Advantage Announces First Quarter 2013 Results

                Advantage Announces First Quarter 2013 Results

PR Newswire

CALGARY, May 9, 2013

Solid Operating and Financial Results Supports Development Plan to Double
Production at Glacier

(TSX: AAV, NYSE: AAV)

CALGARY, May 9, 2013 /PRNewswire/ -  Advantage Oil & Gas Ltd. ("Advantage"  or 
the "Corporation") is pleased to announce the financial and operating  results 
for the  three  months ended  March  31,  2013. The  following  press  release 
summarizes and discusses the unconsolidated financial and operating highlights
for Advantage (excludes Longview Oil Corp).

                                                     Three months ended    
                                                          March 31         
                                                      2013        2012    
                                                                      
Financial ($000, except as otherwise indicated)                         
Sales including realized hedging                     $  41,598  $  33,425 
    per share ^ (2)                                 $    0.25  $    0.20 
    per boe                                         $   21.75  $   15.89 
Funds from operations                                $  21,484  $  12,419 
    per share ^ (2)                                 $    0.13  $    0.07 
    per boe                                         $   11.23  $    5.91 
Dividends received from Longview                     $   3,173  $   4,417 
    per share ^ (2)                                 $    0.02  $    0.03 
Total capital expenditures                           $  54,107  $  63,327 
Working capital deficit ^ (3)                        $  49,027  $  70,422 
Bank indebtedness                                    $ 164,025  $ 188,569 
Convertible debentures (face value)                  $  86,250  $  86,250 
Shares outstanding at end of period (000)              168,383    166,573 
Basic weighted average shares (000)                    168,383    166,541 
Operating                                                               
Daily Production                                                        
    Natural gas (mcf/d)                               119,692    129,951 
    Crude oil and NGLs (bbls/d)                         1,308      1,463 
    Total boe/d @ 6:1                                  21,257     23,121 
Average prices (including hedging)                                      
    Natural gas ($/mcf)                             $    3.04  $    2.00 
    Crude oil and NGLs ($/bbl)                      $   75.58  $   73.31 
(1) Non-consolidated financial and operating                               
     highlights for Advantage excluding Longview.                       
(2)  Based on weighted average shares outstanding                       
     Working capital deficit includes trade and                 
(3) other receivables, prepaid expenses and                                 
     deposits,                                                         
    and trade and other accrued liabilities                            



Stable Production, Increased Funds from Operations and Reduced Bank
Indebtedness

  *On April 30, 2013, Advantage announced that it had closed the Questfire
    Energy Corp. ("Questfire") transaction which constituted the sale of
    substantially all of Advantage's non-core assets. Accordingly, all
    financial and operating results in the first quarter of 2013 include
    results from the non-core assets.
  *Funds from operations for the first quarter of 2013, excluding dividends
    received from Longview Oil Corp. ("Longview"), was $21.5 million or $0.13
    per share, an increase of 27% as compared to the fourth quarter of 2012
    and an increase of 73% as compared to the second quarter of 2012. Funds
    from operations improved significantly due to an increase in realized
    natural gas prices. Advantage's realized natural gas price contains
    deductions for TransCanada pipeline firm service transportation
    commitments including costs for any unutilized service at Glacier.
  *The tax-free dividend income received from Longview amounted to $3.2
    million ($0.02 per share) during the first quarter of 2013 as a result of
    Advantage's 45.1% ownership in the common shares of Longview.
  *Production during the first quarter of 2013 averaged 21,257 boe/d (93%
    natural gas) and was comparable to the fourth quarter of 2012. Production
    during the second quarter of 2013 will include production from the
    non-core assets for the month of April 2013.
  *Advantage's average royalty rate was 4.5% for the first quarter of 2013
    compared to 7.9% during the same period of 2012. Advantage's royalty rates
    have decreased due to lower average royalties attributed to production
    from Glacier.
  *Operating expense for the three months ended March 31, 2013 was $5.18/boe
    ($0.86/mcf) compared to $5.74/boe during the same period of 2012. The
    reduction in operating costs reflects the continued efficiencies created
    by processing our natural gas production through our 100% owned Glacier
    gas plant.
  *Total capital expenditures for the three months ended March 31, 2013 was
    incurred primarily at Glacier and amounted to $54.1 million. During the
    first quarter of 2013, we employed revised completion designs and
    completed 7 Upper Montney wells and 2 Lower Montney wells which remained
    from our previous 2011/2012 drilling season. In addition, 3 new Middle
    Montney wells which were drilled in the second half of 2012 were completed
    during the fourth quarter 2012 and first quarter of 2013. Productivity
    from these wells is anticipated to maintain Glacier production at
    approximately 100 mmcf/d for the remainder of 2013. Capital expenditures
    also included modifications to increase the water disposal capacity at our
    Glacier gas plant and included the drilling of a water disposal well which
    will further reduce operating costs.
  *As of March 31, 2013, bank indebtedness was $164.0 million on a $300
    million credit facility. Concurrent with the closing of our non-core asset
    sales on April 30, 2013, we announced that our credit facility was revised
    to $230 million with a pro-forma bank debt of approximately $125 million
    as of March 31, 2013. This leaves an undrawn credit facility of $105
    million or 46% of our current credit facility.
  *In addition to Glacier, Advantage's other major assets includes a 45.1%
    ownership in the shares of Longview valued at approximately $101 million,
    a $32.6 million Convertible Senior Secured Questfire Debenture and
    1,500,000 Class B Shares of Questfire.
  *Advantage's pro-forma tax pools as of December 31, 2012 are approximately
    $1.1 billion of which approximately $800 million are deductible at a rate
    of 100%.

Looking Forward - Focused on Glacier Development Plan to Double Production  by 
2015

  *On April 30, 2013, Advantage announced the closing of the Questfire
    Transaction which represents substantially all of Advantage's remaining
    non-core assets. Advantage is now a pure play company focused on our
    signature Glacier Montney property.
  *We are currently working on the two year development plan that will
    increase natural gas throughput at Glacier to approximately 140 mmcf/d by
    the spring of 2014 and 200 mmcf/d by the spring of 2015. Preliminary
    estimates for this plan is included in our current investor presentation
    that is available on our website. Capital requirements will be funded
    through growing cash flow, undrawn credit facilities and current Advantage
    investments. Operational activities will include drilling of additional
    Upper Montney wells and further delineation of the Middle and Lower
    Montney intervals where only 2.2% and 27.6% of the total acreage,
    respectively, has been assigned reserves at year end 2012. Options to
    process and extract liquids from the Middle Montney will also be evaluated
    and included in the development plan.
  *We anticipate announcing our capital program and budget for the period
    July 1, 2013 to June 30, 2014 before mid-year 2013.

Commodity Hedging Program

  *Advantage has entered into a number of natural gas hedges in support of
    our two year Glacier development plan. Our natural gas hedges will reduce
    the volatility of future cash flows for the period from January 2013 to
    March 2016 and are summarized in the following table:

                                    Average Price 
    Period    Average Volume Hedged  $Cdn. AECO   
    2013 Year     29,224 mcf/d        $3.31/mcf   
    2014 Year     47,391 mcf/d        $3.79/mcf   
    2015 Year     45,021 mcf/d        $3.91/mcf   
    2016 Q1       42,652 mcf/d        $3.90/mcf

  *Additional details on our hedging program are available at our website at
    www.advantageog.com.

Interim Consolidated Financial Statements and MD&A

Advantage's unaudited interim consolidated financial statements for the three
months ended March 31, 2013 together with the notes thereto, and Management's
Discussion and Analysis for the three months ended March 31, 2013 have been
prepared in accordance with International Financial Reporting Standards
("IFRS") and posted on our website at www.advantageog.com and filed under our
profile on SEDAR at www.sedar.com.

Approval of Advance Notice By-Law

  *Advantage also announces the approval by its board of directors (the
    "Board") of an advance notice by-law (the "By-Law"). The By-Law, among
    other things, includes a provision that requires advance notice to the
    Corporation in circumstances where nominations of persons for election to
    the Board are made by shareholders of the Corporation other than pursuant
    to: (i) a "proposal" made in accordance with section 136(1) of the
    Business Corporations Act (Alberta) (the "Act"); or (ii) a requisition of
    the shareholders made in accordance with section 142(1) of the Act.
  *Among other things, the By-Law fixes a deadline by which holders of record
    of common shares of Advantage must submit director nominations to the
    Chief Financial Officer of the Corporation prior to any annual or special
    meeting of shareholders and sets forth the specific information that a
    shareholder must include in the written notice to the Chief Financial
    Officer of the Corporation for an effective nomination to occur. No person
    will be eligible for election as a director of the Corporation unless
    nominated in accordance with the provisions of the By-Law.
  *In the case of an annual general meeting of shareholders, notice to the
    Chief Financial Officer of the Corporation must be made not less than 30
    nor more than 65 days prior to the date of the annual general meeting of
    shareholders; provided, however, that in the event that the annual general
    meeting of shareholders is to be held on a date that, is less than 50 days
    after the date (the "Notice Date") on which the first public announcement
    of the date of the annual meeting was made, notice by the nominating
    shareholder may be made not later than the close of business on the tenth
    (10^th) day following the Notice Date. In the case of a special meeting
    (which is not also an annual general meeting) of shareholders called for
    the purpose of electing directors (whether or not called for other
    purposes), notice to the Chief Financial Officer of the Corporation must
    be made not later than the close of business on the fifteenth (15^th) day
    following the day on which the first public announcement of the date of
    the special meeting of shareholders was made.
  *The By-Law is effective and in full force and effect as of the date
    hereof. In accordance with the terms of the By-Law, the By-Law will be put
    to shareholders of the Corporation for approval at its upcoming annual
    general meeting of shareholders on June 20, 2013. If the By-Law is not
    confirmed at the meeting by ordinary resolution of shareholders, the
    By-Law will terminate and be of no further force and effect following the
    termination of the shareholders meeting.
  *The full text of the By-Law is available via SEDAR at www.sedar.com or
    upon request by contacting the Chief Financial Officer of the Corporation
    at (403) 718-8246 or by email at kdrader@advantageog.com.

Advisory

The  information  in  this  press  release  contains  certain  forward-looking 
statements,  including  within  the  meaning  of  the  United  States  Private 
Securities Litigation Reform Act  of 1995. These  statements relate to  future 
events or  our future  intentions or  performance. All  statements other  than 
statements   of   historical   fact   may   be   forward-looking   statements. 
Forward-looking statements are often, but not always, identified by the use of
words  such   as  "seek",   "anticipate",  "plan",   "continue",   "estimate", 
"demonstrate", "expect",  "may",  "will", "project",  "predict",  "potential", 
"targeting", "intend",  "could",  "might", "should",  "believe",  "would"  and 
similar expressions and include  statements relating to,  but not limited  to, 
the estimated royalty rate for the life of a Glacier Montney horizontal  well; 
the  Corporation's  anticipated  drilling  and  completion  plans;   estimated 
production from the remainder of 2013 from the completion of the Corporation's
wells drilled  inventory;  effect of  undrawn  credit facility,  ownership  of 
Longview shares and cash flow  on the Corporation's financial flexibility  and 
drilling and  completion  plans; and  the  Corporation's development  plan  to 
increase production  at  Glacier and  the  anticipated production  levels  and 
timing thereof. In addition, statements relating to "reserves" or  "resources" 
are deemed  to be  forward-looking  statements, as  they involve  the  implied 
assessment, based on certain estimates and assumptions, that the resources and
reserves described can be profitably produced in the future.

Advantage's actual decisions, activities, results, performance or  achievement 
could  differ  materially  from  those  expressed  in,  or  implied  by,  such 
forward-looking statements and, accordingly, no  assurances can be given  that 
any of the events anticipated by the forward-looking statements will transpire
or occur or, if any of them do, what benefits that Advantage will derive  from 
them.

These  statements   involve   substantial   known  and   unknown   risks   and 
uncertainties, certain of which are beyond Advantage's control, including, but
not limited to: changes in  general economic, market and business  conditions; 
industry  conditions;  actions  by  governmental  or  regulatory   authorities 
including increasing taxes  and changes  in investment  or other  regulations; 
changes in tax laws,  royalty regimes and incentive  programs relating to  the 
oil and  gas industry;  the  effect of  acquisitions; Advantage's  success  at 
acquisition, exploitation  and development  of reserves;  unexpected  drilling 
results,  changes  in  commodity  prices,  currency  exchange  rates,  capital 
expenditures, reserves or  reserves estimates and  debt service  requirements; 
the occurrence of unexpected events involved  in the exploration for, and  the 
operation and development of,  oil and gas properties;  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;  changes  or fluctuations  in  production 
levels; delays  in anticipated  timing of  drilling and  completion of  wells; 
individual well productivity;  competition from other  producers; the lack  of 
availability of  qualified personnel  or management;  credit risk;  individual 
well productivity; changes in laws  and regulations including the adoption  of 
new environmental laws and regulations and changes in how they are interpreted
and enforced; our ability to comply  with current and future environmental  or 
other  laws;  stock  market  volatility  and  market  valuations;  liabilities 
inherent in  oil and  natural gas  operations; uncertainties  associated  with 
estimating oil and natural gas reserves; competition for, among other  things, 
capital, acquisitions of  reserves, undeveloped lands  and skilled  personnel; 
incorrect assessments  of the  value of  acquisitions; geological,  technical, 
drilling and processing problems and other difficulties in producing petroleum
reserves; failure  to realize  the anticipated  benefits of  the sale  of  the 
Corporation's non-core assets;  and ability  to obtain  required approvals  of 
regulatory authorities and ability to access sufficient capital from  internal 
and external sources.  Many of  these risks and  uncertainties and  additional 
risk factors are described in the Corporation's Annual Information Form  which 
is available  at  www.sedar.com  and  www.advantageog.com.  Readers  are  also 
referred to risk  factors described  in other documents  Advantage files  with 
Canadian securities authorities.

With respect to  forward-looking statements contained  in this press  release, 
Advantage has made assumptions regarding:  conditions in general economic  and 
financial markets;  effects of  regulation by  governmental agencies;  current 
commodity prices and  royalty regimes; future  exchange rates; royalty  rates; 
future  operating  costs;  availability  of  skilled  labor;  availability  of 
drilling and related equipment; timing and amount of capital expenditures; the
impact of increasing competition; the price of crude oil and natural gas; 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 crude oil  and 
natural gas 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.

These forward-looking statements are made as of the date of this press release
and Advantage  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.

References in this  press release  to initial production  test rates,  initial 
"productivity", initial  "flow" rates,  "flush" production  rates and  "behind 
pipe production"  are  useful  in confirming  the  presence  of  hydrocarbons, 
however such rates are not determinative of the rates at which such wells will
commence production and decline thereafter and are not indicative of long term
performance or of ultimate recovery. While encouraging, readers are  cautioned 
not to place reliance  on such rates in  calculating the aggregate  production 
for Advantage.

Barrels of oil  equivalent (boe) may  be misleading, particularly  if used  in 
isolation. A boe conversion ratio has been calculated using a conversion  rate 
of six  thousand cubic  feet  of natural  gas  to one  barrel  of oil.  A  boe 
conversion ratio of 6 mcf:1 bbls 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.

The Corporation  discloses several  financial measures  that do  not have  any 
standardized meaning prescribed under  IFRS. These financial measures  include 
funds from  operations  and  cash netbacks.  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.  Investors should  be  cautioned 
that these measures should not be  construed as an alternative to net  income, 
cash  provided  by  operating  activities  or  other  measures  of   financial 
performance as  determined  in accordance  with  IFRS. Advantage'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.

SOURCE Advantage Oil & Gas Ltd.

Contact:

Investor Relations
Toll free: 1-866-393-0393

Advantage Oil & Gas Ltd.
700, 400 - 3^rd Avenue SW
Calgary, Alberta
T2P 4H2
Phone: (403) 718-8000
Fax: (403) 718-8300
Web Site:www.advantageog.com
E-mail:ir@advantageog.com
 
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