Advantage Announces Second Quarter 2013 Results

Improved Well Performance Drives Strong Glacier Production & Results, 
Strategic Alternatives Update 
CALGARY, Aug. 8, 2013 /CNW/ - Advantage Oil & Gas Ltd. ("Advantage" or the 
"Corporation") (TSX/NYSE: AAV) is pleased to announce the unconsolidated 
financial and operating results (excludes Longview Oil Corp.) for the three 
and six months ended June 30, 2013. These results are included in Appendix A. 
Advantage's second quarter 2013 results include one month of financial and 
operating results for the non-core assets sold to Questfire Energy Corp. 
("Questfire") on April 30, 2013. The table below provides select operating & 
financial information for Advantage during the second quarter of 2013 and 
illustrates Glacier's strong operating income and netbacks. The non-core 
assets included in this table were sold to Questfire. 

                                                Three months ended June 30, 2013 
                             Glacier        Non-core Assets (1)         Total Advantage 
                                     per                      per                      per
                     ($000)        mcfe       ($000)        mcfe       ($000)        mcfe 

Sales                      $    $   3.52    $   5,726    $   5.47    $  40,423    $   3.71

Royalties            (1,927)      (0.20)        (946)      (0.90)      (2,873)      (0.26)

Operating            (2,956)      (0.30)      (1,904)      (1.82)      (4,860)      (0.45)

Operating          $  29,814    $   3.02    $   2,876    $   2.75    $            $   3.00
income/netback                                                          32,690


  Total                108.3                     11.5                    119.8            

  % natural              99%                      78%                      98%            

Average prices

  Natural gas      $    3.44                $    3.83                $    3.47            

  Crude oil and    $   86.58                $   68.69                $   73.22            
  NGLs ($/bbl) 

Note: ((1)) Non-core assets sold to Questfire as of April 30, 2013.
    --  Glacier production averaged 108.3 mmcfe/d (18,049 boe/d) with a
        number of Montney wells demonstrating stronger production rates
        and lower declines resulting from improved completion
        techniques. Current production at Glacier is 110 mmcfe/d
        (18,300 boe/d).
    --  The royalty rate at Glacier during the second quarter of 2013
        was 5.6% which was slightly higher than previous periods due to
        a 2012 Alberta Gas Cost Allowance adjustment.
    --  Operating costs at Glacier averaged $0.30/mcfe ($1.80/boe)
        during the second quarter of 2013 and demonstrates the
        continued efficiencies created by processing our natural gas
        production through our 100% owned Glacier gas plant.
    --  The operating netback at Glacier of $3.02/mcfe during the
        second quarter of 2013 demonstrates the strong cash flow
        generation capacity of our signature asset due to its industry
        leading operating cost and royalty cost structure.  The
        operating netback at Glacier improved significantly compared to
        the same period in 2012 due to an improvement in realized
        natural gas prices and higher production rates at Glacier.
    --  Total capital expenditures at Glacier for the three months
        ended June 30, 2013 was $1.9 million.  These expenditures
        resulted from completion of production testing operations on
        new wells and installation of additional wellsite facilities.
    --  In addition to Glacier, Advantage's other major assets include
        a 45.1% ownership in the shares of Longview Oil Corp.
        ("Longview") valued at approximately $105.3 million as at June
        30, 2013, a $32.6 million Questfire Debenture and 1,500,000
        Questfire Class B Shares. Advantage received tax-free dividend
        income from Longview of $3.2 million ($0.02 per share) during
        the second quarter of 2013.
    --  As of June 30, 2013, Advantage's bank indebtedness decreased
        15% to $144.8 million as compared to the same period of 2012.
        Our credit facility was revised to $230 million with the
        closing of our non-core asset sales on April 30, 2013. A
        routine mid-term credit facility review will occur in October
        2013 followed by an annual review in June 2014.
    --  Advantage's estimated tax pools as of June 30, 2013 are
        approximately $1.1 billion of which approximately $790 million
        are deductible at a rate of 100%.

Glacier Well Production Demonstrates Sustained Improvement with Revised 
Completion Techniques
    --  During the first half of 2013, 11 Montney wells completed with
        revised completion techniques were brought on-production. These
        wells consisted of 6 Upper Montney, 3 Middle Montney and 2
        Lower Montney wells located across the Glacier land block and
        have produced an average of 120 days.
    --  Production from these wells have demonstrated a significant
        improvement in the initial 30 day production rates by 1.5 times
        to 3 times and a shallower decline when compared to directly
        offsetting wells that were completed with our previous
        completion technique after a similar production period. The
        largest production improvement resulted from a Lower Montney
        well which was completed with a high rate slick water frac with
        an open hole packer system. This well is currently flowing at
        7.5 mmcf/d after producing for 155 days and is still being
        restricted due to sand production from high flow rates.
    --  We believe that future optimization of our completion
        techniques could generate additional improvements in overall
        well results as we continue to evaluate multi-frac design

Commodity Hedging Program Reduces Cash Flow Volatility
    --  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
        through to March 2016 and are particularly important during
        this current period of wider Canadian natural gas price
        differentials.  Our hedging positions are summarized in the
        following table:
                     Average          Net Forecast        Average Price

Period             Production      Production Hedged        $Cdn. AECO

Q3 2013 & Q4      38.1 Mmcf/d                39%             $3.45/mcf

Q1 2014 to Q4     50.2 Mmcf/d                39%             $3.81/mcf

Q1 2015 to Q4     45.0 Mmcf/d                27%             $3.91/mcf

Q1 2016           42.7 Mmcf/d                23%             $3.90/mcf
    --  Additional details on our hedging program are available at our
        website at

Strategic Alternatives Process Update
    --  As announced in the Corporation's May 21, 2013 press release,
        the Special Committee's financial advisors, FirstEnergy Capital
        Corp. and RBC Capital Markets, commenced a broad global
        marketing effort to solicit interest in a sale of the
        Corporation or another transaction to maximize value for all
        shareholders.  Response to date has been positive. As noted
        below, a number of parties have begun their review of the
        Corporation's confidential information, and the financial
        advisors continue to coordinate with additional parties wishing
        to participate in the process.
    --  As announced in Advantage's July 15, 2013 press release, a key
        data set, namely the updated Glacier Contingent Resource
        Evaluation, was just recently completed by Sproule Associates
        Ltd. That Evaluation, an addendum to the earlier Sproule
        reports evaluating the petroleum and natural gas Montney
        contingent resources and reserves for Glacier, is an essential
        part of the material in Advantage's virtual data room. It has
        been made available to those parties who have executed
        confidentiality agreements and commenced their review of the
        Corporation's materials.  In addition, the updated Contingent
        Resource Evaluation will form a key element of the management
        team's technical presentations which are currently being
    --  Once those technical presentations have been held and the
        financial advisors are satisfied that interested parties have
        had sufficient time to assess the opportunity, the bid date
        will be determined.
    --  The Corporation cautions that there can be no assurance that
        this process will result in an acceptable transaction.

Glacier Phase VI Capital Development Program Underway
    --  Our Phase VI capital development program (Q2 2013 to Q1 2014)
        which includes 22 net Montney wells is targeted to increase
        production to 135 mmcf/d by the spring of 2014 and is targeted
        to maintain this production rate until early 2015. Three
        drilling rigs are active at Glacier as of August 8, 2013 and we
        anticipate initial completions results will be available by
        early fourth quarter 2013. The Phase VI capital development
        program was approved by our Board of Directors on May 21, 2013
        with the following guidance:
                                                            12 Months
                       April to                              ending
                                          January to
                    December 2013 (                       March 2014 (
                         (1))             March 2014          (1))

(Mmcfe/d)            106.8 - 109.2      128.4 - 130.8     111.0 - 113.4

Exit Production                                          
Rate (Mmcfe/d)                -                  -              135.0

Royalty Rate                                             
(%)                         4.9%              4.5%              4.8%

Operating Costs                                          
($/mcfe)                   $0.40              $0.30             $0.37

Expenditure ($
million)                    $106               $64              $170

Notes: ((1) )Includes the operating and financial results for the month
of April 2013 from non-core assets sold to

Questfire on April 30, 2013.
    --  We continue to work on a future Phase VII capital development
        program (Q2 2014 to Q1 2015) which is targeted to increase
        production to 195 mmcf/d by the spring of 2015. Operating and
        financial estimates for this plan is included in our current
        investor presentation that is available on our website.
    --  Numerous options to facilitate the extraction of natural gas
        liquids are currently being reviewed to determine the timing of
        increasing production from the Middle Montney. These plans will
        be included in our Phase VII estimates as decisions and
        approvals are completed.
    --  Capital requirements for our Phase VI and Phase VII development
        programs are expected to be funded through growing cash flow,
        undrawn credit facilities and current Advantage investments.

Interim Consolidated Financial Statements and MD&A
    --  This press release should be read in conjunction with
        Advantage's unaudited interim consolidated financial statements
        for the three and six months ended June 30, 2013 together with
        the notes thereto, and Management's Discussion and Analysis for
        the three and six months ended June 30, 2013 which have been
        prepared in accordance with International Financial Reporting
        Standards ("IFRS") and posted on our website at
        and filed under our profile on SEDAR at

Appendix A - Advantage's Three and Six Months Ended June 30, 2013 Results
                     Three months ended             Six months ended

Unconsolidated               June 30                       June 30
                      2013          2012          2013           2012

($000, except                                             
as otherwise

hedging            $  39,184    $  27,549      $  80,782      $  60,974

Funds from                                                
operations         $  23,488    $   7,394      $  44,972      $  19,813

  per share(                                              
  (2))             $    0.14    $    0.04      $    0.27      $    0.12

  per boe                                                 
                   $   12.93    $    3.68      $   12.06      $    4.81

received from                                             
Longview           $   3,173    $   3,588      $   6,346      $   8,005

  per share(                                              
  (2))             $    0.02    $    0.02      $    0.04      $    0.05

Total capital                                             
expenditures       $   3,750    $   7,857      $  57,857      $  71,184

deficit( (3))      $   5,954    $  13,615      $   5,954      $  13,615

indebtedness       $ 144,779    $ 172,005      $ 144,779      $ 172,005

(face value)       $  86,250    $  86,250      $  86,250      $  86,250

outstanding at                                            
end of period
(000)                168,383      167,154        168,383        167,154

Basic weighted
average shares                                            
(000)                168,383      167,087        168,383        166,814



  Natural gas                                             
  (mcf/d)            116,469      124,041        118,072        126,996

  Crude oil
  and NGLs                                                
  (bbls/d)               554        1,394            929          1,428

  Total mcfe/d                                            
  ( (4))             119,793      132,405        123,646        135,564

  Total boe/d                                             
  ( (4))              19,966       22,068         20,608         22,594

Average prices

  Natural gas                                             
  ($/mcf)          $    3.35    $    1.65      $    3.19      $    1.83

  Crude oil
  and NGLs                                                
  ($/bbl)          $   73.22    $   70.51      $   74.87      $   71.95

(1)  Non-consolidated financial and operating highlights for Advantage
     excluding Longview. Advantage's second quarter 2013 
     results include one month of financial and operating results for
     the non-core assets sold to Questfire on April 30, 2013

(2)  Based on weighted average shares outstanding

(3)  Working capital deficit includes trade and other receivables,
     prepaid expenses and deposits, and trade and other accrued

(4)  A boe and mcfe conversion ratio has been calculated using a
     conversion rate of six thousand cubic feet of natural gas
     to one barrel of oil.

    --  Advantage production during the second quarter of 2013 averaged
        119.8 mmcfe/d (19,966 boe/d) supported by stronger production
        at Glacier.
    --  Advantage's average royalty rate was 7.1% for the second
        quarter of 2013 which included a 2012 Alberta Gas Cost
        Allowance adjustment payment that was primarily related to the
        non-core assets.
    --  Advantage's operating expense for the three months ended March
        31, 2013 decreased 48% to $0.45/mcfe ($2.67/boe) compared to
        $0.86/mcfe ($5.16/boe) during the same period of 2012 due
        primarily to the divestment of the non-core assets on April 30,
    --  Advantage's funds from operations for the second quarter of
        2013, excluding dividends received from Longview, increased
        218% to $23.5 million or $0.14 per share compared to the second
        quarter of 2012 and an increase of 9% as compared to the first
        quarter of 2013. Funds from operations improved significantly
        due to an improvement in realized natural gas prices and higher
        production rates at Glacier.
    --  Total capital expenditures for the three months ended June 30,
        2013 amounted to $3.7 million of which $1.9 million was
        directed at Glacier to complete production testing operations
        on new wells and to install additional wellsite facilities. The
        remaining capital expenditures were directed to the non-core

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, 
anticipated timing of mid-term and annual reviews of credit facility; 
estimated tax pools as at June 30, 2013; anticipated effect of future 
optimization of completion techniques on well results; the Corporation's 
anticipated drilling and completion plans; anticipated timing of initial 
completion results from three drilling rigs at Glacier; expected effect of 
natural gas hedges on volatility of future cash flows; the Corporation's 
development plan to increase production at Glacier and the anticipated 
production levels and timing thereof; anticipated production, royalty rates, 
operating costs and capital expenditures under the Corporation's Phase VI 
capital development program; the Corporations plans to review options to 
facilitate the extraction of natural gas liquids; anticipated sources of 
funding for Phase VI and Phase VII development program; and status of the 
Corporation's strategic alternatives process. 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 

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; ability to obtain required approvals of 
regulatory authorities; ability to access sufficient capital from internal and 
external sources; and failure to complete an acceptable transaction pursuant 
to the Corporation's strategic alternatives process. Many of these risks and 
uncertainties and additional risk factors are described in the Corporation's 
Annual Information Form which is available at and 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) and thousand cubic feet of natural gas 
equivalent (mcfe) may be misleading, particularly if used in isolation. Boe 
and mcfe conversion ratios have been calculated using a conversion rate of six 
thousand cubic feet of natural gas equivalent to one barrel of oil. A boe and 
mcfe 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 following abbreviations used in this press release have the meanings set 
forth below:

mcf          thousand cubic feet

mcfe         thousand cubic feet of natural gas equivalent, using the
             ratio of 6 mcf of natural gas to 1 bbl of oil

mmcfe        million cubic feet of natural gas equivalent, using the
             ratio of 6 mcf of natural gas to 1 bbl of oil

mmcf         million cubic feet

mmcf/d       million cubic feet per day

bbl          barrel

NGLs         natural gas liquids

Boe/d        barrles of oil equivalent per day

The Corporation discloses several financial measures that do not have any 
standardized meaning prescribed under IFRS. These financial measures include 
funds from operations and operating 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. 
Please see the Corporation's most recent Management's Discussion and Analysis, 
which is available at and for additional 
information about these financial measures, including a reconciliation of 
funds from operations to cash provided by operating activities.

SOURCE  Advantage Oil & Gas Ltd. 
Investor Relations Toll free: 1-866-393-0393 
Advantage Oil & Gas Ltd. 700, 400 - 3rd Avenue SW Calgary, Alberta T2P 4H2 
Phone: (403) 718-8000 Fax: (403) 718-8300 Web 
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CO: Advantage Oil & Gas Ltd.
ST: Alberta
-0- Aug/08/2013 22:56 GMT
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