321% Reserve Replacement, 3.2x Recycle Ratio and $1.03/Mcfe Finding & Development Cost Reaffirms High Quality Glacier Asset

(TSX: AAV, NYSE: AAV)

CALGARY, Feb. 17, 2015 /CNW/ - Advantage Oil & Gas Ltd. ("Advantage" or the "Corporation") is pleased to report highly efficient 2014 reserve additions from its continuing Montney resource development at Glacier, Alberta ("Glacier"). In particular, improved well performance in the Upper, Middle and Lower Montney contributed to a significant portion of the 2014 reserve additions and reflects the high quality of our Glacier asset which underpins the strength of our ongoing capital development program.

Advantage has realized seven consecutive years of highly efficient Montney reserve additions. Continued improvements in well performance and cost optimization resulted in a 2014 Proven plus Probable ("2P") Finding and Development ("F&D") cost of $1.03/mcfe ($6.17/boe) and a three year average 2P F&D cost of $1.03/mcfe ($6.21/boe) including the change in future development capital ("FDC"). Advantage's 2P reserves increased to 1.8 Tcfe which represents 813% growth since 2008 due to successful delineation drilling and improved well production performance.

Proven Developed Producing Reserves ("PDP") increased 33% to 279 Bcfe and Proven ("1P") reserves increased 11% to 1.2 Tcfe resulting from a successful drilling program which targeted the conversion of undeveloped reserves into higher category reserves and the recognition of improved well performance. Future development capital decreased by $78 million as a result of the successful conversion of undeveloped reserves. Delineation drilling to convert resource into reserves in the Middle and Lower Montney will continue in 2015 and beyond. At year-end 2014, a total of 292 undeveloped Montney locations are included in the 2P reserve category compared to Advantage's estimated future drilling inventory of over 1,000 locations at Glacier.

The 2014 2P recycle ratio of 3.2x demonstrates the economic strength of our Montney development program. Advantage's industry leading low cost structure and strong well results generates robust drilling economics and confirms the sustainability of our Glacier Montney resource during periods of lower natural gas prices. Improved production performance results in Glacier well economics with rates of return exceeding 30% at a natural gas price of Aeco Cdn $2.50/GJ.

Glacier outperformance enables a $110 million reduction to our 2015 capital program while maintaining a 36% planned growth from 135 mmcfe/d to 183 mmcfe/d in July 2015. As a result of improved capital efficiencies from slick water completed wells with higher initial production rates and lower declines, there are fewer wells required then were originally scheduled for the 2015 through 2017 period. This has resulted in a $150 million reduced capital program for the entire 2015 to 2017 development period (refer to Advantage's "2015 Guidance and Development Plan Update" press release dated February 17, 2015).

Advantage 2014 Reserves Summary((1)(2))

(All references to year end 2014 financial and operating data in this release are estimates and are unaudited. Advantage is targeting to report on its audited 2014 financial and operating results after markets on March 25, 2015.)




    --  Advantage replaced 321% of 2014 annual production. ((3))
    --  2P Reserves increased 6% to 1.8 Tcfe and reserve additions were achieved
        at 2P F&D cost including the change in FDC as follows:


                                               2014   3 Year Average
                                               ----   --------------

    2P F&D including change
     in FDC                 $1.03/mcfe or $6.17/boe $1.03/mcfe or $6.21/boe


    (1)               Sproule Associates Ltd.
                      ("Sproule") was engaged as an
                      independent qualified reserve
                      evaluator to evaluate
                      Advantage's year-end reserves
                      as of December 31, 2014
                      ("Sproule 2014 reserve report")
                      in accordance with National
                      Instrument 51-101 ("NI 51-
                      101") and the Canadian Oil and
                      Gas Evaluation Handbook ("COGE
                      Handbook").  Reserves are
                      stated on a gross (before
                      royalties) working interest
                      basis unless otherwise
                      indicated. Sproule's year end
                      2014 reserve evaluation did not
                      include Advantage's 33,440 net
                      acres (52.25 net sections) of
                      additional 100% owned Montney
                      land blocks located near
                      Glacier at Valhalla, Wembley
                      and Progress.

    (2)               Only 11 of 33 wells in our most
                      recent Glacier drilling program
                      had well test data available
                      for Sproule to utilize in their
                      December 31, 2014 reserve
                      report.  The remaining wells
                      were or will be tested after
                      December 31, 2014.

    (3)               Reserve replacement is total
                      2014 2P reserve additions
                      divided by 2014 annual
                      corporate production expressed
                      as a percentage.

    --  Technical revisions accounted for 39% of the 2P reserve additions in
        2014.  These revisions, which did not require any increase to FDC, can
        be attributed to improved well test results and production performance.
    --  Sproule's 2014 reserve report demonstrates the continued and efficient
        conversion of identified natural gas and liquids resources into 2P
        reserves. The reserves by category and changes compared to 2013 are
        indicated below:


      Reserve Natural Gas         NGLs          Total Equivalent     % Change from
     Category     Tcf         Million bbls            Tcfe                         2013
     --------     ---         ------------            ----                         ----

        PDP               0.3               1.5                  0.3                   33%

        1P                1.1               8.4                  1.2                   11%

        2P                1.7              15.7                  1.8                    6%

    --  The recycle ratio associated with our 2P F&D cost based on Advantage's
        Q4 2014 estimated operating netback is indicated in the following table:


                                             Q4 2014
                                            ($/mcfe)
                                            --------

    Revenue (1)                                         $3.82

    Royalties                                           $0.18

    Operating Cost                                      $0.34
                                                        -----

    Operating netback                                   $3.30
                                                        =====


    2P Recycle Ratio for 2014
     (2)                                     3.2x

    2P Recycle Ratio average
     for last 3 years (2)                     2.5x


    (1)             Q4 2014 revenue includes
                    adjustments for transportation
                    costs & heat value

    (2)             Recycle ratio represents the Q4
                    operating netback divided by the
                    2P F&D including change in FDC

The total number of future well locations booked and the estimated ultimate recoverable ("EUR") gas per well assigned by Sproule in their 2014 reserve report are illustrated in the following table:



                   Sproule            Sproule
           # of Gross Horizontal Average EUR/well
                Wells Booked        (bcf/well)
                ------------        ----------


                       Developed      Undeveloped Undeveloped
                       ---------      ----------- -----------

    Upper                     99                           157    5.3

    Middle                    14                            63 4.1(1)

    Lower                     27                            72    5.9

    Total                    140                           292


    (1)              Sproule booked natural gas liquids
                     at an average propane plus
                     liquids yield of 39 bbls/mmcf
                     raw for the Middle Montney.  As a
                     result the average reserves/well
                     for a Middle Montney undeveloped
                     location is 4.6 bcfe.

    --  The average 2P reserve assignment per well increased for Lower Montney
        developed and undeveloped locations from 4.8 bcf/well to 5.8 bcf/well.
        The average 2P reserve assignment per well increased for Middle Montney
        developed and undeveloped locations from 3.8 bcf/well to 4.1 bcf/well.


    --  Advantage estimates over 1,000 locations remain unbooked at Glacier
        based on the five Montney development layers within our 300 meter thick
        Montney reservoir. A total of 292 undeveloped locations are booked in
        Sproule's 2014 reserve report.


    --  Advantage's 1P reserve life index is 24 years and its 2P reserve life
        index is 36 years based on its average fourth quarter 2014 production
        rate of 134 mmcfe/d.
    --  The 2P Net Present Value determined by Sproule increased by 8% to $2.3
        billion as at December 31, 2014 (10% discount factor on a pre-tax
        basis).

Operational Update

Advantage increased production in March 2014 to 135 mmcfe/d from 100 mmcfe/d as planned. This was achieved one month ahead of schedule and for less capital than anticipated due to improved well performance from new wells completed with slick water fracs during our 2013 drilling program. Since then, well performance from these 2013 wells have continued to demonstrate higher sustained production in the Upper, Middle and Lower Montney formations at Glacier.

Our most recent drilling program includes the drilling of 33 wells of which 16 wells have now been completed and tested. These 16 standing wells and a number of older wells that are currently shut-in have a combined average first month productivity of over 160 mmcf/d. These wells will be utilized to increase production to 183 mmcfe/d in July 2015 and are capable of sustaining production to early 2016. None of these wells have been required to be placed on production to offset declines which far surpasses our initial plan assumptions. The remaining 17 wells of our 33 well drilling program have been drilled and will be completed and brought on production as required in 2016.

Advantage's drilling program at Glacier continues to demonstrate improving results in the Upper, Middle and Lower Montney. In the Middle Montney, our 2014 drilling program targeted the east area of Glacier with a total of 13 wells where high liquid yields were demonstrated from earlier well results. To date, seven new Middle Montney wells have been completed confirming propane plus ("C3+") liquid yields in excess of 50 bbls/mmcf. Two of the seven Middle Montney wells have demonstrated C3+ liquid yields in excess of 70 bbls/mmcf. Gas flow rates for the seven 2014 Middle Montney wells demonstrated an average final gas production test rate of 6.5 mmcf/d at a normalized gas gathering flowing pressure of 3,000 kpa after an average 68 hours of flow.

Key operational results during the fourth quarter of 2014 and for 2014 are on track with budget expectations and continue to illustrate our industry leading cost structure.



                                     Q4 2014          2014
                                     -------          ----

    Production (mmcfe/d)                        134     132

    Royalties %                              4.7%   4.7%

    Operating Cost ($/mcfe)                   $0.34   $0.32

    Total Cash Cost ($/mcfe)                  $0.83   $0.89

    Capital Expenditures ($ million)            $87    $237

Capital expenditures of $237 million in 2014 included $40 million related to pipeline, plant and land costs.

Looking Forward

The 2014 reserve report demonstrates another year of highly efficient reserve additions at Glacier reaffirming the exceptional quality of our Montney asset. Since 2008, Advantage has implemented a systematic approach to successfully delineate and improve well performance in each of the five development layers within the 300 meter thick Montney reservoir at Glacier. Combined with our diligence on maintaining operational and financial flexibility, Advantage is well positioned to execute on its Montney development plan which is capable of delivering growth during lower commodity price cycles. We look forward to reporting on our progress through 2015.

Company Gross (before royalties) Working Interest Reserves
Summary as at December 31, 2014



                               Oil     Natural  Natural Gas   Equivalent

                            (mbbl) Gas Liquids       (mmcf)       (mboe)

                                        (mbbl)
                                         -----

    Proved

    Developing Producing         5        1,455       270,361        46,520

    Developed Non-producing      -         499        32,469         5,911

    Undeveloped                  -       6,488       798,870       139,633

    Total Proved                 5        8,442     1,101,700       192,063
    ------------               ---        -----     ---------       -------

    Probable                     2        7,240       607,516       108,495

    Total Proved + Probable      7       15,682     1,709,216       300,558
    -----------------------    ---       ------     ---------       -------

Company Present Value of Future Net Revenue using Sproule price and cost forecasts ((1)(2)
)($000)



                        Before Income Taxes Discounted at

                                                        0% 10%        15%
                                                       --- ---         ---

    Proved

    Developed Producing                           $943,305 $604,495    $517,342

    Developed Non-
     producing                                     139,958 83,027      67,923

    Undeveloped                                  2,595,789 671,513     362,609


    Total Proved                                 3,679,052 1,359,035     947,875


    Probable                                     2,900,935 938,122     636,180


    Total Proved +
     Probable                                   $6,579,987 $2,297,158  $1,584,055
    --------------                              ---------- ----------  ----------


    (1)               Advantage's crude oil, natural gas
                      and natural gas liquid reserves
                      were evaluated using Sproule's
                      product price forecast effective
                      December 31, 2014 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
                      Glacier will occur, without
                      regard to the likely availability
                      to the Corporation of funding
                      required for that development.

Sproule Price Forecasts

The present value of future net revenue at December 31, 2014 was based upon natural gas and natural gas liquids pricing assumptions prepared by Sproule effective December 31, 2014. These forecasts are adjusted for reserve 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      Alberta AECO-C   Henry Hub    Edmonton     Edmonton         Edmonton       Exchange

                 Natural Gas Natural Gas     Propane       Butane    Pentanes Plus           Rate

                ($Cdn/mmbtu) ($US/mmbtu)  ($Cdn/bbl)   ($Cdn/bbl)       ($Cdn/bbl)     ($US/$Cdn)
    ---         ------------ -----------  ----------   ----------       ----------     ----------

         2015           3.32         3.25        34.77         50.34             78.60            0.85

         2016           3.71         3.75        43.17         62.51             97.60            0.87

         2017           3.90         4.00        48.57         70.32            109.80            0.87

         2018           4.47         4.50        49.30         71.37            111.44            0.87

         2019           5.05         5.00        50.04         72.44            113.12            0.87

         2020           5.13         5.08        51.32         74.31            116.02            0.87

         2021           5.22         5.15        52.09         75.42            117.76            0.87

Company Gross (before royalties) Working Interest Reserves Reconciliation:



    Proved                           Oil Natural Gas   Natural          Oil

                                  (mbbl)     Liquids       Gas   Equivalent

                                              (mbbl)    (mmcf)       (mboe)
    ---                                        -----     -----        -----


    Opening balance Dec. 31, 2013    6.0        7,086    992,325       172,479

    Extensions                         -         502     24,066         4,513

    Improved recovery                  -           -         -            -

    Infill Drilling                    -         137     12,250         2,179

    Discoveries                        -           -         -            -

    Economic factors                   -           4      (314)         (49)

    Technical revisions            (0.5)         771    121,053        20,946

    Acquisitions                       -           -         -            -

    Dispositions                       -           -         -            -

    Production                     (0.6)        (57)  (47,679)      (8,005)
    ----------                      ----          ---    -------        ------


    Closing balance at Dec. 31,
     2014                            4.9        8,442  1,101,700       192,063
    ---------------------------      ---        -----  ---------       -------


    Proved + Probable                Oil Natural Gas   Natural          Oil

                                  (mbbl)     Liquids       Gas   Equivalent

                                              (mbbl)    (mmcf)       (mboe)
    ---                                        -----     -----        -----


    Opening balance Dec. 31, 2013    7.0       13,035  1,618,833       282,847

    Extensions                         -       1,949     64,576        12,712

    Improved recovery                  -           -         -            -

    Infill Drilling                    -         193     17,170         3,054

    Discoveries                        -           -         -            -

    Economic factors                   -           5      (557)         (88)

    Technical revisions              0.4          552     56,874        10,038

    Acquisitions                       -           -         -            -

    Dispositions                       -           -         -            -

    Production                     (0.6)        (57)  (47,679)      (8,005)
    ----------                      ----          ---    -------        ------


    Closing balance at Dec. 31,
     2014                            6.8       15,682  1,709,216       300,558
    ---------------------------      ---       ------  ---------       -------

Company Finding & Development Costs ("F&D")

Company 2014 F&D Costs - Gross (before royalties) Working Interest Reserves including Future Development Capital - NI 51-101((1)(2)(3) )



                             Proved           Proved + Probable
                             ------           -----------------

    Capital expenditures
     ($000)                         $236,701                    $236,701

    Net change in Future
     Development Capital
     ($000)                           32,616                    (78,080)
    --------------------               ------                     -------

    Total capital ($000)             $269,317                    $158,621


    Total mboe, end of year           192,063                     300,558

    Total mboe, beginning of
     year                             172,479                     282,847

    Production, mboe                    8,005                       8,005
    ----------------                    -----                       -----

    Reserve additions, mboe            27,589                      25,716
    -----------------------            ------                      ------


    2014 F&D costs ($/boe)              $9.76                       $6.17

    2013 F&D costs ($/boe)             $10.20                       $8.10

    Three year average F&D
     costs ($/boe)                      $8.77                       $6.21


    (1)               Under NI 51-101, the methodology
                      to be used to calculate F&D
                      costs includes incorporating
                      changes in FDC required to
                      bring the proved undeveloped
                      and probable reserves to
                      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 future
                      development costs 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
                      reserves on production.

    (3)               In all cases, the F&D number is
                      calculated by dividing the
                      identified capital expenditures
                      by the applicable reserve
                      additions.  Boes may be
                      misleading, particularly if
                      used in isolation.  A boe
                      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.

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", "can", "will", "project", "predict", "potential", "target", "intend", "could", "might", "should", "guidance", "believe", "would" and similar expressions and include statements relating to, among other things, Advantage's anticipated capital budget for 2015; Advantage's anticipated future production from the Glacier Montney resource play and the expected timing thereof; estimated production from Advantage's wells and the timing of achievement thereof; Advantage's drilling plans, including the anticipated timing of completion of wells; the anticipated timing of completion of Advantage's gas plant and the expected capabilities of such gas plant, including processing capability; Advantage's; estimated fourth quarter 2014 operating costs, cash costs and operating cash flow margin; Advantage's planned production growth in July 2015 and April 2016 and effect of firm service contracts on such production growth; effective date of firm service contracts and anticipated financial risk from such contracts; anticipated capital expenditures for 2015, including the expected allocation thereof; including the anticipated length of time such outage will be in place; Advantage's focus on developing its Glacier Montney resource play and preserving a strong balance sheet; and Advantage's future plans and the diligence of Management and Board in monitoring the commodity price environment and preserving Advantage's financial strength and the long term sustainability of Advantage. 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; delays in completion of the expansion of the Glacier gas plant; 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 www.sedar.com ("SEDAR") and www.advantageog.com. 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 and future 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 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.

Management has included the above summary of assumptions and risks related to forward-looking information above and in its continuous disclosure filings on SEDAR in order to provide shareholders with a more complete perspective on Advantage's future operations and such information may not be appropriate for other purposes. Advantage's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits that Advantage will derive there from. Readers are cautioned that the foregoing lists of factors are not exhaustive. These forward-looking statements are made as of the date of this news 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.

The Corporation discloses several financial measures that do not have any standardized meaning prescribed under International Financial Reporting Standards ("IFRS"). 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 www.sedar.com and www.advantageog.com 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

    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

    mcf                          thousand cubic feet

    mmcf                         million cubic feet

    mmcf/d                       million cubic feet per day

    mcfe                          thousand cubic feet
                                  equivalent on the basis of
                                  six thousand cubic feet of
                                  natural gas for one barrel
                                  of oil or NGLs

    mmcfe                         million cubic feet
                                  equivalent

    mmcfe/d                       million cubic feet
                                  equivalent per day

SOURCE Advantage Oil & Gas Ltd.