Longview Oil Corp. Announces First Quarter 2014 Results
07.05.2014 | CNW
CALGARY, May 6, 2014 /CNW/ - Longview Oil Corp. ("Longview" or the "Corporation") (TSX: LNV) announces the financial and operating results for the quarter ended March 31, 2014.
| Three months ended | ||||||||||
| March 31, | ||||||||||
| 2014 | 2013 | |||||||||
| Financial ($000, except as otherwise indicated) (1) | ||||||||||
| Sales excluding realized hedging | $ | 40,841 | $ | 34,327 | ||||||
| per share (2) | $ | 0.87 | $ | 0.73 | ||||||
| per boe | $ | 78.51 | $ | 62.50 | ||||||
| Funds from operations | $ | 17,162 | $ | 14,813 | ||||||
| per share (2) | $ | 0.37 | $ 0.32 | |||||||
| per boe | $ | 32.99 | $ | 26.97 | ||||||
| Net income and comprehensive income | $ | 4,425 | $ | 1,470 | ||||||
| per share (2) | $ | 0.09 | $ | 0.03 | ||||||
| Dividends declared | $ | 5,635 | $ | 7,029 | ||||||
| per share | $ | 0.12 | $ | 0.15 | ||||||
| Expenditures on property, plant and equipment | $ | 26,362 | $ | 14,080 | ||||||
| Payout ratio | 188% | 143% | ||||||||
| Working capital deficit | $ | 18,104 | $ | 13,010 | ||||||
| Bank indebtedness | $ | 124,286 | $ | 116,900 | ||||||
| Shares outstanding at end of period (000) | 46,962 | 46,858 | ||||||||
| Basic weighted average shares (000) | 46,954 | 46,856 | ||||||||
| Operating (1) | ||||||||||
| Daily production | ||||||||||
| Crude oil (bbls/d) | 4,324 | 4,258 | ||||||||
| NGLs (bbls/d) | 455 | 561 | ||||||||
| Natural gas (mcf/d) | 6,003 | 7,706 | ||||||||
| Total boe/d @ 6:1 | 5,780 | 6,103 | ||||||||
| Average prices (excluding hedging) | ||||||||||
| Crude oil ($/bbl) | $ | 88.61 | $ | 76.52 | ||||||
| NGLs ($/bbl) | $ | 73.57 | $ | 53.44 | ||||||
| Natural gas ($/mcf) | $ | 6.19 | $ | 3.33 | ||||||
| Operating netback ($/boe) | ||||||||||
| Petroleum and natural gas sales | $ | 78.51 | $ | 62.49 | ||||||
| Royalties | (13.17) | (11.80) | ||||||||
| Operating expense | (21.14) | (20.49) | ||||||||
| Operating netback | $ | 44.20 | $ | 30.20 | ||||||
| (1) | Boe, funds from operations, payout ratio and working capital deficit do not have a standardized meaning under GAAP. Refer to "Non-GAAP Measures, Definitions and Abbreviations" in this press release. | |||||||
| (2) | Based on basic weighted average shares outstanding. | |||||||
Message to Shareholders
- Funds from operations increased by 16% in the first quarter of 2014 to $17.2 million from $14.8 million received in the first quarter of 2013.
- On a per share basis, funds from operations for the first quarter of 2014 was $0.37 per share versus $0.32 per share in Q1 2013, an increase of 16%.
- The increase in funds from operations is attributable to strengthening pricing for Canadian oil sales and slightly higher crude oil production.
- Approximately 48% of Longview's 2014 capital program was spent in the first quarter of 2014. This produced a payout ratio of 188% for the quarter ended March 31, 2014. By way of comparison, Longview's payout ratio in the first quarter of 2013 was 143%, but for the year ended December 31, 2013 was 105%. Longview anticipates that for the year ended December 31, 2014, the payout ratio will be approximately 102%.
- Preservation of a sustainable payout ratio is the cornerstone of our business strategy which is based on the maintenance of a solid balance sheet while funding our dividend payments and capital expenditure programs primarily with funds from operations.
| Three months ended | ||||||||||
| March 31, | ||||||||||
| ($000) | 2014 | 2013 | % change | |||||||
| Cash provided by operating activities | $ 17,484 | $ 15,643 | 12 | % | ||||||
| Changes in non-cash working capital | 463 | 453 | 2 | % | ||||||
| Interest on bank indebtedness | (1,313) | (1,370) | (4) | % | ||||||
| Expenditures on decommissioning liability | 528 | 87 | 507 | % | ||||||
| Funds from operations | $ 17,162 | $ 14,813 | 16 | % | ||||||
| Dividends declared | 5,635 | 7,029 | (20) | % | ||||||
| Capital expenditures (1) | 26,649 | 14,080 | 89 | % | ||||||
| Total funds outflow | $ 32,284 | $ 21,109 | 53 | % | ||||||
| Payout ratio (2) | 188% | 143% | ||||||||
| (1) Capital expenditures includes expenditures on property, plant and equipment and expenditures on exploration and evaluation assets. | ||||||||||
| (2) Payout ratio is calculated as cash dividends declared and capital expenditures divided by funds from operations. | ||||||||||
- Crude oil production increased by 2% in the first quarter of 2014 to 4,324 bbls/d from 4,258 bbls/d in Q1 2013.
- Our crude oil production volumes slightly increased when compared to levels reported in Q1 2013, demonstrating the high quality, low decline nature of our existing production base. The majority of total production declines related to natural gas which fell by 22% compared to the first quarter of 2013 as our prior year capital expenditure program was focused on the ongoing development of our light oil reserves.
- Crude oil revenue, which comprised 90% of total revenue in the first quarter of 2014, increased by 18% to $34.5 million from $29.3 million in Q1 2013.
- The WTI/Canadian oil price differential widened in the first quarter of 2014 to $8.42/bbl as compared to $6.51/bbl in 2013.
- The price of WTI increased in the first quarter of 2014 averaging US$98.59/bbl versus US$94.34/bbl last year.
- Operating netbacks increased by 46% from $30.20/bbl in Q1 2013 to $44.20/bbl in the first quarter of 2014.
- Operating costs were held constant with prior year levels as ongoing cost reduction efforts are offsetting inflationary pressures seen throughout the Western Canadian sedimentary basin.
- Royalty expenses increased due to higher sales whereas royalties as a percentage of sales decreased due to lower rates associated with new production additions.
- Total capital expenditures for the three months ended March 31, 2014 amounted to $26.6 million which included $16.4 million in Saskatchewan, $3.4 million at Westerose, $2.1 million at Willesden Green, and $1.5 million at Sunset.
Commodity Hedging Program
- Longview's hedging program for calendar 2014 includes crude oil hedges of 2,000 bbls/d at $94.84/bbl for January to December 2014.
- The Corporation will continue to hedge a portion of its production in the future in order to provide stability to cash flow in order to fund our dividend payments and capital expenditure program.
Possible Transportation Disruption Update
- On March 27, 2014, Longview informed its shareholders of a possible pipeline flow restriction affecting the ability to ship natural gas produced at our Nevis property as a result of a safety order issued by the National Energy Board ("NEB"). The NEB has since considered additional information supplied by the operator of the pipeline and has amended the safety order such that the pipeline will continue to operate under current operating conditions. Longview is pleased to inform its shareholders that this matter has now been resolved and the possible flow restriction has been averted.
Looking Forward
- On March 31, 2014, Longview announced that it had entered into an arrangement agreement, pursuant to which Surge Energy Inc. ("Surge") has agreed to acquire all of the issued and outstanding common shares of Longview at an exchange ratio of 0.975 of a Surge common share for each Longview common share. On June 3, 2014, Longview will hold its annual and special meeting at which time shareholders will vote on the proposed transaction.
- Operationally, Longview's business strategy is based on providing shareholders with attractive long term returns by exploiting our assets in a financially disciplined manner and by acquiring additional long-life oil and gas assets of a similar nature. Longview has a base decline rate of approximately 19% which allows the Corporation to maintain production with a modest level of capital expenditures, as demonstrated during 2013 and 2012.
- The 2014 drilling program is budgeted to increase by 44% from 2013 spending levels and will focus on the ongoing development of light oil reserves at 11 project areas in both Saskatchewan and Alberta. The majority of the 29 gross (22.3 net) wells in our 2014 drilling program are expected to qualify for reduced royalty rates and will be directed towards areas where we have existing infrastructure in place resulting in lower operating costs and comparatively high rates of return. In addition, approximately 14% of our total capital budget will be allocated to waterflood enhancement and facility improvements at seven project areas designed to increase reservoir pressures and establish additional drilling locations.
- In order to fund the expansion of our capital development program, Longview pared back its monthly dividend to four cents per common share in December 2013. Longview anticipates that this strategy will lead to a 20% increase in cash flow per share, 16% increase in operating netbacks and 12% increase in crude oil production in 2014, with a payout ratio of 102%. This is supported by our expected base decline rate of 19%, which is among the lowest in the industry.
Interim Financial Statements and MD&A
- This press release should be read in conjunction with Longview's unaudited interim financial statements for the three months ended March 31, 2014 together with the notes thereto, and Management's Discussion and Analysis for the three months ended March 31, 2014 which have been prepared in accordance with International Financial Reporting Standards ("IFRS") and posted on our website at www.longviewoil.com and filed under our profile on SEDAR at www.sedar.com.
Forward-Looking Statements
Certain information regarding Longview set forth in this press release, including management's assessment of the Corporation's future plans and operations, contains forward-looking statements that involve substantial known and unknown risks and uncertainties. The use of any of the words "anticipate", "continue", "estimate", "expect", "may", "will", "project", "should", "believe" and similar expressions are intended to identify forward looking statements. Such statements represent Longview's internal projections, estimates or beliefs concerning, among other things, an outlook on the estimated amounts and timing of capital expenditures or other expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or performance. These statements are only predictions and actual events or results may differ materially. Although Longview believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievement since such expectations are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. Many factors could cause Longview's actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, Longview.
In particular, forward-looking statements included in this press release include, but are not limited to, statements with respect to Longview's business strategy; the Corporation's hedging program and its plans to hedge a portion of its production in the future; the Corporation's capital program for the remainder of 2014; the Corporation's anticipated drilling, development and recompletion activities; the Corporation's plans to advance its waterflood projects in Alberta; and Longview's anticipated 2014 cash flow per share, operating netbacks, crude oil production, payout ratio and base decline rate. In addition, statements relating to "reserves" are deemed to be 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.
These forward-looking statements are subject to numerous risks and uncertainties, certain of which are beyond the Corporation's control, including the impact of general economic conditions; volatility in market prices for crude oil and natural gas; industry conditions; volatility of commodity prices; currency fluctuation; imprecision of reserve estimates; liabilities inherent in crude oil and natural gas operations; environmental risks; incorrect assessments of the value of acquisitions and exploration and development programs; competition from other producers; the lack of availability of qualified personnel or management; changes in tax laws, royalty regimes and incentive programs relating to the oil and gas industry; changes to legislation and regulations and how they are interpreted and enforced; 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; unexpected drilling results; changes or fluctuations in production levels; delays in anticipated timing of drilling and completion of wells; stock market volatility; ability to access sufficient capital from internal and external sources and the other risks considered under "Risk Factors" in Longview's Annual Information Form for the year ended December 31, 2013, which is available on www.sedar.com and www.longviewoil.com.
With respect to forward-looking statements contained in this press release, Longview has made assumptions regarding: current commodity prices and royalty regimes; availability of skilled labour; timing and amount of capital expenditures; future exchange rates; the price of oil and natural gas; the impact of increasing competition; conditions in general economic and financial markets; availability of drilling and related equipment; effects of regulation by governmental agencies; royalty rates; future operating costs; 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 provided in this press release in order to provide shareholders with a more complete perspective on Longview's future operations and such information may not be appropriate for other purposes. Longview'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 the Corporation 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 press release and the Corporation 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.
Non-GAAP Measures, Definitions and Abbreviations
The Corporation discloses several financial measures in this press release that do not have any standardized meaning prescribed by International Financial Reporting Standards ("IFRS" or "GAAP"), such as funds from operations and payout ratio. 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. Longview'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 on www.sedar.com for additional information about these financial measures.
"Boe" may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one barrel of oil equivalent (6 Mcf: 1 bbl) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. 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.
"Funds from operations" represents cash provided by operating activities, adjusted for expenditures on decommissioning liability, changes in non-cash working capital and interest on bank indebtedness.
"Payout ratio" is calculated as cash dividends declared and capital expenditures divided by funds from operations.
"Working capital deficit" includes trade and other receivables, prepaid expenses and deposits, trade and other accrued liabilities and due to parent.
The following abbreviations used in this press release have the meanings set forth below:
| bbls | barrels | mcf | thousand cubic feet |
| bbls/d | barrels per day | mcf/d | thousand cubic feet per day |
| boe | barrels of oil equivalent, on the basis of 1 bbl of oil for 6 mcf of natural gas | ||
| boe/d | barrels of oil equivalent per day | ||
Contact
Investor Relations
Toll free: 1-855-813-0313
Longview Oil Corp.
700, 400-3rd Avenue SW
Calgary, Alberta T2P 4H2
Phone: (403) 718-8100
Fax: (403) 718-8300
Web Site: www.longviewoil.com
E-mail: ir@longviewoil.com