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

 Advantage Announces 2013 Year End Financial & Operating Results and Glacier  Operational Update  (TSX: AAV, NYSE: AAV)  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     Advantage     Unconsolidated                December 31               December 31     Results                               2013         2012          2013         2012                                                                                 Financial ($000,     except as                                                        otherwise     indicated)                                                                  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     Convertible     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     Operating                                                                   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     (including                                                       hedging)                                                                      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          liabilities.      (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             wells.         --  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             kpa.  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             estimates.         --  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             beyond.  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.  Advisory 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                   one                   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                   thousand                   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  To view this news release in HTML formatting, please use the following URL:  CO: Advantage Oil & Gas Ltd. ST: Alberta NI: OIL ERN  
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