CALGARY, ALBERTA--(Marketwired - Mar 5, 2014) - LONG RUN EXPLORATION LTD. (LRE.TO) ("Long Run" or the "Company") is pleased to announce its financial results for the fourth quarter and year ended December 31, 2013 and year end reserve results.
2013 HIGHLIGHTS
- Long Run's funds flow from operations for 2013 was approximately $230 million ($1.83 per share, diluted), an increase of 78 percent over 2012.
- Production averaged 25,094 boe per day for 2013, weighted approximately 53 percent to crude oil and liquids, an increase of 90 percent from 2012.
- Net earnings in 2013 were $24.3 million ($0.19 per share, diluted) compared to net loss of $42.7 million in 2012 ($0.47 per share, diluted). Net income in 2013 reflects the higher funds flow from operations, partially offset by a $48.3 million increase in depletion expense associated with the higher production volumes. The net earnings in 2013 included impairments of $13.0 million (2012 - $146.1 million), partially offset by an $11.2 million gain on disposal of properties (2012 - $87.1 million).
- WTI crude oil prices averaged US$97.99 per barrel in 2013, compared to US$94.15 per barrel in 2012. Edmonton light sweet traded at an average discount of $7.88 per barrel in 2013 compared to CAD WTI. In 2012, this discount was $7.73 per barrel. In 2013, the AECO Monthly Index averaged $3.17 per mcf compared to $2.39 per mcf in 2012.
- Long Run's capital expenditures for 2013 totaled $277 million with 125.2 net wells drilled, at a 98 percent success rate.
- Long Run completed a number of transactions in 2013 to focus and rationalize our portfolio of properties. We acquired production, key infrastructure, and inventory in our core areas of Peace River and Redwater and monetized our minor properties in Saskatchewan. As a result, we are 100 percent focused in the province of Alberta.
- Total Proved plus Probable ("P+P") gross reserves increased by approximately 18 percent per share to 97.7 mmboe compared with 83.2 mmboe at December 31, 2012.
- Total Proved ("TP") gross reserves increased by approximately 17 percent to 62.7 mmboe compared with 53.7 mmboe at December 31, 2012. TP reserves represent 64 percent of our P+P portfolio of 97.7 mmboe.
- Assuming 2014 average daily forecasted production volumes of 26,300 boe per day, Long Run's P+P reserve life index is approximately 10.2 years. On a P+P basis, Long Run replaced 259 percent of 2013 production, achieving total Finding and Development ("F&D") costs, including Future Development Capital ("FDC"), of $21.85 per boe.
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Implementation of Enhanced Oil Recovery ("EOR") projects continues to move forward in the Peace River area at both Normandville and Girouxville. Water injection began at the Normandville pilot project on May 1, 2013, and at Girouxville during the fourth quarter of 2013. Computer modeling continues and initial response could occur in 2014. This EOR work will provide further visibility on ultimate recoveries from this project, with positive results leading to an expansion of the project in 2014 and beyond.
FOURTH QUARTER FINANCIAL AND PRODUCTION RESULTS
OPERATIONS UPDATE
Long Run intends to focus on continuing to develop our substantial inventory in our core areas in the Montney at Peace River and in the Viking at Redwater. Average production volumes for 2014 is expected to be 26,300 BOE/d, weighted approximately 57 percent to liquids, on anticipated total capital spending of approximately $200 million.
In the Peace River area, we drilled a total of 50 net successful horizontal Montney oil wells at Normandville and Girouxville in 2013. In total, 2013 capital spending in the Peace River area was approximately $141 million, of which more than $27 million was invested during the fourth quarter in development activities including the drilling of 9.5 net wells. Forecast 2014 capital spending in the Montney is expected to total $120 million and include drilling approximately 44 net wells.
At Redwater, we drilled 64.2 net successful wells into the Viking in 2013. Total capital spending for 2013 totaled approximately $101 million. Fourth quarter spending totaled approximately $10 million resulting in one net well drilled and the implementation of an Enhanced Oil Recovery ("EOR") pilot. We expect to drill 36 net Viking wells and invest approximately $60 million in capital during 2014.
Currently, Long Run is producing approximately 25,200 barrels of oil equivalent per day (approximately 14,000 barrels of crude oil and NGLs plus 67 Mmcf per day of natural gas). First quarter capital spending is expected to be approximately $100 million, on target with our 2014 budget. Our winter drilling program is approaching completion and we are working to tie-in these wells prior to spring break-up.
DIVIDEND UPDATE
After an internal review process which began in mid-2013 and included a rigorous analysis of existing assets and inventory, Long Run made the decision to implement a moderate growth plus dividend strategy. We believe this strategy aligns with our assets and the strengths of our employees. Long Run anticipates funds flow from operations of approximately $260 million in 2014 based on pricing assumptions of WTI US$95 per barrel and AECO $3.43 per million cubic feet, targeting a sustainability ratio of approximately 96 percent. Long Run paid its first dividend to shareholders on February 14, 2014 and has declared its second dividend which will be paid on March 14, 2014 to shareholders of record as of the close of business on February 28, 2014.
On March 5, 2014, Long Run's Board of Directors affirmed their intent to continue paying monthly dividends of $0.0335 per share per month. These dividends will be subject to and conditional upon the declaration and the issuance of a press release confirming the same. Long Run's dividend rate will be reviewed monthly and will give consideration to a number of factors including current production, current and future commodity prices, commodity hedging, foreign exchange rates, and acquisition opportunities. Shareholders are advised that these dividends will be designated as "eligible dividends" for Canadian income tax purposes.