ENP Newswire -
Release date- 07052014 -
Message to Shareholders
Funds from operations increased by 16% in the first quarter of 2014 to
On a per share basis, funds from operations for the first quarter of 2014 was
The increase in funds from operations is attributable to strengthening pricing for Canadian oil sales and slightly higher crude oil production.
Approximately 48% of Longview's 2014 capital program was spent in the first quarter of 2014. This produced a payout ratio of 188% for the quarter ended
Preservation of a sustainable payout ratio is the cornerstone of our business strategy which is based on the maintenance of a solid balance sheet while funding our dividend payments and capital expenditure programs primarily with funds from operations.
Crude oil production increased by 2% in the first quarter of 2014 to 4,324 bbls/d from 4,258 bbls/d in Q1 2013.
Our crude oil production volumes slightly increased when compared to levels reported in Q1 2013, demonstrating the high quality, low decline nature of our existing production base. The majority of total production declines related to natural gas which fell by 22% compared to the first quarter of 2013 as our prior year capital expenditure program was focused on the ongoing development of our light oil reserves.
Crude oil revenue, which comprised 90% of total revenue in the first quarter of 2014, increased by 18% to
The WTI/Canadian oil price differential widened in the first quarter of 2014 to
The price of WTI increased in the first quarter of 2014 averaging
Operating netbacks increased by 46% from
Operating costs were held constant with prior year levels as ongoing cost reduction efforts are offsetting inflationary pressures seen throughout the Western Canadian sedimentary basin.
Royalty expenses increased due to higher sales whereas royalties as a percentage of sales decreased due to lower rates associated with new production additions.
Total capital expenditures for the three months ended
Commodity Hedging Program
Longview's hedging program for calendar 2014 includes crude oil hedges of 2,000 bbls/d at
The Corporation will continue to hedge a portion of its production in the future in order to provide stability to cash flow in order to fund our dividend payments and capital expenditure program.
Possible Transportation Disruption Update
Operationally, Longview's business strategy is based on providing shareholders with attractive long term returns by exploiting our assets in a financially disciplined manner and by acquiring additional long-life oil and gas assets of a similar nature. Longview has a base decline rate of approximately 19% which allows the Corporation to maintain production with a modest level of capital expenditures, as demonstrated during 2013 and 2012.
The 2014 drilling program is budgeted to increase by 44% from 2013 spending levels and will focus on the ongoing development of light oil reserves at 11 project areas in both
In addition, approximately 14% of our total capital budget will be allocated to waterflood enhancement and facility improvements at seven project areas designed to increase reservoir pressures and establish additional drilling locations.
In order to fund the expansion of our capital development program, Longview pared back its monthly dividend to
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Web Site: www.longviewoil.com
Certain information regarding Longview set forth in this press release, including management's assessment of the Corporation's future plans and operations, contains forward-looking statements that involve substantial known and unknown risks and uncertainties. The use of any of the words 'anticipate', 'continue', 'estimate', 'expect', 'may', 'will', 'project', 'should', 'believe' and similar expressions are intended to identify forward looking statements.
Such statements represent Longview's internal projections, estimates or beliefs concerning, among other things, an outlook on the estimated amounts and timing of capital expenditures or other expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or performance. These statements are only predictions and actual events or results may differ materially.
Although Longview believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievement since such expectations are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. Many factors could cause Longview's actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, Longview.
In particular, forward-looking statements included in this press release include, but are not limited to, statements with respect to Longview's business strategy; the Corporation's hedging program and its plans to hedge a portion of its production in the future; the Corporation's capital program for the remainder of 2014; the Corporation's anticipated drilling, development and recompletion activities; the Corporation's plans to advance its waterflood projects in
In addition, statements relating to 'reserves' are deemed to be forward looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described can be profitably produced in the future.
These forward-looking statements are subject to numerous risks and uncertainties, certain of which are beyond the Corporation's control, including the impact of general economic conditions; volatility in market prices for crude oil and natural gas; industry conditions; volatility of commodity prices; currency fluctuation; imprecision of reserve estimates; liabilities inherent in crude oil and natural gas operations; environmental risks; incorrect assessments of the value of acquisitions and exploration and development programs; competition from other producers; the lack of availability of qualified personnel or management; changes in tax laws, royalty regimes and incentive programs relating to the oil and gas industry; changes to legislation and regulations and how they are interpreted and enforced; 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; unexpected drilling results; changes or fluctuations in production levels; delays in anticipated timing of drilling and completion of wells; stock market volatility; ability to access sufficient capital from internal and external sources and the other risks considered under 'Risk Factors' in
With respect to forward-looking statements contained in this press release,
Management has included the above summary of assumptions and risks related to forward-looking information provided in this press release in order to provide shareholders with a more complete perspective on
Readers are cautioned that the foregoing lists of factors are not exhaustive. These forward-looking statements are made as of the date of this press release and the Corporation 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.
Non-GAAP Measures, Definitions and Abbreviations
The Corporation discloses several financial measures in this press release that do not have any standardized meaning prescribed by International Financial Reporting Standards ('IFRS' or 'GAAP'), such as funds from operations and payout ratio.
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.
'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 oil equivalent (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.
'Funds from operations' represents cash provided by operating activities, adjusted for expenditures on decommissioning liability, changes in non-cash working capital and interest on bank indebtedness. 'Payout ratio' is calculated as cash dividends declared and capital expenditures divided by funds from operations. 'Working capital deficit' includes trade and other receivables, prepaid expenses and deposits, trade and other accrued liabilities and due to parent.
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