Lightstream Resources Ltd.
TSX : LTS

Lightstream Resources Ltd.

August 05, 2015 21:57 ET

Lightstream Announces Second Quarter Production of 31,966 Boepd, Funds Flow from Operations of $67 Million and Guidance Update

CALGARY, ALBERTA--(Marketwired - Aug. 5, 2015) - Lightstream Resources Ltd. (the "Company" or "Lightstream") (TSX:LTS) announces our second quarter financial and operating results.

SECOND QUARTER FINANCIAL & OPERATING HIGHLIGHTS

  • Second quarter production averaged 31,966 barrels of oil equivalent per day ("boepd") (72% light oil and liquids), a 9% decrease from first quarter 2015 production due to a reduced capital program, higher downtime associated with third party facility maintenance and spring breakup.
  • Funds flow from operations for the quarter was $67 million ($0.34 per basic share), representing a 29% increase from first quarter 2015 as a result of higher commodity prices during the quarter. Funds flow for the first half of 2015 was $119 million based on an average WTI price of US$53.29/bbl.
  • Our operating netback for the second quarter was $29.18/boe, a 40% increase from the first quarter of 2015. Including commodity hedge proceeds, our netback was $35.87/boe for the quarter.
  • We continue to achieve operating cost savings on a total and per unit basis. Q2 2015 production costs of $12.89/boe were 10% below Q2 2014 costs of $14.31/boe.
  • Capital expenditures of $20 million (before acquisitions and dispositions ("A&D")) in second quarter 2015 were 67% lower than first quarter 2015, consistent with our reduced capital program and our commitment to spend within cash flow in 2015.
  • We are increasing the mid-point of our 2015 funds flow from operations guidance by 19% to $185 million, which incorporates our strong first half results and a lower WTI price assumption for the second half of the year.
  • Subsequent to June 30, 2015, we issued US$650 million in second lien notes ("Secured Notes"). US$450 million of the Secured Notes were issued in exchange for US$546 million of senior unsecured notes, which were cancelled. A further US$200 million of Secured Notes were issued for cash proceeds, which we used to reduce the outstanding borrowing under our secured revolving credit facility. The Secured Notes bear interest at 9.875% per annum and mature June 15, 2019. As a result, we have reduced our overall debt by approximately $125 million and increased our credit capacity by approximately $250 million.
  • We continue to expect to generate funds flow well above our capital spending in 2015 and based on the mid-point of our guidance, we expect excess net cash of $75 million to be applied to reduce our debt.

SUMMARY OF RESULTS

Three months ended
June 30,
Six months ended
June 30,
2015 2014 2015 2014
Oil and natural gas sales 136,265 326,552 257,396 651,786
Funds flow from operations (1) 66,966 177,034 118,894 352,004
Per share - basic ($)(1) 0.34 0.88 0.60 1.76
Adjusted Net income (loss)(1) (51,533 ) 68,202 (178,695 ) 82,601
Per share - basic ($)(1) (0.26 ) 0.34 (0.90 ) 0.41
Net Capital Expenditures(1) 18,324 (77,174 ) 67,255 8,429
Total debt (1) 1,668,123 1,985,342
Dividends per share ($) - 0.12 - 0.24
Common Shares, end of period (000) (2) 197,565 200,150
Operating netback ($/boe) (1) (3) (4) 29.18 57.49 24.85 56.81
Average daily production (boe) (3) 31,966 42,513 33,563 43,232
(1) Non-GAAP measure. See "Non-GAAP Measures" section.
(2) Denotes basic common shares outstanding.
(3) Six Mcf (thousand cubic feet) of natural gas is equivalent to one barrel of oil equivalent ("boe").
(4) Net of transportation expenses.

OPERATING RESULTS

Our second quarter average production of 31,966 boepd (72% light oil and liquids) was 25% below second quarter 2014 average production primarily due to our material dispositions of assets in 2014, representing 6,315 boepd of production, combined with the reduction in our 2015 capital program. These results are in line with our expectations and we anticipate production levels to continue to decrease over the remainder of the year as we restrict the amount of capital being invested into new operated wells, given the current low price commodity environment.

AVERAGE DAILY PRODUCTION

Three months ended
June 30, 2015
Six months ended
June 30, 2015
Business Unit Oil &NGL (bbl/d) Gas
(Mcf/d)
Total
(boe/d)
Oil &NGL (bbl/d) Gas
(Mcf/d)
Total
(boe/d)
Cardium 10,439 42,094 17,455 10,883 40,045 17,557
Bakken 10,850 5,218 11,720 11,797 5,775 12,760
Alberta/BC 1,777 6,087 2,791 2,146 6,599 3,246
23,066 53,399 31,966 24,826 52,419 33,563

Production expenses decreased from $14.31/boe in Q2 2014 to $12.89/boe in the second quarter 2015, and were essentially unchanged from Q1 2015 production expenses of $12.48/boe. This decrease from 2014 is attributable to lower costs related to repairs and maintenance, trucking, power and chemicals, in addition to the disposition of relatively higher cost production in our southeast Saskatchewan Conventional business unit in the third quarter of 2014. On a total basis, production expenses decreased by 32% versus the second quarter of 2014, primarily due to lower variable production costs associated with decreased production levels.

With a reduced capital expenditure program, we drilled 15 net wells in the first six months of 2015 compared to 47 wells during the same period last year. We largely completed our 2015 drilling program in the first quarter of the year, including two net high impact Falher gas wells. Given the encouraging results to date from this play, we are planning to drill another operated Falher well during the second half of 2015 to efficiently utilize our existing gas infrastructure. Capital spending for the quarter was focused on drilling one net non-operated well in the Bakken, bringing on-stream six of the seven net wells that were in inventory at the end of Q1 2015 and facilities spending in our core areas. The remaining two net wells are scheduled to be brought on-stream in the third quarter of the year.

DRILLING ACTIVITY

Q2 2015

Drilled Completed On Production Inventory(1)
Business Unit Gross Net Gross Net Gross Net Gross Net
Cardium - - 5 5 5 5 1 -
Bakken 5 1 2 - 2 1 6 2
Alberta/BC - - - - - - - -
Total 5 1 7 5 7 6 7 2
(1) Inventory refers to the number of wells pending completion and/or tie-in at June 30, 2015.

FINANCIAL RESULTS AND LIQUIDITY

Second quarter 2015 production of 31,966 boepd and an operating netback of $29.18/boe resulted in funds flow from operations of $67 million ($0.34 per basic share), a 29% increase over the first quarter of 2015, largely due to higher commodity prices. As a result of our hedging program, Lightstream realized further gains of approximately $20 million ($6.69/boe) on crude oil contracts during the second quarter of 2015. We have added additional oil hedges over the remainder of the year as well as new 2016 natural gas hedges to provide greater certainty over future cash flows. We continue to monitor the futures market to optimize our hedge portfolio.

Our adjusted net loss for the second quarter was $52 million (-$0.26 per basic share) compared to our first quarter net loss of $127 million. This net loss is attributable to lower realized prices, lower sales volumes and a larger non-cash foreign exchange loss, partially offset by lower royalties, lower production expenses, and a larger gain on risk management contracts when compared to Q2 2014.

Capital spending of $20 million was significantly lower during the second quarter compared to the first quarter of 2015. First half spending of $80 million represents over 70% of our anticipated spending for the year and was funded entirely through funds flow from operations.

Subsequent to June 30, 2015, we issued US$650 million in Secured Notes. US$450 million of the Secured Notes were issued in exchange for US$546 million of senior unsecured notes, which were cancelled. A further US$200 million of Secured Notes were issued for cash proceeds, which we used to reduce the outstanding borrowing under our secured revolving credit facility. The Secured Notes bear interest at 9.875% per annum and mature June 15, 2019. As a result, we have reduced our overall debt by approximately $125 million. The transaction also significantly increases our credit capacity, providing financial flexibility to help withstand the current low-price commodity environment and giving us optionality to accelerate our drilling program should current economic conditions improve.

2015 GUIDANCE

($000s, except where noted and per share amounts) 2015 Revised Guidance
(August 5, 2015)
Previous Guidance
(March 6, 2015)
Production (annual average)
Total (boe/d) 30,500 - 32,500 30,500 - 32,500
Natural Gas Weighting 27% 26%
Exit Production (boe/d) 26,500 - 28,500 26,500 - 28,500
EBITDA $295,000 - $315,000 $255,000 - $275,000
Funds Flow from Operations(2) $175,000 - $195,000 $145,000 - $165,000
Funds Flow per share(2) (3) $0.89 - $0.99 $0.74 - $0.84
Declared Dividends per share $0.00 $0.00
Capital Expenditures(2) $100,000 - $120,000 $100,000 - $120,000
Pricing Assumptions:
Crude oil - WTI (US$/bbl) 50.00 52.50
Crude oil - WTI (Cdn$/bbl) 64.94 65.63
Corporate oil differential (%) 15 15
Natural gas - AECO (Cdn$/mcf) 3.00 3.00
Exchange rate (Cdn$/ US$) 0.77 0.80

We are updating our 2015 guidance to reflect higher funds flow from operations achieved during the first half of the year. We have also made minor changes to our pricing forecast, including reducing our second half 2015 WTI price assumption to US$50/bbl. We now expect funds flow from operations of $185 million (mid-point of guidance), an increase of 19%, generating surplus cash of approximately $75 million, which we will apply to reduce our net debt.

INVESTOR CONFERENCE CALL

Lightstream management will be hosting a conference call for investors, financial analysts, media and any interested persons on August 6, 2015, at 9:00 a.m. (Mountain Time) (11:00 a.m. Eastern Time) to discuss Lightstream's 2015 second quarter 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/6220

FINANCIAL & OPERATING TABLES

Three months ended
June 30,
Six Months ended
June 30,
2015 2014 % Change 2015 2014 % Change
Financial ($000s, except where noted)
Oil and natural gas sales 136,265 326,552 (58 ) 257,396 651,786 (61 )
Funds flow from operations (1) 66,966 177,034 (62 ) 118,894 352,004 (66 )
Per share - basic ($)(1) 0.34 0.88 (61 ) 0.60 1.76 (66 )
- diluted ($)(1) (2) 0.34 0.87 (61 ) 0.60 1.73 (66 )
Adjusted Net Income (loss)(1) (51,533 ) 68,202 (176 ) (178,695 ) 82,601 (316 )
Per share - basic ($)(1) (0.26 ) 0.34 (176 ) (0.90 ) 0.41 (320 )
- diluted ($)(1) (2) (0.26 ) 0.34 (176 ) (0.90 ) 0.41 (320 )
Dividends(1) - 24,351 (100 ) - 48,649 (100 )
Per share ($)(1) - 0.12 (100 ) - 0.24 (100 )
Capital Expenditures 20,175 61,249 (67 ) 80,429 260,532 (69 )
Net capital expenditures(1) 18,324 (77,174 ) (124 ) 67,255 8,429 698
Total debt(1) (3) 1,668,123 1,985,342 (16 )
Basic common shares, end of period (000) 197,565 200,150 (1 )
Operations
Operating netback($/boe except where noted) (1)(4)
Oil, NGL and natural gas revenue (5) 46.54 83.92 (45 ) 42.07 82.84 (49 )
Royalties 4.47 12.12 (63 ) 4.54 11.93 (62 )
Production expenses 12.89 14.31 (10 ) 12.68 14.10 (10 )
Operating netback 29.18 57.49 (49 ) 24.85 56.81 (56 )
Average daily production (boe/d)
Oil and NGL (bbl/d) 23,066 34,128 (32 ) 24,827 34,665 (28 )
Natural gas (mcf/d) 53,399 50,309 6 52,419 51,400 2
Total (boe/d) (4) 31,966 42,513 (25 ) 33,563 43,232 (22 )
(1) Non-GAAP measure. See "Non-GAAP Measures" section within this document.
(2) Consists of common shares, stock options, deferred common shares, incentive shares and convertible debentures as at the period end date.
(3) Prior to asset acquisitions and dispositions.
(4) Total debt is calculated as secured credit facility outstanding plus accounts payable less accounts receivable, prepaid expense and long-term investments 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.
(5) Six Mcf of natural gas is equivalent to one barrel of oil equivalent ("boe").
(6) Net of transportation expenses.

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.

Forward Looking Statements. Certain information provided in this press release constitutes forward-looking statements. Specifically, this press release contains forward-looking statements relating to, but not limited to Lightstream's guidance for 2015, planned capital spending, proposed exploration and development activities (including the number of wells to be drilled, completed and put on production); sources of capital; our liquidity position; expectation that funds flow will exceed capital expenditures in 2015; and a number of other matters.

The forward-looking statements are based upon certain material factors and expectations and assumptions of Lightstream including, without limitation: that Lightstream will continue to conduct its operations in a manner consistent with past operations; the general continuance of current industry conditions; the continuance of existing (and in certain circumstances, the implementation of proposed) tax, royalty and regulatory regimes, the accuracy of the estimates of Lightstream's reserves and resource volumes; certain commodity price and other cost assumptions; and the continued availability of adequate financing and cash flow to fund its planned expenditures. Although Lightstream believes the material factors, expectations and assumptions on which the forward-looking statements are based are reasonable, no assurance can be given that these factors, expectations and assumptions will prove to be correct.

The forward-looking statements in this press release are not guarantees of future performance and should not be unduly relied upon. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements including, but not limited to: changes in commodity prices and exchange rates; general conditions in the oil and gas industry; operational risks in development, exploration and production; unanticipated operating results or production declines; delays or changes in exploration or development plans; the uncertainty of oil and gas reserve estimates; increase in costs; reliance on industry partners; availability of equipment and personnel; changes in tax or environmental laws, royalty rates or other regulatory matters; increased debt levels or debt service requirements; limited, unfavorable or lack of access to capital markets; a lack of adequate insurance coverage; and the impact of competition. 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
    403.218.6075 (FAX)

    Lightstream Resources Ltd
    Peter D. Scott
    Senior Vice President and Chief Financial Officer
    403.268.7800
    403.218.6075 (FAX)

    Lightstream Resources Ltd.
    Annie C. Belecki
    General Counsel
    403.268.7800
    403.218.6075 (FAX)
    ir@lightstreamres.com
    www.lightstreamresources.com