Advantage Oil & Gas Ltd. : Advantage Announces Non-core Asset Disposition Process to Simplify Corporation and Facilitate Monetization of Glacier
08/22/2012| 06:15pm US/Eastern
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(TSX: AAV, NYSE: AAV)
CALGARY, Aug. 22, 2012 /PRNewswire/ - Advantage Oil & Gas Ltd. ("Advantage" or
the "Corporation") (TSX: AAV) (NYSE: AAV) announces that it has engaged
RBC Capital Markets to market for sale all of the Corporation's
non-core assets, defined as all corporate assets excluding Advantage's
core Glacier Montney natural gas asset and its 21.15 million share
ownership position in Longview Oil Corp. (TSX: LNV).
As previously disclosed the Corporation will continue to execute on its
middle Montney delineation program during the second half of 2012 to
more broadly establish the natural gas and NGL production potential in
the middle Montney across the Corporation's land base at Glacier. The
Corporation expects to be in a position to engage a financial advisor
and initiate a strategic alternatives process by the end of 2012 to
consider among other transactions the sale of Glacier subject to
completion of the ongoing middle Montney delineation.
Advantage's Board of Directors (the "Board") believes that undertaking
the non-core asset disposition process at this time is in the best
interests of the Corporation's shareholders. The Board believes that
its core Glacier asset is materially undervalued in the context of the
Corporation's current market valuation and that disposing of non-core
assets will simplify the Corporation leading to a greater appreciation
of its core Glacier asset as well as generate proceeds that may be used
for debt repayment, special dividends or otherwise deployed to enhance
shareholder value as the Board may determine appropriate.
The Board remains committed to shareholder value maximization and thanks
shareholders for their support.
It is the Corporation's current intention not to disclose developments
with respect to this process until the Board of Directors has approved
a specific transaction or otherwise determines that disclosure is
necessary or appropriate. The Corporation cautions that there are no
assurances or guarantees that this process will result in any
transactions or, if any transactions are undertaken the terms or timing
of any such transactions.
Non-core Asset Disposition
The non-core assets produced a total of approximately 6,700 boe/d (81%
gas and 19% oil and NGL) during the first half of 2012 and had 34.2
mmboe of proved plus probable reserves as at December 31, 2011. A
description of the key areas is as follows:
West Central Alberta
Willesden Green (Open Lake), Alberta
The Willesden Green property is located approximately 35 kilometres
north of the Town of Rocky Mountain House. There are two principal
areas in this property, being the Jurassic Rock Creek gas play on the
east side of the property and the Cretaceous Ostracode/Glauconite oil
on the north side of the property. 3D seismic is used to explore for
this porosity and a number of future targets have been identified. The
Ostracode is developed in a linear sand bar and produces 39(o )API oil. This pool is being evaluated for potential water injection
pressure maintenance. Additional drilling targeting both the Second
White Specks and Glauconite is being evaluated. Production from this
property in the first half of 2012 averaged 696 boe/d.
The December 31, 2011 Sproule Report assigns 3.4 bcf of gross proved
natural gas reserves and 505 Mbbls of gross proved crude oil and NGL
reserves to the Willesden Green property. In addition, 1.6 bcf of gross
probable natural gas reserves and 225 Mbbls of gross probable crude oil
and NGL reserves have been assigned to this property.
Brazeau-Ferrier, Alberta
The Brazeau-Ferrier area is located between 50 and 80 kilometres west of
the town of Drayton Valley. The property produces sour light oil and
natural gas from Devonian aged Nisku pinnacle reefs. The majority of
the production is from a non-operated 50% working interest in the Nisku
C, D and E pools. Additional gas production occurs from several
non-operated Rock Creek, Basal Quartz and Notikewin pools.
In the southern part of this area Advantage has acquired 6.75 sections
(100% net) for Cretaceous Belly River and Notikewin Formation natural
gas. 3D seismic has been acquired and locations are being evaluated as
vertical drill targets in the Belly River. The acreage is being
reviewed for the potential to drill a horizontal multi-stage frac well
in the Notikewin Formation. Production from this property in the first
half of 2012 averaged 572 boe/d.
The Sproule Report assigns 5.1 bcf of gross proved natural gas reserves
and 445 Mbbls of gross proved crude oil and NGL reserves to the Brazeau
River area. In addition, 1.9 bcf of gross probable natural gas reserves
and 210 Mbbls of gross probable crude oil and NGL reserves have been
assigned to this area.
Northeast and East Central Alberta
Chigwell and Oberlin (Nevis), Alberta
Advantage has two coal bed methane ("CBM") fields in the Chigwell and Oberlin (Nevis) areas of Alberta which
produce natural gas from Horseshoe Canyon Formation coal beds and
adjacent associated sandstones. These fields lie approximately 60
kilometers northeast and east of the City of Red Deer respectively.
The wells on these fields are completed on a commingled basis in
multiple layers of individual coals which range in thickness from 1 to
3 meters along with associated and adjacent gas charged sandstones.
The fields are for the most part developed on the basis of 4 vertical
wells per section. These wells are shallow with completed intervals
ranging between 150 and 550 meters in depth. The wells are connected
with low pressure gathering system to central compression facilities
which allows the fields to be drawn down to very low operating pressure
of between 35 and 70 kpa. Advantage operates the Oberlin property with
31 gross and 24.5 net sections. The Chigwell property is a combination
of operated and non-operated with a wide range of working interests
across 27.5 gross (11.25 net) sections. Production from this property
in the first half of 2012 averaged 1,215 boe/d.
The December 31, 2011 Sproule Report assigns 20.1 bcf of gross proved
natural gas reserves to these CBM properties. In addition, 7.7 bcf of
gross probable natural gas reserves have been assigned to this area.
Northeastern Shallow Gas
Advantage has shallow gas properties located in the eastern side of
Alberta, including the Wainwright property, which is located north of
the town of Wainwright, and the Tweedie and Cache properties which are
located west of the town of Bonnyville. These properties produce from
multiple horizons generally all at depths of 750 meters or less. The
principal producing intervals are Cretaceous Mannville Formation sands,
Viking Formation sands and Second White Specks sands and silts.
Production from this property in the first half of 2012 averaged 687
boe/d.
The December 31, 2011 Sproule Report assigns 10.5 bcf of gross proved
natural gas reserves and 6.2 Mbbls of gross proved crude oil and NGL
reserves to these fields. In addition, 2.8 bcf of gross probable
natural gas reserves and 4.8 Mbbls of gross probable crude oil and NGL
reserves have been assigned.
Southern Alberta
Lookout Butte, Alberta
The Lookout Butte property is located approximately 90 kilometres
southwest of Lethbridge. Production occurs primarily from the
Mississippian Rundle Formation where natural gas has been trapped in a
foothills over thrust structure in front of Waterton Park. Advantage
has a 100% working interest in the Rundle gas production. Production
began in 1963 and production decline is low at approximately 12% per
year. A well drilled in 2004 in the southern portion of the pool when
shut in exhibits significant pressure recharge from undrained reserves
beneath adjacent Waterton and Glacier National parks. The property
includes a 100% operated working interest plant and associated gas
gathering system which dehydrates the gas before final processing at
Shell's Waterton gas plant. Production from this property in the first
half of 2012 averaged 836 boe/d.
The December 31, 2011 Sproule Report assigns 24.3 bcf of gross proved
natural gas reserves and 80.7 Mbbls of gross proved crude oil and NGL
reserves to Lookout Butte. In addition, 13.0 bcf of gross probable
natural gas reserves and 87.4 Mbbls of gross probable crude oil and NGL
reserves have been assigned to this property.
Medicine Hat, Alberta
The Medicine Hat property lies 20 kilometres northeast of the City of
Medicine Hat in the heart of the south-eastern shallow gas area.
Advantage has a 100% working interest in 24 sections of land from where
production is taken from all of the main shallow gas producing
formations including the Medicine Hat "A", "C" and "D" sands, as well
as both the Upper and Lower Milk River sands. These sands occur at
approximately 500 metres of depth and have very large in place reserves
with a long production life. These reservoirs consist of low
permeability strata, requiring fracture stimulation to enhance and
induce productivity. The wells are gathered by an extensive network of
low pressure pipelines which feed into large central gas compression
facilities. Production from this property in the first half of 2012
averaged 890 boe/d.
The December 31, 2011 Sproule Report assigns 17.0 bcf of gross proved
natural gas reserves to the Medicine Hat property. In addition, 14.0
bcf of gross probable natural gas reserves have been assigned to this
property.
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 the effect of
commodity prices on the Corporation's financial condition and
performance and future plans; expected production from the Glacier area
and for the Corporation as a whole; projected royalty rates; projected
operating expense and capital expenditures; our future operating and
financial results; supply and demand for crude oil and natural gas;
projections of market prices and costs; the Corporation's drilling and
completion plans; plans for development of the Middle Montney; the
Corporation's business strategy and it plans for its assets; and the
Corporation's expectations regarding its ability to protect Advantage's
business in the current industry and economic environment. In addition,
statements relating to "reserves" or "resources" are deemed to be
forward-looking statements, as they involve the implied assessment,
based on certain estimates and assumptions, that the resources and
reserves described can be profitably produced in the future.
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: the impact of general economic conditions; the intended use
of the net proceeds of any disposition of non-core assets might change
if the board of directors of Advantage determines that it would be in
the best interests of Advantage to deploy the proceeds for some other
purpose; industry conditions; actions by governmental or regulatory
authorities including increasing taxes, changes in investment or other
regulations; changes in tax laws, royalty regimes and incentive
programs relating to the oil and gas industry; 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; 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;
competition from other producers; credit risk; individual well
productivity; changes in laws and regulations including the adoption of
new environmental laws and regulations and changes in how they are
interpreted and enforced; fluctuations in commodity prices and foreign
exchange and interest rates; 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;
obtaining 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 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: 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; and the impact of
increasing competition.
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) may be misleading, particularly if used
in isolation. A boe conversion ratio has been calculated using a
conversion rate of six thousand cubic feet of natural gas to one barrel
of oil. A boe conversion ratio of 6 mcf:1 bbls 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 IFRS. These financial
measures include funds from operations and cash netbacks. 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, cash provided by
operating activities 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.
SOURCE Advantage Oil & Gas Ltd.
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