Advantage Announces Completion of Strategic Alternatives Review, Disposition of Longview Common Shares, Three Year Development

Advantage Announces Completion of Strategic Alternatives Review, Disposition of 
Longview Common Shares, Three Year Development Plan & Glacier Phase VII Budget 
FOR: Advantage Oil & Gas Ltd. 
FEBRUARY 4, 2014 
Advantage Announces Completion of Strategic Alternatives Review, Disposition of
Longview Common Shares, Three Year Development Plan & Glacier Phase VII
Budget Approval 
CALGARY, ALBERTA--(Marketwired - Feb. 4, 2014) - Advantage Oil & Gas Ltd.
--  Advantage Oil & Gas Ltd. ("Advantage" or the "Corporation") announces 
that its strategic alternatives review process has been completed and 
did not result in an acceptable proposal. 
--  Numerous corporate and operational achievements have positioned the 
Corporation as a focused, industry leading, low cost Montney natural gas 
--  Advantage has significantly improved the balance sheet through the 
announced sale today of its Longview Oil Corp. ("Longview") common 
shares and previously announced divestments of non-core conventional 
--  Advantage's development plan is expected to drive 190% cash flow per 
share growth and 100% production per share growth through increasing 
production at Glacier to 245 mmcfe/d (40,800 boe/d) in 2017, while 
targeting an average total debt to cash flow of approximately 1.5 times 
--  Achievements in our current Glacier Phase VI capital program contributed 
to record production of 124 mmcfe/d entering January 2014, a record 13 
mmcf/d(3) liquids rich Middle Montney well and confirmed economic 
production potential from the Upper, Middle and Lower Montney across 
Glacier providing clear visibility for future growth.  
1) An updated February 2014 investor presentation has been posted   
to our website which contains details on our three year          
development plan and approved Glacier Phase VII budget.          
2) All references to total debt are at the end of each development  
phase. Cash flow is based on forward cash flow and may also be   
referred to as funds from operations.                            
3) All references to well production test rates are final test      
rates normalized to our average gas gathering system pressure of 
3,000 kpa unless otherwise indicated.                            
Strategic Alternatives Review 
With the assistance of its external financial advisors, FirstEnergy Capital
Corp. and RBC Capital Markets (collectively, the "Advisors"),
Advantage conducted an extensive and thorough strategic review of the
alternatives available to it that included a broad global marketing effort to
solicit interest in a sale of the Corporation or other transaction to maximize
value for all shareholders. During the process, the Corporation received
expressions of interest in respect of a variety of potential transactions. None
of these proposals were determined to be in the best interests of the
Corporation and do not adequately reflect the intrinsic value of the
Corporation based upon its assets, operations and prospects for growth.  
With the formal conclusion of the strategic alternatives review process, the
Board of Advantage unanimously supports the Corporation's three year
development plan for Glacier which targets strong per share growth in
production and cash flow. Based on an average natural gas price of AECO Cdn
$3.75/gj (strip pricing as of January 28, 2014 for 2014 to 2017), recent well
results and cost performance, this plan can be completed within existing
financial facilities and at a targeted average total debt to cash flow of
approximately 1.5 times.  
The Board will always consider potential alternatives that may arise which are
in the best interests of the Corporation and its shareholders as the business
continues to grow and evolve.  
Advantage continued to achieve significant operational and financial success
during the strategic alternatives review period and is now well positioned as a
low cost, focused Montney operator with a clear strategy to drive strong per
share growth. Key accomplishments which advanced this strategy include:  
--  strengthened its balance sheet by repaying debt and increasing the size 
of the Corporation's borrowing base from $230 million to $300 million; 
--  reduced its bank debt by 58% to $64 million and reduced total debt by 
31% to $199 million based on Advantage's estimated bank debt and total 
debt at December 31, 2013 pro forma net proceeds from the sale of 
Longview common shares 
--  improved well productivity in the Upper, Middle and Lower Montney 
through modified drilling and completion techniques resulting in robust 
well economics across Glacier;  
--  further established itself as an industry leading low cost Montney 
natural gas producer by reducing Glacier operating costs from 
approximately $3.00/mcfe to $0.28/mcfe, combined with an attractive low 
royalty rate of approximately 5% for the life of a Glacier well. G&A 
cash costs are expected to be reduced to approximately $0.20/mcfe in the 
latter half of 2014 and less than $0.20/mcfe in 2015; 
--  acquired an additional 43.25 net sections (27,680 net acres) of Montney 
land holdings (100% working interest) in the Valhalla and Wembley areas 
that will complement its core Glacier holding of 77.1 net (49,344 net 
acres) Montney sections and; 
--  secured natural gas hedges that will reduce volatility of future cash 
flows to March 2016 in support of our Glacier development plan.  
Disposition of Longview Oil Corp. Shares 
With the conclusion of Advantage's strategic review process and in support
of its multi-year growth plan, Advantage has entered into an agreement to sell
the 21.15 million Longview common shares owned by Advantage at a price of CDN
$4.45 per share for aggregate gross proceeds of CDN $94.1 million. Closing of
the offering is anticipated to be on or about February 26, 2014, and all of the
net proceeds will be used to reduce Advantage's existing bank
Termination of Technical Services Agreement  
With the continued progression of both Advantage's and Longview's
business plans, the companies have terminated the Technical Services Agreement
("TSA") originally entered in April 2011. The termination of the TSA
and disposition of Advantage's Longview common shares will reduce
financial and operational complexity and simplify our organizational structure. 
The TSA previously provided that Advantage make available the necessary
personnel and technical services to manage Longview's business.
Appropriate staffing and systems are now in place to enable both organizations
to run independently following termination of the TSA.  
Advantage would like to acknowledge the commitment and dedication of all staff
and personnel that have contributed to the requirements of the TSA. 
Management and Board of Advantage Oil & Gas Ltd.  
The management of Advantage will continue to be led by Andy Mah, President and
Chief Executive Officer and Director, Neil Bokenfohr, Vice President
Exploitation, and Craig Blackwood, Vice President Finance and Chief Financial
Officer. Mr. Blackwood has resigned as Chief Financial Officer of Longview to
focus entirely on Advantage. This executive team has provided oversight and
leadership since development began at Glacier in 2008 and is committed to
successfully executing on future growth plans. Advantage will retain a
complement of 25 employees to support the ongoing operations of the
Corporation. Going forward, we anticipate that cash general and administrative
expenses will be reduced to approximately $0.20/mcfe during the last half of
2014 and are expected to be less than $0.20/mcfe in 2015.  
In addition to Mr. Mah, the Board includes three independent directors, Messrs.
Ron McIntosh (who has been elected Interim non-executive Chairman), Stephen
Balog and Paul Haggis. Mr. Steven Sharpe (former non-executive Chairman) has
resigned from the Board to attend to family matters which have arisen recently.
We wish to specifically thank Mr. Sharpe for his leadership, expertise and
dedication during the strategic alternatives process and for his many
contributions to Advantage during his tenure. The Board has initiated a process
to recruit additional Board members with a particular focus on individuals with
the skills that will further assist in the development and growth of our world
class Montney assets. 
Glacier Development Plan Expected to Double Production to 245 mmcfe/d in 2017,
Glacier Phase VII Capital Budget Approved  
As a result of continued operational success at Glacier since 2008 and the
numerous milestones achieved during our current Glacier Phase VI capital
development program, the Board of Directors of Advantage has endorsed a
multi-year development plan through to 2017. Additionally, the Board of
Directors has approved the Glacier Phase VII Capital and Operating Budget for
the 12 months ending March 31, 2015. 
Current Phase VI Glacier Capital Development Program Achievements Set the Stage
for Future Growth  
Numerous successes during our current Phase VI capital program have been
pivotal in advancing our growth strategy at Glacier and include the following
key accomplishments and implications: 
--  Increasing Glacier production to a record 124 mmcfe/d entering January 
2014. Only eight new wells out of our 22 well Phase VI program will be 
required to initially drive production to 135 mmcfe/d by Q2 2014 due to 
better than anticipated production from wells with revised completion 
--  Improving well performance in the Upper, Middle and Lower Montney such 
that the total combined final production test rate from 12 Phase VI 
wells completed to date is 115 mmcf/d(1). The 22 wells in our current 
program will provide inventory to sustain production through the balance 
of 2014. 
--  Drilling & completion of a record Middle Montney well at 100/12-2-76-    12w6 which flowed at a final production test rate of 13 mmcf/d including 
260 bbls/d of free condensate ("C5+")(2) (natural gas and free 
condensate rate equivalent to 2,427 boe/d). The estimated propane plus 
("C3+") shallow cut liquids yield is 42 bbls/mmcf(3) for this well. 
--  Confirmation that a Middle Montney average well has a 30 day average 
initial production rate ("IP30") of 4 mmcf/d and an average C3+ liquids 
yield of 39 bbls/mmcf(4). The liquids content in east Glacier have been 
observed to be higher than the field average with C3+ liquid yields of 
up to 76 bbls/mmcf and C5+ liquid yields of 45 bbls/mmcf. 
--  Achievement of exceptional Upper Montney wells in east Glacier with the 
last 4 Phase VI wells demonstrating an average final production test 
rate of 15.7 mmcf/d including a record production rate of 21 mmcf/d from 
our Upper Montney well at 100/5-20-76-12w6. These results contribute to 
increasing the Upper Montney average well IP30 to 6.9 mmcf/d which 
generates superior economic returns at current gas prices(5). 
--  Achievement of successful Lower Montney wells, specifically in east 
Glacier, which proves up new areas for reserves and production growth. 
The average final production test rate from the last five Lower Montney 
wells (three in east Glacier, two in west Glacier) in our Phase VI 
capital program is 6.8 mmcf/d(6). 
--  Developed new completion and frac designs which have significantly 
improved well results in the multiple Montney layers at Glacier. Our 
experience has identified additional design changes which will be 
implemented in the future.  
Notes: (1) Based on each of the 12 wells' final gas flow rate at the end of  
each production test period (average 69 hrs) normalized to our    
average gas gathering system pressure of 3,000 kpa.               
(2) Normalized to an average gas gathering system pressure of 3,000   
kpa. Production tested for 72 hours at a final test rate of 11.6  
mmcf/d at 9,410 kpa with 20 bbls/mmcf of free C5+.                
(3) Estimated based on a shallow cut liquids extraction process using 
rich gas analysis and recovered free C5+ from the production      
(4) Based on the average of the estimated C3+ liquids yield for       
Advantage's nine Middle Montney horizontal wells at Glacier from  
a shallow cut liquids extraction process.                         
(5) Based on 14 Upper Montney completed wells with revised completion 
(6) Based on each of the five Lower Montney wells' final gas flow     
rate at the end of each production test period (average 69 hrs)   
normalized to our average gas gathering system pressure of 3,000  
Glacier Development Plan & Phase VII Capital Budget 
The Corporation's development plan is based on an average natural gas
price of AECO Cdn $3.75/gj (strip pricing as of January 28, 2014 for 2014 to
2017), recent well results and cost performance and targets doubling production
at Glacier to 245 mmcfe/d (40,800 boe/d) in 2017 including the extraction of
natural gas liquids. The development plan targets double digit production
growth each year at Glacier with anticipated production at the end of each
phase of 183 mmcfe/d in 2015, 205 mmcfe/d in 2016 and 245 mmcfe/d in 2017.
Natural gas liquids production is expected to grow from approximately 900
bbls/day in 2015 to 1,500 bbls/d in 2017. Total capital expenditures during
each 12 month development period are estimated to be between $210 million to
$270 million with the drilling of approximately 33 wells. Significant growth
potential exists beyond 2017 supported by the quality and size of our Montney
resource and availability of future pipeline transportation capacity. 
Our Phase VII Glacier capital budget targets to increase current production by
48% to approximately 183 mmcfe/d in the second quarter of 2015 including
approximately 900 bbls/d of natural gas liquids from an initial 25 mmcf/d
development in the Middle Montney. The wells in this program are designed to
include an average of 17 fracs per well with an average expected cost of $6.1
million per well. Some of the wells will be drilled on six well pads to improve
cost efficiency. Facility expenditures include additional compression, acid gas
compression, and power generation. A shallow cut liquids extraction process
capable of accommodating future liquids rich gas production growth will be
installed at our current Glacier Gas Plant. 
The following table outlines our Glacier Phase VII Budget and Guidance: 
Glacier Phase VII                                         12 Months ending  
Approved Budget & Guidance                                 March 31, 2015    
Average Production (mmcfe/d)                                 134 to 139     
End of Phase Production Rate Q2 2015 (mmcfe/d)                   183        
Royalty Rate (%)                                              5% to 6%      
Operating Costs ($/mcfe)                                   $0.25 to $0.30   
Capital Expenditures ($ million)                            $260 to $270    
Wells Drilled (net) Dry gas                                      20          
Liquids rich gas                                       13          
Total                                                  33          
Our Capital Budget and multi-year development plan will be funded through cash
flow, available credit facilities and cash generated from Advantage's
investments including the announced sale of Longview common shares. Based on an
average natural gas price of AECO Cdn $3.75/gj (strip pricing as of January 28,
2014 for 2014 to 2017), our development program is targeted to deliver 190%
cash flow per share and 100% production per share growth. Total debt to cash
flow is estimated to average approximately 1.5 times during the 2014 to 2017
By 2017, we estimate that a total of 250 wells will be drilled on our Glacier
land block since development began in 2008. The remaining inventory of wells
after attaining targeted production of 245 mmcfe/d in 2017 is estimated to be
1,280 wells consisting of 440 Upper Montney and Lower Montney wells and 840
Middle Montney wells. This large inventory of undrilled locations provides a
strong platform to drive additional growth. 
Strong Hedging Position Supports Development Plan 
Advantage has entered into a number of natural gas hedges in support of our
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: 
Forecast Production                     
Average             Hedged           Average Price   
Period            Production Hedged  (net of royalties)     AECO - $Cdn.    
April 2014 to                                                               
 March 2015          66.8 mmcf/d             52%              $3.83/mcf     
April 2015 to                                                               
 March 2016          52.1 mmcf/d             33%              $3.85/mcf      
Newly Acquired Montney Lands  
In September 2013, Advantage acquired an additional 43.25 sections (27,680 net
acres) of 100% working interest lands from the Alberta Crown. These lands were
acquired for natural gas liquids potential in the Middle Montney and recent
results in the Middle Montney at Glacier have further supported the liquids
rich trend.  
The Montney varies from an average formation thickness of 290 meters at Glacier
to 230 meters in our new northern Valhalla land block and to a thickness of 185
meters in our southern two Wembley land blocks. A comparison of log responses
between Glacier and the new lands illustrates similar porosity characteristics. 
This newly acquired Montney acreage could provide another significant growth
platform for Advantage pending future delineation success. 
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",
"illustrate", "expect", "may", "will",
"project", "predict", "potential",
"possible", "targeting", "intend",
"could", "might", "should", "believe",
"confidence", "would" and similar expressions and include
statements relating to, but not limited to, the anticipated effect of the
Corporation's growth strategy and development plan on production and cash
flows; the Board's plans to continue to consider potential strategic
alternatives for the Corporation; the Corporation's intent to continue to
assess and enhance the expertise and skills required at all levels of the
organization as it grows and develops its Montney asset; anticipated production
levels by Q2 of 2014; the Corporation's expectations that the wells in its
current drilling program will provide inventory to sustain production through
the balance of 2014; our belief that the intrinsic value of Glacier and its
newly acquired Montney lands will be reflected in shareholder value growth as
we execute our development plan; details of management's future Glacier
development plans and the budget with respect thereto; the Corporation's
guidance in respect of anticipated production levels, royalty rates, operating
costs, capital expenditures, and number and types of wells drilled for the
twelve months ended March 31, 2015; the expected sources of funds to fund the
Corporation's budget and development plans; the Corporation's
expectations that its natural gas hedges will reduce the volatility of future
cash flows through to March 2016; expectations of production levels (including
the commodities expected), capital spending details, number of wells drilled,
funds from operations, debt levels, debt to cash flow ratio, drilling costs per
well, facility costs, commodity price assumptions and netbacks through to March
31, 2017; anticipated reductions in cash general and administrative expenses
during the last half of 2014 and in 2015; expected continued improvements in
cost efficiencies of drilling and completion plans; anticipated use of proceeds
of the sale of the Longview common shares; anticipated closing date for the
sale of the Longview common shares; anticipated debt levels following the sale
of the Longview common shares; expected benefits of the termination of the TSA;
expectations as to the composition of management and employees of Advantage
following the termination of the TSA; anticipated effect of refinement of
drilling and completion techniques; development of new technology and our
experience at Glacier on well performance; the Corporation's anticipated
drilling and completion plans; the Corporation's development plan to
increase production at Glacier and the anticipated production levels and timing
thereof; anticipated production and forecast production levels under the
Corporation's Phase VI capital development program; expectations of
facilities expenditures and details thereof; and plans to proceed with the
installation of a liquids extraction process and a Middle Montney well
development program. 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. The forward-looking information presented herein, including
the future oriented financial information relating to the Corporation's
budget and development plans, has been included herein to provide an outlook of
the Corporation's activities and results and to give an indication of
management's future plans. The actual results of operations of the
Corporation and the resulting financial results will likely vary from the
amounts set forth herein, and such variation may be material, as such the
forward-looking information should not be relied for other purposes. 
These statements involve substantial known and unknown risks and uncertainties,
certain of which are beyond Advantage's control, including, but not
limited to: failure to close the secondary offering of Longview common shares
in the time expected or at all; failure to achieve the expected benefits of the
termination of the TSA; 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; ability to obtain
required approvals of regulatory authorities; and ability to access sufficient
capital from internal and external sources. In addition, although the
Corporation intends to use the net proceeds of the secondary offering as
described herein, there may be circumstances that are not known at this time
where a reallocation of the net proceeds may be advisable for business reasons
that management believes are in the Corporation's best interests. 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, but not limited to: the secondary
offering of Longview common shares will close in the time and on the terms
currently expected; the anticipated use of proceeds from the sale of the
Longview common shares; 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
References in this press release to initial production test rates, initial
"productivity", initial "flow" rates, final gas flow rates,
average gas flow rates and average type curves 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. A pressure transient analysis or well-test
interpretation has not been carried out in respect of all wells. Accordingly,
the Corporation cautions that the test results should be considered to be
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 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. 
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                                          
bbls    barrels                                                             
bbls/d  barrels per day                                                     
boe/d   barrels of oil equivalent per day                                   
kpa     kilopascal                                                           
The Corporation discloses several financial measures that do not have any
standardized meaning prescribed under International Financial Reporting
Standards ("IFRS"). These financial measures include funds from
operations, operating netbacks and cash 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
Advantage Oil & Gas Ltd.
Investor Relations
Toll free: 1-866-393-0393
Advantage Oil & Gas Ltd.
300, 440 - 2nd Avenue SW
Calgary, Alberta, T2P 5E9
(403) 718-8000
(403) 718-8332 
INDUSTRY:  Energy and Utilities - Oil and Gas  
-0- Feb/04/2014 21:32 GMT
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