
7,996
|
$
|
1,912
|
$
|
7,996
|
$
|
1,912
|
Bank
indebtedness
|
$
|
295,624
|
$
|
270,918
|
$
|
295,624
|
$
|
270,918
|
Net debt
(1)
|
$
|
303,620
|
$
|
272,830
|
$
|
303,620
|
$
|
272,830
|
|
|
(1)
|
Non-GAAP measure
which may not be comparable to similar non-GAAP measures used by
other entities. Please see "Non-GAAP Measures".
|
(2)
|
Based on basic
weighted average shares outstanding.
|
(3)
|
Excludes net sales of
natural gas purchased from third parties.
|
(4)
|
Cash provided by
operating activities and cash provided by financing activities for
the three months and year ended December 31, 2018 has been adjusted
to conform to the presentation adopted for the periods ended
December 31, 2019.
|
Operating
Highlights
|
|
Three months
ended
December
31
|
|
Year
ended
December
31
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Operating
|
|
|
|
|
|
|
|
|
Daily
Production
|
|
|
|
|
|
|
|
|
Natural gas
(mcf/d)
|
|
266,035
|
|
262,269
|
|
249,802
|
|
240,959
|
Liquids
(bbls/d)
|
|
3,031
|
|
1,974
|
|
2,700
|
|
1,491
|
Total production
(mcfe/d)
|
|
284,221
|
|
274,113
|
|
266,002
|
|
249,905
|
Total production
(boe/d)
|
|
47,370
|
|
45,686
|
|
44,334
|
|
41,651
|
Average realized
prices (including realized derivatives)
|
|
|
|
|
|
|
|
|
Natural gas ($/mcf)
(2)
|
$
|
2.58
|
$
|
2.69
|
$
|
2.49
|
$
|
2.47
|
Liquids
($/bbl)
|
$
|
49.09
|
$
|
49.23
|
$
|
49.14
|
$
|
62.12
|
Operating Netback
($/boe)
|
|
|
|
|
|
|
|
|
Sales of natural gas
and liquids from production
|
$
|
17.69
|
$
|
16.86
|
$
|
15.53
|
$
|
14.62
|
Net sales of natural
gas purchased from third parties (1)
|
|
0.00
|
|
0.00
|
|
(0.09)
|
|
0.07
|
Realized gains
(losses) on derivatives
|
|
(0.04)
|
|
0.74
|
|
1.48
|
|
1.86
|
Royalty
expense
|
|
(0.51)
|
|
(0.39)
|
|
(0.29)
|
|
(0.17)
|
Operating
expense
|
|
(1.89)
|
|
(1.73)
|
|
(1.98)
|
|
(1.82)
|
Transportation
expense
|
|
(3.46)
|
|
(3.18)
|
|
(3.50)
|
|
(3.33)
|
Operating
netback (1)
|
$
|
11.79
|
$
|
12.30
|
$
|
11.15
|
$
|
11.23
|
(1)
|
Non-GAAP measure
which may not be comparable to similar non-GAAP measures used by
other entities. Please see "Non-GAAP Measures".
|
(2)
|
Excludes net sales of
natural gas purchased from third parties.
|
The Corporation's audited consolidated financial statements for
the fiscal year ended December 31,
2019 together with the notes thereto, and Management's
Discussion and Analysis for the year ended December 31, 2019 have been filed on SEDAR and
are available on the Corporation's website at
http://www.advantageog.com/investors/financial-reports/financial-reports-2019.
The Corporation's audited consolidated financial statements for the
fiscal year ended December 31, 2018
are also available on the Corporation's website via the same
webpage. Upon request, Advantage will provide a hard copy of any
financial reports free of charge.
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
"anticipate", "continue", "demonstrate", "expect", "may", "can",
"will", "believe", "would" and similar expressions and include
statements relating to, among other things, Advantage's strategy
and development plans; and Advantage's expectations generally and
with respect to its liquid development. 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; 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; 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. Readers are cautioned that the
foregoing lists of factors are not exhaustive. These
forward-looking statements are made as of the date of this press
release and 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. References to natural gas or liquids
production in this press release refer to conventional natural gas
and natural gas liquids, respectively, product types as defined in
National Instrument 51-101.
This press release contains a number of oil and gas metrics,
including operating netback, 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 press 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/losses on derivatives and
subtracting royalty expense, operating expense and transportation
expense.
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", "net debt", "net debt to adjusted
funds flow", "working capital" and "net sales of natural gas
purchased from third parties", which should not be considered as
alternatives to, or more meaningful than "net income",
"comprehensive income", "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:
|
Three months
ended
December
31
|
Year ended
December
31
|
($000)
|
2019
|
2018
|
2019
|
2018
|
Cash used in
investing activities
|
$
|
50,365
|
$
|
50,723
|
$
|
173,640
|
$
|
213,734
|
Changes in non-cash
working capital
|
|
9,244
|
|
464
|
|
11,282
|
|
(12,648)
|
Net capital
expenditures
|
$
|
59,609
|
$
|
51,187
|
$
|
184,922
|
$
|
201,086
|
Working Capital
Working capital includes cash and cash equivalents, trade and
other receivables, prepaid expenses and deposits and trade and
other accrued payables at the reporting date. Working capital
provides Management and users with a measure of the Corporation's
operating
liquidity.
Net Debt
Net debt is comprised of bank indebtedness and working
capital. Net 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 net debt is provided below:
($000)
|
|
December
31
2019
|
December
31
2018
|
Bank indebtedness
(non-current)
|
|
$
|
295,624
|
$
|
270,918
|
Working capital
deficit
|
|
|
7,996
|
|
1,912
|
Net debt
|
|
$
|
303,620
|
$
|
272,830
|
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 other
long-term 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. Expenditures on decommissioning liabilities are
excluded from the calculation as the amount and timing of these
expenditures are unrelated to current production, highly variable
and discretionary. Adjusted funds flow has also been
presented per boe, by dividing adjusted funds flow by total
production in boe for the reporting period, and 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:
|
|
Three months
ended
December
31
|
|
Year ended
December
31
|
($000, except as
otherwise indicated)
|
2019
|
2018
|
2019
|
2018
|
Cash provided by
operating activities
|
$
|
39,965
|
$
|
41,627
|
$
|
156,063
|
$
|
149,240
|
Expenditures on
decommissioning liability
|
|
85
|
|
1,045
|
|
1,911
|
|
1,782
|
Changes in non-cash
working capital
|
|
4,402
|
|
3,629
|
|
(2,794)
|
|
(644)
|
Adjusted funds
flow
|
$
|
44,452
|
$
|
46,301
|
$
|
155,180
|
$
|
150,378
|
Net Debt to Adjusted Funds Flow
Net debt to adjusted funds flow is calculated by dividing net
debt by adjusted fund flow for the previous four quarters.
Net 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.
Operating Netback
Advantage calculates operating netback on a 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.
|
|
Three months
ended
December
31
|
|
|
2019
|
|
2018
|
|
|
$000
|
|
per boe
|
|
$000
|
|
per boe
|
Sales of natural gas
and liquids from production
|
$
|
77,102
|
$
|
17.69
|
$
|
70,858
|
$
|
16.86
|
Net sales of natural
gas purchased from third parties
|
|
-
|
|
-
|
|
-
|
|
-
|
Realized gains
(losses) on derivatives
|
|
(181)
|
|
(0.04)
|
|
3,121
|
|
0.74
|
Royalty
expense
|
|
(2,231)
|
|
(0.51)
|
|
(1,654)
|
|
(0.39)
|
Operating
expense
|
|
(8,225)
|
|
(1.89)
|
|
(7,262)
|
|
(1.73)
|
Transportation
expense
|
|
(15,072)
|
|
(3.46)
|
|
(13,350)
|
|
(3.18)
|
Operating
netback
|
$
|
51,393
|
$
|
11.79
|
$
|
51,713
|
$
|
12.30
|
|
|
Year ended
December
31
|
|
|
2019
|
|
2018
|
|
|
$000
|
|
per boe
|
|
$000
|
|
per boe
|
Sales of natural gas
and liquids from production
|
$
|
251,279
|
$
|
15.53
|
$
|
222,335
|
$
|
14.62
|
Net sales of natural
gas purchased from third parties
|
|
(1,505)
|
|
(0.09)
|
|
1,111
|
|
0.07
|
Realized gains on
derivatives
|
|
23,958
|
|
1.48
|
|
28,269
|
|
1.86
|
Royalty
expense
|
|
(4,690)
|
|
(0.29)
|
|
(2,583)
|
|
(0.17)
|
Operating
expense
|
|
(31,967)
|
|
(1.98)
|
|
(27,593)
|
|
(1.82)
|
Transportation
expense
|
|
(56,607)
|
|
(3.50)
|
|
(50,694)
|
|
(3.33)
|
Operating
netback
|
$
|
180,468
|
$
|
11.15
|
$
|
170,845
|
$
|
11.23
|
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.
The following terms and 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
|
mcf
|
thousand cubic
feet
|
mcf/d
|
thousand cubic fee
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
|
mcfe/d
|
thousand cubic
feet equivalent per day
|
mmcf
|
million cubic
feet
|
mmcf/d
|
million cubic feet
per day
|
mmcfe/d
|
million cubic feet
equivalent per day
|
Liquids or
NGLs
|
Natural Gas
Liquids as defined in National Instrument 51-101
|
Natural
gas
|
Conventional
Natural Gas as defined in National Instrument 51-101
|
SOURCE Advantage Oil & Gas Ltd.