In c4339 disseminated today at 19:14e, please note that "Technical Services
Agreement Update" information is added just before "Forward-Looking
Statements". Corrected copy follows:
Longview Announces 2014 Guidance
44% Increase in Capital Program Expected to Boost Oil Production by 12%
Financed in Part by Dividend Reduction
CALGARY, Dec. 12, 2013 /CNW/ - Longview Oil Corp. ("Longview" or the
"Company") is pleased to announce that the Board of Directors has approved the
Company's capital expenditure budget and guidance for the year ending December
31, 2014 which includes a 44% increase in the capital expenditure program to
$56 million. We anticipate this program will lead to a 20% increase in cash
flow per share in 2014 as crude oil production volumes are expected to grow by
12% resulting in a 16% increase in operating netbacks.
-- Capital expenditures are budgeted to increase by 44% from 2013
spending levels to $56 million.
-- We anticipate that capital spending will be focused on the
ongoing development of our light oil reserves including the
drilling of 29 gross (22.3 net) wells.
-- Oil production is expected to increase by 12% in 2014 as a
result of the drilling program.
-- Funds from operations are anticipated to increase by 20% in
2014 to $1.64 per share due to the increase in oil production.
-- Our debt to cash flow ratio is expected to decline by 11% in
2014 to 1.7x, thereby preserving our strong balance sheet.
-- Longview's payout ratio for 2014 is anticipated to be 102% as
compared to 105% in 2013.
In order to fund the expansion of our capital development program, Longview
announces that it will be paring back its monthly dividend to four cents per
share effective with the dividend to be paid on January 15, 2014 to
shareholders of record on December 31, 2013. The ex-dividend date for the
dividend is December 27, 2013. The dividend is considered an "eligible
dividend" for Canadian tax purposes.
Longview's new monthly dividend payout of four cents per share represents an
annualized yield of 9.5% based on the December 12, 2013 closing price of $5.06
Operational and Financial Guidance - Summary
The following table summarizes operational and financial guidance for Longview
for the year ending December 31, 2014 as compared to our published guidance
2014 2013 Variances
(bbls/d) 4,750 4,250 +12%
(bbls/d) 465 525
(mcf/d) 6,800 7,400
Boe/d ((1)) 6,350 6,000
(2)) $77 million $64 million +20%
Per share (
(3)) $1.64 $1.39 +20%
expenditures $56 million $39 million +44%
((3)) 102% 105%
Debt to cash
flow ratio (
(3)) 1.7x 2.0x -11%
Royalty rate 17% 17.5%
expenses $20.00/boe $21.00/boe
(1) Boe, funds from operations, payout ratio and debt to cash flow
ratio do not have
a standardized meaning under GAAP. Refer to "Non-GAAP Measures,
and Abbreviations" in this press release.
(2) Commodity price assumptions: WTI - 2014 US $93.00/bbl, 2013 US
Edmonton light oil - 2014 $92.50/bbl, 2013 $93.00/bbl; Cdn/US
exchange rate -
2014 $0.93, 2013 $0.97 and AECO C gas price - 2014 $3.68/mcf,,
(3) Based on our weighted average shares outstanding.
Capital Development Strategy
Our asset base consists of operated oil-weighted resource plays where
management of Longview has identified an extensive inventory of low risk
development drilling and waterflood enhancement projects that offer the
potential to significantly increase both production and reserve recoveries
across our land holdings.
Management of Longview believes that in order to more fully realize the value
inherent in our asset base, the pace of our capital development program needs
to be accelerated. Consistent with this strategy, we have developed a 2014
budget that increases the capital program by 44% and directs a greater portion
of our funds from operations towards organic growth projects while maintaining
a sustainable payout ratio.
The 2014 drilling program will focus on the ongoing development of light oil
reserves at 11 project areas in both Saskatchewan and Alberta which includes
the drilling of 29 gross (22.3) net wells. The majority of the wells in our
2014 drilling program are expected to qualify for reduced royalty rates and
will be directed towards areas where we have existing infrastructure in place
resulting in lower operating costs and comparatively high rates of return. In
addition, approximately 14% of our total capital budget will be allocated to
waterflood enhancement and facility improvements at seven project areas
designed to increase reservoir pressures and establish additional drilling
Longview anticipates that this strategy will lead to a 12% increase in crude
oil production in 2014. This is supported by our expected base decline rate of
19%, which is among the lowest in the industry. This boost in crude oil
production is anticipated to improve our corporate netbacks by reducing
royalty rates and per boe operating costs resulting in a 20% increase in cash
flow per share. Production of lower value natural gas and NGL's are expected
to decline by 9% in 2014 as normal production declines are forecast to more
than offset modest production additions.
2014 Capital Program
-- Our 2014 capital program will be focused on low-risk crude oil
drilling and waterflood expansion activities in areas with
comparatively high netbacks where Longview operates existing
infrastructure. Drilling operations will focus on areas where
recent activity has demonstrated strong economics while
limiting facility and other infrastructure expenditures.
-- Longview's 2014 capital drilling program in SE Saskatchewan
will continue to focus on further development of our Midale and
Frobisher plays where we have an extensive undeveloped land
base of 106 gross (87 net) sections, high working interests,
and existing infrastructure.
-- Approximately 47% of our 2014 drilling budget is allocated to
SE Saskatchewan targeting five different project areas,
including 18 gross (13.2 net) wells. These wells are
considered by Management to be lower risk locations primarily
targeting the Midale formation that are offset by nearby
production where successful results will lead to additional
drilling in future years.
-- Approximately 50% of our 2014 drilling program will be
allocated to five different project areas within Alberta. A
total of six gross (5.7 net) wells are planned to be drilled
targeting light oil development in the Cardium, Wabumun,
Montney and Belly River formations. In addition, one gross (one
net) well is planned to be drilled targeting the liquids rich
Glauconite Hoadly trend at Willesden Green where Longview has
100% interest in an existing shallow cut gas processing
facility that currently has excess capacity. All of these wells
are considered by management to be lower risk locations which
are offset by nearby production.
Waterflood Projects and Lloydminster area
-- Our existing waterflood projects have demonstrated positive
results due to capital expenditures incurred in the last
several years which were undertaken to enhance water injection
rates and flood patterns.
-- Funds will be allocated in 2014 to further enhance existing
waterflood projects at Nevis, Sunset and Pembina in Alberta and
Weyburn in Saskatchewan. These enhancements are expected to
help establish future drilling opportunities as voidage
replacement ratios and reservoir pressures are increased to
acceptable levels in each property.
-- In addition, horizontal wells are planned for each of Nevis and
Sunset in areas of these pools where pressure has been
increased to levels sufficient to warrant additional infill
-- Approximately 3% of our 2014 drilling program is anticipated to
be directed to the drilling of four gross (2.4 net) wells
targeting the Waseca formation at Lashburn, Saskatchewan where
our infrastructure was upgraded in 2013 in order to handle
additional production volumes.
2014 Capital Budget - Drilling Summary
The following table summarizes our 2014 capital budget by area and target
Well # of Wells
Area Target Formation Type Gross Net
S.E. SK Midale Hz 16 11.2
S.E. SK Frobisher Hz 2 2.0
Lashburn, Waseca Vt 4 2.4
Sunset, AB Montney Hz 1 0.7
Pembina, Cardium Hz 3 3.0
Nevis, AB Wabamun Hz 1 1.0
Other, AB Belly Hz 2 2.0
Total 29 22.3
-- Given the current volatility in crude oil pricing conditions,
we will continue to closely monitor our funds from operations
as compared to our dividend policy and capital expenditure
commitments to ensure they are substantially balanced.
-- The following table compares the anticipated operating netbacks
for the year ending December 31, 2014 to the estimate for 2013:
($/boe) 2014 2013 Comment
Revenues $71.89 $68.96 Higher percent of
from light oil
more than offsets
slight decrease in
(1.45) (2.99) Same volume of oil
Hedging loss hedged in 2014 at a
Royalties (12.22) (12.14) Lower royalty rate
as new production
Royalty rate 17.0% 17.6% qualifies for
(20.02) (21.01) Increase in oil
Operating costs anticipating
$38.20 $32.82 Anticipated
Operating netback increase of 16% or
-- Longview has the following commodity price hedging positions
2000 bbls/d, January 1 to December 31, 2014 @ $94.85/bbl.
-- Longview hedges production in order to stabilize cash flow and
enhance our ability to fund dividend payments and incur capital
expenditures during periods of commodity price volatility.
Technical Services Agreement Update
Management anticipates that the Technical Services Agreement ("TSA") between
Longview and Advantage Oil & Gas Ltd. ("Advantage") will be terminated by
March 31, 2014. The process of terminating the TSA has commenced which
included the physical separation of Longview and Advantage employees into
separate offices in early December 2013. We anticipate a smooth transition to
a full separation early in 2014.
Certain information regarding Longview set forth in this press release,
including management's assessment of the Company's future plans and
operations, contains forward-looking statements that involve substantial known
and unknown risks and uncertainties. The use of any of the words
"anticipate", "continue", "estimate", "expect", "may", "will", " lead to",
"project", "should", "believe" and similar expressions are intended to
identify forward looking statements. Such statements represent Longview's
internal projections, estimates or beliefs concerning, among other things, an
outlook on the estimated amounts and timing of capital expenditures or other
expectations, beliefs, plans, objectives, assumptions, intentions or
statements about future events or performance. These statements are only
predictions and actual events or results may differ materially. Although
Longview believes that the expectations reflected in the forward-looking
statements are reasonable, it cannot guarantee future results, levels of
activity, performance or achievement since such expectations are inherently
subject to significant business, economic, competitive, political and social
uncertainties and contingencies. Many factors could cause Longview's actual
results to differ materially from those expressed or implied in any
forward-looking statements made by, or on behalf of, Longview.
In particular, forward-looking statements included in this press release
include, but are not limited to, 2014 guidance; statements with respect to
targeted average production; expected operating expenses for the year ended
December 31, 2014; future royalty rates; projected capital expenditures for
the year ended December 31, 2014; focus of capital budget; the focus of and
timing of capital expenditures; drilling plans; timing of drilling of rigs;
and crude oil and natural gas production levels. The payment and the amount of
dividends declared in any month will be subject to the discretion of the board
of directors and may vary depending on a variety of factors, including
fluctuations in commodity prices, production levels, capital expenditure
requirements, debt service requirements, operating costs, royalty burdens and
foreign exchange rates. 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.
These forward-looking statements are subject to numerous risks and
uncertainties, certain of which are beyond the Corporation's control,
including the impact of general economic conditions; volatility in market
prices for crude oil and natural gas; industry conditions; volatility of
commodity prices; currency fluctuation; imprecision of reserve estimates;
liabilities inherent in crude oil and natural gas operations; environmental
risks; incorrect assessments of the value of acquisitions and exploration and
development programs; competition from other producers; the lack of
availability of qualified personnel or management; changes in income tax laws
or changes in tax laws and incentive programs relating to the oil and gas
industry; 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; stock
market volatility; ability to access sufficient capital from internal and
external sources and the other risks considered under "Risk Factors" in
Longview's Annual Information Form dated March 26, 2013, which is available on
With respect to forward-looking statements contained in this press release,
Longview has made assumptions regarding: current commodity prices and royalty
regimes; availability of skilled labour; timing and amount of capital
expenditures; future exchange rates; the price of oil and natural gas; the
impact of increasing competition; conditions in general economic and financial
markets; availability of drilling and related equipment; effects of regulation
by governmental agencies; royalty rates and future operating costs.
Management has included the above summary of assumptions and risks related to
forward-looking information provided in this press release in order to provide
shareholders with a more complete perspective on Longview's future operations
and such information may not be appropriate for other purposes. Longview's
actual results, performance or achievement could differ materially from those
expressed in, or implied by, these forward-looking statements and,
accordingly, no assurance can be given that any of the events anticipated by
the forward-looking statements will transpire or occur, or if any of them do
so, what benefits that the Company will derive there from. Readers are
cautioned that the foregoing lists of factors are not exhaustive. These
forward-looking statements are made as of the date of this press release and
the Company 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
The payment and the amount of dividends declared in any month will be subject
to the discretion of the board of directors and will depend on the board of
directors' assessment of the Corporation's outlook for growth, capital
expenditure requirements, funds from operations, potential acquisition
opportunities, debt position and other conditions that the board of directors
may consider relevant at such future time, including applicable restrictions
that may be imposed under the Corporations' Credit Facilities and on the
ability of the Corporation to pay dividends. The amount of future cash
dividends, if any, may also vary depending on a variety of factors, including
fluctuations in commodity prices, production levels, capital expenditure
requirements, debt service requirements, operating costs, royalty burdens and
foreign exchange rates.
All dollar amounts in this press release are Canadian dollars unless otherwise
Non-GAAP Measures, Definitions and Abbreviations
The Corporation discloses several financial measures in this press release
that do not have any standardized meaning prescribed by International
Financial Reporting Standards ("IFRS" or "GAAP"), such as funds from
operations and payout ratio. 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. Longview'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 on
www.sedar.com for additional information about these financial measures.
"Boe" may be misleading, particularly if used in isolation. A boe conversion
ratio of six thousand cubic feet of natural gas to one barrel of oil
equivalent (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.
"Funds from operations" represents cash provided by operating activities,
adjusted for expenditures on decommissioning liability, changes in non-cash
working capital and interest on bank indebtedness.
"Debt to cash flow ratio" is calculated as bank indebtedness plus working
capital deficit divided by funds from operations.
"Operating netback" is calculated as revenue less hedging losses, royalties
and operating costs.
"Payout ratio" is calculated as cash dividends declared and capital
expenditures divided by funds from operations.
"Working capital deficit" includes trade and other receivables, prepaid
expenses and deposits, trade and other accrued liabilities and due to parent.
The following abbreviations used in this press release have the meanings set
bbls barrels mcf thousand cubic feet
bbls/d barrels per day mcf/d thousand cubic feet
boe barrels of oil
equivalent, on the
basis of 1 bbl of
6 mcf of natural gas
boe/d barrels of oil
equivalent per day
SOURCE Longview Oil Corp.
Investor Relations Toll free: 1-855-813-0313
Longview Oil Corp. 700, 400 -3rd Avenue SW Calgary, Alberta T2P 4H2 Phone:
(403) 718-8000 Fax: (403) 718-8300 Web Site:www.longviewoil.com
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CO: Longview Oil Corp.
-0- Dec/13/2013 00:59 GMT
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