good Q Long Run Exploration Ltd. Announces Financial Results for the Fourth Quarter and Year Ended December 31, 2012 and 2012 Year End Reserve Results
Press Release: Long Run Exploration Ltd. – 9 hours ago CALGARY, ALBERTA--(Marketwire - Mar 7, 2013) - LONG RUN EXPLORATION LTD. (LRE.TO) ("Long Run" or the "Corporation") is pleased to announce its results for the fourth quarter and year ended December 31, 2012 and year end reserve results.
In the fourth quarter, WestFire Energy Ltd. ("WestFire") and Guide Exploration Ltd. ("Guide") completed an all share merger transaction. The management team of Guide is leading the renamed Long Run Exploration Ltd. Long Run is focusing on core properties in the Peace River and Edmonton areas of Alberta. Short to medium term development will focus on Montney oil projects at Peace River and Viking oil projects at Redwater. On a land base of more than 1.8 million net acres, Long Run is actively exploring new concepts while continuing to drive development and growing production in our core areas. Over the long term, it is our intention to build an exploration company with a balanced oil and gas portfolio that focuses on resource plays in western Canada.
Currently, Long Run is producing approximately 24,000 barrels of oil equivalent per day (12,500 barrels of crude oil and NGLs plus 69 Mmcf/d of natural gas), on target with our 2013 budget. Our winter drilling program is approaching completion and we are working to tie-in these wells prior to spring break-up.
All financial, operational, and reserve comparatives are based on historical WestFire information.
2012 HIGHLIGHTS
- Long Run replaced 927 percent of 2012 production achieving all-in Finding, Development and Acquisition ("FD&A") costs of $12.10 per boe on a Proved plus Probable ("P+P") basis, including changes in Future Development Costs ("FDC"), and achieved Total Proved ("TP") FD&A costs of $16.46 per boe, including FDC;
- Fourth quarter funds from operations was $55.8 million or $0.48 per share (basic), (excluding transaction costs of $17.4 million or $0.15 per share (basic));
- Using a fourth quarter funds flow netback of $28.34 per boe (excluding transaction costs) and 2012 P+P FD&A costs of $12.10 per boe, Long Run achieved a 2012 recycle ratio of 2.3x;
- Exit production for 2012 of 23,032 boe per day was in-line with forecasted exit volumes of 23,000 boe per day and an increase of 148 percent (82 percent per share) compared to 2011 exit production of approximately 9,300 boe per day;
- Long Run successfully divested non-core assets in west central Saskatchewan for cash proceeds of approximately $180 million, before closing adjustments. As a result of this transaction, Long Run''s 2012 year-end net debt was $293.1 million, which positions Long Run with a debt to annualized 2012 fourth quarter funds from operations ratio (excluding transaction costs) of 1.3x, among the lowest in the junior and intermediate oil and gas sector.
- Long Run''s 2013 capital program of $265 million targets to increase production to average 25,000 boe per day for 2013, with an increase in liquids production from approximately 11,500 bbls per day at the end of 2012 to an average of approximately 13,400 bbls per day in 2013, an increase in average crude oil and liquids production in 2013 of approximately 17 percent.
FOURTH QUARTER FINANCIAL AND PRODUCTION RESULTS
- Fourth quarter production averaged 21,405 boe per day, weighted approximately 56 percent to oil and liquids. Compared to the fourth quarter 2011, production increased approximately 149 percent with 2012 full year light oil volumes increasing 157 percent over 2011.
- Higher production volumes in the fourth quarter increased funds from operations to approximately $55.8 million (excluding transaction costs) or $0.48 per share (basic), a 33 percent increase per share over the $29.9 million or $0.36 per share (basic) generated in the third quarter of 2012, (inclusive of Q4 2012 transaction costs funds from operations was $38.4 million or $0.33 per share (basic));
- Operating costs improved for the fourth quarter of 2012, down 35 percent to $11.78 per boe, compared to $18.20 per boe in the third quarter of 2012, and down more than 30 percent from the fourth quarter of 2011 when operating costs were $16.83 per boe;
- Capital spending of approximately $64.5 million in the fourth quarter of 2012 targeted oil development in the Montney at Girouxville and in the Viking at Redwater.
- During the fourth quarter of 2012, Long Run recorded a net loss of $56.6 million ($0.49 per share (basic)) primarily due to a property, plant and equipment impairment charge of $144.1 million for the year ended December 31, 2012 resulting from a weakening of the future price forecasts and a reduction of the estimated reserve volumes at Kaybob, partially offset by a gain on disposal of assets, and income from operations.
2012 RESERVES
- Total Proved plus Probable ("P+P") gross reserves increased by approximately 92 percent (27 percent per share) to 83.2 mmboe compared with 43.3 mmboe at December 31, 2011;
- Total Proved ("TP") gross reserves increased by approximately 86 percent to 53.7 mmboe compared with 28.9 mmboe at December 31, 2011. TP reserves represent 65 percent of our P+P portfolio of 83.2 mmboe, a number which Long Run believes will increase further with 87 percent of development capital being directed into crude oil plays in the Montney in the Peace area and in the Viking at Redwater, two plays which continue to show improving results delivering low finding and development costs;
- In Long Run''s emerging oil play in the Peace River area, P+P reserve bookings for the area increased 34 percent from year end 2011 from 21.2 mmboe to 28.5 mmboe (Guide, December 31, 2011), which is a trend likely to accelerate with Long Run''s plan to drill 50 wells into this emerging oil play in 2013;
- Assuming 2013 average daily forecasted production volumes of 25,000 boe per day, Long Run''s P+P reserve life index is approximately 9.1 years.
2012 FINDING, DEVLEOPMENT and ACQUISITION COSTS
- On a P+P basis, Long Run replaced 927 percent of 2012 production achieving total Finding, Development and Acquisition ("FD&A") costs, including Future Development Capital ("FDC"), of $12.10 per boe. On a TP basis, FD&A costs were $16.46 per boe, including FDC.
COMMODITY ENVIRONMENT
- WTI crude oil prices averaged US$94.19 per barrel in 2012, compared to US$95.00 per barrel in 2011. Edmonton light sweet traded at an average discount of $7.97 per barrel in 2012 compared to WTI (2011 - premium of $1.22 per barrel).
- WTI crude oil prices averaged US$88.20 per barrel in the fourth quarter of 2012, compared to US$92.19 per barrel in the third quarter of 2012 and US$94.02 per barrel for the fourth quarter of 2011. Edmonton light sweet oil traded at a discount of $3.46 per barrel compared to WTI during the fourth quarter of 2012 (2011 - premium of $1.44 per barrel) compared to a discount of $7.40 per barrel during the third quarter of 2012.
- In 2012, the AECO Monthly Index averaged $2.40 per mcf compared to $3.67 per mcf in 2011.
- In the fourth quarter of 2012, the AECO Monthly Index averaged $3.06 per mcf compared to $2.19 per mcf in the third quarter of 2012 and $3.47 per mcf for the fourth quarter of 2011.
OPERATIONS UPDATE
In the fourth quarter of 2012, Long Run spent $64.5 million in capital which included drilling 29 (26.5 net) wells. This included 9 (net) Viking oil wells at Redwater, 5 (net) Montney oil wells in the Peace River area, 12 (9.5 net) on subsequently divested west central Saskatchewan assets, and 3 (net) exploration wells in the Peace River area. Long Run continues to achieve results above management''s expectations while keeping on-stream costs in-line with historical averages.
In the near term, Long Run will focus development primarily on oil opportunities at Redwater and in the Peace River area, both in Alberta. Up to 53 (50.4 net) wells are planned, including 18 (net) Montney oil wells in the Peace Area, and 30 (27.4 net) Viking oil wells at Redwater.
Total first quarter capital spending is expected to be approximately $100 million.
Peace Area Montney
- Results from this project have started to exceed management''s expectations with wells completed with 20 or more frac stages exhibiting initial month average rates in excess of 200 boe per day.
- During the second half of 2012, Long Run expanded the Girouxville portion of this play and brought the 5,000 bbl per day capacity Girouxville crude oil processing facility on stream. This increases our oil processing capacity in the Peace Area to 10,000 bbl per day complemented by 50 Mmcf per day of gas processing.
- Enhanced oil recovery ("EOR") will be a key component in maximizing the value from this project. Long Run anticipates receiving regulatory approval for its EOR pilot project in the Peace Area during the first half of 2013, and is working towards a second EOR pilot with expected approval in late 2013.
Redwater Viking
- During the fourth quarter of 2012, Long Run tested cemented liner completion systems which was a departure from the previously applied burst-port completion system. Long Run expects to see improved reservoir stimulation, resulting in better well performance from this change and other changes to the Redwater frac design.
- Currently, the average rate of the initial 12 wells completed since these changes is approximately 86 boe per day per well.