Long Run Exploration Ltd. Announces Second Quarter 2013 Results

Long Run Exploration Ltd. Announces Second Quarter 2013 Results 
CALGARY, ALBERTA -- (Marketwired) -- 07/31/13 -- Long Run Exploration
Ltd. ("Long Run" or the "Corporation") (TSX:LRE) is pleased to report
financial and operational results for the quarter ended June 30,
2013. The unaudited financial statements of Long Run for the quarter
ended June 30, 2013 and the related Management's Discussion and
Analysis ("MD&A") can be accessed on-line on SEDAR at www.sedar.com
or on Long Run's website at www.longrunexploration.com. 
ACCOMPLISHMENTS  
During the second quarter of 2013, Long Run:  


 
--  Increased average daily production to 24,431 boe per day in the second
    quarter of 2013, an increase of production per share of approximately 40
    percent over the second quarter of 2012. Second quarter 2013 production
    increased more than three percent from 23,611 boe per day in the first
    quarter of 2013. During the first half of 2013, average daily production
    was 24,023 boe per day, on-track with internal forecasts. Based on the
    success of development work to-date and the repeatability of well
    performance at key oil properties, Long Run is in-line to achieve 2013
    annual average daily production guidance of 25,000 boe per day.  
    
--  Generated funds flow from operations of $63.2 million ($0.50 per share)
    compared to $48.6 million ($0.39 per share) in the first quarter of
    2013. This increase was due to increased production and stronger
    commodity pricing, including much narrower pricing differentials
    throughout the second quarter. Funds flow from operations increased by
    almost 22 percent per share in the second quarter of 2013 over the same
    period last year.  
    
--  Invested a total of $38.9 million of development capital into the
    portfolio of producing properties. Reduced spending in the second
    quarter of 2013, when compared to first quarter 2013 spending of $102.9
    million, as a result of the normal slowdown in field activity caused by
    spring breakup. Second quarter spending included maintenance of
    facilities and associated infrastructure. As outlined in the operational
    update released on July 2, 2013, maintenance included a major facility
    turnaround at the Kaybob processing complex. This fa
cility returned to
    full operation during the first week of June.  
    
--  Completed a resource assessment through the independent engineering
    firm, Sproule Associates Limited ("Sproule"), which identified
    Discovered Petroleum Initially-in-Place ("DPIIP) of 301.2 million
    barrels of oil (best case) on a portion of Long Run's Montney lands in
    the Peace area. Assuming successful primary and secondary recovery
    programs, Long Run believes increased recovery of crude oil is possible
    at the Normandville and Girouxville Montney oil play. This play has
    rapidly evolved over the past three years from a natural gas project to
    a successful oil play. The establishment of a DPIIP number demonstrates
    the potential of this play to deliver significant value to shareholders
    both in the near-term as a key driver delivering production and funds
    flow growth and in the longer-term through secondary recovery programs. 
    
--  Renewed the $450 million revolving credit facilities and extended the
    term of the facilities to May 31, 2016. The bank syndicate is jointly
    led by The Bank of Nova Scotia and National Bank of Canada, and includes
    a broad syndicate of Canadian and international banks.  
    
--  Increased full year 2013 capital spending guidance to an anticipated
    total of approximately $275 million. This increase reflects modest
    increases associated with plant turnarounds and facility maintenance, as
    well as increased spending on crown land in core areas. Second half
    spending of approximately $114 million is estimated to be weighted
    towards higher third quarter spending with an expected $80 million being
    invested into Long Run's portfolio of properties. As a result of
    spending during the third and fourth quarters, Long Run anticipates
    second half production to average approximately 26,000 boe per day and
    that crude oil production, as a percentage of total corporate
    production, will continue to increase. 

 
COMMODITY ENVIRONMENT  


 
--  WTI crude oil prices averaged US$94.20 per barrel in the second quarter
    of 2013, compared to US$93.49 per barrel for the second quarter of 2012
    and US$94.37 per barrel in the first quarter of 2013. During the second
    quarter of 2013, Edmonton light sweet oil traded at an average discount
    of $1.87 per barrel compared to WTI. This compares to an average
    discount of $9.54 per barrel compared to WTI during the second quarter
    of 2012, and of $6.18 per barrel during the first quarter of 2013. 
    
--  In the second quarter of 2013, the AECO Monthly Index averaged $3.53 per
    mcf compared to $1.90 per mcf in the second quarter of 2012 and $3.20
    per mcf in the first quarter of 2013.

 
OPERATIONS UPDATE  
As outlined in the operations update released on July 2, 2013, Long
Run continues to steadily increase production, in-line with internal
forecasts. During the second quarter, development work continued on
Long Run's two key play areas. 
Peace Area  


 
--  In the second quarter of 2013, production in the Peace area averaged
    9,952 boe per day. Production from this area increased an incremental
    499 boe per day during the second quarter when compared to the first
    quarter of 2013. 
    
--  In June, Long Run drilled four net successful horizontal Montney oil
    wells at Girouxville and Normandville. Results from these new wells
    continue to exceed the established type curve for this play, and remain
    consistent with the improved well results achieved in the fourth quarter
    of 2012 and the first quarter of 2013.  
    
--  Long Run anticipates drilling up to 27 additional net wells in this play
    during the second half of 2013. Full-year 2013 development capital
    spending on the Montney oil play at Normandville and Girouxville area is
    expected to be approximately $110 million, resulting in a total of 49
    wells.  
    
--  The transition from planning and analysis to the pilot project stage of
    Long Run's enhanced oil recovery ("EOR") work is moving forward in the
    Montney at Normandville in advance of a full pressure maintenance
    project utilizing down-dip water injection. Long Run's pilot project
    commenced early in the second quarter with water injection beginning on
    May 1, 2013. Long Run expects near-term results from this EOR work to
    provide better visibility on ultimate recoveries from this project.
    Assuming positive results from this scheme, Long Run anticipates
    expanding the scope of this project in 2014. Secondary recovery is a key
    part of the long-term development plan for this play.  
    
--  The recently completed resource assessment by Sproule further confirms
    Long Run's confidence in the size and value of this play. The press
    release on July 2, 2013 outlined a total DPIIP of 337 million boe (best
    case) (including more than 301 million barrels of oil) which exceeded
    Long Run's initial internal estimates. The resource assessment combined
    with recent improvements in well performance and reliability, along with
    the EOR work already underway, provide Long Run the opportunity to
    create significant shareholder value through growth in
 this play.

 
Redwater Viking 


 
--  Production from the Viking light oil play at Redwater in the second
    quarter increased slightly from the first quarter of 2013 to 5,444 boe
    per day. A total of six successful net oil wells were drilled during the
    quarter delivering results consistent with previously announced improved
    well performance rates. The previously drilled but uncompleted wells
    from the first quarter have been completed, tied-in and are currently
    on-production.  
    
--  Long Run expects to drill up to 30 additional net wells in the second
    half of 2013 estimated to cost approximately $36 million to drill,
    complete and tie-in. Development plans remain on-track for this play
    with full-year 2013 expectations of 64 net wells drilled with total
    development capital spending forecast to be $84 million. 
    
--  Plans for water injection as part of early-stage work on a broader EOR
    strategy continue at Redwater. As part of these plans, Long Run
    anticipates implementing a pilot EOR scheme injecting water into the
    Viking formation to test the viability of such a plan. Subsequent to the
    end of the second quarter, an application has been made to provincial
    regulators for approval to begin this pilot EOR project. Long Run
    expects to receive approval by the end of the third quarter of 2013.  
    
--  Complementing Long Run's Viking position at Redwater is the work
    currently underway on the Viking at Provost. Long Run drilled two net
    wells during the month of June with both wells currently on-production
    averaging 75 barrels of light oil per day per well with minimal natural
    gas production. Management is pleased with early results and may
    accelerate work on this project should positive results continue,
    potentially drilling two additional wells in the second half of 2013.
    Long Run believes potential for more than 50 drilling locations is
    possible on Long Run's 15 net sections. Long Run also believes EOR
    potential exists on this Viking play due to geologic similarities with
    the Viking at Redwater. 
    
 
Results Overview                                                            
                                                                            
                       Six months ended June 30             2013            
                      ------------------------------------------------------
($000s, except per                                                          
 share)                       2013          2012            Q2           Q1 
----------------------------------------------------------------------------
Funds flow from                                                             
 operations(1)             111,871        63,766        63,227       48,644 
Per share, basic &                                                          
 diluted (1)                  0.89          0.77          0.50         0.39 
                                                                            
Net earnings (loss)         20,272        18,685        21,099         (827)
Per share, basic &                                                          
 diluted                      0.16          0.22          0.17        (0.01)
                                                                            
Production                                                                  
 Liquids (Bbl/d)            12,473         7,212        12,587       12,358 
 Natural Gas (Mcf/d)        69,297        17,918        71,058       67,516 
 Total (BOE/d)              24,023        10,198        24,431       23,611 
                                                                            
Prices, including                                                           
derivatives                                                                 
 Liquids ($/Bbl)             76.90         82.57         80.67        73.03 
 Natural Gas($/Mcf)           3.76          2.10          3.89         3.63 
 Total ($/BOE)               51.26         63.02         53.29        49.12 
                                                                            
Revenues, before                                                            
 royalties                 220,823       117,511       117,210      103,613 
                                                                            
Capital expenditures       141,797       108,789        38,878      102,919 
                                                                            
Net acquisitions                                                            
 (divestitures)             19,103         5,718         1,158       17,945 
                                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
 
Results Overview                                                            
                                                                            
                                      2012                       2011       
                      ------------------------------------------------------
($000s, except per                                                          
 share)                     Q4       Q3        Q2       Q1      Q4        Q3
----------------------------------------------------------------------------
Funds flow from                                                             
 operations(1)          38,407   26,546    34,385   29,381  29,896    27,448
Per share, basic &                                                          
 diluted (1)              0.33     0.32      0.41     0.35    0.36      0.33
                                                                            
Net earnings (loss)    (56,590)  (4,747)   17,506    1,179 (66,612)   11,427
Per share, basic &                                                          
 diluted                 (0.49)   (0.06)     0.21     0.01   (0.80)     0.14
                                                                            
Production                                                                  
 Liquids (Bbl/d)        11,995    7,854     8,291    6,133   5,872     5,499
 Natural Gas (Mcf/d)    56,453   18,214    19,548   16,288  16,376    17,766
 Total (BOE/d)          21,405   10,890    11,549    8,848   8,601     8,460
                                                                            
Prices, including                                                           
derivatives                                                                 
 Liquids ($/Bbl)         75.49    77.67     80.68    85.15   88.74     85.97
 Natural Gas($/Mcf)       4.19     2.44      1.94     2.29    3.41      4.20
 Total ($/BOE)           53.99    61.34     61.57    64.92   69.26     66.79
                                                                            
Revenues, before                                                            
 royalties              99,000   60,094    64,025   53,486  56,192    51,568
                                                                            
Capital expenditures    58
,342   29,192    44,615   64,173  72,443    58,451
                                                                            
Net acquisitions                                                            
 (divestitures)       (169,734)    (138)      466    5,252     109       858
                                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
1   See Non-GAAP Measures section.                                          
                                                                            
Capital Investment                                                          
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                                 Six months ended                           
($000s)                              June 30                                
                                    2013     2012  Q2 2013 Q1 2013   Q2 2012
                                --------------------------------------------
                                                                            
Drilling and completion          100,308   83,715   19,541  80,767    30,374
Plant and facilities              37,349   21,662   17,697  19,652    12,003
Geological and geophysical         2,093    1,833      779   1,314       999
Other assets                       2,047    1,579      861   1,186     1,239
----------------------------------------------------------------------------
Capital expenditures             141,797  108,789   38,878 102,919    44,615
Acquisitions - land & facilities  11,087    5,718      968  10,119       466
             - properties         13,869        -       20  13,849         -
Dispositions                      (5,853)       -      168  (6,021)        -
----------------------------------------------------------------------------
Capital investment               160,900  114,507   40,036 120,864    45,081
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Share Capital                                                               
                                                                            
# of units (000s)             July 31, 2013  June 30, 2013 December 31, 2012
----------------------------------------------------------------------------
                                                                            
Common Shares                       110,107        110,107           110,107
Non-Voting Convertible Shares        15,513         15,513            15,513
Options                               9,538          9,538             8,042
Warrants(1 )                          2,300          2,300             2,300
----------------------------------------------------------------------------
----------------------------------------------------------------------------
1   Each common share purchase warrant ("Warrant") entitles the holder to   
    purchase 0.4167 of a common share at an exercise price of $3.10 per     
    0.4167 of a share until September 15, 2014. The Warrants are not        
    exercisable until the twenty-day volume weighted average trading price  
    of the common shares exceeds $12.00 per share.                          

 
Non-GAAP Measures 
This press release contains terms commonly used in the oil and
natural gas industry, such as funds flow from operations, and funds
flow from operations per share. These terms are not defined by
International Financial Reporting Standards (IFRS) and should not be
considered an alternative to, or more meaningful than, cash provided
by operating activities or net earnings as determined in accordance
with IFRS as an indicator of Long Run's performance. Management
believes that funds flow from operations is a useful financial
measures which assists in demonstrating the Corporation's ability to
fund capital expenditures necessary for future growth or to repay
debt. Long Run's determination of funds flow from operations may not
be comparable to that reported by other companies. All references to
funds flow from operations throughout this report are based on cash
flow from operating activities before changes in non-cash working
capital and abandonment expenditures. The Corporation calculates
funds flow from operations per share by dividing funds flow from
operations by the diluted weighted average number of Common Shares
outstanding.  
Long Run uses the term net debt herein. This measure does not have
any standardized meaning prescribed by IFRS and therefore may not be
comparable to similar measures presented by other companies.  
With respect to funds flow from operations and net debt, reference is
made to the Corporation's Management's Discussion and Analysis for
the six months ended June 30, 2013 which includes a table showing how
they have been determined.  
Long Run is a Calgary-based intermediate oil company focused on
light-oil development and exploration in western Canada. For further
information about Long Run, visit the Company's website at
www.longrunexploration.com.  
ADVISORIES  
Forward Looking Statements:  
Certain information in this news release including management's
assessment of future plans and operations, 2013 and second half of
2013 average production guidance, expected 2013 and second half of
2013 capital expenditures and type and timing of expenditures,
expectations as to recoveries at Normandville and Girouxville Montney
oil play and potential for the play, drilling plans and estimated
costs, expectations that near-term results from EOR will provide
better visibility on ultimate recoveries at Normandville Montney
project and plans to expand project in 2014 assuming positive results
and anticipated pilot EOR project at Redwater are forward looking
statements. Since forward-looking statements address future events
and conditions, by their very nature they involve inherent risks and
uncertainties including, without limitation, risks related to closing
of the disposition, risks associated with oil and gas exploration,
development, exploitation, production, marketing and transportation,
loss of markets, volatility of commodity prices, currency
fluctuations, imprecision of reserve estimates, environmental risks,
competition from other producers, inability to retain drilling rigs
and other services, capital expenditure costs, including drilling,
completion and facilities costs, unexpected decline rates in wells,
wells not performing as expected, delays resulting from or inability
to obtain required regulatory approvals and ability to access
sufficient capital from internal and external sources. As a
consequence, actual results may differ materially from those
anticipated in the forward-looking statements.  
Forward-looking statements or information are based on a number of
factors and assumptions which have been used to develop such
statements and information but which may prove to be incorrect.
Although the Corporation 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
the Corporation can give no assurance that such expectations will
prove to be correct. In addition to other factors and assumptions
which may be identified in this document, assumptions have been made
regarding, among other things: the impact of increasing competition;
the general stability of the economic and political environment in
which the Corporation operates; the timely receipt of any required
regulato
ry approvals; the ability of the Corporation 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 results; the timing
and costs of pipeline, storage and facility construction and
expansion and the ability of the Corporation to secure adequate
product transportation; future oil and natural gas prices; currency,
exchange and interest rates; the regulatory framework regarding
royalties, taxes and environmental matters in the jurisdictions in
which the Corporation operates; and the ability of the Corporation to
successfully market its oil and natural gas products. Readers are
cautioned that the foregoing list of factors and assumptions is not
exhaustive. Additional information on these and other factors that
could affect Long Run's operations and financial results are included
in reports on file with Canadian securities regulatory authorities
and may be accessed through the SEDAR website (www.sedar.com), at
Long Run's website (www.longrunexploration.com). Furthermore, the
forward looking statements contained in this news release are made as
at the date of this news release and Long Run does not undertake any
obligation to update publicly or to revise any of the included
forward looking statements, whether as a result of new information,
future events or otherwise, except as may be required by applicable
securities laws.  
BOES:  
Disclosure provided herein in respect of barrels of oil equivalent
(boe) may be misleading, particularly if used in isolation. A boe
conversion ratio of 6 Mcf: 1 Bbl 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.   
Discovered Petroleum-Initially-in-Place:  
DPIIP referred to herein is based on the resource assessment
effective December 31, 2012, prepared by Sproule Associates Limited.
DPIIP is that quantity of petroleum that is estimated, as of a given
date, to be contained in known accumulations prior to production. The
recoverable petroleum initially-in-place includes cumulative
production, reserves and contingent resources; the remainder is
categorized as unrecoverable. DPIIP disclosed herein includes
cumulative production to December 31, 2012 of 1.9 million barrels and
proved and probable reserves of 13.6 million barrels, as evaluated by
Sproule in its year-end evaluation effective December 31, 2012. For
low, best and high estimates of DPIIP, further definitions related
thereto, positive and negative factors related to the DPIIP and risk
factors related thereto, please refer to the press release of the
Corporation dated July 2, 2013. There is no certainty that it will be
commercially viable to produce any portion of the resources.
Contacts:
Long Run Exploration Ltd.
William E. Andrew
Chair and Chief Executive Officer
(403) 261-6012 
Long Run Exploration Ltd.
Dale A. Miller
President
(403) 261-6012 
Long Run Exploration Ltd.
Jason Fleury
Vice President, Capital Markets
(403) 261-8302 
Long Run Exploration Ltd.
Investor Relations
(888) 598-1330
information@longrunexploration.com
www.longrunexploration.com
 
 
Press spacebar to pause and continue. Press esc to stop.