Advantage Announces 2013 Year End Financial & Operating Results and Glacier Operational Update

Advantage Announces 2013 Year End Financial & Operating Results and Glacier 
Operational Update 
CALGARY, March 27, 2014 /CNW/ - Advantage Oil & Gas Ltd. ("Advantage" or the 
"Corporation") is pleased to report the unconsolidated financial and operating 
results (excludes Longview Oil Corp.) for the three months and year ended 
December 31, 2013. Advantage's remaining non-core assets which had a 
production rate of approximately 5,600 boe/d were divested on April 30, 2013. 
As a result, financial and operating results during the second half of 2013 
are more representative of our industry leading low cost pure play Montney 
development at Glacier. 
Advantage's 2013 results, achievement of our 135 mmcfe/d Phase VI production 
target ahead of schedule, and acceleration of our Phase VII drilling program 
provides a solid foundation for multi-year growth. Advantage's growth strategy 
is targeted to deliver 100% production per share growth and 190% cash flow per 
share growth through its three year development plan at its world class 
Montney resource play at Glacier, Alberta. 

                              Three months ended             Year ended
    Unconsolidated                December 31               December 31
                              2013         2012          2013         2012
    Financial ($000,
    except as                                                   
    Sales including                                             
    realized hedging     $   34,304    $  36,556    $  142,943   $  126,749
      per boe            $    20.57    $   19.15    $    20.08   $    15.97
    Funds from                                                  
    operations           $   23,822    $  16,890    $   85,310   $   47,046
      per share(2)       $     0.14    $    0.10    $     0.51   $     0.28
      per boe            $    14.30    $    8.85    $    11.98   $     5.94
    Dividends received                                          
    from Longview        $    2,961    $   3,172    $   12,479   $   14,350
      per share(2)       $     0.02    $    0.02    $     0.07   $     0.09
    Total capital                                               
    expenditures         $   69,512    $  35,849    $  155,370   $  130,570
    Working capital                                             
    deficit(3)           $   49,034    $  35,467    $   49,034   $   35,467
    Bank indebtedness    $  153,697    $ 161,630    $  153,697   $  161,630
    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      167,509
    Daily Production                                                       
      Natural gas                                               
      (mcf/d)               108,260      116,929       113,947      122,069
      Crude oil and                                             
      NGLs (bbls/d)              79        1,261           507        1,337
      Total mcfe/d(4)       108,734      124,495       116,989      130,091
      Total boe/d(4)         18,122       20,749        19,498       21,682
    Average prices
      Natural gas                                               
      ($/mcf)            $     3.39    $    2.70    $     3.10   $     2.09
      Crude oil and                                             
      NGLs ($/bbl)       $    77.01    $   65.21    $    76.01   $    68.35
    (1)  Non-consolidated financial and operating highlights for Advantage
         excluding Longview.
    (2)  Based on weighted average shares outstanding. 
    (3)  Working capital deficit includes trade and other receivables,
         prepaid expenses and deposits, and trade and other accrued
    (4)  A boe and mcfe conversion ratio has been calculated using a
         conversion rate of six thousand cubic feet of natural gas
         equivalent to one barrel of oil.

Increased Funds from Operations driven by Glacier Production, Low Cost 
Structure and Improved Gas Prices
        --  Funds from operations for the fourth quarter of 2013, excluding
            dividends from Longview Oil Corp. ("Longview"), increased 41%
            to $23.8 million or $0.14 per share as compared to the fourth
            quarter of 2012. Funds from operations during 2013 increased
            81% to $85.3 million or $0.51 per share as compared to 2012.
            The increase in funds from operations was supported by a
            continued reduction in Advantage's cost structure due to
            development at Glacier and an increase in realized natural gas
            prices for the quarter and year.
        --  The tax free dividend income received from Longview amounted to
            $3.0 million ($0.02/share) during the fourth quarter of 2013
            and $12.5 million ($0.07/share) for 2013 due to Advantage's
            45.1% ownership in the common shares of Longview in 2013.
        --  Glacier production increased to 135 mmcfe/d (22,500 boe/d) in
            early March, approximately one month ahead of our Phase VI
            budget schedule. Production averaged 117.0 mmcfe/d (19,498
            boe/d) for 2013 and averaged 108.7 mmcfe/d (18,122 boe/d)
            during the fourth quarter of 2013. The 2013 average production
            rate included the non-core assets from January 1 to April 30,
            2013. Production during the fourth quarter of 2013 was impacted
            by minor facility outages at Glacier to accommodate field
            gathering system work in preparation for the eventual tie-in of
            new Phase VI Montney wells.
        --  The royalty rate in 2013 was 5.4% as compared to 5.7% during
            2012. The reduction in royalty rate reflects the disposition of
            the non-core assets and increased production from Glacier where
            royalty rates of approximately 5% are realized on our Montney
        --  Operating costs decreased 68% to $0.28/mcfe ($1.66/boe) in the
            fourth quarter of 2013 compared to the same period in 2012. The
            decrease in operating costs was due to the divestment of the
            higher cost non-core assets and the continued improvement in
            operating efficiencies achieved through our Glacier Montney
            development. Advantage's operating costs for 2013 which
            included the non-core assets to April 30, 2013 decreased 47% to
            $0.48/mcfe ($2.88/boe) compared to 2012.
        --  Advantage's operating netback during the fourth quarter of 2013
            was $3.00/mcfe which is 93% of our realized natural gas price
            of $3.21/mcfe. This strong cash margin is due to the industry
            leading low cost structure at Glacier and is a key success
            factor in our go forward three year development plan which is
            targeted to deliver 190% cash flow per share growth at an
            average natural gas price of $3.75/GJ.
        --  Total capital expenditures in the fourth quarter of 2013 were
            $69.5 million and $155.4 million for the 2013 year which
            resulted from ongoing activities in our Glacier Phase VI
            development program.
        --  On a pro forma basis after giving consideration to net proceeds
            of $90 million received from the sale of the Longview common
            shares, Advantage's bank debt was $63.7 million and total debt
            was $199.0 million as of December 31, 2013.
        --  Advantage's estimated tax pools as of December 31, 2013 are
            approximately $1.1 billion of which $0.8 billion are
            categorized as immediately deductible at a rate of 100%.

Glacier Operations On-Track with Three Year Development Plan

Advantage's Glacier three year development plan is targeted to deliver 100% 
production per share growth and 190% cash flow per share growth. Production is 
expected to grow to 183 mmcfe/d in 2015, 205 mmcfe/d in 2016 and 245 mmcfe/d 
in 2017. The three year development plan is supported by continuing strong 
operational results and a solid financial strategy which includes an improved 
balance sheet and hedging program. The three year development plan is designed 
to maintain an average total debt to forward cash flow ratio of 1.5x based on 
an average natural gas price of AECO Cdn $3.75/GJ. Advantage has hedged an 
average of 47% of its forecast production through to Q1 2016 at an average 
price of $3.86/mcf.

Strong Initial Production from New Phase VI Glacier Wells
        --  Only nine of the 22 new Phase VI Montney wells were required to
            ramp production to our 135 mmcfe/d Phase VI target which was
            achieved approximately one month ahead of schedule. The
            remaining Phase VI wells will be brought on stream as required
            to maintain the 135 mmcfe/d production rate through the balance
            of 2014.
        --  Advantage's record Upper Montney well at 05-20-76-12W6 which
            demonstrated a final production test rate of 21 mmcf/d was
            initially brought on production at rates of up to 21 mmcf/d and
            then restricted to approximately 10 mmcf/d for the last 80
            days.  The production rate has been restricted to manage the
            flow back of frac sand through well site equipment which is
            typical in most higher rate Montney wells. The 05-20-76-12W6
            well is still producing at a strong flowing wellhead pressure
            of 7,620 kpa compared to our average gas gathering system
            pressure of 3,000 kpa. During the first 80 days of production,
            the 05-20-76-12W6 well has produced 0.7 bcf.
        --  Two Lower Montney wells located at 15-31-75-13W6 and
            10-31-75-13W6 were initially brought on production at rates of
            up to 15 mmcf/d and 11 mmcf/d and then restricted to a rate of
            8.0 mmcf/d for each well. The wells have produced for an
            average of 125 days and each well has produced approximately 1
            bcf during this period. These wells, which were completed with
            slickwater and modified completion techniques, are
            demonstrating significantly improved performance compared to
            older Lower Montney wells.
        --  Since the winter of 2012, a total of 15 Upper and Lower Montney
            wells that were completed with slickwater and brought on
            production are demonstrating performance which is trending at
            or above our Phase VII budget type curve (based on an average
            initial 30 day production rate of 6.9 mmcf/d).
        --  Advantage's record Middle Montney well located at 12-02-76-12W6
            which demonstrated a final production test rate of 13 mmcf/d,
            including 20 bbl/mmcf of free condensate, was initially brought
            on production at restricted rates of up to 9.5 mmcf/d. This
            well has been further rate restricted to approximately 6.0
            mmcf/d for the last 20 days to manage the flow back of frac
            sand and to control the amount of free condensate that our
            facilities can handle at this time since our Glacier gas plant
            does not currently have liquid extraction or condensate
            stabilization processes installed. The 12-02-76-12W6 well is
            still producing at a strong wellhead pressure of 10,100 kPa
            compared to our average gas gathering system pressure of 3,000

Glacier Phase VII Glacier Development Program Underway
        --  The Glacier Phase VII drilling program was accelerated during
            the first quarter of 2014 due to lower than anticipated capital
            expenditures in our Phase VI program.  The lower capital
            spending resulted from improved drilling and well completion
            efficiencies which reduced well costs below our original budget
        --  To date, four new Phase VII wells have been rig released. One
            drilling rig is currently situated on a six well pad that will
            continue drilling through spring breakup. Two additional rigs
            will be deployed once weather conditions permit access to new
            drilling sites. A total of 33 wells are included in our Phase
            VII drilling program.
        --  Engineering design is nearing completion for the expansion of
            our 100% owned Glacier gas plant. The expansion work is
            targeted for completion during the second quarter of 2015 and
            includes the installation of a shallow cut liquids extraction
            process and increased natural gas processing capacity to
            accommodate our Phase VII production target of 183 mmcfe/d. The
            engineering design will allow our Glacier gas plant to
            ultimately provide 245 mmcfe/d of processing capacity to
            accommodate our three year development plan through to 2017.
        --  Design plans are also underway for increasing the
            transportation capacity of the sales gas lateral which connects
            the Glacier gas plant to TransCanada Pipeline's main sales
            pipeline to accommodate our three year development plan and

Advantage's strong operating and financial achievements during 2013 combined 
with simplification of the Corporate structure have positioned the company as 
an industry leading low cost Montney producer with strong growth. We look 
forward to reporting results on our progress as we execute Advantage's Glacier 
three year development plan.

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, among other things, 
Advantage's anticipated production per share growth and cash flow per share 
growth, including the targeted amount and timing of achievement thereof; 
expectations as to future natural gas prices;  estimated tax pools; expected  
increases in production in 2015, 2016 and 2017 resulting from Advantage's 
Glacier three year development plan; expectations of future debt to cash flow 
ratios; expectations as to the number of wells in Advantage's Phase VI Program 
required to provide sufficient production inventory to maintain production at 
anticipated levels through to the end of 2014; expectations regarding tie-ins 
of Phase VI wells; expected number of future drilling locations; anticipated 
drilling plans, including drilling rigs to be deployed and number of wells to 
be included in Advantage's Phase VIII drilling program; anticipated timing of 
completion of expansion of Glacier gas plant and effect of engineering design 
on processing capacity, including the amount of such processing capacity; and 
the status of design plans to increase transportation capacity of the sales 
gas lateral which connects the Glacier gas plant to TransCanada Pipeline's 
main sales pipeline. Advantage's actual decisions, activities, results, 
performance or achievement could differ materially from those expressed in, or 
implied by, such forward-looking statements and accordingly, no assurances can 
be given that any of the events anticipated by the forward-looking statements 
will transpire or occur or, if any of them do, what benefits that Advantage 
will derive from them.

These statements involve substantial known and unknown risks and 
uncertainties, certain of which are beyond Advantage's control, including, but 
not limited to: changes in general economic, market and business conditions; 
industry conditions; actions by governmental or regulatory authorities 
including increasing taxes and changes in investment or other regulations; 
changes in tax laws, royalty regimes and incentive programs relating to the 
oil and gas industry; the effect of acquisitions; Advantage's success at 
acquisition, exploitation and development of reserves; unexpected drilling 
results; changes in commodity prices, currency exchange rates, capital 
expenditures, reserves or reserves estimates and debt service requirements; 
the occurrence of unexpected events involved in the exploration for, and the 
operation and development of, oil and gas properties, including 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. 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: 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.

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.

References in this press release to final production test rates, initial test 
production rates, production type curves,  restricted rates and 30 day 
production rates and other short-term production rates 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.

The Corporation discloses several financial measures that do not have any 
standardized meaning prescribed under International Financial Reporting 
Standards ("IFRS"). These financial measures include operating netbacks and 
debt to cash flow 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. Investors should be cautioned that these measures should not be 
construed as an alternative to net income 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.

The following abbreviations used in this press release have the meanings set 
forth below:
    bbls          barrels
    mbbls         thousand barrels
    mmbbls        million barrels
    boe           barrels of oil equivalent of natural gas, on the basis of
                  barrel of oil or NGLs for six thousand cubic feet of
                  natural gas
    mboe          thousand barrels of oil equivalent
    mmboe         million barrels of oil equivalent
    mcf           thousand cubic feet
    mmcf          million cubic feet
    bcf           Billion cubic feet
    tcf           trillion cubic feet
    mcfe          thousand cubic feet equivalent on the basis of six
                  cubic feet of natural gas for one barrel of oil or NGLs
    mmcfe/d       million cubic feet equivalent per day
    tcfe          trillion cubic feet equivalent

SOURCE  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 
Phone: (403) 718-8000 Fax: (403) 718-8332 Web 
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CO: Advantage Oil & Gas Ltd.
ST: Alberta
-0- Mar/28/2014 00:37 GMT
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