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 Approval 
CALGARY, ALBERTA -- (Marketwired) -- 02/04/14 -- Advantage Oil & Gas

--  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 indebtedness. 
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
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,
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

Glacier Phase VII                                         12 Months endin
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
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, exploitat
ion 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
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 laws. 
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 preliminary. 
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
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 activities.
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 (FAX)
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