Lightstream Resources Ltd.
TSX : LTS

Lightstream Resources Ltd.

February 20, 2015 06:00 ET

Lightstream Announces 2014 Reserves and Operations Update

CALGARY, ALBERTA--(Marketwired - Feb. 20, 2015) - Lightstream Resources Ltd. ("Lightstream" or the "Company") (TSX:LTS) announces 2014 year-end reserves and updated operations information. The Company's annual audit of our consolidated financial statements is not yet complete and accordingly all financial and production amounts herein are management's estimates which are unaudited and subject to change.

HIGHLIGHTS

  • January 2015 average production was approximately 36,400 boepd (76% light oil and liquids weighted).

  • We anticipate drilling 14 net wells in the first half of 2015, with capital expenditures expected to be approximately $75 million, $20 million lower than our earlier forecast.

  • 1H 2015 funds flow from operations expected to exceed capital expenditures by up to $20 million (assuming US$50/bbl for WTI oil) with surplus cash being applied to debt.

  • 2014 capital expenditures (unaudited and before asset acquisitions and divestitures ("A&D")) were $472 million, slightly below 2014 guidance estimates and 34% lower than 2013 levels.

  • Our year-end reserves evaluation resulted in 2P reserves of 161.2 MMboe (78% light-oil and liquids weighted) which have a net present value (before tax, discounted at 10%) of $3.2 billion as at December 31, 2014.

  • 2014 activity resulted in total proved plus probable ("2P") reserves additions of 15.1 MMboe, replacing 103% of 2014 production before asset dispositions and net negative economic and technical revisions.

  • 2014 disposition activity (net of acquisitions) resulted in the sale of 20.9 MMboe of 2P reserves for gross proceeds of $729 million.

  • We recorded net negative economic and technical revisions of 18.5 MMboe of 2P reserves largely concentrated on probable reserves in our Cardium business unit.

  • 2014 2P finding & development ("F&D") cost excluding revisions is $25.67/boe. Five year F&D cost is $34.35/boe for our 2P reserves including net technical revisions and future development costs ("FDC").

OPERATIONS UPDATE

In 2014, our capital spending program for the year (before A&D) was $472 million (unaudited), slightly below our guidance estimate and 34 percent lower than 2013 capital spending. As previously announced, average production for 2014 after total dispositions of 6,315 boepd, was 40,400 boepd, which was in line with our guidance estimate.

First half 2015 capital spending is expected to be approximately $75 million, down from our previous estimate of $95 million, and anticipated to be well below funds flow from operations if WTI oil averages US$50/bbl. The cut in spending relative to previous estimates reflects a further reduction in our drilling budget in recognition of continued low commodity prices. We are currently expecting to drill 14 wells in the first half of 2015, 7 in the Bakken and 7 in the Cardium, and have these wells, along with the 13 wells in inventory at December 31, 2014, on production by the end of Q2 2015. We will continue to review our capital plans and adjust spending further, if necessary, in order to preserve our balance sheet and long term asset value until we are in a more positive economic environment with higher commodity prices and/or lower capital costs.

RESERVES

Sproule Associates Limited ("Sproule") has completed their evaluation of Lightstream's reserves, effective December 31, 2014 ("Sproule Evaluation").

Unless otherwise noted, all reserves herein are "Company Interest" reserves, which represent the Company's working interest and royalty interest share of reserves, before deduction of the Company's royalty obligations. All values in this press release are based on Sproule's forecast prices and estimates of future operating and capital costs at December 31, 2014.

Year-end 2014 2P reserves were 161.2 MMboe, after 20.9 MMboe of non-core asset dispositions, 14.7 MMboe of production, the addition of 15.1 MMboe as a result of capital investment, and 18.5 MMboe in negative economic and technical revisions. Sproule's net present value of our 2P reserves, discounted at 10%, is $3.2 billion before tax, based on their December 31, 2014 price forecast.

During 2014, our capital program resulted in the addition of 15.1 MMboe of 2P reserves. With a total of 14.7 MMboe of reserves produced during the year, this resulted in our 2014 capital program replacing 103% of 2014 production. Based on capital spending of $472 million, 2P F&D costs were $25.67/boe for 2014, prior to net economic and technical revisions*.

* 2P F&D (including FDC) prior to revisions is calculated using $472 million 2014 capital less $85 million of net 2P FDC changes, divided by 2P production additions of 15.1 MMboe.

We executed a successful divestiture program in 2014 comprised of non-core conventional assets, including our Conventional business unit in southeast Saskatchewan. The impact (after minor acquisitions) was a reduction of 20.9 MMboe 2P reserves with net proceeds of $712 million resulting in 2P reserves being sold for $38.40/boe, including FDC of $89 million.

For the year ended December 31, 2014, we realized net economic and technical revisions that resulted in 2P reserves being reduced by 18.5 MMboe. The majority of these revisions were probable reserves in our Cardium business unit. Revisions were driven by additional area production history which necessitated the reduction in probable ultimate reserves assignments.

Including all of our capital expenditures and reserve revisions, our three-year weighted average F&D cost is $43.93/boe, generating an operating recycle ratio of 1.1 times, based on a $49.07/boe operating netback. This F&D performance metric does not meet our corporate target and has been materially impacted by negative revisions. However, over the past 5 years we have added 127.7 MMboe of 2P reserves with F&D costs of $34.35/boe, generating an operating recycle ratio of 1.5 times and replacing production by 165%.

2P reserves in our Cardium business unit decreased from 95.4 MMboe in 2013 to 79.0 MMboe in 2014 due to economic and technical revisions and production, partially offset by 5.8 MMboe of 2P additions. We generated a recycle ratio of 1.9 times based on our operating netback for the business unit of $47.19/boe and F&D costs of $25.57/boe*, prior to revision. Our 5 year 2P F&D cost is $26.18/boe (including revisions) with a recycle ratio of 1.8 times.

2P reserves in our Bakken business unit were down slightly over 2013, resulting in 2014 2P reserves of 69.4 MMboe. Total 2P additions of 5.4 MMboe reflected our modest but successful Mississippian and Bakken drilling program in 2014. Our five year 2P F&D cost is $45.13/boe (including revisions) generating an operating recycle ratio of 1.2 times. In 2014, 2P F&D improved to $28.03/boe (including revisions), which is more in line with our corporate targets. In 2015, we anticipate EOR related reserves to increase due to new injectors being added at Creelman early this year.

2014 2P reserves in our AB/BC business unit were 12.5 MMboe, down 0.8 MMboe after 3.3 MMboe of production and dispositions. We added 3.9 MMboe in 2P reserves from our drilling program in Swan Hills. 2P F&D (including FDC) was $40.41/boe prior to revisions**. We recorded negative 2P revisions in this business unit of 1.5 MMboe, which are primarily associated with economic factors on legacy shallow gas assets.

* 2P F&D (including FDC) prior to revisions is calculated using total capital of $237 million less $88 million of net 2P FDC changes, divided by 2P production additions of 5.8 MMboe.

** 2P F&D (including FDC) prior to revisions is calculated using total capital of $95 million plus $63 million of net 2P FDC changes, divided by 2P production additions of 3.9MMboe.

Reserves
Forecast Prices(1)
As at December 31, 2014

Company Gross(2)
Royalty
Interests
(3)
Company
Interest
(4)
Total Oil
(Mbbl)
NGL
(Mbbl)
Natural Gas
(MMcf)
Sub-total
(Mboe)
Sub-total
(Mboe)
Total
(Mboe)
Proved Developed Producing 45,076 5,863 95,901 66,923 325 67,248
Total Proved 70,448 8,787 142,048 102,910 332 103,242
Proved + Probable (2P) 112,949 13,073 208,322 160,742 480 161,222
Net Present Value - Before Tax ($ millions)(5)(6)
Forecast Prices(1)
As at December 31, 2014
0% 5% 10%
Proved Developed Producing $2,595 $2,028 $1,667
Total Proved 3,573 2,626 2,045
Proved + Probable (2P) $6,081 $4,215 $3,150
Net Present Value - After Tax ($ millions)(5)(6)
Forecast Prices(1)
As at December 31, 2014
0% 5% 10%
Proved Developed Producing $1,914 $1,497 $1,231
Total Proved 2,635 1,915 1,474
Proved + Probable (2P) $4,483 $3,071 $2,265
Company Interest Reserve Reconciliation (Mboe)(4)
Forecast Prices(1)
As at December 31, 2014
Developed
Producing
Total
Proved
Proved+
Probable
Lightstream reserves at December 31, 2013 79,422 124,973 200,217
2014 production (14,753 ) (14,753 ) (14,753 )
Net dispositions (9,864 ) (13,271 ) (20,865 )
Net additions and revisions 12,443 6,293 (3,377 )
Lightstream reserves at December 31, 2014 67,248 103,242 161,222
Lightstream year-over-year increase in reserves (7) (8) (15 %) (17 %) (19 %)
Lightstream production replacement before revisions (7) (8) (9) 84 % 43 % (23 %)
Lightstream production replacement excluding revisions (8) (9) 80 % 67 % 103 %
Notes:
(1) Based on the Sproule price forecast effective December 31, 2014.
(2) Company Gross reserves, which represent the Company's working interest share of reserves excluding the Company's royalty interests in reserves and before deduction of royalty obligations.
(3) Royalty interest reserves owned by the Company.
(4) "Company Interest" reserves, which represent the Company's working interest share of reserves including the Company's royalty interests in reserves and before deduction of the Company's royalty obligations.
(5) Company working interest reserves value plus royalties received less royalties and burdens.
(6) Estimated values of future net revenue disclosed in this press release do not represent fair market values.
(7) Represents total reserve additions, including revisions and before dispositions, as a percentage of 2014 production.
(8) The disclosures required in accordance with National Instrument 51-101 of the Canadian Securities Administrators will be available in the Company's Annual Information Form to be filed on the SEDAR website at http://www.sedar.com/ prior to March 31, 2015.
(9) Includes transfers and additions.
F&D and FD&A Costs(1)
For the year ended December 31, 2014
F&D
Acquisitions &
Dispositions(2)
FD&A(3)
Capital expenditures (unaudited-$000s)
Capital expenditures 471,821 - 471,821
Net Acquisition/Disposition(2) receipts - (712,456)(5 ) (712,456 )
Total capital 471,821 (712,456 ) (240,635 )
Change in FDC ($000s)
Total Proved (150,690 ) (54,570 ) (205,260 )
Proved + Probable (2P) (179,850 ) (88,691 ) (268,541 )
Total costs ($000s)
Total Proved 321,131 (767,026 ) (445,895 )
Proved + Probable (2P) 291,971 (801,147 ) (509,176 )
Net reserve additions (mboe)
Total Proved 6,293 (13,271 ) (6,978 )
Proved + Probable (2P) (3,377 ) (20,865 ) (24,242 )
F&D and FD&A costs ($/boe)
Total Proved 51.03 57.80 63.90
Proved + Probable (2P) NMF (6 ) 38.40 21.00
For the year-ended Dec. 31, 2013
F&D and FD&A costs ($/boe)
Total Proved 55.23 18.28 60.56
Proved + Probable (2P) 57.63 23.68 65.55

F&D
Acquisitions &
Dispositions(2)
FD&A(3)
For the 3 years-ended Dec. 31, 2014(4)
F&D and FD&A costs ($/boe)
Total Proved 35.59 58.37 16.42
Proved + Probable (2P) 43.93 39.60 77.92
For the 5 years-ended Dec. 31, 2014(4)(7)
F&D and FD&A costs ($/boe)
Total Proved 37.25 41.03 36.37
Proved + Probable (2P) 34.35 26.85 37.11
Notes:
(1) The aggregate of the exploration and development costs incurred in the most recent financial year and the change during that year in estimated future development costs generally will not reflect total finding and development costs related to reserve additions for that year.
(2) Net A&D represents effective net sales price received from dispositions plus the net cost of acquisitions.
(3) The Company uses FD&A as a measure of the efficiency of its overall capital program including the effect of A&D.
(4) 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.
(5) Reflects gross proceeds of $729 million adjusted for customary closing adjustments and asset acquisition expenditures.
(6) Non meaningful due to negative net reserve additions for 2014.
(7) 5 year F&D and FD&A figures include capital, change in future development costs, reserves added and net revisions from 2010-2014. For corporate acquisitions completed in 2010, costs allocated to goodwill have been excluded from the FD&A results. Due to the magnitude of 2P revisions in 2014, the 5-year average is disclosed to illustrate long-term corporate reserve performance.

2014 Fourth Quarter and Year-End Financial Results and Conference Call

Lightstream will be releasing our audited 2014 fourth quarter and year-end financial results before markets open on March 6, 2015. Management will also be hosting a conference call for investors, financial analysts, media and any interested persons on March 6, 2015, at 9:00 a.m. (Mountain Time) (11:00 a.m. Eastern Time) to discuss Lightstream's 2014 fourth quarter and annual financial and operating results.

The investor conference call details are as follows:

Live call dial-in numbers: 1-416-340-2216 / 1-800-355-4959
Replay dial-in numbers: 1-905-694-9451 / 1-800-408-3053
Passcode: 8559370

http://www.gowebcasting.com/6160

Lightstream Resources Ltd. is an oil and gas exploration and production company focused on light oil in the Bakken and Cardium resource plays. We are committed to delivering industry leading operating netbacks, strong cash flows and consistent operating results through leading edge technology applied to a multi-year inventory of existing and emerging resource play opportunities. Our long-term strategy is to efficiently develop our assets and deliver an attractive dividend yield.

Non-GAAP Measures. This press release contains financial terms that are not considered measures under IFRS, such as funds flow from operations, operating netback and net capital expenditures. These measures are commonly utilized in the oil and gas industry and are considered informative for management and stakeholders. Specifically, funds flow from operations reflects cash generated from operating activities before changes in non- cash working capital. Management considers funds flow from operations, important as it helps evaluate performance and demonstrate the ability to generate sufficient cash to fund future growth opportunities, pay dividends and repay debt. Profitability relative to commodity prices per unit of production is demonstrated by an operating netback. Operating netback reflects revenues less royalties, transportation costs, and production expenses divided by production for the period. Net capital expenditures represent capital expenditures, including exploration and evaluation expenditures, less proceeds from asset dispositions. Funds flow from operations, operating netbacks, and net capital expenditures may not be comparable to those reported by other companies nor should they be viewed as an alternative to cash flow from operations or other measures of financial performance calculated in accordance with IFRS. Further information in respect of these non-GAAP measures is set forth in our MD&A.

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, plans and objectives; our capital budget for 2015; 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, and the sufficiency of our financial resources to fund our operations. 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 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 commodity price and exchange rate fluctuations, 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, 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)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 www.sedar.com. 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
    403.268.7800

    Lightstream Resources Ltd.
    Peter D. Scott
    Senior Vice President and Chief Financial Officer
    403.268.7800

    Lightstream Resources Ltd.
    Annie C. Belecki
    General Counsel
    403.268.7800

    Lightstream Resources Ltd.
    403.268.7800
    403.218.6075 (FAX)
    ir@lightstreamres.com
    www.lightstreamresources.com