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COMMODITY ENVIRONMENT
-- WTI crude oil prices averaged US$94.37 per barrel in the first quarter of 2013, compared to US$102.93 per barrel for the first quarter of 2012 and US$88.18 per barrel in the fourth quarter of 2012. During the first quarter of 2013, Edmonton light sweet oil traded at an average discount of $6.18 per barrel compared to WTI. This compares to an average discount of $10.70 per barrel compared to WTI during the first quarter of 2012, and of $4.19 per barrel during the fourth quarter of 2012.-- In the first quarter of 2013, the AECO Monthly Index averaged $3.20 per mcf compared to $2.15 per mcf in the first quarter of 2012 and $3.21 per mcf in the fourth quarter of 2012.
OPERATIONS UPDATE
Peace River Area Montney
-- Production in the Peace River area averaged 9,453 boe per day in the first quarter of 2013, an increase of 41 percent over the 6,691 boe per day average in the fourth quarter of 2012. The Peace River Area Montney contributed 40 percent of Long Run's first quarter 2013 production volumes.-- Recent well results are, on average, above the established type-curve. Continued use of cemented liner completion design is yielding improved completion reliability. Long Run believes operational and engineering improvements in this play realized over the past several months will lead to an increased inventory of drilling locations and higher booked reserves in the longer-term.-- Enhanced oil recovery ("EOR") work in the Montney at Normandville is progressing on-schedule. Water injection began on April 1, 2013 on this project with a response anticipated in 2014. Long Run believes this pressure maintenance program will improve recoveries, lower natural gas/oil ratios, and enhance overall project economics.Redwater Viking
-- In the first quarter of 2013 Redwater production averaged approximately 5,195 boe per day, more than 22 percent of Long Run's total production volumes. 30 (28.6 net) wells were drilled in this play during the first quarter with 26 gross wells tied-in. Higher production volumes have been achieved through modifications of drilling technique and completion technology. These improved results are driving strong project economics which confirm the deep value in this play. On-stream well costs remain at $1.2 million.-- Plans continue to advance EOR work in this play. To ensure that maximum value from this property is achieved, Long Run is moving forward with the initial stages of a pilot water injection scheme and plans to implement injectivity before the end of 2013 to further test this concept. Long Run anticipates initial results from the early stages of this project to be available in 2014.
Duvernay
-- During the first quarter of 2013, Long Run re-completed a 100% working interest vertical well into the Duvernay located in the Smoky Heights area at 3-26-72-2W6. Initial testing recovered light oil and associated natural gas volumes. Additional analysis will be available in coming months when further testing is completed.Results Overview--------------------------------------------------------------------------------------------------------------------------------------------------------($000s, except per share) 2013 2012 --------------------------------------------- Q1 Q4 Q3 Q2 Q1----------------------------------------------------------------------------Funds flow from operations (1) 48,644 38,407 26,546 34,385 29,381 Per share, diluted 0.39 0.33 0.32 0.41 0.35Net earnings (loss) (827) (56,590) (4,747) 17,506 1,179 Per share, basic & diluted (0.01) (0.49) (0.06) 0.21 0.01Production (BOE/d) Liquids (Bbl/d) (2) 12,358 11,995 7,854 8,291 6,133 Natural Gas (Mcf/d) 67,516 56,453 18,214 19,548 16,288 Total (BOE/d) 23,611 21,405 10,890 11,549 8,848Prices, including derivatives Liquids ($/Bbl) (2) 73.03 75.49 77.67 80.68 85.15 Natural Gas ($/Mcf) 3.63 4.19 2.44 1.94 2.29 Total $/BOE 49.12 53.99 61.34 61.57 64.92Revenues, before royalties 103,613 99,000 60,094 64,025 53,486Capital expenditures 103,936 64,524 31,379 45,081 69,425Net acquisitions (divestitures) 16,928 (175,916) (2,325) - -Net debt 366,305 293,123--------------------------------------------------------------------------------------------------------------------------------------------------------Results Overview--------------------------------------------------------------------------------------------------------------------------------------------------------($000s, except per share) 2011 --------------------------------------------- Q4 Q3 Q2----------------------------------------------------------------------------Funds flow from operations (1) 29,896 27,448 10,641 Per share, diluted 0.36 0.33 0.23Net earnings (loss) (66,612) 11,427 4,387 Per share, basic & diluted (0.80) 0.14 0.10Production (BOE/d) Liquids (Bbl/d) (2) 5,872 5,499 2,243 Natural Gas (Mcf/d) 16,376 17,766 6,392 Total (BOE/d) 8,601 8,460 3,308Prices, including derivatives Liquids ($/Bbl) (2) 88.74 85.97 90.26 Natural Gas ($/Mcf) 3.41 4.20 4.83 Total $/BOE 69.26 66.79 70.55Revenues, before royalties 56,192 51,568 21,377Capital expenditures 72,552 59,361 20,453Net acquisitions (divestitures) - (52) (1,704)Net debt 124,753--------------------------------------------------------------------------------------------------------------------------------------------------------(1) See "Non-GAAP Measurements".(2) Liquids includes light oil, heavy oil and natural gas liquids.Capital Investment--------------------------------------------------------------------------------------------------------------------------------------------------------($000s) Q1 2013 Q4 2012 Q1 2012----------------------------------------------------------------------------Drilling and completion 80,767 46,620 53,339Plant and facilities 19,652 9,967 9,659Land 1,659 6,806 5,505Geological and geophysical 1,314 772 834Other assets 544 359 88----------------------------------------------------------------------------Capital expenditures 103,936 64,524 69,425Acquisitions 22,949 - -Dispositions (6,021) (175,916) -----------------------------------------------------------------------------Capital investment 120,864 (111,392) 69,425--------------------------------------------------------------------------------------------------------------------------------------------------------Share Capital May 6, March 31, December 31,(# of units) 2013 2013 2012----------------------------------------------------------------------------Common Shares 110,107,152 110,107,152 110,107,152Non-Voting Convertible Shares 15,512,858 15,512,858 15,512,858Options 9,661,400 9,727,400 8,042,000Warrants(1) 2,300,000 2,300,000 2,300,000--------------------------------------------------------------------------------------------------------------------------------------------------------(1) Each common share purchase warrant ("Warrant") entitles the holder to purchase 0.4167 of a common share at an exercise price of $3.10 per 0.4167 of a share until September 15, 2014. The Warrants are not exercisable until the twenty-day volume weighted average trading price of the common shares exceeds $12.00 per share.
