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Press release from CNW Group

Longview Announces Second Quarter 2012 Results

Wednesday, August 08, 2012

Longview Announces Second Quarter 2012 Results23:50 EDT Wednesday, August 08, 2012Funds from Operations Continue to Support Capital Program and Dividends (TSX: LNV)CALGARY, Aug. 8, 2012 /CNW/ - Longview Oil Corp. ("Longview" or the "Corporation") is pleased to announce the financial and operating results for the quarter ended June 30, 2012. Three months ended   June 30, 2012 March 31, 2012  Financial ($000, except as otherwise indicated)    Sales including realized hedging $30,977 $40,425   per share (1) $0.66 $0.86   per boe $57.88 $65.93Funds from operations $10,849 $19,572   per share (1) $0.23 $0.42   per boe $20.28 $31.93Net income and comprehensive income $6,164 $5,561   per share (1) $0.13 $0.12Dividends declared $7,018 $7,016   per share (2) $0.15 $0.15Expenditures on property, plant and equipment $5,310 $18,596Working capital deficit (3) $6,463 $15,522Bank indebtedness $112,949 $101,918Shares outstanding at end of period (000) 46,788 46,774Basic weighted average shares (000) 46,787 46,771Operating         Daily Production             Crude oil and NGLs (bbls/d) 4,486 5,119   Natural gas (mcf/d) 8,370 9,713   Total boe/d @ 6:1 5,881 6,738Average prices (including hedging)             Crude oil and NGLs ($/bbl) $72.10 $82.44   Natural gas ($/mcf) $2.02 $2.29(1)Based on basic weighted average shares outstanding.      (2)Based on shares outstanding at each dividend record date.        (3) Working capital deficit includes trade and other receivables, prepaid expenses and deposits,trade and other accrued liabilities and due to parent.    Funds from Operations Continue to Support Capital Program and DividendsFunds from operations for the second quarter of 2012 was $10.8 million or $0.23 per share, a decrease of 45% as compared to the $19.6 million or $0.42 per share realized during the first quarter of 2012. The lower funds from operations has been primarily due to a reduction in realized commodity prices and production as well as an increase in operating expenses.Crude oil prices decreased during the second quarter of 2012 due to weakened WTI pricing and wide differentials between WTI and Canadian realized pricing. Natural gas prices also decreased in comparison to prior quarters and have remained low for the last several years due to decreased demand and increasing US domestic natural gas production.Production for the second quarter of 2012 averaged 5,881 boe/d with 76% from crude oil and liquids, a 13% decrease compared to the 6,738 boe/d realized during the first quarter of 2012. Lower average production was a direct result of extended maintenance at numerous facilities including a third-party facility outage that shut-in production of approximately 2,200 boe/d from the Nevis area for a period in excess of three weeks. Additionally, prolonged spring break-up conditions caused road bans and lease access restrictions, delaying regular well maintenance, reactivations and scheduled tie-ins until late in the current quarter. With the conclusion of facility turnaround outages and some reprieve from wet weather conditions, our second quarter 2012 exit daily production rate was approximately 6,300 boe/d.Operating expense for the second quarter of 2012 was $22.44/boe, a 26% increase from $17.78/boe realized in the prior quarter. Operating expense per boe was significantly impacted by lower daily production levels and costs associated with the clean-up of salt water spills resulting from injection pipeline failures at Sunset.  Additional costs will impact the third quarter of 2012 due to the continuing clean-up activities at Sunset.Capital expenditures for the three months ended June 30, 2012 amounted to $5.3 million due to spring break-up conditions that caused road bans and lease access restrictions. We drilled a total of 1.7 net oil wells (5 gross) at 100% success rate and completed a number of wells that were drilled during the first quarter of 2012.  For the six months ended June 30, 2012, we have drilled a total of 11.6 net oil wells (19 gross) at a 100% success rate with overall results that are in-line with expectations.As at June 30, 2012, Longview's bank debt was $112.9 million on a credit facility of $200 million (56% drawn) resulting in an unutilized capacity of $87.1 million. Our strategy of maintaining a conservative financial structure has positioned Longview to execute a capital program that provides growth potential while paying a stable dividend to shareholders.Longview currently pays a monthly dividend of $0.05 per share and has declared and paid $7.0 million of dividends for the second quarter of 2012.Commodity Hedging ProgramLongview's hedging program for calendar 2012 includes crude oil hedges of 1,000 bbls/d at $97.10/bbl and 1,000 bbls/d at a floor price of $90.00/bbl.Additional details on our hedging program are available at our website at www.longviewoil.com.Looking ForwardOn June 19, 2012 we announced a $27 million reduction in our capital expenditure program to $46 million and revised operational guidance for the year ending December 31, 2012.  These actions were taken in response to the current weakness in global oil markets and the increase in differentials caused by a lack of pipeline take away capacity for Canadian crude oil. The reduction in capital expenditures is consistent with Longview's strategy of maintaining financial discipline and a strong balance sheet in response to weak commodity prices.The following table summarizes the operational guidance for Longview for the year ending December 31, 2012:      Average Production      6,400 boe/d      % oil & liquids      77%      Exit production rate      6,400 boe/d      Royalty rate      19% to 20%      Operating expenses      $19.00/boe      Capital expenditures      $46 millionOur remaining capital program has reduced spending in higher cost areas and includes additional drilling plans for Southeast Saskatchewan where lower cost horizontal wells are being targeted within our extensive land base. The capital expenditure program also included analysis of cores that were taken from the Duvernay and Nordegg shale formations on a well that was drilled at Sunset in the fourth quarter of 2011. Our detailed core analysis has confirmed the presence of hydrocarbons and we appear to be within the oil window. We are currently evaluating the various strategic arrangements and opportunities that will allow us to continue evaluating our extensive 123 undeveloped sections of land (100% working interest). We will continue to execute our 2012 capital program, focusing on operational and cost efficiencies to increase returns and produce stable cash flows while maintaining a conservative financial structure. Longview will continue to high grade its inventory of drilling locations and invest in opportunities that we believe provide strong economics during low commodity price cycles.About LongviewLongview was incorporated on March 4, 2010 and completed its initial public offering (the "Offering") on April 14, 2011 at a price of $10 per common share issuing 17,250,000 shares and raising gross proceeds of $172.5 million (including full exercise of the over-allotment option on April 28, 2011).Concurrent with the closing of the Offering, Longview purchased certain oil-weighted assets from Advantage Oil & Gas Ltd. ("Advantage") for total consideration of $546.9 million, comprised of 29,450,000 common shares of Longview and $252.4 million in cash (the "Acquisition"). The Acquisition had an effective date of January 1, 2011 and a closing date of April 14, 2011.On May 22, 2012, Advantage sold 8,300,000 Longview common shares owned by Advantage to a syndicate of underwriters. Longview did not receive any proceeds or incur any costs related to the sale of the common shares. Advantage owns 21,150,010 common shares of Longview, representing an interest of approximately 45.2% in Longview.Interim Financial Statements and MD&ALongview's unaudited interim financial statements for the three and six months ended June 30, 2012 together with the notes thereto, and Management's Discussion and Analysis for the three and six months ended June 30, 2012 have been prepared in accordance with International Financial Reporting Standards ("IFRS") and posted on our website at www.longviewoil.com and filed under our profile on SEDAR at www.sedar.com.Forward-Looking StatementsCertain information regarding Longview set forth in this press release contains forward-looking statements, which are based on the Corporation's current internal expectations, estimates, projections, assumptions and beliefs. These statements relate to future events or Longview's future performance. All statements other than statements of historical fact may be forward-looking statements. The use of any of the words "anticipate", "continue", "estimate", "expect", "may", "will", "project", "should", "believe" and similar expressions are intended to identify forward looking statements. These statements are only predictions and actual events or results may differ materially. Although Longview believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievement since such expectations are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. Many factors could cause Longview's actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, Longview.In particular, forward-looking statements included in this press release include, but are not limited to, Longview's dividend policy; Longview's hedging program for 2012; anticipated effect of operating costs on Q3 2012; focus of the Corporation's 2012 capital program and the anticipated effect on returns, cash flows and financial structure; Longview's plans to high grade its inventory of drilling locations and to invest in opportunities that it believes provides strong economics; and anticipated average production, percentage of production attributable to oil and liquids, exit production rate, royalty rate, operating expenses and capital expenditures for 2012.These forward-looking statements are subject to numerous risks and uncertainties, certain of which are beyond the Corporation's control, including, but not limited to, the impact of general economic, market and business conditions; industry conditions; stock market volatility, including volatility of commodity prices and currency fluctuations; unexpected drilling results; imprecision of reserve estimates; changes or fluctuations in production levels; environmental risks; incorrect assessments of the value of acquisitions and exploration and development programs; competition from other producers; the lack of availability of qualified personnel or management; changes in income tax laws or changes in tax laws and incentive programs relating to the oil and gas industry; liabilities inherent in crude oil and natural gas operations; hazards such as fire, explosion, blowouts, cratering, and spills, each of which could result in substantial damage to wells, production facilities, other property and the environment or in personal injury; ability to access sufficient capital from internal and external sources; and the other risks considered under "Risk Factors" in Longview's annual information form dated March 22, 2012, which is available on www.sedar.com and www.longviewoil.com.With respect to forward-looking statements contained in this press release, Longview has made assumptions regarding, among other things: current commodity prices and royalty regimes; availability of skilled labour; timing and amount of capital expenditures; future exchange rates; the price of oil and natural gas; the impact of increasing competition; conditions in general economic and financial markets; availability of drilling and related equipment; effects of regulation by governmental agencies; royalty rates; future operating costs; that the Corporation will have sufficient cash flow, debt or equity sources or other financial resources required to fund its capital and operating expenditures and requirements as needed; availability of funds for the payment of dividends and Longview's capital program; that the Corporation's conduct and results of operations will be consistent with its expectations; that the Corporation will have the ability to develop the Corporation's oil and gas properties in the manner currently contemplated; and the estimates of the Corporation's production volumes and the assumptions related thereto (including commodity prices and development costs) are accurate in all material respects.Management has included the above summary of assumptions and risks related to forward-looking information provided in this press release in order to provide shareholders with a more complete perspective on Longview's future operations and such information may not be appropriate for other purposes. Longview's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits that the Corporation will derive there from. Readers are cautioned that the foregoing lists of factors are not exhaustive. These forward-looking statements are made as of the date of this press release and the Corporation disclaims any intent or obligation to update publicly any forward-looking statements, whether as a result of new information, future events or results or otherwise, other than as required by applicable securities laws."boes" may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one barrel of oil equivalent (6 Mcf: 1 bbl) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value. SOURCE: Longview Oil Corp.For further information: Investor Relations Toll free: 1-855-813-0313 LONGVIEW OIL CORP. 700, 400 -3rd Avenue SW Calgary, Alberta T2P 4H2 Phone:  (403) 718-8000 Fax: (403) 718-8300 Web Site: www.longviewoil.com E-mail:ir@longviewoil.com