CALGARY, ALBERTA — (Marketwire) — 03/07/13 — LONG RUN EXPLORATION LTD. (TSX: LRE) (“Long Run” or the “Corporation”) is pleased to announce its results for the fourth quarter and year ended December 31, 2012 and year end reserve results.
In the fourth quarter, WestFire Energy Ltd. (“WestFire”) and Guide Exploration Ltd. (“Guide”) completed an all share merger transaction. The management team of Guide is leading the renamed Long Run Exploration Ltd. Long Run is focusing on core properties in the Peace River and Edmonton areas of Alberta. Short to medium term development will focus on Montney oil projects at Peace River and Viking oil projects at Redwater. On a land base of more than 1.8 million net acres, Long Run is actively exploring new concepts while continuing to drive development and growing production in our core areas. Over the long term, it is our intention to build an exploration company with a balanced oil and gas portfolio that focuses on resource plays in western Canada.
Currently, Long Run is producing approximately 24,000 barrels of oil equivalent per day (12,500 barrels of crude oil and NGLs plus 69 Mmcf/d of natural gas), on target with our 2013 budget. Our winter drilling program is approaching completion and we are working to tie-in these wells prior to spring break-up.
All financial, operational, and reserve comparatives are based on historical WestFire information.
2012 HIGHLIGHTS
FOURTH QUARTER FINANCIAL AND PRODUCTION RESULTS
2012 RESERVES
2012 FINDING, DEVLEOPMENT and ACQUISITION COSTS
COMMODITY ENVIRONMENT
OPERATIONS UPDATE
In the fourth quarter of 2012, Long Run spent $64.5 million in capital which included drilling 29 (26.5 net) wells. This included 9 (net) Viking oil wells at Redwater, 5 (net) Montney oil wells in the Peace River area, 12 (9.5 net) on subsequently divested west central Saskatchewan assets, and 3 (net) exploration wells in the Peace River area. Long Run continues to achieve results above management–s expectations while keeping on-stream costs in-line with historical averages.
In the near term, Long Run will focus development primarily on oil opportunities at Redwater and in the Peace River area, both in Alberta. Up to 53 (50.4 net) wells are planned, including 18 (net) Montney oil wells in the Peace Area, and 30 (27.4 net) Viking oil wells at Redwater.
Total first quarter capital spending is expected to be approximately $100 million.
Peace Area Montney
Redwater Viking
CAPITAL EXPENDITURES
SHARE INFORMATION
The following table summarizes the outstanding shares of Long Run as of December 31:
RESERVES
At December 31, 2012, total proved reserves as a percentage of proved plus probable reserves were 65 percent. All of our reserves were evaluated, effective December 31, 2012, in a report (the “Sproule Report”) prepared by the independent engineering firm Sproule Associates Limited (“Sproule”).
The following summarizes the Corporation–s crude oil, natural gas and natural gas liquids reserves and the net present value of the future net revenues therefrom using forecast prices and costs as evaluated in the Sproule Report. The reserve estimates contained in the Sproule Report have been calculated in compliance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities (“NI 51-101”). Under NI 51-101, proved reserves estimates are defined as having a high degree of certainty with a targeted 90 percent probability in aggregate that actual reserves recovered over time will equal or exceed proved reserve estimates. For proved plus probable reserves under NI 51-101, the targeted probability is an equal (50 percent) likelihood that the actual reserves to be recovered will be equal to or greater than the proved plus probable reserves estimate. The reserves estimates set forth below are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual reserves may be greater than or less than the estimates provided herein.
Additional information with respect to the Corporation–s reserves at December 31, 2012 will be contained in the Corporation–s Annual Information Form for the year ended December 31, 2012 which will be filed on SEDAR at on or before March 31, 2013.
Gross reserves are the total of the Corporation–s working interest share before deduction of royalties owned by others and without including any of the Corporation–s royalty interests. Net reserves are the total of the Corporation–s working interest reserves after deducting amounts attributable to royalties owned by others, plus the Corporation–s royalty interest reserves.
SUMMARY OF OIL AND GAS RESERVES
AS OF DECEMBER 31, 2012
FORECAST PRICES AND COSTS
PRICING
Pricing utilized in the Sproule Report was an average of the January 1, 2013 pricing forecast of each of Sproule, GLJ Petroleum Consultants Ltd. and McDaniel & Associates Consultants Ltd. and are summarized below.
(1) Inflation rates for forecasting prices and costs.
(2) Exchange rates used to generate the benchmark reference prices in this table.
NET PRESENT VALUE OF FUTURE NET REVENUE
NET PRESENT VALUES OF FUTURE NET REVENUE (1)
(1) Net present value of future net revenue does not represent fair market value. Tables may not add due to rounding.
NET ASSET VALUE
As at December 31, 2012
(1) Reserve value is the net present value of future net revenues before tax which does not represent fair market value, as derived from the Sproule Report.
(2) As internally evaluated at $75.7 million using an average of $98.91 per acre.
(3) See “Non-GAAP Measurements”
(4) Basic shares include outstanding common shares and outstanding non-voting convertible shares.
(5) The above does not include asset retirement obligations. The Sproule Report included abandonment costs only for undeveloped locations with reserves.
RESERVES RECONCILIATION
(1) The Corporation has no unconventional reserves (Bitumen, Synthetic Crude Oil, Natural Gas from Coal, etc.).
FD&A
(1) New management and the new evaluator viewed the development plans in certain properties differently than previously evaluated, resulting in 2012 F&D being negative and therefore not being meaningful. For both FD&A and F&D, the 2012 values are included in the three year averages.
(2) The aggregate of the exploration and development costs incurred in the most recent financial year and the change during that year in estimated future development costs generally will not reflect total finding and development costs related to reserve additions for that year.
(3) In 2012, the acquisition costs related to corporate acquisitions reflect the fair market value. In prior years the acquisition costs related to the corporate acquisitions reflect the consideration paid plus the net debt assumed, both valued at closing and does not reflect the fair market value allocated to the acquired oil and gas assets under generally accepted accounting principles.
(4) Calculation includes reserve revisions. Long Run calculates FD&A costs which incorporate both the costs and associated reserve additions related to acquisitions net of any dispositions during the year. Since acquisitions can have a significant impact on Long Run–s annual reserve replacement costs, the Corporation believes the FD&A costs provide a more meaning portrayal of Long Run–s cost structure.
(5) The 2012 FD&A calculations were based on Long Run–s reserves at December 31, 2012 evaluated by Sproule and WestFire–s reserves at December 31, 2011. The FD&A calculations prior to 2012 were based on WestFire–s reserves from December 31, 2009 to December 31, 2011.
Non-GAAP Measurements
The MD&A contains terms commonly used in the oil and gas industry, such as funds flow from operations, funds flow from operations per share, and operating netback. These terms are not defined by International Financial Reporting Standards (IFRS) and should not be considered an alternative to, or more meaningful than, cash provided by operating activities or net earnings as determined in accordance with IFRS as an indicator of Long Run–s performance. Management believes that funds flow from operations is a useful financial measurement which assists in demonstrating the Corporation–s ability to fund capital expenditures necessary for future growth or to repay debt. Long Run–s determination of funds flow from operations may not be comparable to that reported by other companies. All references to funds flow from operations throughout this report are based on cash flow from operating activities before changes in non-cash working capital and abandonment expenditures. The Corporation calculates funds flow from operations per share by dividing funds flow from operations by the weighted average number of common shares outstanding.
Long Run uses the term net debt in the MD&A and presents a table showing how it has been determined. This measure does not have any standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other companies.
Long Run is a Calgary-based intermediate oil company focused on light-oil development and exploration in western Canada. For further information about Long Run, visit the Company–s website at .
Advisories
Oil and Gas Information:
Barrels of oil equivalent (“boe”) may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one barrel of crude oil 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 conversion ratio of 6:1, utilizing a conversion on a 6:1 basis is misleading as an indication of value.
The estimates of reserves and future net revenue for individual properties may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to the effects of aggregation.
Forward Looking Statements:
Certain information regarding Long Run in this news release including management–s assessment of future plans and operations, 2013 capital expenditures budget and nature of expenditures, 2013 expected average production and crude oil and liquids production, nature of development capital expenditures and the effects thereof, expected timing of receipt of regulatory approval for pilot project at the Peace area and the anticipated effects of new design and completion systems at Redwater, are forward looking statements. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties including, without limitation, risks related to closing of the disposition and satisfaction of the conditions precedent thereto, the effect of the business combination and resulting operations, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, inability to retain drilling rigs and other services, capital expenditure costs, including drilling, completion and facilities costs, unexpected decline rates in wells, wells not performing as expected, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements.
Forward-looking statements or information are based on a number of factors and assumptions which have been used to develop such statements and information but which may prove to be incorrect. Although the Company believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because the Company can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified in this document, assumptions have been made regarding, among other things: the impact of increasing competition; the general stability of the economic and political environment in which the Company operates; the timely receipt of any required regulatory approvals; the ability of the Company to obtain financing on acceptable terms; field production rates and decline rates; the ability to replace and expand oil and natural gas reserves through acquisition, development and exploration results; the timing and costs of pipeline, storage and facility construction and expansion and the ability of the Company to secure adequate product transportation; future oil and natural gas prices; currency, exchange and interest rates; the regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which the Company operates; and the ability of the Company to successfully market its oil and natural gas products. Readers are cautioned that the foregoing list of factors and assumptions is not exhaustive. Additional information on these and other factors that could affect Long Run–s operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (), at Long Run–s website (). Furthermore, the forward looking statements contained in this news release are made as at the date of this news release and Long Run does not undertake any obligation to update publicly or to revise any of the included forward looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.
Contacts:
Long Run Exploration Ltd.
William E. Andrew
Executive Chairman and Chief Executive Officer
(403) 261-6012
Long Run Exploration Ltd.
Dale A. Miller
President
(403) 261-6012
Long Run Exploration Ltd.
Jason Fleury
Vice President, Capital Markets
(403) 261-8302
Long Run Exploration Ltd.
Investor Relations
(888) 598-1330