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Press release from CNW Group

Legacy Oil + Gas Inc. announces first quarter 2010 results

Tuesday, May 11, 2010

Legacy Oil + Gas Inc. announces first quarter 2010 results17:08 EDT Tuesday, May 11, 2010/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES LAW./CALGARY, May 11 /CNW/ - Legacy Oil + Gas Inc. ("Legacy" or the "Company") (TSX:LEG) is pleased to announce it has filed on SEDAR its unaudited financial statements and related Management's Discussion and Analysis ("MD&A") for the three months ended March 31, 2010. Selected financial and operational information is outlined below and should be read in conjunction with Legacy's unaudited financial statements and related MD&A which are available for review at www.legacyoilandgas.com or www.sedar.com. << FINANCIAL + OPERATIONAL HIGHLIGHTS: Three Months Ended March 31 ------------------------------------------------------------------------- 2010 2009 % change ------------------------------------------------------------------------- Financial ($000's, except per share amounts) ------------------------------------------------------------------------- Petroleum and natural gas sales 42,543 2,054 1,971 Funds generated by operations (1) 26,402 422 6,156 Per share basic 0.36 0.08 350 Per share diluted 0.34 0.08 325 Net loss (2,859) (914) 213 Per share basic (0.04) (0.16) (75) Per share diluted (0.04) (0.16) (75) Capital expenditures 49,878 743 6,613 Corporate and asset acquisitions 439 - n/a Net debt and working capital surplus (deficit) (76,661) (7,503) 9,217 ------------------------------------------------------------------------- Operating ------------------------------------------------------------------------- Production Crude oil (Bbls per day) 5,924 513 1,055 Natural gas (Mcf per day) 1,364 - n/a Natural gas liquids (Bbls per day) 70 - n/a Barrels of oil equivalent (Boe per day) (2) 6,221 513 1,113 Average realized price Crude oil ($ per Bbl) 78.20 44.47 76 Natural gas ($ per Mcf) 4.69 - n/a Natural gas liquids ($ per Bbl) 44.28 - n/a Barrels of oil equivalent ($ per Boe) (2) 75.99 44.47 71 Netback ($ per Boe) (2) Petroleum and natural gas revenue 75.99 44.47 71 Royalties 11.91 2.79 327 Operating expenses (3) 11.92 19.38 (38) Transportation expenses (3) 1.86 - n/a ------------------------------------------------------------------------- ------------------------------------------------------------------------- Operating Netback 50.30 22.30 126 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Undeveloped land holdings (gross acres) 382,790 28,510 1,243 (net acres) 285,743 21,652 1,220 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Common & Class A shares (4) 74,162 4,032 1,739 Class B common shares (4) - 154 n/a Weighted average shares 74,162 5,569 1,231 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (1) Management uses funds generated by operations to analyze operating performance and leverage. Funds generated by operations as presented do not have any standardized meaning prescribed by Canadian GAAP and therefore it may not be comparable with the calculation of similar measures for other entities. (2) Boe conversion ratio for natural gas of 1 Boe: 6 Mcf has been used, which is based on an energy equivalency conversion method primarily applicable at the burner tip and does not necessarily represent a value equivalency at the wellhead. (3) Transportation expenses in the 2008 fiscal year were reported as part of operating expenses. (4) The class B common shares were converted to class A common shares on October 5, 2010. On December 2, 2009, Legacy Oil + Gas Inc. consolidated its outstanding class A shares on a 6 to 1 basis and redesignated the class A shares as common shares as approved by shareholders. Comparative figures have been presented as if this share consolidation occurred on January 1, 2009 ACCOMPLISHMENTS --------------- - Increased average production from 513 Boe per day in the first quarter of 2009 to 6,221 Boe per day in the first quarter of 2010 (1,113 percent increase). Increased production from 4,728 Boe per day in the fourth quarter of 2009 (32 percent increase). Production for the first quarter 2010 consisted of 96 percent oil and 4 percent natural gas. - Increased funds flow from operations from $0.4 million in the first quarter of 2009 to $26.4 million in the first quarter of 2010 (6,156 percent increase). Increased funds flow from operations from $17.4 million in the fourth quarter of 2009 (52 percent increase). - Increased funds flow from operations per share (basic) from $0.08 in the first quarter of 2009 to $0.36 in the first quarter of 2010 (350 percent increase). Increased funds flow from operations per share (basic) from $0.29 in the fourth quarter of 2009 (24 percent increase). - Reduced operating and transportation costs from $19.38 per Boe in the first quarter of 2009 to $13.79 per Boe in the first quarter of 2009 (29 percent decrease) and from $14.84 per Boe in the fourth quarter of 2009 (7 percent decrease). Operating costs for the first quarter 2010 were $11.92 per Boe. - Reduced G&A costs from $10.65 per Boe in the first quarter of 2009 to $2.18 per Boe in the first quarter of 2010 (80 percent decrease) and from $4.36 per Boe in the fourth quarter of 2009 (50 percent decrease). - The cost reductions have contributed to Legacy improving its operating netback to $50.30 per Boe in the first quarter of 2010. - Drilled 18 (14.2 net) wells with a 100 percent drilling success in the first quarter of 2010. - Increased undeveloped land holdings from 21,652 net acres at the end of the first quarter of 2009 to 285,743 net acres at the end of the first quarter of 2010 (1,220 percent increase). >> Operations Overview-------------------Legacy participated in the drilling of 18 (14.2 net) wells targeting light oil with a 100 percent success rate. The Company spent $50.3 million on capital expenditures in the quarter: $31.9 million on drilling and completions, $7.2 million on equipping and facilities and $11.2 million on land, seismic and other.At Taylorton the Company continues to be encouraged with its drilling results since it took over operatorship of the property. Refinements to the completion technique have continued to result in better initial production rates compared to the property's historical average. Legacy operated the drilling of 2.0 gross (1.5 net) Bakken wells in Taylorton in the first quarter of 2010.At Heward/Stoughton, the Company has applied the completion refinements developed at Taylorton and continues to achieve better than historical initial production rates and water cuts from the Bakken. The Company operated the drilling of 6.0 gross (5.5 net) wells in the first quarter of 2010. The Heward battery was connected to the Enbridge system in March which should lead to reduced future production downtime and trucking costs associated with the property.Legacy acquired a total of 37 square miles of 3D seismic data over its key producing properties in SE Saskatchewan and has identified a number of development, step-out and exploration light oil locations that are expected to be drilled later in 2010.SUBSEQUENT EVENTS-----------------On May 1, 2010, Legacy announced that its banking syndicate had completed its spring review and increased the Borrowing Base to $125 million, from the previous $110 million. The next interim review is scheduled for October 31, 2010. The increase continues to provide Legacy with significant financial flexibility with which to conduct its operations.OUTLOOK-------Late in 2009, Legacy initiated its drilling activities and has since delivered significant success and growth. We expect the operational momentum to continue throughout the remainder of 2010 and into 2011. This drilling activity complements our ongoing corporate and asset acquisition efforts.We continue to make significant and decisive strides to establish Legacy as the premier Canadian junior oil and natural gas company. Our light oil, high netback production base, concentrated assets, strong balance sheet, significant light oil resource play exposure and successful consolidation strategy has differentiated Legacy from the rest of the junior sector.Our corporate activities have not only bolstered the number of development drilling opportunities and their impact but added to the sustainability of our business model. Our resolute pursuit of focused, high quality light oil assets has resulted in an attractive portfolio of short, medium and long-term opportunities. The Company's conventional Mississippian development drilling locations will enable near-term production growth and cash flow to fund the medium term Bakken light oil resource play development. Our Bakken assets provide a multi-year, repeatable development drilling inventory for high netback light oil with predictable costs and economics. Finally, our recently expanded position at Antler encompasses a potentially large future waterflood project that could add substantial light oil reserves over an extended time frame.Legacy has established itself as a leader in light oil resource play development and in 2010 intends to lever this expertise into the discovery, commercialization, capture and ultimate development of additional light oil resource play opportunities within and outside of its current operational area. These efforts are intended to bolster Legacy's already impressive development growth opportunities while solidifying the long-term sustainability of our business plan. Furthermore, we continue to be opportunistic for further strategic light oil acquisitions to augment our existing inventory of 385 light oil development drilling locations and more than 285,000 net acres of undeveloped land.Legacy is a uniquely positioned, well-capitalized junior oil and natural gas company with a proven management team committed to aggressive, cost-effective growth of light oil reserves and production in Saskatchewan and Manitoba. Legacy's common shares trade on the TSX Exchange under the symbol LEG.FORWARD LOOKING STATEMENTS: This press release contains forward-looking statements. More particularly, this press release contains statements concerning the anticipated impact of the connection of the Heward battery to the Enbridge system, the potential for waterflood development at Antler and potential future exploration and development activities. The forward-looking statements are based on certain key expectations and assumptions made by the Company, including expectations and assumptions concerning the success of optimization and efficiency improvement projects, the availability of capital, the success of future drilling and development activities, the performance of existing wells, the performance of new wells and prevailing commodity prices. Although the Company believes 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 the Company 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, and health, safety and environmental risks), commodity price and exchange rate fluctuations and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures. Certain of these risks are set out in more detail in the Company's Annual Information Form which has been filed on SEDAR and can be accessed at www.sedar.com. The forward-looking statements contained in this press release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.Meaning of Boe: When used in this press release, Boe means a barrel of oil equivalent on the basis of 1 Boe to 6 thousand cubic feet of natural gas. Boe per day means a barrel of oil equivalent per day. 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.This press release shall not constitute an offer to sell, nor the solicitation of an offer to buy, any securities in the United States, nor shall there be any sale of securities mentioned in this press release in any state in the United States in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state.NEITHER THE TSX NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.%SEDAR: 00023400EFor further information: Trent J. Yanko, P.Eng., President + CEO, Legacy Oil + Gas Inc., 3900, Bow Valley Square II, 205 - 5th Avenue S.W., Calgary, AB, T2P 2V7, Telephone: (403) 441-2300, Fax: (403) 441-2017; Matt Janisch, P.Eng., Vice-President, Finance + CFO, Legacy Oil + Gas Inc., 3900, Bow Valley Square II, 205 - 5th Avenue S.W., Calgary, AB, T2P 2V7, Telephone: (403) 441-2300, Fax: (403) 441-2017