Quarterly / Earnings Reports | Second Quarter (2Q) Update

Advantage Oil & Gas Details Q2 2019 Results

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Advantage Oil & Gas Ltd. reported solid operating and financial results for the second quarter of 2019 with liquids production growth of 142%, strong market diversification gains of $16 million and continued low costs.

The Corporation's second quarter operational highlights were substantially reported in our press release dated July 8, 2019 and included successful liquids-rich well results, commissioning of a new liquids handling facility at Valhalla and dry gas production curtailments in response to periods of very low AECO natural gas prices.  In addition, Advantage secured 76 mmcf/d of firm NGTL capacity to Empress, which will substantially eliminate AECO exposure by 2021.

These operational and financial achievements demonstrate the ongoing disciplined execution of Advantage's multi-year liquids development program and our transition to increasing liquids revenues.

Highlights:

• First half of 2019 production was 43,935 boe/d (17% higher than 2018). Second quarter 2019 production was 42,982 boe/d (22% higher than 2018)
• First half 2019 liquids production was 2,306 bbls/d (112% higher than 2018). Second quarter 2019 liquids production was 2,580 bbls/d (142% higher than 2018). Liquids production reached approximately 2,900 bbls/d (71% C5+/Oil) in July
• Generated adjusted funds flow^(a) of $82.8 million ($0.44/share) for the first half of 2019, and $32.8 million ($0.18/share) for the second quarter. Adjusted funds flow exceeded net capital expenditures by $6 million in the first half of 2019
• Achieved $21.6 million of gains from our market diversification portfolio including $13.6 million of hedging gains over the six months of 2019. This resulted in an average realized natural gas price of $2.65/mcf compared to the average daily AECO price of $1.82/mcf
• Maintained low costs including royalty costs of $0.28/boe, operating costs of $1.95/boe, transportation costs of $3.48/boe and general & administrative costs of $0.63/boe over the first half of 2019
• Retained strong financial flexibility with total debt to adjusted funds flow^(a) of 1.7x at the end of the second quarter 2019
• Secured an additional 76 mmcf/d of firm NGTL transportation capacity to Empress, AB in two tranches commencing November 2020 and November 2021 providing additional downstream capacity to continental markets and virtually eliminating AECO price exposure by 2021

Outlook

During the second half of 2019, Advantage will bring 11 standing liquids-rich wells onstream at east Glacier and Valhalla; the 12-25 Pipestone/Wembley well (see Advantage press release dated March 5, 2018) is expected to begin production in September 2019 when Tidewater's new Pipestone gas plant is scheduled to be commissioned.  Construction of our Wembley liquids handing facility will begin in September and is targeted for completion in second quarter of 2020.  

Advantage retains flexibility to moderate capital spending by up to $30 million through the second half of 2019 with no impact expected to our 2019 production guidance. Any reductions to the capital program will be prioritized to minimize the impact on our high-returns liquids projects and will be intended to preserve mid-term total debt to adjusted funds flow^(a) ratio below two times. 

The Corporation's 2019 net capital expenditures^(a) guidance range remains between $180 and $200 million. Our 2019 annual production guidance range remains between 43,500 and 46,500 boe/d (261 and 279 mmcfe/d), including liquids production between 2,900 and 3,200 bbls/d.

In the third quarter of 2019, Advantage is prepared to continue restricting AECO-exposed dry natural gas production if there are periods of extremely low prices.  However, the Corporation has adequate productive capacity to achieve 2019 gas production targets, so long as prices justify steady production in the second half. Liquids production is expected to continue increasing throughout the second half of 2019.

Advantage will remain diligent in monitoring commodity and industry trends and respond accordingly to retain a strong balance sheet while advancing our multi-year strategy to increase liquids development and enhance shareholder returns.

Q2 2019 Operating and Financial Summary