Legacy Oil + Gas Inc.
TSX VENTURE : GLM.A

Legacy Oil + Gas Inc.

November 26, 2009 18:34 ET

Legacy Announces Third Quarter Results

CALGARY, ALBERTA--(Marketwire - Nov. 26, 2009) -

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES LAW.

Legacy Oil + Gas Inc. ("Legacy" or the "Company") (TSX VENTURE:GLM.A) is pleased to announce it has filed on SEDAR its unaudited financial statements and related Management's Discussion and Analysis ("MD&A") for the three and nine months ended September 30, 2009. Selected financial and operational information is outlined below and should be read in conjunction with Legacy's unaudited financial statements and related MD&A which are available for review at www.legacyoilandgas.com or www.sedar.com.



FINANCIAL + OPERATIONAL HIGHLIGHTS:

Three Months Ended Nine Months Ended
September 30 September 30
----------------------------------------------------------------------------
----------------------------------------------------------------------------
2009 2008 % change 2009 2008 % change
----------------------------------------------------------------------------
Financial ($000's,
except per share
amounts)
----------------------------------------------------------------------------
Petroleum and natural
gas sales 11,625 3,184 265 15,959 8,872 80
Funds generated by
operations (1) 4,549 1,828 149 5,645 4,773 18
Per share basic 0.03 0.06 (50) 0.08 0.17 (53)
Per share diluted 0.03 0.06 (50) 0.07 0.16 (56)
Net earnings (loss) (3,286) 542 (706) (4,672) 1,347 (447)
Per share basic (0.02) 0.02 (200) (0.06) 0.05 (220)
Per share diluted (0.02) 0.02 (200) (0.06) 0.05 (220)
Capital expenditures 4,492 5,648 (20) 6,605 11,288 (41)
Corporate and asset n/a n/a
acquisitions 270,444 - 270,444 -
Net debt and working
capital surplus
(deficit) (42,314) (3,643) (1,062) (42,314) (3,643) (1,062)
----------------------------------------------------------------------------
Operating
----------------------------------------------------------------------------
Production
Crude oil (Bbls per
day) 1,801 312 477 906 310 192
Natural gas (Mcf per
day) 280 9 3,011 94 17 453
Natural gas liquids
(Bbls per day) - - n/a - - n/a
Barrels of oil
equivalent (Boe per
day) (2) 1,847 313 490 922 314 194
Average realized
price
Crude oil ($ per Bbl) 69.87 110.45 (37) 64.31 103.59 (38)
Natural gas ($ per
Mcf) 1.90 8.91 (79) 1.90 9.35 (80)
Natural gas liquids
($ per Bbl) - - - - - -
Barrels of oil
equivalent ($ per
Boe) (2) 68.40 110.51 (38) 63.41 102.98 (38)
Netback ($ per Boe)
(2)
Petroleum and natural
gas revenue 68.40 110.51 (38) 63.41 102.98 (38)
Royalties (9.18) (8.47) 8 (7.36) (9.39) (22)
Operating expenses (15.11) (23.53) (36) (16.61) (21.76) (24)
Transportation
expenses (0.66) - n/a (0.44) - n/a
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating Netback 43.45 78.51 (45) 39.00 71.83 (46)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Undeveloped land
holdings
(gross acres) 271,571 19,331 1,305 271,571 19,331 1,305
(net acres) 207,863 12,324 1,287 207,863 12,324 1,287
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Class B common
shares 923 923 - 923 923 -
Weighted average
shares 156,002 28,903 440 73,519 27,478 168
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(1) Management uses funds generated by operations to analyze operating
performance and leverage. Funds generated by operations as presented do
not have any standardized meaning prescribed by Canadian GAAP and
therefore it may not be comparable with the calculation of similar
measures for other entities.

(2) Boe conversion ratio for natural gas of 1 Boe: 6 Mcf has been used,
which is based on an energy equivalency conversion method primarily
applicable at the burner tip and does not necessarily represent a value
quivalency at the wellhead.


ACCOMPLISHMENTS

- Closed an asset acquisition and two private company acquisitions, acquiring high quality, high netback, light oil assets focused in the Company's southeast Saskatchewan core area for total consideration of approximately $270.4 million. These acquisitions were comprised of production of 3,675 Boe/d (93% light oil, average 38o API) and proved plus probable reserves of 12.65 MMBoe.

- Closed a bought deal private placement of 72,000,000 class A shares at a price of $1.25 per class A share for gross aggregate proceeds of $90 million.

- Completed a 6,222,170 class A shares rights offering for gross aggregate proceeds of approximately $2.4 million.

- Increased average production from 313 Boe per day in the third quarter of 2008 to 1,847 Boe per day in the third quarter of 2009 (490 percent increase).

- Increased funds flow from operations from $1.8 million in the third quarter of 2008 to $4.5 million in the third quarter of 2009 (148 percent increase).

- Reduced operating and transportation costs from $23.53/Boe in the third quarter 2008 to $15.77/Boe in the third quarter 2009 (33 percent decrease).

- Reduced G&A costs from $14.50/Boe in the third quarter 2008 to $11.91/Boe in the third quarter 2009 (18 percent decrease) while incurring significant one-time costs associated with the recapitalization of the Company. These one-time costs accounted for approximately one-half of the G&A expense in the quarter.

- Drilled 6.0 (4.6 net) wells with an 83 (78 net) percent drilling success in the third quarter 2009.

- Increased undeveloped land holdings from 12,324 net acres at the end of the third quarter 2008 to 207,863 net acres at the end of the third quarter 2009 (1,287 percent increase).

- Received shareholder approval to change the Company's name to Legacy Oil + Gas Inc., the reclassification of the class A shares to common shares and the consolidation of common shares on a one for six basis. The Company changed its name to Legacy Oil + Gas Inc. on November 10, 2009 and expects to consolidate and re-designate the shares in early December 2009. The Company has obtained conditional listing approval from the TSX and anticipates being able to satisfy the listing requirements of the TSX at the time of the consolidation, expected in early December 2009.

OPERATIONS OVERVIEW

Legacy participated in the drilling of 6.0 (4.6 net) oil wells targeting light oil on its southeast Saskatchewan core properties with an 83 (78 net) percent success rate.

A number of wells were worked-over and repaired in the quarter to improve future production run times. The majority of the wells in the Heward area were electrified which is expected to result in more consistent production and lower operating costs.

SUBSEQUENT EVENTS

Two Private Company Acquisitions and $110 Million Bought Deal Financing

On October 20, 2009, the Company announced the acquisition of partnership interests from a private company and a private company acquisition (collectively the "Acquisitions") in its southeast Saskatchewan core area. The purchase price for the Acquisitions was approximately $108 million in cash and 88.3 million Legacy class A shares for total consideration of approximately $256 million.

The Acquisitions represent the successful continuation of Legacy's business plan to acquire high quality conventional light oil assets and high impact light oil resource play assets. At the time of the announcement, the Acquisitions were comprised of production of 1,500 Boe per day (96% light oil, average 39o API) and proved plus probable reserves of 3.3 MMBoe. The Acquisitions provide a number of attractive conventional light oil opportunities and two new exciting light oil resource play opportunities at Antler and Taylorton.

The acquired lands at Antler provide capture of a significant light oil (40o API) resource play in the Torquay formation for future delineation and development drilling and potential waterflood. Portions of the neighbouring Sinclair Three Forks B Pool (Torquay) are currently being successfully waterflooded with potential recoveries of up to 50 percent (based on public data).

The Acquisitions add the foremost position in an emerging, operated, high working interest (75 percent), high-impact Bakken light oil resource play at Taylorton, enhancing appreciably the Company's already significant Bakken play exposure. Legacy will have the dominant interest on its lands in a large, light sweet crude (42-46o API) oil accumulation and significant high heat content, liquids rich associated natural gas reserves. Company interests encompass approximately 44 (32.8 net) sections of land, with approximately 30 net sections or 19,252 net acres undeveloped.

The Acquisitions dramatically increase Legacy's opportunity inventory in its light oil focus area of southeast Saskatchewan. After closing the Acquisitions, Legacy will have production of approximately 5,500 Boe per day, proven plus probable reserves of 17.6 MMBoe, nearly 270,000 net acres of undeveloped land and a drilling inventory of 385 (268.9 net) development locations, all for high quality light oil (corporate average 38o API). Legacy continues to grow its resource play exposure, with Bakken locations comprising approximately 62 percent of the net development location inventory. The Company is the third largest independent producer in the Bakken and the dominant interest holder in the emerging high impact Taylorton Bakken light oil resource play.

To fund the cash portion of the Acquisitions, Legacy issued 34,375,000 Units for gross proceeds of $110 million ("the Financing"). Each Unit consisted of one subscription receipt at a price of $1.60 per subscription receipt and one special warrant at a price of $1.60 per special warrant. The subscription receipts converted to special warrants on November 6, 2009, when Legacy closed the Connaught acquisition. The special warrants have been cleared by a prospectus filed on November 23, 2009 and the special warrants will be exercised for class A shares for no additional consideration on November 30, 2009.

On November 6, 2009, the Company announced its banking syndicate had increased the banking facility to $90 million. The banking facility was subsequently increased to $110 million on November 24, 2009.

The Company anticipates the Financing will result in an under-levered balance sheet that, combined with the surplus capacity in Legacy's banking facility, provides certainty to the execution of a capital program and the ability to better weather commodity volatility, with the flexibility to be opportunistic on future acquisition opportunities.

On November 26, 2009, the Company issued 26,460,000 options to employees and directors, of these options 16,500,000 were issued to officers and directors. All of these options were priced at $1.61, the five day volume weighted average share price immediately preceding the grant.

INCREASED 2009 GUIDANCE AND OUTLOOK

Legacy's Board of Directors has approved a capital program for the fourth quarter of 2009 of $25 million to accelerate the drilling on lands recently acquired as part of the two private company acquisitions. The Company now expects to exit 2009 at 5,750 Boe per day, up significantly from the third quarter 2009 average of 1,847 Boe per day. A capital expenditure budget for 2010 is anticipated to be announced mid-December 2009.

We continue to take significant and decisive strides to establish Legacy as the premier Canadian junior oil and natural gas company. Our light oil, high netback production base, concentrated assets, strong balance sheet, significant light oil resource play exposure and successful consolidation strategy has differentiated Legacy from the rest of the junior sector.

Our corporate activities have not only bolstered the number of development drilling opportunities and their impact but added to the sustainability of our business model. Our resolute pursuit of focused, high quality light oil assets has resulted in an attractive portfolio of short, medium and long-term opportunities. The Company's conventional Mississippian development drilling locations will enable near-term production growth and cash flow to fund the medium term Bakken light oil resource play development. Our Bakken assets provide a multi-year, repeatable development drilling inventory for high netback light oil. Finally, our recently expanded position at Antler encompasses a potentially large future waterflood project that could add substantial light oil reserves over an extended time frame.

The Company anticipates ramping up drilling activity beginning in the fourth quarter that should lead to production additions in early 2010. We continue to be opportunistic for further strategic light oil acquisitions to augment our existing inventory of 385 light oil development drilling locations nearly 270,000 net acres of undeveloped land.

Legacy is a uniquely positioned, well-capitalized junior oil and natural gas company with a proven management team committed to aggressive, cost-effective growth of light oil reserves and production in Saskatchewan and Manitoba. Legacy's Class A Shares trade on the TSX Venture Exchange under the symbol GLM.A.

FORWARD LOOKING STATEMENTS: This press release contains forward-looking statements. More particularly, this press release contains statements concerning the anticipated impact of workovers and repairs, the anticipated impact of the Financing and the anticipated timing of the release of the Company's 2010 capital expenditure budget. The forward-looking statements are based on certain key expectations and assumptions made by the Company, including expectations and assumptions concerning the success of optimization and efficiency improvement projects, the availability of capital, the success of future drilling and development activities, the performance of existing wells, the performance of new wells and prevailing commodity prices. Although the Company believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because the Company can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), commodity price and exchange rate fluctuations and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures. Certain of these risks are set out in more detail in the Company's Annual Information Form which has been filed on SEDAR and can be accessed at www.sedar.com. The forward-looking statements contained in this press release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

Meaning of Boe: When used in this press release, Boe means a barrel of oil equivalent on the basis of 1 Boe to 6 thousand cubic feet of natural gas. Boe per day means a barrel of oil equivalent per day. Boe's may be misleading, particularly if used in isolation. A Boe conversion ratio of 1 Boe for 6 thousand cubic feet of natural gas is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

This press release shall not constitute an offer to sell, nor the solicitation of an offer to buy, any securities in the United States, nor shall there be any sale of securities mentioned in this press release in any state in the United States in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state.

NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.

Contact Information

  • Legacy Oil + Gas Inc.
    Trent J. Yanko, P.Eng.
    President + CEO
    (403) 441-2300
    (403) 441-2017 (FAX)
    or
    Legacy Oil + Gas Inc.
    Matt Janisch, P.Eng.
    Vice-President, Finance + CFO
    (403) 441-2300
    (403) 441-2017 (FAX)
    or
    Legacy Oil + Gas Inc.
    3900, Bow Valley Square II
    205 - 5th Avenue S.W.
    Calgary, AB T2P 2V7