Advantage Announces Third Quarter 2013 Results

Glacier Outperforms Budget
Middle Montney Liquids Demonstrate Consistency
Two New Lower Montney Wells Test at Combined Rate of 20 mmcf/d
Strategic Alternatives Update 
CALGARY, Nov. 7, 2013 /CNW/ - Advantage Oil & Gas Ltd. ("Advantage" or the 
"Corporation") is pleased to announce the unconsolidated financial and 
operating results (excludes Longview Oil Corp.) for the three and nine months 
ended September 30, 2013. The detailed results are included in Appendix A. 
Glacier continues to demonstrate solid performance as reflected in our third 
quarter 2013 Corporate results. This quarter represents the first reporting 
period which excludes the non-core assets that were sold in April, 2013. 
Advantage                          Three months ended September 30,
Unconsolidated                                               2013  
Results( (1))                                                         
Operating                     Financial                      
Daily Production                                     $000  per mcfe   
Natural gas                 Petroleum and                          
(mcf/d)             111,518   natural gas sales  $  26,148   $ 2.53 
Crude oil and               Royalties                              
NGLs (bbls/d)           105                        (1,283)   (0.12) 
Total mcfe/d(                   Royalty Rate                       
(2))                112,148                           4.9%          
Total boe/d (               Realized gain on                       
(2))                 18,691   derivatives            1,709     0.17 

                              Operating expense    (2,978)   (0.29)  

Average prices                Operating  income  $  23,596
(excluding hedging)           and netback                    $ 2.29  

  Natural gas                                               
($/mcf)           $    2.46                               

  Crude oil and               Total capital                          
NGLs ($/bbl)      $   95.13   spending           $  28,001         
                              Working capital                        
                              deficit( (3))      $  19,836         
                              Bank indebtedness  $ 139,941           
                              debentures (face                       
                              value)             $  86,250         

(1) Non-consolidated operating and financial highlights for            
Advantage excluding Longview.

(2) 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.

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

    --  Glacier working interest production during the third quarter of
        2013 averaged 111.3 mmcfe/d (18,542 boe/d) which exceeded our
        internal budget by 11%. A number of Montney wells continue to
        exhibit stronger production resulting from revised completion
        techniques which were implemented in early 2013.
    --  The royalty rate during the third quarter of 2013 was 4.9%
        which reflects the positive impact of the Alberta royalty
        programs on Montney wells drilled at Glacier. We estimate that
        the royalty rate on an Upper or Lower Montney well at Glacier
        is approximately 5% for its producing life at an AECO natural
        gas price below $6.00 Cdn/mcf.
    --  Operating costs averaged $0.29/mcfe ($1.73/boe) during the
        third quarter of 2013 and demonstrates the continued
        optimization achievements and efficiencies at our Glacier
        Montney development. Operating costs in the fourth quarter of
        2013 are expected to decrease further due to processing of
        third party natural gas production of approximately 10 mmcf/d
        during October and November 2013. In addition, our new water
        injection well will reduce future water disposal costs.
    --  The operating netback of $2.29/mcfe represents 91% of sales due
        to our favorable operating and royalty cost structure and
        strong natural gas hedge position. This demonstrates the solid
        cash flow generation of our Glacier asset as lower natural gas
        prices prevailed during the third quarter of 2013 due to record
        wide AECO to Nymex differentials. AECO prices have improved for
        the fourth quarter of 2013 as the differentials have narrowed
        to historical levels.
    --  Total capital expenditures at Glacier for the three months
        ended September 30, 2013 were $28 million. These expenditures
        resulted from the commencement of drilling activities
        associated with our Phase VI capital development program and
        the purchase of additional Montney lands which complement our
        Middle Montney liquids reserve and resource upside at Glacier.
    --  Advantage's current Montney land holdings increased 52% during
        the third quarter to a total of 125.65 gross (120.35 net)
        sections comprised of four separate contiguous blocks including
        our Glacier property. In September 2013, an additional 43.25
        sections of 100% working interest Montney lands were acquired
        from the Province of Alberta at a cost of $6.7 million. These
        lands are located southeast of Glacier in a fairway that we
        believe is prospective for Middle Montney natural gas liquids.
    --  Our credit facility borrowing base was recently increased to
        $300 million as a result of our lender's regular semi-annual
        review in October 2013. As of September 30, 2013, Advantage's
        bank indebtedness was $140 million which represents an undrawn
        credit facility of 53%. The next credit facility review will be
        in June 2014 when Glacier production is targeted to be 135
    --  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 $136 million as at
        September 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 third quarter of 2013.
    --  Advantage's estimated tax pools as of September 30, 2013 are
        approximately $1.1 billion of which approximately $800 million
        are immediately deductible at a rate of 100%.

Middle Montney Wells Demonstrate Consistent Liquid Yields
    --  As referenced in our press release dated September 30, 2013,
        our 103/1-9-76-12w6 and 102/13-29-76-12w6 Middle Montney wells
        demonstrated free condensate ("C5+") yields of 50 bbls/mmcf and
        24 bbls/mmcf respectively, during initial production testing.
        Follow-up liquid gas ratio tests on 103/1-9-76-12w6 indicate
        consistent liquid yields.  The 102/13-29-76-12w6 well will be
        tested this winter when ground conditions permit access to this
    --  Additionally, monitoring of the total free C5+ yield at our
        Glacier gas plant has been consistent since the 103/1-9-76-12w6
        and 102/13-29-76-12w6 Middle Montney wells were brought
        on-stream in the second quarter of 2013. Our Glacier gas plant
        does not currently have a liquid extraction process installed.
        However, individual re-testing of wells and monitoring of our
        total free C5+ volumes provides us with an indication of the
        liquid content trend.
    --  The calculated shallow cut propane plus (C3+) liquid extraction
        yields based on the initial production tests were 76 bbls/mmcf
        and 57 bbls/mmcf for 103/1-9-76-12W6 and 102/13-29-76-12W6,
    --  Our evaluation of liquids extraction options at Glacier is
        progressing. External discussions have been held with several
        parties and comparative economics are currently underway to
        determine a development plan which delivers long term
        operational flexibility and maximizes our return on investment.
        We anticipate providing further details in the near future.

Two New Glacier Lower Montney Wells Tested at a Combined Rate of 20 mmcf/d
    --  As part of our Phase VI Glacier capital development program,
        two new Lower Montney wells located in the southwest portion of
        our Glacier land block were completed in October 2013. These
        wells were completed with a high rate slickwater frac utilizing
        an open hole packer system and confirmed strong productivity
        based on this completion design. These two new wells are the
        southernmost horizontal wells we have drilled in the Lower
        Montney and illustrate that the southern portion of our Glacier
        land block is also highly productive in the Lower Montney
    --  The new 100/15-31-75-13w6 Lower Montney well was production
        tested for 72 hours and demonstrated a final gas flow rate at
        the end of the test of 9.8 mmcf/d at a final flowing pressure
        of 7,778 kpa.  The final gas flow rate normalized to our gas
        gather system average pressure of 3,000 kpa is 10.6 mmcf/d.
    --  The new 100/10-31-75-13w6 Lower Montney well was production
        tested for 57 hours and demonstrated a final gas flow rate at
        the end of the test of 8.8 mmcf/d at a final flowing pressure
        of 7,067 kpa. The final gas flow rate normalized to our gas
        gather system average pressure of 3,000 kpa is 9.4 mmcf/d.
    --  These two new Lower Montney wells were completed with a similar
        frac design to the technique utilized for our 100/7-7-76-13w6
        Lower Montney well which was completed in early 2013 and showed
        superior results. The 100/7-7-76-13w6 well was brought on
        production at 12 mmcf/d and has produced 1.7 bcf compared to an
        average of 0.6 bcf per well from older offset Lower Montney
        wells after seven months of production.

Phase VI Glacier Capital Development Program On-Track
    --  Our Phase VI Glacier capital development program which is
        designed to ramp Advantage production to 135 mmcfe/d by Q2 2014
        is progressing on-track with three drilling rigs.
    --  To date, 10 of the total 22 wells in the program have been rig
        released. Of the 10 wells drilled, five are Lower Montney
        wells, two are Middle Montney wells and three are Upper Montney
    --  We anticipate additional well completion information, including
        new Middle and Upper Montney wells, will be available in
        December 2013.

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. Our hedging positions are summarized in
        the following table:
                           Average        Net Forecast    Average Price

Period              Production Hedged  Production Hedged    $Cdn. AECO

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

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

Q1 2015 to Q4 2015      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 previously announced, the Corporation'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. The process is ongoing. Scheduled technical
        presentations have been completed, interested parties have
        received their bid instruction packages and a bid date has been
    --  There can be no assurance that this process will result in an
        acceptable transaction.

Looking Forward
    --  The operating netback during the third quarter of 2013 was
        impacted by lower natural gas prices due to record wide AECO to
        Nymex differentials.  AECO prices have improved in the fourth
        quarter of 2013 as the differentials have narrowed to
        historical levels. This will significantly improve the
        operating netback at Glacier due to the strong leverage to
        natural gas prices driven by the low cost structure at our
        signature property.
    --  The Phase VI capital development program was approved by our
        Board of Directors on May 21, 2013 with the following guidance:
                          April to         January to  12 Months ending
                     December 2013 ((1))   March 2014  March 2014 ((1))

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

Exit Production Rate              -                            135.0
(Mmcfe/d)                                         -

Royalty Rate (%)                4.9%           4.5%             4.8%

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

Capital Expenditure             $106                            $170
($ million)                                     $64

Notes: ((1)) ( )Includes the operating and financial results for the
             month of April 2013 from non-core assets sold to
             Questfire Energy Corp. on April 30, 2013.
    --  We are currently reviewing the available options for extracting
        the natural gas liquids present in the Middle Montney. Further
        details on the chosen extraction method and the timing of
        increasing production from the Middle Montney will be provided
        in the near future.

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 nine months ended September 30, 2013 together
        with the notes thereto, and Management's Discussion and
        Analysis for the three and nine months ended September 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 Nine Months Ended
September 30, 2013 Results
                           Three months ended       Nine months ended

Unconsolidated                September 30
Results                                                 September 30
                            2013       2012         2013         2012

Financial ($000,
except as otherwise                                           

Sales including        $            $            $            $
realized hedging          27,857       29,219      108,639       90,193

  per boe              $   16.20    $   15.26    $   19.93    $   14.97

Funds from operations  $  16,516    $  10,343    $  61,488    $  30,156

  per share( (2))      $    0.10    $    0.06    $    0.37    $    0.18

  per boe              $    9.61    $    5.40    $   11.27    $    5.01

Dividends received     $            $            $            $
from Longview              3,172        3,173        9,518       11,178

  per share( (2))      $    0.02    $    0.02    $    0.06    $    0.07

Total capital          $            $            $            $
expenditures              28,001       23,537       85,858       94,721

Working capital        $            $            $            $
deficit( (3))             19,836       30,813       19,836       30,813

Bank indebtedness      $ 139,941    $ 152,877    $ 139,941    $ 152,877

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

Shares outstanding at                                         
end of period (000)      168,383      168,383      168,383      168,383

Basic weighted                                                
average shares (000)     168,383      168,383      168,383      167,216


Daily Production                                                       

  Natural gas (mcf/d)    111,518      117,462      115,863      123,795

  Crude oil and NGLs                                           
  (bbls/d)                   105        1,235          651        1,363

  Total mcfe/d( (4))     112,148      124,872      119,769      131,973

  Total boe/d( (4))       18,691       20,812       19,962       21,995

Average prices                                                
(including hedging)                                                    

  Natural gas ($/mcf)  $    2.63    $    2.04    $    3.01    $    1.90

  Crude oil and NGLs                                          $
  ($/bbl)              $   95.13    $   63.34    $   75.97        69.33

(1)  Non-consolidated financial and operating highlights              
     for Advantage excluding Longview.

(2)  Based on weighted average shares                                 

(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 equivalent to one barrel of            

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 the next review of the Corporation's credit facility; 
estimated tax pools as at September 30, 2013; anticipated effect of future 
optimization of completion techniques on well results; the Corporation's 
anticipated drilling and completion plans; anticipated timing of completion 
results from 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 and forecast production levels, royalty 
rates, operating costs and capital expenditures under the Corporation's Phase 
VI capital development program; anticipated effect of new water injection well 
on water disposal costs; the Corporations plans to review options to 
facilitate the extraction of natural gas liquids; 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; 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, C5+ yields, 
C3+ yields, "liquid yields" and "behind pipe production" are useful in 
confirming the presence of hydrocarbons, however such rates and yields are not 
determinative of the rates and yields 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 and yields 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 
To view this news release in HTML formatting, please use the following URL: 
CO: Advantage Oil & Gas Ltd.
ST: Alberta
-0- Nov/08/2013 02:56 GMT
Press spacebar to pause and continue. Press esc to stop.