Advantage Announces Second Quarter 2013 Results

               Advantage Announces Second Quarter 2013 Results

PR Newswire

CALGARY, Aug. 8, 2013

Improved Well Performance Drives Strong Glacier Production & Results,
Strategic Alternatives Update

CALGARY, Aug. 8, 2013 /PRNewswire/ - 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
                  ($000)       per    ($000)      per    ($000)      per
                                    mcfe                     mcfe                     mcfe
Sales                   $  $   3.52  $    5,726  $   5.47   $   40,423  $   3.71
                       34,697
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)
expense
Operating        $   29,814  $   3.02  $    2,876  $   2.75  $  32,690  $   3.00
income/netback
                                                                          
Daily                                                                      
Production
   Total             108.3                 11.5                119.8         
    Mmcfe/d
   % natural           99%                  78%                  98%         
    gas
                                                                          
Average prices
(excluding                                                                 
hedging)
   Natural gas  $     3.44           $     3.83           $     3.47         
    ($/mcf)
    Crude oil
   and NGLs     $    86.58            $    68.69            $    73.22         
    ($/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 technologies.

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 Hedged     Production      $Cdn. AECO
                                                 Hedged
Q3 2013 & Q4 2013      38.1 Mmcf/d           39%          $3.45/mcf
Q1 2014 to Q4           50.2 Mmcf/d           39%          $3.81/mcf
2014
Q1 2015 to Q4           45.0 Mmcf/d           27%          $3.91/mcf
2015
Q1 2016                42.7 Mmcf/d           23%          $3.90/mcf

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

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
    scheduled.

  *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
                            December 2013       January to        March 2014
                                 ^(1)           March 2014           ^(1)
                                                              
Production (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             $0.37
Capital Expenditure ($                                    
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
    www.advantageog.com and filed under our profile on SEDAR at www.sedar.com.

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

                          Three months ended          Six months ended
Advantage
Unconsolidated                  June 30                     June 30
Results
                         2013          2012        2013        2012
                                                                
Financial ($000,
except as otherwise                                           
indicated)                                                            
Sales including                                                 
realized 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
Dividends 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
Working capital                                                 
deficit ^ (3)            $   5,954    $  13,615    $   5,954    $  13,615
Bank indebtedness                                               
                         $ 144,779    $ 172,005    $ 144,779    $ 172,005
Convertible
debentures (face                                                
value)                   $  86,250    $  86,250    $  86,250    $  86,250
Shares 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
Operating                                                         
Daily Production                                                  
    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                                                
(including hedging)                                                   
    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 liabilities.
(4) A boe and mcfe conversion ratio has been calculated using a conversion
     rate of six thousand cubic feet of natural gas equivalent
     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, 2013.

  *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 properties.

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,
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 
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;  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   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)  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  www.sedar.com and  www.advantageog.com 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.

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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