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2019 Year-End Reserves & Operating Results
(TSX: AAV)
CALGARY, Feb. 5, 2020 /CNW/ – Advantage Oil & Gas Ltd. (“Advantage” or the “Corporation”) is pleased to announce its 2019 year-end reserve evaluation by Sproule Associates Limited (“Sproule”), and a summary of 2019 operating results.
During 2019, Advantage achieved several important milestones in our liquids-focused transition, as demonstrated by our reserves additions and operating results. These achievements have positioned Advantage for a step change in oil and condensate production in 2020, enhancing our portfolio of investment opportunities while preserving our low-cost prolific gas foundation.
Accomplishments in 2019 include an important light oil pool discovery at Progress (see Advantage press release dated September 3, 2019), first oil production at Pipestone/Wembley, and further development of the condensate-rich middle Montney at Glacier and Valhalla. These accomplishments increased reserves in all four assets, with the following highlights:
- Proved developed producing (“PDP”) reserves increased by 21%
- PDP finding and development cost (“F&D”) of $5.38/boe
- PDP recycle ratio of 2.2
- Proved plus probable (“2P”) condensate/light oil reserves increased by 45%
- Total 2P liquids reserves increased by 15%
During the fourth quarter of 2019, Advantage achieved record production of 47,370 boe/d, up 5,290 boe/d or 13% above the third quarter of 2019 by increasing natural gas production to capture increased AECO prices. Annual production was 44,334 boe/d, up 6% over 2018. Liquids production in the fourth quarter of 2019 was 3,031 bbls/d, with annual liquids production reaching 2,700 bbls/d, an increase of 81% over 2018.
Advantage achieved adjusted funds flow(a) for 2019 of $155 million or $0.83/share(a). Year-end total debt-to-adjusted funds flow ratio(a) was 2.0 with bank debt of $296 million drawn on the Corporation’s $400 million credit facility.
Low Cost Reserves Additions Continued in 2019 as Liquids Program Progresses
|
2019 Reserves Highlights |
PDP |
1P (1) |
2P |
|
2019 Reserves (million boe) |
106.0 |
352.8 |
465.7 |
|
2019 F&D Cost ($/per boe, including FDC(2)) |
$5.38 |
$4.26 |
$5.94 |
|
2019 Recycle ratio |
2.2 |
2.8 |
2.0 |
|
2019 Reserves Increase Over 2018 |
20.7% |
8.5% |
7.8% |
|
(1) |
Proved reserves (“1P”). |
|
(2) |
Future development capital (“FDC”). |
|
a) |
Non-GAAP Measure which may not be comparable to similar non-GAAP measures used by other entities. Please see Advisory for reconciliations to the nearest measure calculated in accordance with GAAP. |
Key accomplishments included:
- Replaced 307% of annual production (2P)
- Increased liquids reserves by 11% to 6.6 million bbls (PDP) and 15% to 44.7 million bbls (2P)
- Annual corporate decline rate of 26%
2019 Operating & Financial Information
(References to 2019 operational and financial results are estimates only and have not been reviewed or audited by our independent auditor. Advantage is expected to release its fourth quarter and year-end results after markets close on or about February 27, 2020)
|
Q4 2019E |
2019E |
|
|
Production (boe/d) |
47,370 |
44,334 |
|
Natural gas (mcf/d) |
266,035 |
249,802 |
|
Natural gas liquids (bbls/d) |
3,031 |
2,700 |
|
Operating netback ($/boe) (a) |
$11.79 |
$11.15 |
|
Cash provided by operating activities ($ millions) |
$40 |
$156 |
|
Adjusted Funds Flow ($ millions) (a) |
$45 |
$155 |
|
Cash used in investing activities ($ millions) |
$50 |
$174 |
|
Net Capital Expenditures ($ millions) (a) |
$60 |
$185 |
|
Total Debt ($ millions)(a) |
$304 |
$304 |
|
Total Debt to Adjusted Funds Flow(a) |
2.0 |
- Achieved low annual 2019 royalty costs of $0.29/boe, operating costs of $1.98/boe, transportation expenses of $3.50/boe, general and administrative costs of $0.73/boe and finance costs of $0.84/boe
- Annual 2019 cash provided by operating activities of $156 million and adjusted funds flow(a) of $155 million was supported by market diversification gains and realized gains on derivatives
- Cash used in investing activities was $174 million and 2019 net capital expenditures(a) was $185 million
- Capital efficiency(a) was $13,100/boe/d, including $57 million for major facilities projects, and $9,000/boe/d excluding major facilities expenditures
|
a) |
Non-GAAP Measure which may not be comparable to similar non-GAAP measures used by other entities. Please see Advisory for reconciliations to the nearest measure calculated in accordance with GAAP. |
RESERVES SUMMARY TABLES
Company Gross (before royalties) Working Interest Reserves
Summary as at December 31, 2019
|
Light & Medium (mbbl) |
Conventional (mmcf) |
Natural Gas Liquids (mbbl) |
Total Oil (mboe) |
|
|
Proved |
||||
|
Developed Producing |
232 |
595,907 |
6,414 |
105,963 |
|
Developed Non-producing |
2,215 |
35,912 |
1,506 |
9,706 |
|
Undeveloped |
4,233 |
1,302,300 |
15,873 |
237,156 |
|
Total Proved |
6,679 |
1,934,120 |
23,792 |
352,824 |
|
Probable |
5,973 |
591,922 |
8,254 |
112,880 |
|
Total Proved + Probable |
12,652 |
2,526,042 |
32,046 |
465,705 |
|
(1) |
Table may not add due to rounding. |
Company Net Present Value of Future Net Revenue using Sproule price forecasts (1)(2)(3)($000)
|
Before Income Taxes Discounted at |
|||
|
0% |
10% |
15% |
|
|
Proved |
|||
|
Developed Producing |
1,725,541 |
909,505 |
741,899 |
|
Developed Non-producing |
213,394 |
125,305 |
105,203 |
|
Undeveloped |
2,194,028 |
473,956 |
201,754 |
|
Total Proved |
4,132,963 |
1,508,766 |
1,048,856 |
|
Probable |
2,289,288 |
696,966 |
477,451 |
|
Total Proved + Probable |
6,422,251 |
2,205,731 |
1,526,307 |
|
(1) |
Advantage’s light and medium oil, conventional natural gas and natural gas liquid reserves were evaluated using Sproule’s product price forecast effective December 31, 2019 prior to the provision for income taxes, interests, debt services charges and general and administrative expenses. It should not be assumed that the discounted future net revenue estimated by Sproule represents the fair market value of the reserves. |
|
(2) |
Assumes that development of reserves will occur, without regard to the likely availability to the Corporation of funding required for that development. |
|
(3) |
Future Net Revenue incorporates Managements’ estimates of required abandonment and reclamation costs, including expected timing such costs will be incurred, associated with all wells, facilities and infrastructure. |
|
(4) |
Table may not add due to rounding. |
|
a) |
Non-GAAP Measure which may not be comparable to similar non-GAAP measures used by other entities. Please see Advisory for reconciliations to the nearest measure calculated in accordance with GAAP. |
Sproule Price Forecasts
The net present value of future net revenue at December 31, 2019 was based upon oil, natural gas and natural gas liquids pricing assumptions prepared by Sproule effective December 31, 2019. These forecasts are adjusted for reserves quality, transportation charges and the provision of any applicable sales contracts. The price assumptions used over the next seven years are summarized in the table below:
|
Year |
Canadian |
Alberta Natural Gas ($Cdn/mmbtu) |
Henry Hub Natural Gas ($US/mmbtu) |
Edmonton Propane ($Cdn/bbl) |
Edmonton Butane ($Cdn/bbl) |
Edmonton Pentanes ($Cdn/bbl) |
Exchange Rate ($US/$Cdn) |
|
2020 |
73.84 |
2.04 |
2.80 |
25.07 |
37.72 |
76.32 |
0.76 |
|
2021 |
78.51 |
2.27 |
3.00 |
31.84 |
43.90 |
80.52 |
0.77 |
|
2022 |
78.73 |
2.81 |
3.25 |
32.43 |
47.74 |
80.00 |
0.80 |
|
2023 |
80.30 |
2.89 |
3.32 |
33.26 |
48.69 |
81.68 |
0.80 |
|
2024 |
81.91 |
2.98 |
3.38 |
34.12 |
49.67 |
83.38 |
0.80 |
|
2025 |
83.54 |
3.06 |
3.45 |
34.99 |
50.66 |
85.13 |
0.80 |
|
2026 |
85.21 |
3.15 |
3.52 |
35.88 |
51.67 |
86.90 |
0.80 |
Company Gross (before royalties) Working Interest Reserves Reconciliation (1):
|
Proved |
Light & (mbbl) |
Conventional (mmcf) |
Natural Gas Liquids (mbbl) |
Total Oil Equivalent (mboe) |
|
Opening balance Dec. 31, 2018 |
3,011 |
1,777,022 |
25,884 |
325,065 |
|
Extensions and improved recovery |
3,473 |
28,996 |
3,181 |
11,487 |
|
Technical revisions(1) |
215 |
219,310 |
(4,293) |
32,474 |
|
Discoveries |
– |
– |
– |
– |
|
Acquisitions |
– |
12 |
40 |
42 |
|
Dispositions |
– |
– |
– |
– |
|
Economic factors |
(5) |
(42) |
(49) |
(61) |
|
Production |
(15) |
(91,178) |
(970) |
(16,182) |
|
Closing balance at Dec. 31, 2019 |
6,679 |
1,934,120 |
23,792 |
352,824 |
|
a) |
Non-GAAP Measure which may not be comparable to similar non-GAAP measures used by other entities. Please see Advisory for reconciliations to the nearest measure calculated in accordance with GAAP. |
|
Proved Plus Probable |
Light & (mbbl) |
Conventional (mmcf) |
Natural Gas Liquids (mbbl) |
Total Oil Equivalent (mboe) |
|
Opening balance Dec. 31, 2018 |
4,404 |
2,360,157 |
34,423 |
432,186 |
|
Extensions and improved recovery |
9,390 |
73,771 |
6,019 |
27,704 |
|
Technical revisions(1) |
(1,122) |
183,318 |
(7,454) |
21,977 |
|
Discoveries |
– |
– |
– |
– |
|
Acquisitions |
– |
18 |
59 |
62 |
|
Dispositions |
– |
– |
– |
– |
|
Economic factors |
(5) |
(44) |
(31) |
(43) |
|
Production |
(15) |
(91,178) |
(970) |
(16,182) |
|
Closing balance at Dec. 31, 2019 |
12,652 |
2,526,042 |
32,046 |
465,705 |
|
(1) |
Technical revisions accounted for 74% of the total proved additions and 44% of the total proved plus probable additions. Percentage of each category calculated by dividing the technical revisions in the category by the total reserve additions in the same category before production. |
|
(2) |
Tables may not add due to rounding. |
Company 2019 F&D Costs – Gross (before royalties) Working Interest Reserves including FDC (1)(2)(3)
|
Proved |
Proved + Probable |
|
|
Net capital expenditures ($000)(a) |
184,922 |
184,922 |
|
Net change in FDC ($000) |
2,402 |
110,096 |
|
Total capital ($000) |
187,324 |
295,018 |
|
Total mboe, end of year |
352,824 |
465,705 |
|
Total mboe, beginning of year |
325,065 |
432,186 |
|
Production, mboe |
(16,182) |
(16,182) |
|
Reserve additions, mboe |
43,941 |
49,701 |
|
2019 F&D costs ($/boe) |
$4.26 |
$5.94 |
|
2018 F&D costs ($/boe) |
$8.33 |
$8.04 |
|
Three-year average F&D costs ($/boe) |
$5.97 |
$6.03 |
|
(1) |
F&D costs are calculated by dividing total capital by reserve additions during the applicable period. Total capital includes both capital expenditures incurred and changes in FDC required to bring the proved undeveloped and probable undeveloped reserves to production during the applicable period. Reserves additions are calculated as the change in reserves from the beginning to the ending of the applicable period excluding production. |
|
(2) |
The aggregate of the exploration and development costs incurred in the most recent financial year and the change during that year in estimated FDC generally will not reflect total finding and development costs related to reserves additions for that year. Changes in forecast FDC occur annually as a result of development activities, acquisition and disposition activities and capital cost estimates that reflect Sproule’s best estimate of what it will cost to bring the proved undeveloped and probable undeveloped reserves on production. |
|
(3) |
The change in FDC is primarily from incremental undeveloped locations. |
|
a) |
Non-GAAP Measure which may not be comparable to similar non-GAAP measures used by other entities. Please see Advisory for reconciliations to the nearest measure calculated in accordance with GAAP. |
The reserves by category and year-over-year changes compared to 2018 are indicated below:
|
Reserve |
Light & |
Conventional |
Natural Gas |
Total Oil |
% |
|
PDP |
0.23 |
0.60 |
6.41 |
106.0 |
20.7% |
|
1P |
6.68 |
1.93 |
23.79 |
352.8 |
8.5% |
|
2P |
12.65 |
2.53 |
32.05 |
465.7 |
7.8% |
The total number of 2P future well locations booked in the Sproule 2019 Reserves Report are illustrated in the following table:
|
Sproule Number of Gross Horizontal Wells Booked |
|||
|
Developed |
Undeveloped |
Total |
|
|
Upper |
120 |
121 |
241 |
|
Middle |
71 |
139 |
210 |
|
Lower |
55 |
87 |
142 |
|
Total |
246 |
347 |
593 |
Advantage’s 1P reserves life index is 20 years and its 2P reserves life index is 27 years based on the Corporation’s average fourth quarter 2019 production rate of approximately 47,370 boe/d.
Additional comments pertaining to each of the reserves categories:
- PDP reserves increased 21% due to the recognition of 24 new wells that were brought on production through 2019 and upward technical revisions
- 1P reserves increased 8.5%
- 2P reserves increased 7.8% through the addition of 35 new wells and locations. A total of 347 undeveloped locations are booked in the Sproule 2019 Reserves Report
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