Lightstream Resources Ltd.
TSX : LTS

Lightstream Resources Ltd.

November 02, 2015 20:00 ET

Lightstream Announces Third Quarter Production of 30,255 boepd and Funds Flow From Operations of $45 Million

CALGARY, ALBERTA--(Marketwired - Nov. 2, 2015) - Lightstream Resources Ltd. (the "Company" or "Lightstream") (TSX:LTS) announces our third quarter financial and operating results.

THIRD QUARTER FINANCIAL & OPERATING HIGHLIGHTS

  • Third quarter 2015 production averaged 30,255 boepd (71% light oil and liquids weighted), a 5% decrease from second quarter 2015 production due to a reduced capital program and third-party facility restrictions. Average production for the first nine months of 2015 was 32,448 boepd, which is in line with expectations and on track for meeting our annual average and exit production guidance.
  • Funds flow from operations for the quarter was $45 million ($0.23 per basic share), representing a 33% decrease from the second quarter of 2015, primarily due to lower commodity prices and decreased production. Funds flow for the first nine months of 2015 was $164 million, in line with guidance estimates.
  • We are re-iterating our annual guidance and expect funds flow from operations to be at the upper end of our $175 to $195 million range.
  • Our operating netback for the third quarter was $22.14/boe, a 24% decrease from the second quarter of 2015, primarily due to lower realized oil prices. Including commodity hedge proceeds of $25 million, our netback was $30.94/boe for the quarter.
  • We recognized a non-cash impairment charge to property, plant and equipment assets of $535 million, due to lower estimated future commodity prices from our external reserve evaluator.
  • Capital expenditures before acquisitions and dispositions totalled $14 million in third quarter 2015, a 30% decrease from the second quarter 2015, resulting in 2 wells drilled, 2 wells brought on production and 2 wells in inventory at the end of the quarter.
  • During the quarter, we issued a total of US$650 million in 9.875% second lien notes due in 2019 ("Secured Notes"). US$450 million of the Secured Notes were issued in exchange for US$546 million of 8.625% unsecured notes due in 2020 ("Unsecured Notes"), which were cancelled, and we recognized a net gain of $103 million on the transactions. A further US$200 million of Secured Notes were issued for cash proceeds, which were applied to reduce the amount outstanding under our secured termed credit facility ("Credit Facility").
  • Year-to-date, we have reduced our total debt by $125 million through the debt exchanges and by a further $69 million as funds flow from operations exceeded capital spending.
  • At quarter end, we had $354 million drawn on our $750 million Credit Facility. The Credit Facility provides lenders with a semi-annual borrowing base re-determination, the first of which is expected to be completed in November 2015.

SUMMARY OF RESULTS

Three months ended
September 30,
Nine months ended
September 30,
2015 2014 2015 2014
Oil and natural gas sales 108,759 269,177 366,155 920,963
Funds flow from operations (1) 44,646 130,950 163,540 482,954
Per share - basic ($)(1) 0.23 0.65 0.83 2.41
Adjusted Net income (loss)(1) 6,621 6,935 (172,074) 89,536
Per share - basic ($)(1) 0.03 0.03 (0.87) 0.45
Net Capital Expenditures(1) 14,437 (372,259) 81,692 (363,830)
Total debt (1)(5) 1,603,610 1,557,817
Dividends per share ($) - 0.12 - 0.36
Common Shares, end of period (000) (2) 197,984 200,466
Operating netback ($/boe) (1)(3) (4) 22.14 48.67 24.01 54.24
Average daily production (boe) (3) 30,255 38,837 32,448 41,750
  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.
  5. US dollar denominated debt has been translated to Canadian dollars using the period end exchange rate of 0.75 at September 30, 2015 (September 30, 2014 - 0.89).

OPERATING RESULTS

Our third quarter average production of 30,255 boepd (71% light oil and liquids) was comprised of 16,089 boepd from our Cardium business unit, 11,173 boepd from our Bakken business unit in southeast Saskatchewan and 2,993 boepd from our AB/BC business unit. The 5% decrease in production compared to the previous quarter was due to the impact of our reduced drilling program and third party facility restrictions. Production for the first nine months of the year was 32,448 boepd, in line with our expectations. Although we continue to restrict the amount of capital invested into new operated wells, we expect to remain within our guidance range for annual average production and exit production rate.

AVERAGE DAILY PRODUCTION

Three months ended
September 30, 2015
Nine months ended
September 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 9,202 41,324 16,089 10,316 40,477 17,062
Bakken 10,292 5,283 11,173 11,290 5,608 12,225
Alberta/BC 1,942 6,305 2,993 2,078 6,500 3,161
21,436 52,912 30,255 23,684 52,585 32,448

Production expenses in Q3 2015 were $12.48/boe, a 16% decrease compared to the same period last year. The decrease is mainly attributable to lower costs related to repairs and maintenance, field personnel and workovers in combination with the disposition of higher cost production in our southeast Saskatchewan Conventional business unit in Q3 2014. While production expenses have been below 2014 levels, on a per boe basis we do expect them to rise for the remainder of the year as fixed costs will be spread over lower levels of production.

Given the sustained low oil price environment, we continue to execute a conservative capital plan, funded through internally generated cash flow, to preserve the long-term value of our assets. Capital expenditures before acquisitions and dispositions ("A&D") for the third quarter totaled $14 million. This is 30% lower than the second quarter of 2015 and 84% lower than the same quarter of the prior year. Capital spending in the quarter was focused on drilling two Cardium Falher gas wells, completing and equipping two Bakken wells that were in inventory at the end of Q2, and facilities investments. During the first nine months of 2015, we drilled 17 wells and brought 28 wells on production, leaving 2 wells in inventory at the end of this quarter, which are expected to be on production in November 2015.

DRILLING ACTIVITY
Q3 2015
Drilled Completed On Production Inventory(1)
Business Unit Gross Net Gross Net Gross Net Gross Net
Cardium 3.0 1.8 1.0 0.3 - - 4.0 2.3
Bakken - - 5.0 2.2 6.0 2.4 - -
Alberta/BC - - - - - - - -
Total 3.0 1.8 6.0 2.5 6.0 2.4 4.0 2.3
  1. Inventory refers to the number of wells pending completion and/or tie-in at September 30, 2015.

FINANCIAL RESULTS AND LIQUIDITY

Production of 30,255 boepd and an operating netback of $22.14/boe in the third quarter resulted in funds flow from operations of $45 million ($0.23 per basic share). In the first nine months of 2015, funds flow from operations was $164 million, well above our capital expenditures and in line with our expectations as realized oil prices were consistent with our annual average WTI oil price assumption of US$50.00/bbl.

As a result of our 2015 WTI hedging program, Lightstream realized gains of approximately $25 million during the third quarter and $74 million for the first nine months of the year. We continue to add additional hedges to our 2016 portfolio to provide funds flow downside protection.

Capital expenditures of $14 million (before A&D) in the third quarter were significantly lower than second quarter 2015. We spent $95 million over the first nine months of 2015, representing 85% of anticipated spending for the year, consistent with our capital plan.

We incurred a net loss of $426 million for the third quarter of 2015, which is primarily attributable to a non-cash asset impairment charge and non-cash foreign exchange losses. A $535 million impairment charge to property, plant and equipment ("PP&E") was recognized due to lower current and estimated future commodity prices. Impairment losses related to PP&E can be reversed in future periods if the estimated recoverable amount of the asset exceeds the carrying value. With the Canadian dollar weakening approximately 5.5% against the US dollar in the third quarter, we also recorded a non-cash loss of $80 million once we translate our US dollar denominated debt to Canadian dollars for financial statement presentation. These losses were partially offset by a $103 million gain on our repurchase of Unsecured Notes and a non-cash income tax recovery of $127 million.

At the beginning of the third quarter, we issued a total of $650 million in Secured Notes. US$450 million of these notes were issued in exchange for US$546 million of outstanding Unsecured Notes, which were cancelled. An additional US$200 million of Secured Notes were issued for cash proceeds, which we used to reduce our outstanding borrowing on our Credit Facility. Through the debt exchanges we reduced our total debt by $125 million and we also expect to generate surplus operating cash for the year of approximately $75 million, applied to further reduce our debt.

At the end of the third quarter, we had $1.6 billion in total debt, including $354 million of debt drawn on our $750 million Credit Facility, US$650 million of Secured Notes, US$254 million Unsecured Notes and convertible debentures of US$4.5 million. The Credit Facility provides lenders with a semi-annual borrowing base re-determination, the first of which is expected to be complete in November 2015.

GUIDANCE

($000s, except where noted and per share amounts) 2015 Revised Guidance
(August 5, 2015)
2015 Actual Results
(to September 30, 2015)
Production (annual average)
Total (boe/d) 30,500 - 32,500 32,448
Natural Gas Weighting 27% 27%
Exit Production (boe/d) 26,500 - 28,500 -
EBITDA $295,000 - $315,000 $251,221
Funds Flow from Operations(2) $175,000 - $195,000 $163,540
Funds Flow per share(2) (3) $0.89 - $0.99 $0.83
Declared Dividends per share $0.00 $0.00
Capital Expenditures(2) $100,000 - $120,000 $94,646
Pricing Assumptions:
Crude oil - WTI (US$/bbl) 50.00 51.00
Crude oil - WTI (Cdn$/bbl) 64.94 64.05
Corporate oil differential (%) 15 14
Natural gas - AECO (Cdn$/mcf) 3.00 2.81
Exchange rate (Cdn$/ US$) 0.77 0.80

Low commodity prices continue to be a challenge for us and the industry. As the macro environment of service costs and commodity pricing has not changed enough to warrant an expanded capital spending plan, we will continue to preserve long-term asset value through a reduced capital program and use any surplus cash to reduce debt. Given that our near-term strategy has not changed, we are reiterating our annual guidance and, based on positive results to-date, we expect our funds flow from operations to be at the upper end of our guidance range. We are prepared to alter our capital plans quickly should the macro environment improve and support an expanded drilling program.

THIRD QUARTER FINANCIAL INVESTOR CONFERENCE CALL

Lightstream management will be hosting a conference call for investors, financial analysts, media and any interested persons on Tuesday, November 3, 2015, at 9:00 a.m. (Mountain Time) to discuss Lightstream's 2015 third 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/6221

FINANCIAL & OPERATING TABLES

Three months
ended September 30,
Nine Months
ended September 30,
2015 2014 %
Change
2015 2014 %
Change
Financial ($000s, except where noted)
Oil and natural gas sales 108,759 269,177 (60) 366,155 920,963 (60)
Funds flow from operations (1) 44,646 130,950 (66) 163,540 482,954 (66)
Per share - basic ($)(1) 0.23 0.65 (65) 0.83 2.41 (66)
- diluted ($)(1) (2) 0.23 0.64 (64) 0.81 2.37 (66)
Adjusted Net Income (loss)(1) 6,621 6,935 (5) (172,074) 89,536 -
Per share - basic ($)(1) 0.03 0.03 567 (0.87) 0.45 -
- diluted ($)(1) (2) 0.03 0.03 567 (0.87) 0.44 -
Dividends(1) - 24,370 - - 73,019 -
Per share ($)(1) - 0.12 - - 0.36 -
Capital Expenditures(3) 14,217 90,164 (84) 94,646 350,696 (73)
Net capital expenditures(1) 14,437 (372,259) - 81,692 (363,830) -
Total debt(1) (4) 1,603,610 1,557,817 3
Basic common shares, end of period (000) 197,984 200,466 (1)
Operations
Operating netback($/boe except where noted) (1)(5)
Oil, NGL and natural gas revenue (6)(7) 38.79 74.84 (48) 41.04 80.32 (49)
Royalties 4.17 11.32 (63) 4.42 11.74 (62)
Production expenses 12.48 14.85 (16) 12.61 14.34 (12)
Operating netback 22.14 48.67 (55) 24.01 54.24 (56)
Average daily production (boe/d)
Oil and NGL (bbl/d) 21,436 30,203 (29) 23,684 33,161 (29)
Natural gas (mcf/d) 52,912 51,802 2 52,585 51,536 2
Total (boe/d) (5) 30,255 38,837 (22) 32,448 41,750 (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.
  7. US dollar denominated debt has been translated to Canadian dollars using the period end exchange rate of 0.75 at September 30, 2015 (September 30, 2014 - 0.89).

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; the timing of the next borrowing base re-determination, 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

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

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