Longview Oil earns $4.42-million in Q1 2014
2014-05-07 06:40 ET - News Release
An anonymous director reports
LONGVIEW ANNOUNCES FIRST QUARTER 2014 RESULTS
Longview Oil Corp. has released 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 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
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.
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.
We seek Safe Harbor.
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