Liquids Growth, Market Diversification & Operational Excellence
(TSX: AAV) – CALGARY, Feb. 28, 2019 /CNW/ – Advantage Oil & Gas Ltd. (“Advantage” or the “Corporation”) is pleased to announce its 2018 results, culminating in increased liquids development, successful revenue diversification, and operational excellence. These accomplishments, combined with an emphasis on capital and financial discipline, will continue to strengthen the Corporation’s solid business and advance its multi-year liquids development plan.
Highlights from our 2018 accomplishments include:
- Record annual production of 41,651 boe/d including a 22% increase in liquids
- $59 million gain through marketing diversification initiatives
- Low operating expenses of $1.80/boe
- Year-end total debt(a) to adjusted funds flow(a) ratio of 1.8
- 3 year capital efficiency(a) of $13,400/boe/d
- Increased Montney holdings by acquiring 17 net sections (10,880 acres) of complimentary lands for $2 million resulting in total land ownership of 206 net sections (131,840 acres)
- 30% improvement in the liquids-rich Montney productivity per well through frac design enhancements
- Completed Glacier plant expansion and new Valhalla liquids hub to accommodate liquids development strategy
- Increased CO2e sequestration credits by 59% to 90,500 tonnes
- Participated in several industry advocacy initiatives and continued to explore marketing opportunities
We are proud of our Team’s 2018 achievements and thank Advantage’s Board of Directors and our shareholders for their support. We look forward to reporting on our progress as our Team continues to advance Advantage’s multi-year liquids development plan.
2018 Operating and Financial Results Summary
- Record annual and fourth quarter production of 41,651 boe/d (249.9 mmcfe/d) and 45,686 boe/d (274.1 mmcfe/d), respectively, representing increases of 6% and 12% compared to the same periods of 2017.
- Annual liquids production increased 22% to 1,491 bbls/d and generated a 40% increase in liquids revenue over 2017.
- Achieved low annual 2018 costs including royalty costs of $0.18/boe, operating costs of $1.80/boe, transportation expenses of $3.36/boe, general and administrative costs of $0.60/boe and finance costs of $0.72/boe.
- Annual 2018 cash provided by operating activities of $160 million and adjusted funds flow(a) of $150 millionwas supported by $59 million market diversification gains (includes realized gains on derivatives and revenue less transportation realized from physical sales arrangements involving markets outside of AECO). Advantage’s revenue exposure to AECO daily prices was 22% in 2018 and is anticipated to be 20% in 2019.
- Year-end total debt(a) was $273 million resulting in a total debt(a) to adjusted funds flow(a) ratio of 1.8 and an undrawn bank credit facility of $120 million.
Strengthened Market Diversification and Hedging
On November 1, 2018, Advantage began receiving Midwest U.S. prices on 20,000 mcf/d, increasing to 40,000 mcf/d in April 2019. This arrangement complements our Dawn, Ontario market where we delivered 52,700 mcf/d in 2018.
For 2019, Advantage has fixed price hedges on 45% of our estimated natural gas production at an average price of Cdn $2.46/mcf, with 29% of production remaining exposed to AECO. In the summer when prices are anticipated to be more volatile, 52% of estimated natural gas production is hedged at an average price of Cdn $2.13/mcf, with only 19% of production remaining exposed to AECO.
Looking Forward
As previously communicated (see Advantage press release February 11, 2019) the Corporation’s 2019 net capital expenditures(a) guidance range was reduced to $185 to $215 million from $210 to $240 million as a result of accelerated spending. Our 2019 production guidance range remains between 43,500 and 46,500 boe/d (261 and 279 mmcfe/d).
Advantage is planning to invest approximately $65 million through the first quarter of 2019 which is expected to substantially provide the well productivity to achieve our 2019 annual production guidance. Liquids production is forecast to begin increasing through the second quarter as we tie-in new wells at east Glacier and Valhalla. Production from our Pipestone/Wembley asset is targeted to be brought on-stream during the third quarter when third party processing capacity is available.
Investment for the remainder of 2019 will be reviewed during the second quarter of 2019. The Corporation has identified capital projects of up to $100 million which could be deferred from our 2019 plan with minimal 2019 production impact. Capital deferrals will be prioritized to minimize impact on the highest-return liquids projects.
Advantage will remain diligent in monitoring commodity and industry trends and respond accordingly to retain a strong balance sheet while advancing our multi-year strategy to increase liquids development.
2018 Operating and Financial Summaries
Three months ended |
Year ended |
||||||||||
Financial Highlights |
December 31 |
December 31 |
|||||||||
($000, except as otherwise indicated) |
2018 |
2017 |
2018 |
2017 |
|||||||
Financial Statement Highlights |
|||||||||||
Sales including realized hedging (3) |
$ |
73,979 |
$ |
65,779 |
$ |
250,604 |
$ |
259,611 |
|||
Net income and comprehensive income |
$ |
25,162 |
$ |
21,425 |
$ |
11,119 |
$ |
95,039 |
|||
per basic share(2) |
$ |
0.14 |
$ |
0.12 |
$ |
0.06 |
$ |
0.51 |
|||
Cash provided by operating activities |
$ |
44,790 |
$ |
29,848 |
$ |
160,162 |
$ |
186,401 |
|||
Cash provided by financing activities |
$ |
8,576 |
$ |
50,659 |
$ |
53,015 |
$ |
48,945 |
|||
Cash used in investing activities |
$ |
50,723 |
$ |
73,591 |
$ |
213,734 |
$ |
228,430 |
|||
Basic weighted average shares (000) |
185,942 |
185,963 |
186,040 |
185,641 |
|||||||
Other Financial Highlights |
|||||||||||
Adjusted funds flow(1) |
$ |
46,301 |
$ |
43,883 |
$ |
150,378 |
$ |
183,202 |
|||
per mcfe |
$ |
1.84 |
$ |
1.94 |
$ |
1.65 |
$ |
2.13 |
|||
per basic share (2) |
$ |
0.25 |
$ |
0.24 |
$ |
0.81 |
$ |
0.99 |
|||
Net capital expenditures (1) |
$ |
52,000 |
$ |
73,723 |
$ |
203,834 |
$ |
248,774 |
|||
Working capital deficit |
$ |
1,912 |
$ |
13,808 |
$ |
1,912 |
$ |
13,808 |
|||
Bank indebtedness |
$ |
270,918 |
$ |
208,978 |
$ |
270,918 |
$ |
208,978 |
|||
Total debt (1) |
$ |
272,830 |
$ |
222,786 |
$ |
272,830 |
$ |
222,786 |
(1) |
Non-GAAP Measure which may not be comparable to similar non-GAAP measures used by other entities. Please see “Non-GAAP Measures”. |
(2) |
Based on basic weighted average shares outstanding. |
(3) |
Excludes net sales of natural gas purchased from third parties. |
Three months ended |
Year ended |
|||||||||||
Operating Highlights |
December 31 |
December 31 |
||||||||||
2018 |
2017 |
2018 |
2017 |
|||||||||
Operating |
||||||||||||
Daily Production |
||||||||||||
Natural gas (mcf/d) |
262,269 |
237,780 |
240,959 |
228,583 |
||||||||
Liquids (bbls/d) |
1,974 |
1,227 |
1,491 |
1,218 |
||||||||
Total mcfe/d |
274,113 |
245,142 |
249,905 |
235,891 |
||||||||
Total boe/d |
45,686 |
40,857 |
41,651 |
39,315 |
||||||||
Average prices (including realized hedging) |
||||||||||||
Natural gas ($/mcf) (2) |
$ |
2.70 |
$ |
2.69 |
$ |
2.47 |
$ |
2.82 |
||||
Liquids ($/bbl) |
$ |
49.23 |
$ |
60.48 |
$ |
62.12 |
$ |
54.28 |
||||
Operating Netback ($/mcfe) |
||||||||||||
Sales of natural gas and liquids from production |
$ |
2.81 |
$ |
2.38 |
$ |
2.44 |
$ |
2.69 |
||||
Net sales of natural gas purchased from third parties(1) |
– |
– |
0.01 |
– |
||||||||
Realized gains on derivatives |
0.12 |
0.53 |
0.31 |
0.32 |
||||||||
Royalty expense |
(0.07) |
(0.07) |
(0.03) |
(0.07) |
||||||||
Operating expense |
(0.29) |
(0.26) |
(0.30) |
(0.25) |
||||||||
Transportation expense |
(0.53) |
(0.50) |
(0.56) |
(0.40) |
||||||||
Operating netback(1) |
$ |
2.04 |
$ |
2.08 |
$ |
1.87 |
$ |
2.29 |
(1) |
Non-GAAP Measure which may not be comparable to similar non-GAAP measures used by other entities. Please see “Non-GAAP Measures”. |
(2) |
Excludes net sales of natural gas purchased from third parties. |
The Corporation’s audited consolidated financial statements for the fiscal year ended December 31, 2018together with the notes thereto, and Management’s Discussion and Analysis for the year ended December 31, 2018 have been filed on SEDAR and are available on the Corporation’s website at http://www.advantageog.com/investors/financial-reports/financial-reports-2018. The Corporation’s audited consolidated financial statements for the fiscal year ended December 31, 2017 are also available on the Corporation’s website via the same webpage. Upon request, Advantage will provide a hard copy of any financial reports free of charge.
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