(TSX: AAV)
CALGARY, April 13, 2020 /CNW/ - Advantage Oil &
Gas Ltd. ("Advantage" or the "Corporation") is pleased to announce
it has reached a definitive agreement to sell a 12.5% interest in
the Glacier Gas Plant to a strategic partner for $100 million cash proceeds. This transaction will
fortify Advantage's robust balance sheet during a time of
unprecedented volatility and augment the Corporation's ability to
pursue strategic opportunities and execute value-generating capital
projects. National Bank Financial Inc. acted as financial advisor
to Advantage on the transaction.
Minor Plant Interest Sale Enhances Significant
Flexibility
The Glacier Gas Plant is one of the largest producer-owned gas
processing facilities in Canada.
It was commissioned by Advantage in 2010 and expanded in six phases
to reach 400 mmcf/d raw gas and 6,800 bbl/d liquids capacity by
2018. The Plant features innovative design, high operating
run-times, zero venting, and state-of-the-art automation
technology. Complemented by the Glacier Acid Gas Sequestration
project, it continues to be a key element of Advantage's leading
operating cost structure and extremely low carbon emissions
intensity.
Advantage will continue to be operator of the Plant and will
retain all surplus capacity during the term of a volume commitment.
Advantage and the purchaser may pursue further strategic
opportunities together.
The Glacier Gas Plant processes all production from Advantage's
Montney assets at Glacier,
Valhalla and Progress through a
network of owned pipelines, compressor stations and liquids hubs.
As commodity prices vary, Advantage maintains the optionality to
redeploy capital to the assets with superior economics depending on
the mix of gas, condensate and light oil, with no major
infrastructure projects required.
Transaction Summary
- Advantage will sell a 12.5% interest in the 400 mmcf/d Glacier
Gas Plant for $100 million, and
retain the remaining 87.5% interest
- In conjunction with the transaction, Advantage will enter into
a 15-year volume commitment agreement with the purchaser for 50
mmcf/d at a fee of $0.66/mcf
- No growth capital is required to fulfill the volume
commitment
- Advantage's low-cost structure will be preserved, with an
annualized impact to adjusted funds flow of approximately
$5 million or less than $0.03/share (1)
- The transaction is planned to close in July 2020, subject to customary closing
conditions
Second Half of 2020 Outlook
Advantage accomplished several significant milestones in the
first quarter of 2020, including a 30-day initial rate of over
2,150 boe/d (>50% oil and liquids) at Progress 16-36. However,
discretionary spending on oil projects at Progress and Wembley has been deferred considering the
current economic environment. Advantage plans to revise the capital
program for second half of 2020; key goals for the program will be
to optimize returns, invest opportunistically, and target a net
debt to adjusted funds flow ratio of approximately 2x through
2021.
Advantage continues to monitor fundamental supply/demand
balances of oil and natural gas. While gas price fundamentals
appear to be strengthening, Advantage is prepared to mitigate the
impact of low oil prices and may adjust production levels to
protect value and revenue should this exceptional environment
persist.
Forward Looking Statement 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 focus, strategy, plans and
expectations for its operations generally; and Advantage's
management of its capital spending plans. 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: its calculations of adjusted funds flow and expected
accounting standards and treatments under International Financial
Reporting Standards; 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 risks and
assumptions related to forward-looking statements 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.
Oil and Gas Advisories
Barrels of oil equivalent (boe) may be misleading,
particularly if used in isolation. Boe 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 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 in this press release to production test rates,
flow rates, yields and other short-term production rates are useful
in confirming the presence of hydrocarbons, however such rates are
not determinative of the rates at which such wells will commence
production and decline thereafter and are not indicative of long
term performance or of ultimate recovery. Additionally, such rates
may also include recovered "load oil" fluids used in well
completion stimulation. While encouraging, readers are cautioned
not to place reliance on such rates in calculating the aggregate
production of Advantage. Advantage cautions that test
results and short-term production rates should be considered
preliminary.
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 "adjusted funds flow", "net debt", and "net debt
to adjusted funds flow", which should not be considered as
alternatives to, or more meaningful than "net income",
"comprehensive income", "cash provided by operating 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.
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. A reconciliation between adjusted funds flow and the
nearest measure calculated in accordance with GAAP, cash provided
by operating activities, is provided in Management's Discussion and
Analysis. Net debt is comprised of bank indebtedness and working
capital. Net debt provides Management and users with a measure of
the Corporation's bank indebtedness and expected settlement of net
liabilities in the next year. 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 bank
debt if it devoted all its adjusted funds flow to bank debt
repayment.
Abbreviations
The following abbreviations used in this press release have
the meanings set forth below:
bbl
|
one
barrel
|
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
feet per day
|
mmcf
|
million cubic
feet
|
mmcf/d
|
million cubic feet
per day
|
SOURCE Advantage Oil & Gas Ltd.