CALGARY, Nov. 12, 2013 /CNW/ - TORC Oil & Gas Ltd. ("TORC" or the
"Company") (TSX: TOG) is pleased to announce its financial and
operating results for the three and nine months ended September 30,
2013.
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Highlights
(in thousands, except per share data)
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Three months
ended
Sept. 30, 2013
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Three months
ended
Sept. 30, 2012
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Nine months
ended
Sept. 30, 2013
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Nine months
ended
Sept. 30, 2012
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Financial
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Funds flow from operations (1)
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$
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16,223
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$
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2,932
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$
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48,078
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$
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9,154
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Per share basic (2)
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$
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0.32
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$
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0.14
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$
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1.13
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$
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0.43
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Per share diluted (2), (3)
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$
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0.32
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$
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0.14
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$
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1.11
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$
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0.43
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Funds flow from operations (excluding transaction related costs) (1)
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$
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23,888
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$
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2,932
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$
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55,743
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$
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9,154
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Per share basic (2)
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$
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0.48
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$
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0.14
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$
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1.31
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$
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0.43
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Per share diluted (2), (3)
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$
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0.47
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$
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0.14
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$
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1.28
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$
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0.43
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Net income (loss)
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$
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3,287
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$
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(1,659)
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$
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7,757
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$
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(5,090)
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Per share basic (2)
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$
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0.06
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$
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(0.08)
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$
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0.18
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$
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(0.24)
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Per share diluted (2), (3)
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$
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0.06
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$
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(0.08)
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$
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0.18
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$
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(0.24)
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Exploration and development expenditures
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$
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25,851
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$
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20,383
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$
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93,716
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$
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87,621
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Property acquisitions, net of dispositions
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$
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495,137
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$
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(1,398)
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$
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494,813
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$
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4,229
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Net debt (4)
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$
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121,486
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$
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3,392
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$
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121,486
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$
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3,392
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Common shares (2)
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Shares outstanding, end of period
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91,069
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21,178
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91,069
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21,178
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Weighted average shares (basic)
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50,604
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21,178
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42,648
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21,157
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Weighted average shares (diluted)
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51,091
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21,178
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43,383
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21,157
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Operations
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Production
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Crude oil and NGL (Bbls per day)
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4,465
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855
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3,712
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801
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Natural gas (Mcf per day)
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7,449
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433
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6,280
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424
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Barrels of oil equivalent (Boepd, 6:1)
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5,706
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927
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4,758
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872
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Average realized price
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Crude oil and NGL ($ per Bbl)
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$
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97.20
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$
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78.18
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$
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89.22
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$
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81.56
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Natural gas ($ per Mcf)
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$
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2.61
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$
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2.09
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$
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3.19
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$
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1.96
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Barrels of oil equivalent ($ per Boe, 6:1)
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$
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79.46
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$
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73.14
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$
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73.80
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$
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75.98
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Netback per Boe (6:1) ($)
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Operating netback (1)
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$
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49.91
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$
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44.42
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$
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46.98
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$
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47.86
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Operating netback (prior to hedging) (1)
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$
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52.21
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$
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44.42
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$
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47.88
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$
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47.86
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Funds flow netback (1)
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$
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30.90
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$
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34.37
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$
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37.01
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$
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38.33
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Funds flow netback (excluding transaction related costs) (1)
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$
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46.02
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$
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34.37
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$
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42.91
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$
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38.33
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Wells drilled:
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Gross
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8
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6
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21
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19
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Net
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4.1
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3.6
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13.7
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14.8
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Success (%)
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100
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100
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100
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90
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(1)
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Management uses funds flow from operations (cash from operating
activities before changes in non-cash working capital and the
settlement of decommissioning
obligations) and operating and funds flow netback to analyze operating
performance and leverage. Funds flow as presented, and operating and
funds flow netback
does not have any standardized meaning prescribed by International
Financial Reporting Standards and therefore may not be comparable with
the calculation of
similar measures for other entities.
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(2)
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The corporate acquisition of Vero in November 2012 has been accounted
for as a reverse takeover. As a result, the number of outstanding
common shares, stock
options, incentive shares and warrants of comparative periods have been
reduced by a factor of 0.87 (the arrangement exchange ratio), in order
for the comparative
common share, stock options, incentive shares, warrants, per share and
per diluted share amounts to be equivalent. In addition, in September
2013, the Company
consolidated its outstanding common shares, stock options, incentive
shares and warrants on a 1 for 5 basis. As a result, the number of
outstanding common shares,
stock options, incentive shares and warrants of comparative periods have
been reduced by a factor of five, in order for the comparative common
share, stock options,
incentive shares, warrants, per share and per diluted share amounts to
be equivalent.
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(3)
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In the three and nine months ended September 30, 2012, the diluted
number of shares is equivalent to the basic number of shares due to
stock options, incentive
shares and/or warrants being antidilutive. Therefore, in this period,
the diluted per share amounts are equivalent to the basic per share
amounts.
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(4)
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Net working capital (net debt) is calculated as current assets
(excluding financial derivative assets) less current liabilities
(excluding financial derivative liabilities) and
non-current deferred lease incentives.
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HIGHLIGHTS
The Company's achievements in the third quarter of 2013 include the
following:
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On September 9th, established a new light oil core area through a significant
acquisition of light oil assets in southeast Saskatchewan which was
partially funded by a cornerstone investment by the Canada Pension Plan
Investment Board of $170 million and a bought deal public offering of
$242 million for total equity financing of $412 million. Production
and cash flow related to the acquisition as well as shares associated
with the financing are included for 22 days of the quarter;
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Increased production to 5,706 boepd in the third quarter of 2013 from
927 boepd in the third quarter of 2012;
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Third quarter 2013 represents TORC's 11th consecutive quarter of production growth;
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Cash flow increased to $16.2 million ($23.9 million before transaction
related costs) in the third quarter of 2013 from $2.9 million in the
third quarter of 2012;
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Cash flow per share increased to $0.32 per share ($0.48 per share before
transaction related costs) in the third quarter of 2013 from $0.14 per
share in the third quarter of 2012;
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At quarter end, the Company was drawn $91.6 million on an available $350
million credit facility, with net debt of approximately $121.5 million;
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The Company drilled 8 (4.1 net) wells during the third quarter with a
100 percent success rate;
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Subsequent to quarter end, paid the first dividend to shareholders on
October 15, 2013 for the month of September; and
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Due to continued operational outperformance, the Company is pleased to
increase its 2013 exit guidance to 9,800 boepd (85% light oil and
liquids) from 9,500 boepd.
MESSAGE TO SHAREHOLDERS
The third quarter of 2013 was very active at TORC as the Company
completed the strategic transition to a dividend plus growth business
model. The transition to the dividend plus growth model was
underpinned by the significant acquisition of low decline, high
netback, light oil assets in southeast Saskatchewan which closed in
early September. The assets acquired have long established decline
profiles along with extensive light oil infrastructure providing
stable, predictable cash flow. The southeast Saskatchewan assets are
complementary to TORC's established light oil growth platform in the
Cardium trend and the emerging play at Monarch, and position TORC to
pay sustainable dividends to shareholders over the long term while
providing a balanced approach to disciplined per share growth. TORC
was pleased to pay its first monthly dividend of $0.0417 per share to
shareholders on October 15, 2013 for the month of September.
As an integral part of the new dividend plus growth model, TORC
management is committed to maintaining conservative debt levels. At
the end of the third quarter, TORC was drawn $91.6 million on its $350
million credit facility providing the Company with significant
financial flexibility. The fourth quarter of 2013 is expected to be an
active quarter for TORC as the Company fulfills its remaining
exploration expenditure commitments drilling exploration wells at
Monarch and in the Three Forks play in southeast Saskatchewan. This
exploration commitment will see the Company outspend its cash flow in
the fourth quarter with the expectation that net debt at the end of
2013 will be below the Company's original guidance of $150 million,
maintaining a debt to cash flow ratio below one times.
The Company expects to release 2014 guidance by mid-December. With an
upwardly revised 2013 exit rate of 9,800 boepd and a maintained 2014
outlook of a 25 percent decline profile, the Company believes that its
run rate maintenance capital requirement is less than $100 million to
keep production flat. With a cash dividend requirement at the current
dividend policy of approximately $35 million (including the Canada
Pension Plan Investment Board's participation in the Company's share
dividend program), total capital required to keep production flat and
pay a sustainable dividend is approximately $135 million. Run rate
cash flow at 9,800 boepd and C$90 Edmonton light oil and C$3.00 per mcf
AECO pricing is more than $160 million providing for an estimated $25
million of free cash flow. This uniquely positions TORC with the
ability to achieve disciplined per share production growth with a
payout ratio below 100 percent, further enhancing TORC's
sustainability.
To provide some certainty around its guidance, TORC has undertaken an
active commodity hedging program to further protect our core capital
spending requirements and dividend policy and currently has 5,000
bbls/d of oil production hedged through the remainder of 2013 and an
average of 3,000 bbls/d currently hedged in 2014.
OPERATIONAL REVIEW
TORC's strategy has uniquely positioned the Company with a sizeable,
high quality development inventory and exposure to emerging light oil
resource plays with the potential for substantial upside. Three
primary core areas have been established: the Cardium play in Central
Alberta providing an established, lower risk, light oil focused
development inventory to underpin long term production growth;
Southeast Saskatchewan providing a free cash flow core asset to support
the dividend plus growth model; and Monarch in southern Alberta
providing emerging light oil resource play exposure.
Production averaged 5,706 boepd during the third quarter of 2013, an
increase of 32% from the second quarter of 2013, with only 22 days of
production included from the southeast Saskatchewan acquisition.
Capital expenditures for the third quarter totaled $22.2 million and
included the drilling of 8 (4.1 net) wells with a 100% success rate.
The integration of the acquired assets has been seamless as southeast
Saskatchewan comprised material operations of public companies
previously operated by TORC management and staff.
CARDIUM
The Cardium development program executed in the third quarter resulted
in drilling 7 (3.6 net) Cardium light oil wells achieving a 100 percent
success rate. Year to date, TORC has drilled 18 (11.2 net) Cardium
development wells with a 100% success rate.
With the continued focus on capital program efficiencies and economic
parameters, field initiatives include shorter rig moves, rig
efficiency, pad drilling, infrastructure centralization and a
continuous program of oilfield service cost reductions. This focus has
resulted in well costs below initial budgeted costs with the Company's
most recent wells realizing significant efficiency improvements. The
Company's average well cost has dropped below $3.5 million per well
from $3.9 million per well initially budgeted.
TORC expects to drill an additional 7.8 net wells in the Cardium play in
the fourth quarter of 2013. With over 300 net identified development
drilling locations, TORC's 2013 Cardium program of 19 net wells
represents only six percent of the identified inventory.
SOUTHEAST SASKATCHEWAN
TORC's southeast Saskatchewan core area is characterized by long
established low decline rates and significant light oil infrastructure
underpinning the balanced go-forward strategy of TORC. Southeast
Saskatchewan's development drilling inventory consists of 130 net
locations of which only 41 are booked in the year-end 2012 reserve
report. With a long term decline profile of less than 15% and high
operating netbacks, the southeast Saskatchewan assets yield significant
free cash flow.
The fourth quarter 2013 capital expenditure program includes the
drilling of an estimated 3 (2.5 net) development wells. In addition to
the significant identified undrilled development drilling inventory,
management believes that numerous optimization opportunities exist on
the acquired assets to further manage decline rates and maximize free
cash flow from these assets.
The Three Forks geological zone has seen industry activity including
drilling on lands adjacent to TORC's southeast Saskatchewan acreage.
TORC is currently drilling a Three Forks exploration well to begin
testing the concept. TORC has more than 70 net sections on this play.
MONARCH
The Company's focus at Monarch in 2013 has been the continued geological
delineation of the play as well as completion optimization. As
planned, the Company drilled two wells during the first half of 2013
with both wells being brought on production in September. The
production profile from both these wells continues to be monitored.
During the third quarter, the Company was successful in adding
complementary acreage offsetting the 16-2 and 2-9 wells which are both
on track for significant recoveries. TORC's 16-2 well has produced
approximately 87,000 bbls of light oil in the first year of production
while the 2-9 well has produced more than 77,500 bbls of light oil in
the first 330 days.
TORC is currently drilling a step out exploration well 3 miles to the
northwest of the 16-2 well with the completion scheduled in the fourth
quarter of 2013.
With only 15 delineation wells drilled into Monarch to date, the Company
has identified an initial development area in the heart of the play
that is more than 20 sections around the 16-2 and 2-9 wells. It is
anticipated that TORC will drill its first development well into the
play in the fourth quarter of 2013 setting up a development program in
2014.
BOARD OF DIRECTORS
The Company completed the final steps of its strategic transition to a
dividend plus growth business model with the appointment of Mr. Scott
Lawrence to TORC's Board of Directors. Mr. Lawrence is Vice-President
and Head of Relationship Investments for the Canada Pension Plan
Investment Board. Additionally, TORC is pleased to announce the
appointment of current board member, Mr. David D. Johnson as Chairman
of the Board of Directors of TORC.
Mr. James Pasieka, Corporate Secretary, has announced his resignation
effective November 8, 2013. Mr. Pasieka has served as TORC's Corporate
Secretary since inception of the Company in 2010. Mr. Pasieka has been
an asset to TORC and we thank him for his guidance and committed
service.
OUTLOOK
TORC has built a sustainable growth platform of light oil focused
assets. The stability of the high quality, low decline, light oil
assets in southeast Saskatchewan combined with the low risk Cardium
development inventory in central Alberta and exposure to the emerging
light oil resource play at Monarch in southern Alberta positions TORC
to provide a sustainable dividend along with value creation through a
disciplined growth strategy.
As a result of the Company's continued strong operating results, TORC is
increasing its 2013 exit production forecast to more than 9,800 boepd
(~85% light oil and liquids) from the previous 9,500 boepd estimate.
Management is currently finalizing a detailed review of 2014 capital
spending plans and anticipates releasing a 2014 budget by mid-December.
TORC has the following key operational and financial attributes:
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High Netback Production
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2013E Exit: greater than 9,800 boepd (greater than 85 percent light oil
& NGLs)
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Reserves (1)
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25.9 mmboe (85 percent light oil & NGLs) Total Proved
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40.3 mmboe (84 percent light oil & NGLs) Total Proved plus Probable
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Southeast Saskatchewan Light Oil
Development Inventory
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Greater than 130 net undrilled locations
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Cardium Light Oil Development Inventory
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Greater than 300 net undrilled locations
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Emerging Light Oil Resource Exposure
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Greater than 150 net sections at Monarch
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Sustainability Assumptions
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Corporate decline ~25 percent
Light Oil Full Cycle Capital Efficiency ~$40,000/boe/d (IP 365)
$45 per boe cash netback ($90 Edm light)
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Run Rate Cash Flow (2)
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~$160 million
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Run Rate Maintenance Capex
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~$100 million
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Annual Dividend (paid monthly)
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$0.50 per share
$46 million
$35 million (net of CPPIB Share Dividend participation)
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Targeted Growth
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>5 percent ($90 Edm light)
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Targeted All-in-Payout Ratio
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Less than 100%
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Net Debt & Bank Line
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Estimated Net Debt of less than $150 million at year-end 2013
Bank line of $350 million, greater than 55 percent undrawn at year-end
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Debt/Cash Flow
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1.0x (year-end 2013)
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Pro Forma Shares Outstanding
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91 million (basic)
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99 million (fully-diluted)
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Tax Pools
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Greater than $1 billion
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Notes:
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(1)
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Company gross reserves being pro forma TORC's working interest share
before deduction of royalties and without including any
royalty interests of pro forma TORC. Based on the respective
independent reserve reports of the southeast Saskatchewan acquisition
and TORC, prepared
by GLJ Petroleum Consultants and Sproule Associates Limited respectively
and each effective as of December 31, 2012 and prepared
in accordance with NI 51-101 and the COGE Handbook.
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(2)
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Based on $90 Edmonton Light and $3.00 AECO.
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(signed)
Brett Herman
President & Chief Executive Officer
November 12, 2013
TORC Oil & Gas Ltd. is a Calgary based company active in the
acquisition, exploration, development and production of crude oil and
natural gas in Western Canada.
Note regarding forward looking statements:
This news release contains certain forward-looking information and
statements within the meaning of applicable securities laws. The use of
any of the words "expect", "anticipate", "continue", "estimate", "may",
"will", "project", "should", "believe", "plans", "intends" and similar
expressions are intended to identify forward-looking information or
statements. In particular, but without limiting the foregoing, this
news release contains forward-looking information and statements
pertaining to the following: the volumes and estimated value of TORC's
oil and gas reserves; the life of TORC's reserves; the volume and
product mix of TORC's oil and gas production; drilling inventory;
future oil and natural gas prices; future results from operations and
operating metrics, future development, exploration, acquisition and
development activities (including drilling plans) and related
production and reserves expectations; dividend policy and plans; and
future debt levels.
The recovery and reserve estimates of TORC's reserves and resources
provided herein are estimates only and there is no guarantee that the
estimated reserves or resources with be recovered. In addition,
forward-looking statements or information are based on a number of
material factors, expectations or assumptions of TORC which have been
used to develop such statements and information but which may prove to
be incorrect. Although TORC believes that the expectations reflected in
such forward-looking statements or information are reasonable, undue
reliance should not be placed on forward-looking statements because
TORC can give no assurance that such expectations will prove to be
correct. In addition to other factors and assumptions which may be
identified herein, assumptions have been made regarding, among other
things: that TORC will continue to conduct its operations in a manner
consistent with past operations; results from drilling and development
activities consistent with past operations; the quality of the
reservoirs in which TORC operates and continued performance from
existing wells; the continued and timely development of infrastructure
in areas of new production; the accuracy of the estimates of TORC's
reserve volumes; continued availability of debt and equity financing
and cash flow to fund TORC's current and future plans and expenditures;
the impact of increasing competition; the general stability of the
economic and political environment in which TORC operates; the general
continuance of current industry conditions; the timely receipt of any
required regulatory approvals; the ability of TORC to obtain qualified
staff, equipment and services in a timely and cost efficient manner;
drilling results; the ability of the operator of the projects in which
TORC has an interest in to operate the field in a safe, efficient and
effective manner; the ability of TORC to obtain financing on acceptable
terms; field production rates and decline rates; the ability to replace
and expand oil and natural gas reserves through acquisition,
development and exploration; the timing and cost of pipeline, storage
and facility construction and expansion and the ability of TORC to
secure adequate product transportation; future commodity prices;
currency, exchange and interest rates; regulatory framework regarding
royalties, taxes and environmental matters in the jurisdictions in
which TORC operates; and the ability of TORC to successfully market its
oil and natural gas products.
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The forward-looking information and statements included in this news
release are not guarantees of future performance and should not be
unduly relied upon. Such information and statement, including the
assumptions made in respect thereof, involve known and unknown risks,
uncertainties and other factors that may cause actual results or events
to defer materially from those anticipated in such forward-looking
information or statements including, without limitation: changes in
commodity prices; changes in the demand for or supply of TORC's
products, the early stage of development of some of the evaluated
areas; unanticipated operating results or production declines; changes
in tax or environmental laws, royalty rates or other regulatory
matters; changes in development plans of TORC or by third party
operators of TORC's properties, increased debt levels or debt service
requirements; inaccurate estimation of TORC's oil and gas reserve and
resource volumes; limited, unfavourable or a lack of access to capital
markets; increased costs; a lack of adequate insurance coverage; the
impact of competitors; and certain other risks detailed from
time-to-time in TORC's public disclosure documents.
The forward-looking information and statements contained in this news
release speak only as of the date of this news release, and TORC does
not assume any obligation to publicly update or revise any of the
included forward-looking statements or information, whether as a result
of new information, future events or otherwise, except as may be
required by applicable securities laws.
Meaning of Boe and Boepd
When used in this press release, boe means a barrel of oil equivalent on
the basis of 1 boe to 6 thousand cubic feet of natural gas. Boepd
means a barrel of oil equivalent per day.
Boe's may be misleading, particularly if used in isolation. A boe
conversion ratio of 1 boe for 6 thousand cubic feet of natural gas 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 of oil compared to natural gas
based on currently prevailing prices is significantly different than
the energy equivalency conversion ratio of 6 Mcf to 1 BOE, utilizing a
conversion ratio of 6 Mcf to 1 BOE may be misleading as an indication
of value.
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SOURCE TORC Oil & Gas Ltd.
