Exploration & Production | Capital Markets | Capital Expenditure

Legacy O&G Targets Light Crude in Bakken, Drilling 124 Net Wells in 2014

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Legacy Oil + Gas Inc. has announced its capital and operating budget and associated public guidance for 2014.

Continued success in the Company's Turner Valley , Midale and Spearfish plays have added significantly to production volumes and drilling inventory. These areas, along with expansion of the Company's waterflood pilots, will play key roles in 2014 organic activity and growth.

Legacy expects to spend $350 million in 2014 focused on light oil development with the majority of capital (85 percent) directed to drilling, completions and tie-ins.

The capital spending is distributed as follows:

• drilling, completions and tie-ins - $297 million ;
• facilities - $32 million ;
• land and seismic - $16 million and other - $5 million .

The majority of the capital spending will be allocated to the Company's major plays:

• Taylorton/Pinto - $102 million (29 percent),
• Spearfish ( Manitoba and North Dakota ) - $60 million (17 percent),
• Turner Valley - $57 million (16 percent),
• Steelman / Alameda - $42 million (12 percent) and
• Manor/Wordsworth - $20 million (6 percent).

Legacy is planning to drill 159 gross (124.2 net) wells in 2014, targeting high quality light oil. In addition to drilling, the Company is planning capital expenditures on expansion of the successful pilot waterfloods at Frys/ Antler , Heward and Taylorton/Pinto, as well as implementation of pilot waterfloods at Pierson , Steelman and Star Valley. No capital has been budgeted for acquisitions, although the Company continues to evaluate new opportunities, both within and beyond its core areas.

Legacy anticipates a 2014 average production rate of 21,350 Boe per day, representing growth of 12 percent over 2013 expected average production. This production target includes the tie-in of significant associated natural gas volumes at the Company's successful Midale play. Similar to previous years, the Company is planning an active first quarter program, with capital spending of approximately $140 million , drilling 69 gross wells.

The Company has incorporated a significant reduction in second quarter volumes to account for the possibility of an extended spring break up and planned turnarounds in its core areas, particularly the non-operated gas plant at Quirk Creek which processes Turner Valley natural gas. Legacy expects to exit 2014 at approximately 23,650 Boe per day.

The operational parameters used in the budget are as follows:

• Average Production - 21,350 Boe per day (88 percent light oil and NGL)
• Exit Production - 23,650 Boe per day (87 percent light oil and NGL)
• Average Crude Quality - 39⁰ API
• Royalty Rate - 15.7 percent
• Operating Costs - $13.25 per Boe
• Transportation Costs - $3.00 per Boe
• G&A (expensed) - $2.35 per Boe
• Common Shares Outstanding (basic, weighted average) - 157.2 million
• Hedging - 9,000 Bbl/day at C$97.47 /Bbl WTI first half 2014 and 5,000 Bbl/day at C$98.15 /Bbl WTI second half 2014.

Legacy begins 2014 with an extensive light oil development drilling inventory of more than 2,000 net locations, which represents over 15 years of development potential, based on expected 2014 activity levels. This significant opportunity set does not reflect the upside from the waterflood potential at Frys/ Antler , Taylorton, Heward / Stoughton and the Spearfish, and recognizes only a portion of the Bottineau County, North Dakota Spearfish drilling potential. Furthermore, Legacy has material exposure to emerging light oil resource plays in southern Alberta for Alberta Bakken (through the Company's investment in LGX Oil + Gas Inc.), which could add significant value to the Company.