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Legacy Highlights Bakken Spending, Villanova Acquisition in Q2

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Legacy Oil + Gas Inc. has reported its results for the three and six months ended June 30, 2013 . 

Accomplishments:

• Increased average production from 15,075 Boe per day in the second quarter of 2012 to 18,164 Boe per day in the second quarter of 2013 (20 percent increase)
• Increased oil and NGL's weighting from 85 percent in the second quarter of 2012 to 89 percent in the second quarter of 2013
• Increased funds generated from operations of $47.4 million in the second quarter of 2012 to a record $71.3 million in the second quarter of 2013 (50 percent increase)
• Increased funds generated from operations of $0.33 per share in the second quarter of 2012 to a record $0.46 per share in the second quarter of 2013 (39 percent increase)
• Legacy's operating netbacks increased year over year from $41.16 per Boe in the second quarter of 2012 to a record $52.30 per Boe in the second quarter of 2013 (27 percent increase), in spite of only a one percent increase in WTI prices
• Reduced operating expenses from $14.34 per Boe in the second quarter of 2012 to $13.71 per Boe for the second quarter of 2013 (4 percent decrease)
• Reduced total operating costs (operating plus transportation costs) from $17.76 in the second quarter of 2012 to $16.39 in the second quarter of 2013 (8 percent decrease).  This represents the sixth consecutive quarter of reduced per Boe operating plus transportation costs
• Reduced G&A expenses from $3.57 per Boe in the second quarter of 2012 to $2.66 per Boe in the second quarter of 2013 (25 percent decrease)
• Drilled 35 gross (28.6 net) light oil wells in the second quarter of 2013, with a 100 percent success rate
• The Herriman #6 well set a modern era Turner Valley single day production record of 700 Boe per day and the 30 day rate averaged 535 Boe per day with production not fully optimized.  Current rate is in excess of 500 Boe per day
• Drilled successful step-out Midale wells at Steelman, Taylorton, Pinto and Alameda South, proving up numerous additional development locations
• Expanded pilot waterfloods at Taylorton, Heward and Frys/Antler
• Significantly increased crude oil hedging program to 8,000 Bbls per day at WTI C$98.31/Bbl for the first half of 2013, 8,000 Bbls per day at WTI C$96.71/Bbl for the first half of 2014 and 2,000 Bbls per day at WTI C$95.49/Bbl for the first half of 2014
• Legacy's banking syndicate increased the borrowing base from the previous $525 million to $600 million , bringing total borrowing capacity to $800 million 
• Legacy announced the closing of the acquisition of Villanova Oil Corp. and the acquisition of light oil assets from a senior producer.  Combined, these acquisitions added 1,775 Boe per day of production (90 percent light oil, average 39 API) and 9.1 MMBoe of Proved plus Probable reserves

Operations Overview

In the second quarter of 2013, the Company drilled 35 gross (28.6 net) light oil wells, with a 100 percent success rate.  Due to a less severe than anticipated spring break-up in the Company's Williston Basin core area, drilling operations were able to commence in mid-May enabling an acceleration of capital spending in the quarter.  Production volumes were marginally impacted by the heavy rains and subsequent flooding in southern Alberta.  Various portions of the Turner Valley Field were shut-in as a precautionary measure, however production was restored within days of the flood waters subsiding.  The Company continues to be on track to meet its previously announced increased full year production and capital expenditure guidance.

Turner Valley

At Turner Valley, Legacy has continued to evolve drilling and completion practices to optimize both production rate and capital costs. Drilling to-date has targeted infill locations testing areas of varying water cut, reservoir pressure, proximity to water injection and three different stratigraphic horizons.  New logging while drilling (LWD) equipment and the recently acquired 3D seismic have enabled longer horizontal drilling runs (greater than 90 percent) in the pay zones increasing reservoir exposure in these multi-lateral horizontal wells. Legacy's most recent wells at Candor #2, Hartell #7 and now Herriman #6 exemplify the successful evolution of the development at Turner Valley.

Candor #2 was brought on production in late March and has an average 30 day initial production rate of 375 Boe per day, with a peak production rate of 485 Boe per day.  This well is currently producing at a stable 225 Boe per day with a zero percent watercut.  Legacy's Hartell #7 has an average 30 day initial production rate of 135 Boe per day and is currently at 160 Boe per day with a high fluid level.  Herriman #6 set a modern era Turner Valley single day production record of 700 Boe per day and the 30 day rate averaged 535 Boe per day with production not fully optimized.  Current rate is approximately 500 Boe per day with a 33 percent watercut.

Conventional Mississippian

Legacy continues to show strong success in Steelman, with three successful wells being put on production in the second quarter of 2013. Average 30 day initial production rates from these wells was 260 Boe per day per well.  With the commissioning of the new Steelman battery and tie-in of the wells, area production of 3,500 Boe per day was achieved in April 2013.  Two years ago production from the Steelman area was approximately 350 Boe per day.

The Company has successfully expanded the boundaries of the Midale play with its drilling activity in the quarter.  Two horizontal offsets to the Midale new pool discovery at Taylorton have been drilled, with the first well producing in excess of 350 Boe per day.  A two mile step-out well at Pinto has an average 30 day initial production rate of 235 Boe per day and has proved up additional development locations.  An offset horizontal well was drilled at Pinto East (Alameda South) and is producing 225 Boe per day while flowing for the last four weeks.  Numerous follow-up locations have been identified in all areas, with additional drilling planned for 2013.

Spearfish

At Pierson, Manitoba, results continue to meet the Legacy established historical type curve.  The Company drilled 4 (3.4 net) wells in the second quarter 2013.  Company operated wells have outperformed area competitors' wells with respect to recoverable reserves and lower capital costs, in spite of Legacy drilling mile long horizontal laterals versus competitors drilling half-mile horizontal laterals.

In North Dakota, the Company has had similar success in the Spearfish.  Favourable surface access conditions permitted the drilling of 9 (6.3 net) wells in the second quarter 2013.

Waterfloods

At Taylorton, the Company has continued to observe improved waterflood response in the Bakken Formation in both the original and expanded pilot areas.  A total of five wells have been converted to water injection, expanding the pilot area to cover portions of four sections.

At Heward, the pilot Bakken waterflood project initiated in December 2011 continues to demonstrate waterflood response as the oil production rate in eight offsetting wells has increased since the commencement of the pilot.  The Company is rapidly expanding the waterflood pilot project from three injectors with four additional water injector conversions anticipated in the third and fourth quarter of 2013.

At Frys/Antler, a pilot waterflood initiated in December 2012 in the Torquay Formation has shown early signs of response.  Approval has been received to expand the pilot to the offsetting sections.  The analogous field at Sinclair, located immediately east of Frys/Antler now has 34 sections under waterflood and has seen oil production rate increases ranging from 50 to 100 percent after waterflood response.

At Pierson, applications are being prepared for two pilot waterfloods, with anticipated approvals late in the third quarter of 2013.  The Spearfish Formation has been successfully waterflooded over the past 20 years in six different project areas that are good analogs to Legacy's proposed pilot.

Legacy has made application at Steelman for its first water injector and is working on additional water injection conversions. The Midale Formation has been successfully waterflooded for more than 50 years in the offsetting Steelman units.

Acquisitions

Legacy acquired all of the issued and outstanding shares of Villanova Oil Corp., a Saskatchewan based private oil company, pursuant to a plan of arrangement under the Business Corporations Act (Alberta), for $21.3 million cash consideration and the issuance of 13.9 million Legacy common shares.  Also in the second quarter, Legacy closed the acquisitions of light oil assets in the Company's core areas of Turner Valley and Taylorton from a senior producer for total cash consideration of $57.5 million plus Legacy's minor working interest in the Freda Lake Unit.

Increase to Bank Borrowing Base

The Company's syndicate of Canadian banks increased the Company's borrowing base to $600 million from the previous $525 million .  In addition, security for the facility in the form of a fixed and floating charge debenture has been increased to $1 billion from the previous $750 million , and the term-out date for the facility was extended to April 25, 2014.  The borrowing base continues to be subject to semi-annual review, the next of which is scheduled to occur in October 2013.