Exploration & Production | Quarterly / Earnings Reports

Longview to Maintain Saskatchewan Midale Focus

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Longview Oil Corp. has reported the financial and operating results for the quarter ended June 30, 2013.

Message to Shareholders

Funds from operations increased by 54% in the second quarter of 2013 to $16.7 million from $10.8 million received in the second quarter of 2012.

On a per share basis, funds from operations for the second quarter of 2013 was $0.36 per share versus $0.23 per share in Q2 2012, an increase of 54%.

The increase in funds from operations is attributable to higher crude oil production and strengthening pricing for Canadian oil sales.

Our payout ratio during the second quarter of 2013 was 56% as compared to the corresponding period in 2012 which was 114%.

The payout ratio for the first six months of 2013 was 97% versus 125% in the first half of 2012.

Preservation of a sustainable payout ratio is the cornerstone of our business strategy which is based on the maintenance of a solid balance sheet while funding our dividend payments and capital expenditure programs primarily with funds from operations.

Crude oil production increased by 9% in the second quarter of 2013 to 4,302 bbls/d from 3,947 bbls/d in Q2 2012.

The gains in crude oil production are the result of our successful drilling and completion programs that have been entirely focused on the continuing development of our light oil assets.

Total production rose by 3% to 6,041 boe/d in Q2 2013 from 5,881 boe/d in Q2 2012 as gains in higher value crude oil production more than offset reductions in natural gas and NGL production.

Crude oil revenue, which comprised 87% of total revenue in the second quarter of 2013, increased by 27% to $33.2 million from $26.2 million in Q2 2012.

The WTI/Canadian oil price differential narrowed significantly in the second quarter of 2013 to $3.16 /bbl as compared to $10.20 /bbl in 2012.

The price of WTI increased slightly in the second quarter of 2013 averaging $94.23 /bbl versus $93.51 /bbl last year and the Canadian/US dollar was relatively unchanged.

WTI oil prices have strengthened further heading into the third quarter of 2013 and the WTI/Canadian oil price differential remains at levels significantly below those experienced last year.

Operating netbacks increased by 57% from $22.82 /bbl in Q2 2012 to $35.85 /bbl in the second quarter of 2013.

Both operating costs and royalty expenses were held constant with prior year levels as ongoing cost reduction efforts are offsetting inflationary pressures seen throughout the Western Canadian sedimentary basin.

Our Q2 2013 capital program experienced delays due to extreme spring break-up conditions which continue to hamper our ability to drill and complete wells throughout SE Saskatchewan and Alberta.

We spud 2 gross (1.5 net) wells in SE Saskatchewan late in the second quarter of 2013 that were rig released in July.

Commodity Hedging Program

Longview's hedging program for calendar 2013 and 2014 includes crude oil hedges of 1,000 bbls/d at $90.29 /bbl for January to December 2013 and 1,000 bbls/d at $93.00 /bbl for February to December 2013 as well as 2,000 bbls/d at $94.84 /bbl for January to December 2014 .

The Corporation will continue to hedge a portion of its production in the future in order to provide stability to cash flow in order to fund our dividend payments and capital expenditure program.

Looking Forward

Longview's business strategy is to provide shareholders with attractive long term returns that combine both income and moderate growth by exploiting our assets in a financially disciplined manner and by acquiring additional long-life oil and gas assets of a similar nature. Longview has a base decline rate of approximately 19% which allows the Company to maintain production with a modest level of capital expenditures, as demonstrated during 2012 and 2011.

Our 2013 capital program is designed to maintain production at 2012 levels while maintaining a sustainable payout ratio. Our planned capital program for the second half of 2013 is $21.5 million and will be focused on further development of the Midale formation in Southeast Saskatchewan where we have an extensive land base, high working interest and existing infrastructure. In addition, we plan on continuing to advance our waterflood projects across Alberta during the second half of 2013 through the drilling of several injection wells and further enhancement of water injection facilities.