Lightstream Announces 2014 Funds Flow From Operations of $572 Million
CALGARY, ALBERTA--(Marketwired - Mar 6, 2015) - Lightstream Resources Ltd. (the "Company" or "Lightstream") (LTS.TO) announces fourth quarter and year-end 2014 financial and operating results.
HIGHLIGHTS
In this press release, annual comparisons are 2014 compared to 2013 and quarterly comparisons are fourth quarter 2014 compared to fourth quarter 2013, unless otherwise noted. All references to well counts are on a net basis.
Our 2014 proved plus probable ("2P") year-end reserve value has a net present value (before tax and discounted at 10%) of $3.2 billion ($2.6 billion after tax) as determined by Sproule Associates Limited, which significantly exceeded our $1.9 billion enterprise value (total debt plus equity market value) at December 31, 2014.
Average daily production for 2014 totaled 40,420 boepd (78% light-oil and liquids weighted) and 36,472 boepd (75% light-oil and liquids weighted) for Q4 2014 reflecting dispositions of 6,315 boepd completed through the first three quarters in 2014.
2014 funds flow was $572 million ($2.86 per basic share) a 15% decrease from 2013; fourth quarter funds flow was $89 million ($0.45 per basic share), down 39% from the prior year on lower commodity prices and lower production (primarily as a result of dispositions).
Our operating netback for 2014 was $49.45/boe, 1% below our operating netback in 2013, and for the fourth quarter was $33.15/boe, down 27% from the fourth quarter of 2013 reflecting a 25% drop in US$ WTI prices over the same period.
Capital expenditures (before acquisitions and divestitures ("A&D")) were $472 million for 2014, 34% below 2013 levels, and $121 million for the fourth quarter of 2014, a decrease of 22% for the same period a year earlier.
Dispositions of non-core assets totaled $729 million with net proceeds applied to debt.
As a result of our disposition program and cash expenditures being 99% of funds flow, total debt was reduced to $1.65 billion as at December 31, 2014, a 28% decrease from the same time last year. We expect to realize at least $30 million in annual cash interest savings going forward.
For 2014, we reported a net loss of $446 million as a result of a non-cash $700 million impairment charge to property, plant and equipment, primarily due to reduced forward pricing estimates compared to year end 2013.
SUMMARY OF RESULTS | ||||||||
Three months ended | Year ended | |||||||
2014 | 2013 | 2014 | 2013 | |||||
Oil and natural gas revenue | 186,861 | 287,727 | 1,107,824 | 1,250,491 | ||||
Funds flow from operations (1) | 89,278 | 146,017 | 572,232 | 670,928 | ||||
Per share - basic ($)(1) | 0.45 | 0.73 | 2.86 | 3.43 | ||||
Adjusted Net income (loss)(1) | 160,386 | (45,598 | ) | 249,922 | (42,608 | ) | ||
Per share - basic ($)(1) | 0.81 | (0.23 | ) | 1.25 | (0.22 | ) | ||
Capital Expenditures(2) Net Capital Expenditures(1) | 121,124 | 155,933 | 471,820 | ) | 715,913 | |||
Total debt (1) | 1,646,862 | 2,274,122 | ||||||
Dividends per share ($)(1) | 0.10 | 0.20 | 0.46 | 0.91 | ||||
Cash dividends per share ($)(1) | 0.10 | 0.17 | 0.46 | 0.67 | ||||
Common Shares, end of period (000) | 197,304 | 199,774 | ||||||
Operating netback ($/boe) (1) (3) (4) | 33.15 | 45.43 | 49.45 | 50.00 | ||||
Average daily production (boe) (3) | 36,472 | 45,521 | 40,420 | 46,438 | ||||
(1) | Non-GAAP measure. See "Non-GAAP Measures" section in the 2014 Management's Discussion and Analysis. |
(2) | Prior to asset acquisitions and divestitures |
(3) | Six Mcf (thousand cubic feet) of natural gas is equivalent to one barrel of oil equivalent ("boe"). |
(4) | Net of transportation expenses. |
OPERATING SUMMARY
Primarily reflecting non-core asset dispositions of 6,315 boepd, total average production in 2014 decreased 13% to 40,420 boepd (78% light-oil and liquids weighted) from our average 2013 production of 46,438 boepd. Our fourth quarter average production of 36,472 boepd (75% light oil and liquids weighted) was 20% lower than average production in the fourth quarter of 2013, due primarily to the sale of our conventional assets in southeast Saskatchewan.
Our capital spending program for the year was $472 million, a 34% decrease from 2013 levels and a 50% decrease from 2012 levels. Capital expenditures in the fourth quarter were $121 million (before A&D), a decrease of 22% from the $156 million invested in the fourth quarter of 2013, reflecting our reduced capital program and commitment in 2014 to spend within cash flow. Capital spending has decreased significantly over the last several years which is consistent with our maturing asset base.
Production expenses for the fourth quarter decreased by 15% on a total basis compared to the same period in 2013 due primarily to lower variable production costs associated with decreased production levels and the disposition of our southeast Saskatchewan Conventional assets. On a per boe basis, production expenses increased to $13.47/boe for the quarter and $14.14/boe for 2014 as a result of additional well workovers.
AVERAGE DAILY PRODUCTION | ||||||
Three months ended | Year ended | |||||
Business Unit | Oil &NGL | Gas | Total | Oil &NGL | Gas | Total |
Bakken (incl. Conventional) | 12,912 | 6,467 | 13,990 | 16,632 | 7,148 | 17,823 |
Cardium | 11,798 | 40,607 | 18,566 | 12,381 | 37,348 | 18,606 |
Alberta/BC | 2,589 | 7,963 | 3,916 | 2,671 | 7,922 | 3,991 |
27,299 | 55,037 | 36,472 | 31,684 | 52,418 | 40,420 | |
The Cardium business unit continues to be our most active area, followed by the Bakken business unit and finally Alberta/BC, more specifically Swan Hills. During 2014, we drilled 98 wells at a 100% success rate. We brought 88 wells on production, leaving an inventory of 13 wells at December 31, 2014, which we expect to have on production by the end of Q2 2015.
Q4 2014 DRILLING ACTIVITY | ||||||||
Drilled | Completed | On Production | Inventory(1) | |||||
Business Unit | Gross | Net | Gross | Net | Gross | Net | Gross | Net |
Bakken (incl. Conventional) | 21 | 13 | 24 | 15 | 21 | 12 | 8 | 6 |
Cardium | 18 | 15 | 19 | 15 | 17 | 13 | 9 | 7 |
Alberta/BC | 2 | 1 | 2 | 1 | 2 | 1 | - | - |
Total | 41 | 29 | 45 | 31 | 40 | 26 | 17 | 13 |
(1) | Inventory refers to the number of wells pending completion and/or tie-in at December 31, 2014. |
2014 DRILLING ACTIVITY | ||||||||
Drilled | Completed | On Production | Inventory(1) | |||||
Business Unit | Gross | Net | Gross | Net | Gross | Net | Gross | Net |
Bakken (incl. Conventional) | 58 | 39 | 54 | 34 | 52 | 31 | 8 | 6 |
Cardium | 69 | 51 | 60 | 46 | 63 | 49 | 9 | 7 |
Alberta/BC | 9 | 8 | 9 | 8 | 9 | 8 | - | - |
Total | 136 | 98 | 123 | 88 | 124 | 88 | 17 | 13 |
(1) | Inventory refers to the number of wells pending completion and/or tie-in at December 31, 2014. |
Southeast Saskatchewan
Our Bakken business unit averaged 13,990 boepd of production during the fourth quarter of 2014, representing a 17% decrease from Q4 2013 due to attenuation of investment in the area as we continue to maximize the free cash flow generated from this resource play. In 2014, this business unit generated $282 million of net operating income yielding $164 million of free cash flow after capital expenditures of $118 million. Prior to selling our conventional business unit these assets generated $56 million in free cash flow.
As previously announced, we are looking to monetize, at an appropriate valuation, all or part of our Bakken business unit over the next 12 - 24 months, which, if successful, would allow us to significantly transform our balance sheet and refocus Lightstream into an Alberta-based company with production of over 20,000 boepd (pro-forma Q4 2014 rates).
Cardium
Production in the Cardium business unit averaged 18,566 boepd during the fourth quarter of 2014, representing a 6% decrease from the same period last year. This was primarily driven by divestitures of 1,200 boepd in the first quarter of 2014. Prior to dispositions, Cardium production would have been largely unchanged with 26% lower capital spending. As a result, free cash flow in this business unit improved to $85 million in 2014 from $32 million in 2013 and we expect the Cardium to continue to be our largest producing business unit.
Alberta/BC
In Alberta/BC, fourth quarter production averaged 3,916 boepd, which represents a 7% decrease from Q4 2013 which can be largely attributed to 500 boepd of production that was sold during the first quarter 2014. This was partially offset by new well activity where we brought 7 operated Swan Hills wells on production in Q2 2014 and participated in 2 (1 net) non-operated wells in Q4 2014.
FINANCIAL RESULTS
In 2014 we successfully executed our planned non-core asset divestiture program generating total gross proceeds of $729 million at attractive metrics. These proceeds were used to reduce overall corporate debt levels by 28% to $1.65 billion and, as a result of this reduction, we also expect to realize at least $30 million in annual cash interest savings going forward. We exceeded our goal to be cash flow neutral with 2014 capital expenditures (before A&D) plus dividend payments being 99% of funds flow from operations.
Funds flow from operations was $572 million ($2.86 per basic share) for 2014, a 15% decrease from 2013 driven mostly by lower annual production, primarily due to asset sales. Our average operating netback in 2014 was $49.45/boe, a decrease of 1%, as higher oil and natural gas prices were offset by higher royalties and production expenses. For 2014 our average realized liquids price was $88.00/bbl (WTI price was US$93.00/bbl). Our Q4 operating netback was $33.15/boe, a 27% decrease from the same period last year primarily due to lower oil prices and slightly higher production expenses, partially offset by lower royalties.
In 2014, we recorded a net loss of $446 million compared to a net loss of $1,384 million in 2013. The loss in 2014 is the result of a non-cash impairment charge to property, plant and equipment of $700 million recognized in the fourth quarter, due to reduced forward commodity pricing estimates and negative probable reserve revisions.
In response to the rapid decline in world oil prices, we decreased our monthly dividend effective December 2014 and ultimately suspended our dividend effective January 2015. We continue to monitor oil price trends and will adjust our capital spending forecasts and dividend policy accordingly.
2015 GUIDANCE
Our revised guidance reflects a lower commodity price forecast. In the current commodity price and service cost environment, we do not intend to invest in operated, new well drilling programs in the second half of 2015. This is reflected in a 45% decrease in planned capital expenditures for the year compared to previous 2015 guidance, which has not impacted annual average production but is expected to reduce exit production. We continue to expect to realize excess funds flow relative to our capital program with any and all excess cash being applied to our debt. As previously stated, we are renegotiating debt terms with our credit facility lenders to manage our financial covenants and maintain financial flexibility.
($000s, except where noted and per share amounts) | 2015 Guidance | 2015 Guidance | % | |
Production (annual average) | ||||
Total (boe/d) | 30,500 - 32,500 | 30,000 - 32,000 | 2% | |
Natural Gas Weighting | 26% | 23% | 3% | |
Exit Production (boe/d) | 26,500 - 28,500 | 30,000 - 32,000 | (11%) | |
EBITDA | 255,000 - 275,000 | 330,000 - 350,000 | (22%) | |
Funds Flow from Operations | 145,000 - 165,000 | 225,000 - 245,000 | (34%) | |
Funds Flow per share(1) | 0.74 - 0.84 | 1.14 - 1.24 | (34%) | |
Dividends per share | 0.00 | 0.48 | (100%) | |
Capital Expenditures(2) | 100,000 - 120,000 | 190,000 - 210,000 | (45%) | |
Pricing Assumptions: | ||||
Crude oil - WTI (US$/bbl) (3) | 52.50 | 65.00 | (19%) | |
Crude oil - WTI (Cdn$/bbl) | 65.63 | 74.71 | (12%) | |
Corporate oil differential (%) | 15 | 10 | 5% | |
Natural gas - AECO (Cdn$/mcf) | 3.00 | 4.00 | (25%) | |
Exchange rate (US$/Cdn$) | 0.80 | 0.87 | (8%) | |
(1) | Funds flow per share calculation based on 197 million weighted average basic shares outstanding. |
(2) | Projected capital expenditures exclude acquisitions and divestitures, which are evaluated separately. |
(3) | Oil pricing assumption is $50/bbl WTI for first half of 2015 and $55/bbl WTI for second half. |
2014 FOURTH QUARTER AND YEAR-END FINANCIAL RESULTS CONFERENCE CALL
Lightstream management will 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 |
SELECTED QUARTERLY AND ANNUAL RESULTS FROM CONTINUING OPERATIONS
Three months ended | Years ended | ||||||||||||
2014 | 2013 | % | 2014 | 2013 | % | ||||||||
Financial ($000s, except where noted) | |||||||||||||
Oil and natural gas sales | 186,861 | 287,727 | (35 | ) | 1,107,824 | 1,250,491 | (11 | ) | |||||
Funds flow from operations (1) | 89,278 | 146,017 | (39 | ) | 572,232 | 670,928 | (15 | ) | |||||
Per share - basic ($)(1) | 0.45 | 0.73 | (38 | ) | 2.86 | 3.43 | (17 | ) | |||||
- diluted ($)(1) (2) | 0.44 | 0.72 | (39 | ) | 2.82 | 3.38 | (17 | ) | |||||
Adjusted Net Income (loss)(1) | 160,386 | (45,598 | ) | (452 | ) | 249,922 | (42,608 | ) | (687 | ) | |||
Per share - basic ($)(1) | 0.81 | (0.23 | ) | (452 | ) | 1.25 | (0.22 | ) | (668 | ) | |||
- diluted ($)(1) (2) | 0.80 | (0.23 | ) | (448 | ) | 1.23 | (0.22 | ) | (659 | ) | |||
Dividends(1) | 19,247 | 40,320 | (52 | ) | 92,266 | 182,536 | (49 | ) | |||||
Per share ($)(1) | 0.10 | 0.20 | (50 | ) | 0.46 | 0.91 | (49 | ) | |||||
Payout ratio(1) | 22% | 28% | - | 16% | 27% | - | |||||||
Cash dividends(1) | 19,247 | 33,983 | (43 | ) | 92,266 | 133,815 | (31 | ) | |||||
Cash dividend payout ratio(1) | 22% | 23% | 16% | 20% | - | ||||||||
Capital Expenditures(3) | 121,124 | 155,933 | (22 | ) | 471,820 | 715,913 | (34 | ) | |||||
Net capital expenditures(1) | 123,194 | 154,487 | (20 | ) | (240,636 | ) | 719,101 | (133 | ) | ||||
Sustainability Ratio(1) | 99% | 127% | - | ||||||||||
Total debt(1) (4) | 1,646,862 | 2,274,122 | (28 | ) | |||||||||
Basic common shares, end of period (000) | 197,304 | 199,774 | (1 | ) | |||||||||
Operations | |||||||||||||
Operating netback($/boe except where noted) (1)(5) | |||||||||||||
Oil, NGL and natural gas revenue (6) | 55.38 | 68.29 | (19 | ) | 74.65 | 73.35 | 2 | ||||||
Royalties | 8.76 | 10.11 | (13 | ) | 11.06 | 10.16 | 9 | ||||||
Production expenses | 13.47 | 12.75 | 6 | 14.14 | 13.19 | 7 | |||||||
Operating netback | 33.15 | 45.43 | (27 | ) | 49.45 | 50.00 | (1 | ) | |||||
Average daily production (boe/d) | |||||||||||||
Oil and NGL (bbl/d) | 27,299 | 36,421 | (25 | ) | 31,684 | 37,443 | (15 | ) | |||||
Natural gas (mcf/d) | 55,037 | 54,600 | 1 | 52,418 | 53,969 | (3 | ) | ||||||
Total (boe/d) (5) | 36,472 | 45,521 | (20 | ) | 40,420 | 46,438 | (13 | ) | |||||
(1) | Non-GAAP measure. See "Non-GAAP Measures" section in the 2014 Management's Discussion and Analysis. |
(2) | Consists of common shares, stock options, deferred common shares, incentive shares and convertible debentures as at the period end date. |
(3) | Prior to asset acquisitions and dispositions. |
(4) | Total debt is calculated as secured credit facility outstanding plus accounts payable less accounts receivable, prepaid expense and long-term investments plus the full value outstanding on the senior unsecured notes and convertible debentures converted to Canadian dollars at the exchange rate on the period end date. |
(5) | Six Mcf of natural gas is equivalent to one barrel of oil equivalent ("boe"). |
(6) | Net of transportation expenses. |
CORRECTION TO FEBRUARY 19, 2015 RESERVES RELEASE
There was an inadvertent input error which understated after-tax values reported in our February 20, 2015 press release. The previously reported and corrected values are below.
Net Present Value 2P Reserves - After Tax ($millions)(2)(3) | |||
Forecast Prices(1) | |||
As at December 31, 2014 | |||
0% | 5% | 10% | |
Reported | $4,483 | $3,071 | $2,265 |
Revised | 4,937 | 3,472 | 2,625 |
Variance ($) | 454 | 401 | 360 |
Variance (%) | 10% | 13% | 16% |
Notes: | |
(1) | Based on the Sproule price forecast effective December 31, 2014. |
(2) | Company working interest reserves value plus royalties received less royalties and burdens. |
(3) | Estimated values of future net revenue disclosed in this press release do not represent fair market values. |
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 as outlined under the 2015 Guidance section, including planned capital spending, production targets and the anticipated product type weighting, expectations regarding our realized oil and natural gas prices, proposed exploration and development activities (including the number of wells to be drilled, completed and put on production); sources of capital; expectation that funds flow will exceed capital expenditures in 2015 and our plans to reduce debt with any excess funds flow; anticipated cash interest savings as a result of 2014 debt retirement; and a number of other matters including future results from operations; projected financial results and future capital and operating costs.
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; risks that asset dispositions cannot be completed, 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.
