Lightstream Resources Ltd.

Lightstream Resources Ltd.

March 10, 2014 20:56 ET

Lightstream Announces 2013 Funds Flow from Operations of $671 Million

CALGARY, ALBERTA--(Marketwired - March 10, 2014) - Lightstream Resources Ltd. (TSX:LTS) (the "Company" or "Lightstream") is pleased to announce our fourth quarter and year-end 2013 financial and operating results.


In this press release, annual comparisons are 2013 compared to 2012 and quarterly comparisons are fourth quarter 2013 compared to fourth quarter 2012, unless otherwise noted. All references to well counts are on a net basis.

  • Average daily production for 2013 increased to 46,438 barrels of oil equivalent per day ("boepd"), representing a 9% increase over our 2012 average production of 42,784 boepd.
  • Average fourth quarter 2013 production was 45,521 boepd, essentially unchanged from third quarter of 2013, and was 4% lower than the fourth quarter of 2012.
  • Our operating netback for 2013 was $50.00/boe, 4% higher than our operating netback in 2012, and for the fourth quarter it was $45.43/boe, down 5% from the fourth quarter of 2012.
  • Funds flow was $671 million ($3.43 per basic share) for 2013, a 12% increase over 2012; fourth quarter funds flow was $146 million ($0.73 per basic share), down 13% from the prior year.
  • Capital expenditures (before acquisitions and divestitures) were $716 million for 2013, 25% below 2012 levels, and $156 million for the fourth quarter of 2013, a decrease of 57% for the same period a year earlier.
  • For 2013 we are reporting a net loss from operations of $1,384 million ($7.07 per basic share) primarily due to a one-time non-cash goodwill impairment charge of $1,342 million.

Summary of Results

Three months ended
December 31,
Year ended
December 31,
2013 2012 2013 2012
Oil and natural gas revenue 287,727 296,584 1,250,491 1,104,983
Funds flow from operations(1) 146,017 168,342 670,928 597,096
Per share - basic ($)(1)(2) 0.73 0.88 3.43 3.17
Adjusted Net income (loss)(1) (45,598) 106,951 (42,608) 262,718
Per share - basic ($)(1)(2) (0.23) 0.56 (0.22) 1.39
Net Capital Expenditures(1) 154,487 368,973 719,101 320,383
Total debt(1) 2,274,122 2,013,714
Dividends per share ($)(1)(3) 0.20 0.24 0.91 0.96
Cash dividends per share ($)(1)(3) 0.17 0.09 0.67 0.40
Common Shares, end of period (000)(4) 199,774 192,452
Operating netback ($/boe)(1)(5)(6) 45.43 47.60 50.00 47.89
Average daily production (boe)(5) 45,521 47,192 46,438 42,784
(1) Non-GAAP measure. See "Non-GAAP Measures" section in the 2013 Management's Discussion and Analysis.
(2) Calculated using shares outstanding of Lightstream Resources prior to the reorganization in December 2012.
(3) Dividends paid by Lightstream Resources prior to the reorganization in December 2012.
(4) Denotes basic common shares outstanding.
(5) Six Mcf (thousand cubic feet) of natural gas is equivalent to one barrel of oil equivalent ("boe").
(6) Net of transportation expenses.


Total average production in 2013 grew 9% to 46,438 boepd (81% light-oil and liquids weighted). Our capital spending program for the year was $716 million, a 25% decrease from 2012 levels.

Our fourth quarter average production of 45,521 boepd (80% light oil and liquids weighted) was essentially unchanged from the third quarter of 2013 and decreased 4% from the fourth quarter of 2012. This reflects our execution of a level loaded capital program between the first and second halves of the year. Capital expenditures in the fourth quarter were $156 million (before asset acquisitions and dispositions), a decrease of 57% from the $367 million invested in the fourth quarter of 2012. Capital spending in the quarter represented 22% of total annual spending compared to 39% in 2012.

Production expenses for the fourth quarter were $12.75/boe, up 12% from the same quarter last year. The increase was due to higher fixed costs on producing wells for electricity and equipment rentals. Average production expenses for 2013 were $13.19/boe as a result of the increased fixed costs referred to above as well as higher third party processing fees and well servicing costs. We are expecting production expenses to trend up to approximately $15.25/boe in 2014 due to a higher proportion of workover expenses versus capitalized optimization costs in prior years, although in aggregate the total amount to be spent on these activities is expected to be the same year over year.

Average Daily Production

Three months ended
December 31, 2013
Year ended
December 31, 2013
Business Unit Oil &NGL (bbl/d) Gas (Mcf/d) Total (boe/d) Oil &NGL (bbl/d) Gas (Mcf/d) Total (boe/d)
Bakken 15,665 6,886 16,813 16,084 6,069 17,095
Conventional (SE SK) 4,611 866 4,755 5,133 1,114 5,319
Cardium (central AB) 13,465 37,675 19,744 14,150 36,720 20,270
Alberta/BC 2,680 9,173 4,209 2,076 10,066 3,754
36,421 54,600 45,521 37,443 53,969 46,438

We executed on our drilling program in 2013 with the Cardium business unit being our most active area, followed by the Bakken in southeast Saskatchewan. Our primary activity in our emerging play areas has been focused on the Swan Hills region, which is expected to continue in 2014.

Q4 2013 Drilling Activity

Drilled Completed On Production Inventory(1)
Business Unit Gross Net Gross Net Gross Net Gross Net
Bakken 9 6 15 11 13 10 4 1
Conventional (SE SK) 11 8 11 8 10 9 5 2
Cardium (central AB) 15 10 20 14 19 14 6 5
Alberta/BC 3 3 4 4 4 4 - -
Total 38 27 50 37 46 37 15 8
(1) Inventory refers to the number of wells pending completion and/or tie-in at December 31, 2013.

2013 Drilling Activity

Drilled Completed On Production Inventory(1)
Business Unit Gross Net Gross Net Gross Net Gross Net
Bakken 48 33 53 37 48 33 4 1
Conventional (SE SK) 29 17 32 18 30 18 5 2
Cardium (central AB) 63 48 76 59 72 56 6 5
Alberta/BC 15 12 17 15 13 11 - -
Total 155 110 178 129 163 118 15 8
(1) Inventory refers to the number of wells pending completion and/or tie-in at December 31, 2013.

Southeast Saskatchewan Update

Operations in southeast Saskatchewan generated free operating cash flow (after all capital expenditures) of $171 million in 2013. Our average production in southeast Saskatchewan was 21,568 boepd in the fourth quarter and 22,414 boepd for the year. We continued to advance our enhanced oil recovery ("EOR") efforts in the area in 2013 and received additional reserve recognition for our EOR program due to the encouraging results that are being seen from the four wells we have on injection. In 2014, we will be increasing the amount of acreage under injection and expect to have two additional patterns online by year-end, with wells and infrastructure in place for two additional patterns to be added in early 2015.

We also plan to build on the success that we have had with our optimization program in southeast Saskatchewan by spending $30 million on optimizations in the area in 2014.

Cardium Update

In Alberta, we continue to grow production in the Cardium business unit, which averaged 19,744 boepd during the fourth quarter of 2013. Average production for the year was 20,270 boepd, an increase of 22% over the prior year. During 2013, we drilled 48 wells and brought 56 wells on production. Proved plus probable reserves in the Cardium business unit increased from 93.7 MMboe in 2012 to 95.4 MMboe in 2013, replacing 124% of the business unit's production (including revisions). As a result of continued production growth and attenuating declines, the Cardium business unit achieved the significant milestone of generating free cash flow during 2013, which we expect will increase in 2014. We will continue to develop the area and grow production in 2014 and will also look for opportunities to expand our optimization program into the Cardium.

Alberta/BC Update

In Alberta/BC, fourth quarter production was 4,209 boepd, which represents a 52% increase over 2012, and our light oil and liquids weighting increased from 40% to 64% over the same time period. We drilled 3 wells in the fourth quarter of 2013 and continue to be active in 2014, with 5 wells drilled so far this year and plans to drill an additional 3 wells prior to spring break-up. The results we have seen in the Swan Hills area are very encouraging and we view the play as providing our next wedge of growth. To facilitate this future growth, we are presently constructing a 3,500 bopd battery in our core area of Deer Mountain. The facility is expected to be on-stream during the second quarter and will eliminate emulsion trucking costs and gas flaring. In addition, the battery will provide a platform for our future activity in the area, which includes plans to drill four wells in Deer Mountain in the second half of 2014.


Our production and operating netbacks resulted in funds flow from operations of $671 million ($3.43 per basic share) for 2013, a 12% increase from 2012. This increase was driven by a combination of higher annual production and a higher operating netback. Our average operating netback in 2013 of $50.00/boe was positively impacted by a 5% increase in average realized price to $73.35/boe. This was partially offset by a 6% increase in production expenses, which averaged $13.19/boe for the year.

In 2013, we had a net loss from continuing operations of $1,384 million ($7.07 per basic share) compared to a net income from continuing operations of $113 million ($1.01 per basic share) in 2012. The loss in 2013 is primarily the result of the impairment of goodwill, a non-depleting asset on our balance sheet, of $1,342 million and a foreign exchange loss of $62 million (virtually all non-cash) compared to goodwill impairments of $61 million and a foreign exchange gain of $19 million in 2012. This impairment reflects goodwill that was recorded in conjunction with acquisitions in southeast Saskatchewan in 2009 and for Cardium assets in 2010. Since that time, these properties have generated $3.0 billion of net operating income to the Company; however, under accounting standards, this goodwill cannot be depleted. Based on this cumulative net operating income, and in light of our current reduced capital plan, we have determined that the future expected value of these assets no longer supports the goodwill, and we have eliminated it from our balance sheet. There is no funds flow impact from this impairment.

In 2013, we declared $183 million in dividends, reflecting a 27% payout ratio of funds flow from operations, of which $134 million were paid in cash reflecting a 20% payout ratio. In November 2013, we reduced our dividend from $0.96/share to $0.48/share per annum and eliminated our dividend reinvestment program and share dividend program to improve our long-term sustainability. During the year we improved our sustainability ratio (cash flow out prior to acquisitions and dispositions, compared to cash flow in) to 127% (2012 - 173%). This is a result of strategic measures taken in 2013 to focus capital spending to increase average production levels and a lower level of sustaining capital expenditures due to moderating declines of our base production. We expect this positive trend to continue into 2014.

Lightstream's strategy is to provide a yield to shareholders combined with an accretive long-term growth-oriented business plan. We are focused on securing appropriate levels of capitalization to support this business strategy. At year-end 2013 we had net debt of $2.3 billion, comprised of US$900 million in high yield notes (2020 maturity), $1.16 billion drawn on our $1.4 billion line of credit (2016 renewal), US$6.5 million in convertible debentures (2016 maturity), and $156 million in negative working capital. We are compliant with all of our covenants related to our debt and, as previously disclosed, we are undertaking a number of initiatives to reduce our debt-to-cash flow levels, including executing an asset disposition program for targeted proceeds of $300 million in 2014 and $600 million in total by the end of 2015. To-date in 2014, we have completed sales or have agreements to sell certain non-core assets for gross proceeds of $112 million.


We have revised our guidance to reflect the impact of the announced dispositions on our expected 2014 production and net operating income, as well as to update our pricing assumptions to reflect recent increases in AECO gas prices and the weakening of the Canadian dollar against the U.S. dollar.

Our revised guidance results in slightly lower production levels, however, we are forecasting an increase in funds flow from operations to approximately $650 million for the year (a 7% increase relative to the midpoint of our guidance). Based on these forecasts, our sustainability ratio (pre-acquisitions and dispositions) is expected to be approximately 100%, an improvement from 106% previously.

($000s, except where noted and per share amounts) 2014 Guidance
(Revised Mar 3, 2014)
2014 Guidance
(Initial Nov 21, 2013)
% Variance
Production (annual average)
Total (boe/d) 43,500 - 45,500 45,000 - 47,000 (3%)
Natural Gas Weighting unchanged 20% -
Exit Production (boe/d) 45,000 - 47,000 46,000 - 48,000 (2%)
Funds Flow from Operations(1) $635,000 - $665,000 $595,000 - $620,000 7%
Funds Flow per share(1) $3.19 - $3.34 $2.99 - $3.12 7%
Dividends per share unchanged $0.48 -
Capital Expenditures(2) unchanged $525,000 - $575,000 -
Pricing Assumptions:
Crude oil - WTI (US$/bbl) unchanged 95.00 -
Crude oil - WTI (Cdn$/bbl) unchanged 100.00 -
Corporate oil differential (%) unchanged 10 -
Natural gas - AECO (Cdn$/mcf) 4.00 3.00 33%
Exchange rate (US$/Cdn$) 1.10 1.05 5%


Lightstream's foundation remains strong. We have a light-oil focused asset base, 200.2 MMboe of proved plus probable reserves that have an net present value of $4.1 billion (before taxes, discounted at 10%), and an inventory of over 2,000 drilling locations. Our assets provide a platform to generate long-term funds flow growth and returns for our shareholders. Currently, three out of our four major business units are generating positive cash flow for our Company. We expect similar results from the Swan Hills area as we move forward with our development plan. As a Company, we are optimistic for the future and see 2014 as a year of progress for all aspects of our business, including execution of our capital plan and strengthening our balance sheet.


Management of Lightstream will be holding a conference call for investors, financial analysts, media and any interested persons on Tuesday, March 11th at 9:00 a.m. (MST) (11:00 a.m. EST) to discuss Lightstream's fourth quarter and year-end financial and operating results.

The investor conference call details are as follows

Live call dial-in numbers: 1-416-340-8530 / 1-800-766-6630
Replay dial-in numbers: 1-905-694-9451 / 1-800-408-3053
Passcode: 5694926


We are pleased to announce that we have recently released a software application (an "App") that can be used with Apple and Android products to have ready access to investor information about Lightstream Resources Ltd. The App gives shareholders and all other interested parties access to a calendar of investor related events, webcast presentations, press releases, the latest copy of our corporate presentation, financial reports and dividend information. The App is available for download from the App Store or Google Play and can be found by searching "Lightstream Resources Ltd".


Three months ended
December 31,
Years ended
December 31,
2013 2012 % Change 2013 2012 % Change
Financial ($000s, except where noted)
Oil and natural gas sales 287,727 296,584 (3) 1,250,491 1,104,983 13
Funds flow from operations(1) 146,017 168,342 (13) 670,928 597,096 12
Per share - basic ($)(1)(2) 0.73 0.88 (17) 3.43 3.17 8
- diluted ($)(1)(2)(3) 0.72 0.88 (18) 3.38 3.17 6
Adjusted Net Income (loss)(1)(4) (45,598) 106,951 - (42,608) 262,718 -
Per share - basic ($)(1)(2) (0.23) 0.56 - (0.22) 1.39 -
- diluted ($)(1)(2) (0.23) 0.55 - (0.22) 1.37 -
Dividends(1)(5) 40,320 45,958 (12) 182,536 182,070 -
Per share ($)(1)(5) 0.20 0.24 (17) 0.91 0.96 (5)
Payout ratio(1)(5) 28% 27% - 27% 30% -
Cash dividends(1)(5) 33,983 18,045 88 133,815 77,546 73
Cash dividend payout ratio(1)(5) 23% 11% - 20% 13% -
Net capital expenditures(1) 154,487 368,973 (58) 719,101 320,383 124
Total debt(1)(6) 2,274,122 2,013,714 13
Basic common shares, end of period (000) 199,774 192,452 4
Operating netback
($/boe except where noted)(1)(7)
Oil, NGL and natural gas revenue(8) 68.29 67.88 1 73.35 70.17 5
Royalties 10.11 8.92 13 10.16 9.89 3
Production expenses 12.75 11.36 12 13.19 12.39 6
Operating netback 45.43 47.60 (5) 50.00 47.89 4
Average daily production (boe/d)
Oil and NGL (bbl/d) 36,421 39,466 (8) 37,443 35,923 4
Natural gas (mcf/d) 54,600 46,354 18 53,969 41,163 31
Total (boe/d)(7) 45,521 47,192 (4) 46,438 42,784 9
(1) Non-GAAP measure. See "Non-GAAP Measures" section within the 2013 Management's Discussion and Analysis.
(2) 2012 balance calculated using shares outstanding of Lightstream Resources Ltd. prior to the reorganization in December 2012.
(3) Consists of common shares, stock options, deferred common shares, incentive shares and convertible debentures as at the period end date.
(4) Adjusted net income is calculated using net income from continuing operations and adding back non-controlling interest and impairments, and adding back the loss or deducting the gain on settlement of convertible debentures and derivative liabilities.
(5) 2012 balance represents dividends paid out by Lightstream Resources Ltd. prior to the reorganization in December 2012. Petrobank Energy and Resources Ltd., which amalgamated with Lightstream Resources Ltd. pursuant to the Reorganization, did not pay out any dividends in the year ending December 31, 2012. See "Reorganization" in the December 31, 2013 year-end report.
(6) Total debt is calculated as bank debt outstanding plus accounts payable less accounts receivable and prepaid expense plus the full value outstanding on the senior unsecured notes and convertible debentures converted to Canadian dollars at the exchange rate on the period end date less long-term investments.
(7) Six Mcf of natural gas is equivalent to one barrel of oil equivalent ("boe").
(8) Net of transportation expenses.

Lightstream Resources Ltd. is an oil and gas exploration and production company combining light oil Bakken and Cardium resource plays with conventional light oil assets, delivering industry leading operating netbacks, strong cash flows and production growth. Lightstream is applying leading edge technology to a multi-year inventory of Bakken and Cardium light oil development locations, along with other emerging resource play opportunities. Our strategy is to deliver accretive production and reserves growth, along with an attractive dividend yield.

Forward-Looking Statements. Certain information provided in this press release constitutes forward-looking statements. Specifically, this press release contains forward-looking statements relating to financial results, results from operations, future production rates, proposed exploration and development activities (including the number of wells to be drilled, completed and put on production), our drilling prospect inventory, projected capital expenditures, the timing of certain projects, future finding and development costs, the anticipated completion of asset dispositions, and future dividend payments. The forward-looking statements are based on certain key expectations and assumptions, including expectations and assumptions concerning the success of future drilling, completion, recompletion and development activities, the performance of new and existing wells, prevailing commodity prices and economic conditions, the market for asset dispositions and the ability of counterparties to close on dispositions, the availability and cost of labour and services, timing of pipeline and facilities construction, access to third party facilities and weather and access to drilling locations. Although we believe 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 we 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, reliance on industry partners, risks that asset dispositions cannot be completed, availability of equipment and personnel, uncertainty surrounding timing for drilling and completion activities resulting from weather and other factors, changes in applicable regulatory regimes and health, safety and environmental risks), commodity price and exchange rate fluctuations and general economic conditions. Certain of these risks are set out in more detail in our Annual Information Form which has been filed on SEDAR and can be accessed at Except as may be required by applicable securities laws, Lightstream assumes no obligation to publicly update or revise any forward-looking statements made herein or otherwise, whether as a result of new information, future events or otherwise.

BOEs. Natural gas volumes have been converted to barrels of oil equivalent ("boe"). Six thousand cubic feet ("Mcf") of natural gas is equal to one barrel of oil equivalent based on an energy equivalency conversion method primarily attributable at the burner tip and does not represent a value equivalency at the wellhead. Boes may be misleading, especially if used in isolation.

Well Counts. All references to well counts are on a net basis.

Contact Information

  • Lightstream Resources Ltd.
    John D. Wright
    President and Chief Executive Officer

    Lightstream Resources Ltd.
    Peter D. Scott
    Senior Vice President and Chief Financial Officer

    Lightstream Resources Ltd.
    William A. Kanters
    Vice President, Capital Markets
    403.218.6075 (FAX)