FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of
1934
For the month of May
2018
Commission File Number: 001-34406
Advantage Oil & Gas Ltd.
(Exact name of registrant as specifiec
in its charter)
300,
440 2 Ave SW,
Calgary, AB, T2P 5E9
(Address of principal executive offices)
Indicate by check mark whether the registrant
files or will file annual reports under cover Form 20-F or Form 40-F.
Note: Regulation S-T Rule 101(b)(1) only
permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.
Indicate by check mark if the registrant
is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):_______
Note: Regulation S-T Rule 101(b)(7) only
permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private
issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally
organized (the registrant’s "home country"), or under the rules of the home country exchange on which the registrant’s
securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed
to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission
or other Commission filing on EDGAR.
Indicate by check mark whether by furnishing
the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to
Rule 12g3-2(b) under the Securities Exchange Act of 1934.
If “ Yes” is marked, indicate
below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-________
EXHIBIT INDEX
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| |
ADVANTAGE OIL & GAS LTD. |
| |
(Registrant) |
| |
|
|
| Date: May 3, 2018 |
By: |
/s/ Craig Blackwood |
| |
|
Name: Craig Blackwood |
| |
|
Title: Vice President, Finance and CFO |
Exhibit 99.1
Advantage Announces First Quarter 2018 Operating &
Financial Results
Solid Cash Flow, Strong Well Results
and Glacier Gas Plant Expansion Advances Liquids Development Strategy
(TSX: AAV, NYSE: AAV)
CALGARY, May 3, 2018 /CNW/ - Advantage Oil & Gas
Ltd. ("Advantage" or the "Corporation") is pleased to report strong cash flow of $48.9 million ($0.26/share)
and net income of $10.1 million ($0.05/share) during the first quarter of 2018. Cash flow was supported by the Corporation's
proactive marketing strategy which included $18.1 million from hedging gains and enhanced netbacks from natural gas sales at Dawn,
Ontario. In addition, liquids revenue increased 18% to $6.6 million and the Corporation achieved low total corporate cash
costs of $1.13/mcfe ($6.78/boe) contributing to solid cash flow results. On April 30, 2018, the Corporation renewed its annual
credit facility of $400 million with improved borrowing terms and maintained a strong balance sheet with a total debt to trailing
12 month cash flow ratio of 1.4.
First quarter results also included completion of six liquids
rich wells on a new west Glacier well pad which demonstrated an 86% improvement in productivity over all previous Middle Montney
Glacier wells. These six wells had a combined initial production flowrate of 64 mmcf/d and 1,914 bbls/d of C3+ liquids at
the end of the first 48 hours. Two additional Lower Montney wells, located on the same well pad, had a combined production
rate of 25.8 mmcf/d at the end of 37 hours of flow, which ranks in the top quartile of all Glacier wells. The Middle Montney
wells will be brought on-production during the second half of 2018 after the Glacier plant expansion project is completed. In
addition, liquids production from a four well pad at Valhalla, will be increased after completion of the Glacier plant expansion
and flow unrestricted once the new Valhalla compressor and liquids handling facility is completed in the fourth quarter of 2018.
This four well pad was completed prior to year-end 2017 and demonstrated an initial combined liquids productivity of 1,075 bbls/d.
Construction activity associated with the expansion of our
100% owned Glacier gas plant neared completion during the end of the first quarter when planned shut-downs commenced to tie-in
new equipment. Average production during the quarter was 239 mmcfe/d (39,848 boe/d) and included two days of outage during
the last week of March. As previously noted in Advantage's press release of April 19, 2018, this planned outage extended
longer than scheduled in April due to a process upset which has been fully resolved. The Glacier plant expansion increases
gas processing capacity from 250 to 400 mmcf/d and increases shallow cut propane plus ("C3+") liquids extraction capacity
to 6,800 bbls/d providing room to accommodate future liquids production growth from east Glacier, Valhalla and Wembley. The
Corporation's first quarter capital expenditures were $77.6 million, including $42 million invested in facilities infrastructure
to support longer term liquids and natural gas development.
As previously announced, Advantage will lower natural gas
production in 2018 in response to low price periods and to preserve dry gas productivity for higher price periods. Dry gas
well completions in the second half of 2018 will be deferred to increase liquids rich drilling at east Glacier and Valhalla. The
Corporation's first quarter liquids production of 1,105 bbls/d represents 3% of total production and generated 11% of total revenues.
In 2019, Advantage targets to increase liquids production to 8% or more of total production and 13% or more of total production
in 2020 which is anticipated to significantly enhance our netbacks and cash flows. Liquids production growth in 2018 and
2019 will primarily come from east Glacier and Valhalla, with significant growth from Wembley expected by mid-2020 when additional
processing and pipeline capacity is expected to be completed.
As a result of increased liquids production, an active hedging
program and secured egress to downstream markets in eastern Canada and the U.S. Midwest, Advantage has diversified its revenue
portfolio reducing AECO gas exposure to approximately 27% of total revenues through 2019. Furthermore, Advantage continues
to evaluate new commercial opportunities capable of providing incremental sources of long term natural gas demand and continued
revenue diversification.
Operations Update
Glacier
Advantage completed an eight well pad located in the western
portion of Glacier during the quarter. These wells were drilled in the second half of 2017 and consist of six wells in the
Middle Montney and two wells in the Lower Montney.
The six Middle Montney wells further delineated all three
layers within the Middle Montney and demonstrated a total combined production rate of 64 mmcf/d with an average rate of 10.6 mmcf/d
per well at an average flowing pressure of 15,444 kPa at the end of 48 hours of flow. This represents an increase in the average
per well test rate and average flowing pressure of 86% and 126%, respectively, compared to all of our previously drilled Glacier
Middle Montney wells. Based on measured gas compositions from the six wells with a combined gas rate of 64 mmcf/d, the recoverable
C3+ liquid rates is estimated to be 1,914 bbls/d at an average liquids yield of 30 bbls/mmcf, consistent with the previous results
in this area of Glacier. Average frac count was increased to 34 stages per well which represents a 76% increase over our previous
Middle Montney wells.
The two Lower Montney wells were flowed at an average rate
of 12.9 mmcf/d per well at an average flowing pressure of 11,678 kPa at the end of 37 hours of flow. These results are consistent
with the exceptional Lower Montney results that have been achieved in the western portion of Glacier over the past number of drilling
programs.
During the first quarter of 2018, Advantage drilled a horizontal
acid gas disposal well at Glacier to provide back-up and incremental disposal capacity to our two existing vertical disposal wells.
This well was successfully drilled through our targeted interval with a lateral length of 1,585 meters and will be completed during
the summer of 2018. Advantage's two existing vertical acid gas disposal wells are capable of handling the total acid gas
stream based on current H2S compositions at Glacier and the expanded gas plant capacity of 400 mmcf/d. The new
horizontal acid gas disposal well will provide additional acid gas disposal capacity to accommodate higher H2S gas levels
as liquids development continues at Valhalla, Wembley and Progress.
Valhalla
Installation of Advantage's first compressor and liquids handling
facility at Valhalla is continuing on track. This facility is designed to handle 40 mmcf/d of raw gas and 2,000 bbls/d of liquids
and is expandable to accommodate future liquids rich production growth at Valhalla. Current Valhalla production has been limited
due to the size of the existing Advantage pipeline connected to the Glacier gas plant. The Valhalla facility will help alleviate
the current capacity limitation and is designed to separate wellhead liquids and transport liquids rich gas to Glacier for further
processing and liquids extraction. Engineering design has been completed with the majority of major equipment items to be
sourced from surplus equipment resulting from the Glacier gas plant expansion project. Construction is planned during the second
half of 2018 with the facility scheduled to be brought-on stream in the fourth quarter of 2018.
Wembley
Engineering evaluations are underway to assess facility designs
and pipeline options for transporting and processing liquids rich natural gas production from our Wembley land block. Prolific
development of this liquids rich area has resulted in limited processing capacity. Options currently under consideration include
transporting production back to our Glacier gas plant for processing and collaborating with third party processors and area producers
to maximize efficiencies. Advantage is in the process of working through stakeholder consultations in anticipation of securing
regulatory approvals targeted for 2019. Facility and pipeline construction is expected to occur during the first half of
2020; although, Advantage will be prepared to commence this work earlier if the timeline can be shortened.
Looking Forward
Our 2018 production guidance was updated recently to incorporate
our strategy to lower natural gas production in response to low AECO price periods and the extended Glacier plant outage which
occurred in the second quarter (refer to Advantage's press release dated April 19, 2018). Production for the second quarter
of 2018 is expected to be 205 to 215 mmcfe/d, including liquids production between 950 and 1,150 bbls/d with higher per unit total
corporate cash costs of $1.35/mcfe to $1.45/mcfe due to lower production. Annual 2018 production is estimated to average
between 240 and 255 mcfe/d with average liquids production of approximately 1,800 bbls/d and a year-end exit rate of 2,400 bbls/d.
Annual total corporate cash costs are estimated to be $1.10/mcfe to $1.30/mcfe. Advantage's 2018 capital program of
$175 million is expected to be approximately 60% invested during the first half of the year.
Advantage has successfully executed on its Montney development
at Glacier since 2008, achieving an industry leading low-cost structure, preserving a strong balance sheet and maintaining operational
and financial flexibility. This solid foundation which includes a significant liquids resource on our 200 net sections of Montney
lands provides flexibility to create long term value through multiple investment options as we respond promptly and responsibly
to market conditions. We look forward to reporting on our progress through the remainder of 2018.
First Quarter 2018 Operating and Financial Summary
| |
Three months ended |
| Financial and Operating Highlights |
March 31 |
| |
2018 |
|
2017 |
| |
|
|
|
| Financial ($000, except as otherwise indicated) |
|
|
|
| Sales including realized hedging |
$ |
73,378 |
|
$ |
72,957 |
| Net income and comprehensive income |
$ |
10,103 |
|
$ |
42,249 |
| |
per share(1) |
$ |
0.05 |
|
$ |
0.23 |
| Funds from operations |
$ |
48,882 |
|
$ |
53,792 |
| |
per share(1) |
$ |
0.26 |
|
$ |
0.29 |
| Total capital expenditures |
$ |
77,636 |
|
$ |
53,791 |
| Working capital deficit(2) |
$ |
13,779 |
|
$ |
10,895 |
| Bank indebtedness |
$ |
237,319 |
|
$ |
147,781 |
| Basic weighted average shares (000) |
185,963 |
|
184,842 |
| Operating |
|
|
|
| Daily Production |
|
|
|
| |
Natural gas (mcf/d) |
232,456 |
|
230,906 |
| |
Liquids (bbls/d) |
1,105 |
|
1,151 |
| |
Total mcfe/d(3) |
239,086 |
|
237,812 |
| |
Total boe/d(3) |
39,848 |
|
39,635 |
| Average prices (including hedging) |
|
|
|
| |
Natural gas ($/mcf) |
$ |
3.19 |
|
$ |
3.24 |
| |
Liquids ($/bbl) |
$ |
66.11 |
|
$ |
53.73 |
| Cash netbacks ($/mcfe)(3) |
|
|
|
| |
Natural gas and liquids sales |
$ |
2.70 |
|
$ |
3.17 |
| |
Realized gains on derivatives |
0.71 |
|
0.24 |
| |
Royalty expense |
(0.06) |
|
(0.10) |
| |
Operating expense |
(0.32) |
|
(0.23) |
| |
Transportation expense |
(0.57) |
|
(0.38) |
| Operating netback |
2.46 |
|
2.70 |
| |
General and administrative |
(0.08) |
|
(0.10) |
| |
Finance expense |
(0.10) |
|
(0.08) |
| Cash netbacks |
$ |
2.28 |
|
$ |
2.52 |
| |
| (1) |
Based on basic weighted average shares outstanding. |
| (2) |
Working capital deficit includes cash and cash equivalents, trade and other receivables, prepaid expenses and deposits and trade and other accrued liabilities. |
| (3) |
A boe and mcfe conversion ratio has been calculated using a conversion rate of six thousand cubic feet of natural gas equivalent to one barrel of liquids. |
The Corporation's unaudited interim condensed consolidated
financial statements for the three months ended March 31, 2018 together with the notes thereto, and Management's Discussion and
Analysis for the three months ended March 31, 2018 have been filed on SEDAR and with the SEC and are available on the Corporation's
website at http://www.advantageog.com/investors/financial-reports/financial-reports-2018.
Advisory
The information in this press release contains certain forward-looking statements, including within the meaning of the United
States Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future intentions or performance.
All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often,
but not always, identified by the use of words such as "seek", "anticipate", "plan", "continue",
"estimate", "guidance", "demonstrate", "expect", "may", "can", "will",
"project", "predict", "potential", "target", "intend", "could", "might",
"should", "believe", "would" and similar expressions and include statements relating to, among other
things, completion of expansion of the Corporation's Glacier gas plant, including the anticipated raw processing capacity and shallow
cut propane plus liquids extraction capacity following such expansion; Advantage's expectation that the expansion of the Corporation's
Glacier gas plant will support anticipated production growth; the Corporation's plans to lower natural gas production and defer
dry gas well completions; Advantage's targeted increase in liquids production for 2019 and 2020 and the expected effect of such
production on netbacks and cash flows; the anticipated source of liquids production growth in 2018, 2019 and 2020 and the
effect of such increased liquids production on the Corporation's revenue portfolio and AECO exposure; estimated recoverable C3+
liquid rates, combined gas rates and average C3+ liquids yields from certain wells at Glacier; anticipated timing of completion
of a horizontal acid gas disposal well at Glacier, and the effect of such well on additional acid gas disposal capacity; the status
of Advantage's first compressor and liquids handling facility at Valhalla, including expected gas and liquids handling capacity,
the effect of such facility on current capacity limitations, and the targeted timing of construction and completion of such facility;
options under consideration for transporting and processing production at Wembley, including the anticipated timing of securing
regulatory approvals and commencing facilities and pipeline construction; Advantage's anticipated annual 2018 production guidance
range, including expected total production and liquids production for the second quarter of 2018, expected amount of total production
and liquids production for 2018 and expected exit liquids production; Advantage's capital program for 2018, including the expected
timing of incurring capital expenditures; the factors that Advantage believes will provide Advantage with the ability to respond
promptly and responsibly to market conditions; and other matters. Advantage's actual decisions, activities, results, performance
or achievement could differ materially from those expressed in, or implied by, such forward-looking statements and accordingly,
no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur or, if
any of them do, what benefits that Advantage will derive from them.
These statements involve substantial known and unknown
risks and uncertainties, certain of which are beyond Advantage's control, including, but not limited to: changes in general economic,
market and business conditions; industry conditions; impact of significant declines in market prices for oil and natural gas; actions
by governmental or regulatory authorities including increasing taxes and changes in investment or other regulations; changes in
tax laws, royalty regimes and incentive programs relating to the oil and gas industry; the effect of acquisitions; Advantage's
success at acquisition, exploitation and development of reserves; failure to achieve production targets on timelines anticipated
or at all; unexpected drilling results; changes in commodity prices, currency exchange rates, capital expenditures, reserves or
reserves estimates and debt service requirements; the occurrence of unexpected events involved in the exploration for, and the
operation and development of, oil and gas properties, including 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; changes or fluctuations in production levels; individual well productivity; lack of available capacity on pipelines; delays
in anticipated timing of drilling and completion of wells; delays in completion of the expansion of the Glacier gas plant; delays
in completion of the facility at Valhalla; delays in construction and completion of other infrastructure projects; that test results
are not indicative of future production rates; lack of available capacity on pipelines; competition from other producers; the lack
of availability of qualified personnel or management; credit risk; changes in laws and regulations including the adoption of new
environmental laws and regulations and changes in how they are interpreted and enforced; our ability to comply with current and
future environmental or other laws; stock market volatility and market valuations; liabilities inherent in oil and natural gas
operations; uncertainties associated with estimating oil and natural gas reserves; competition for, among other things, capital,
acquisitions of reserves, undeveloped lands and skilled personnel; incorrect assessments of the value of acquisitions; geological,
technical, drilling and processing problems and other difficulties in producing petroleum reserves; ability to obtain required
approvals of regulatory authorities; and ability to access sufficient capital from internal and external sources. Many of these
risks and uncertainties and additional risk factors are described in the Corporation's Annual Information Form dated March 5, 2018,
which is available at www.Sedar.com and www.advantageog.com. Readers are also referred to risk factors described in other documents
Advantage files with Canadian securities authorities.
With respect to forward-looking statements contained in
this press release, Advantage has made assumptions regarding, but not limited to: timing of regulatory approvals; conditions in
general economic and financial markets; effects of regulation by governmental agencies; current and future commodity prices and
royalty regimes; future exchange rates; royalty rates; future operating costs, cash costs and liquids transportation costs; frac
stages per well; lateral lengths per well; well costs; expected annual production growth rates; availability of skilled labor;
availability of drilling and related equipment; timing and amount of capital expenditures; the impact of increasing competition;
the price of crude oil and natural gas; 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; 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
properties in the manner currently contemplated; available pipeline capacity; that the Corporation will be able to complete the
expansion and increase capacity at the Glacier gas plant; that Advantage's production will increase; current or, where applicable,
proposed assumed industry conditions, laws and regulations will continue in effect or as anticipated; and that the estimates of
the Corporation's production and reserves volumes and the assumptions related thereto (including commodity prices and development
costs) are accurate in all material respects. Production estimates contained herein are expressed as anticipated average production
over the calendar year. In determining anticipated production for the year ended December 31, 2018 Advantage considered historical
drilling, completion and production results for prior years and took into account the estimated impact on production of the Corporation's
2018 expected drilling and completion activities.
Management has included the above summary of assumptions
and risks related to forward-looking information in order to provide shareholders with a more complete perspective on Advantage's
future operations and such information may not be appropriate for other purposes. Advantage'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 Advantage 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 Advantage 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.
This press release contains a number of oil and gas metrics,
including operating netbacks, which do not have standardized meanings or standard methods of calculation and therefore such measures
may not be comparable to similar measures used by other companies and should not be used to make comparisons. Such metrics have
been included herein to provide readers with additional measures to evaluate the Corporation's performance; however, such measures
are not reliable indicators of the future performance of the Corporation and future performance may not compare to the performance
in previous periods and therefore such metrics should not be unduly relied upon. Management uses these oil and gas metrics for
its own performance measurements and to provide securityholders with measures to compare Advantage's operations over time. Readers
are cautioned that the information provided by these metrics, or that can be derived from the metrics presented in this news release,
should not be relied upon for investment or other purposes.
References in this press release to flow rates and other
short-term production rates are useful in confirming the presence of hydrocarbons, however such rates are not determinative of
the rates at which such wells will commence production and decline thereafter and are not indicative of long term performance or
of ultimate recovery. Additionally, such rates may also include recovered "load oil" fluids used in well completion stimulation.
While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production of Advantage.
Barrels of oil equivalent (boe) and thousand cubic feet
of natural gas equivalent (mcfe) may be misleading, particularly if used in isolation. Boe and mcfe conversion ratios have been
calculated using a conversion rate of six thousand cubic feet of natural gas equivalent to one barrel of oil. A boe and mcfe conversion
ratio of 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.
The Corporation discloses several financial measures that
do not have any standardized meaning prescribed under International Financial Reporting Standards ("IFRS"). These financial
measures include operating netbacks, cash netbacks, cash costs and total debt to annualized cash flow ratio. Cash netbacks are
dependent on the determination of funds from operations and include the primary cash sales and expenses on a per mcfe basis that
comprise funds from operations. Total debt to cash flow ratio is calculated as indebtedness under the Corporation's credit facilities
plus working capital deficit divided by funds from operations for the prior twelve month period. Management believes that these
financial measures are useful supplemental information to analyze operating performance and provide an indication of the results
generated by the Corporation's principal business activities. Investors should be cautioned that these measures should not be construed
as an alternative to net income or other measures of financial performance as determined in accordance with IFRS. Advantage's method
of calculating these measures may differ from other companies, and accordingly, they may not be comparable to similar measures
used by other companies. Please see the Corporation's most recent Management's Discussion and Analysis, which is available at www.sedar.com
and www.advantageog.com for additional information about these financial measures, including a reconciliation of funds from operations
to cash provided by operating activities.
| The following abbreviations used in this press release have the meanings set forth below. |
|
| |
|
| bbls/d |
barrels per day |
| boe |
barrels of oil equivalent of natural gas, on the basis of one barrel of oil or NGLs for six thousand cubic feet of natural gas |
| boe/d |
barrels of oil equivalent per day |
| GJ |
gigajoule |
| GJ/d |
gigajoules per day |
| mboe |
thousand barrels of oil equivalent |
| mcf |
thousand cubic feet |
| mcf/d |
thousand cubic feet per day |
| mcfe |
thousand cubic feet equivalent on the basis of six thousand cubic feet of natural gas for one barrel of oil or NGLs |
| mcfe/d |
thousand cubic feet equivalent per day on the basis of six thousand cubic feet of natural gas for one barrel of oil or NGLs |
| mmcf/d |
million cubic feet per day |
| mmcfe/d |
million cubic feet equivalent per day |
View
original content:http://www.prnewswire.com/news-releases/advantage-announces-first-quarter-2018-operating--financial-results-300642670.html
SOURCE Advantage Oil & Gas Ltd.
View original content: http://www.newswire.ca/en/releases/archive/May2018/03/c7449.html
%CIK: 0001468079
For further information: Craig Blackwood, Vice President,
Finance and Chief Financial Officer, (403) 718-8005 OR Investor Relations, Toll free: 1-866-393-0393; ADVANTAGE OIL & GAS LTD.,
300, 440 - 2nd Avenue SW, Calgary, Alberta T2P 5E9, Phone: (403) 718-8000, Fax: (403) 718-8332, Web Site: www.advantageog.com,
E-mail: ir@advantageog.com
CO: Advantage Oil & Gas Ltd.
CNW 22:00e 03-MAY-18
This regulatory filing also includes additional resources:
ex991.pdf
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