Quarterly / Earnings Reports | Debt | Second Quarter (2Q) Update | Production Rates | Forecast - Production | Capital Markets | Capital Expenditure | Drilling Program

TORC Oil and Gas to Drill 9 Cardium Wells in H2

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TORC Oil & Gas Ltd. has announced its financial and operating results for the three and six months ended June 30, 2015.

In the second quarter, TORC closed the strategic acquisition of 4,750 boepd of low decline, high netback light oil assets in southeast Saskatchewan and Manitoba. To date in 2015, TORC has added more than 6,000 boepd of high quality assets through acquisitions, strengthening the Company's netback, continuing to improve the decline profile, adding top tier light oil drilling locations and improving the Company's overall capital efficiencies.

Highlights:

• Achieved record quarterly production of 13,910 boepd, up from 12,539 boepd in the first quarter of 2015 and 11,116 boepd in the second quarter of 2014;
• Generated cash flow of $37.4 million relative to $26.4 million in the first quarter of 2015 and $50.7 million in the second quarter of 2014;
• Drilled 1 (1.0 net) well and initiated the second half drilling program;
• Expanded the Company's credit facility to $550 million from $425 million;
• At quarter end, the Company was drawn $227.8 million on its credit facility, with net debt of approximately $269.9 million; and
• During the second quarter, TORC completed the strategic acquisition of complementary southeast Saskatchewan properties producing 4,750 boepd (98% light oil and liquids) financed by a bought deal public offering and a private placement to CPPIB.

Operational Update

• TORC achieved record production of 13,910 boepd during the second quarter, which is traditionally the least active quarter from a capital expenditure perspective. 
• TORC spent a total of $13.1 million of exploration and development capital in the second quarter, including drilling 1 (1.0 net) well with 100% success. Combined with the first quarter, total first half capital spending was $46.7 million.
• Despite growing total production by approximately 50% since the beginning of the year, TORC will maintain the Company's original $125 million 2015 capital program during this challenging commodity price cycle. With only $46.7 million spent in the first half of 2015, TORC expects to maintain a flexible but active second half capital program. 
• TORC currently has drilling rigs running in both the Cardium and southeast Saskatchewan core areas. To prudently manage both economic and financial flexibility, TORC has elected to defer the originally planned Monarch capital program until 2016, reallocating capital to projects in the Company's other core areas.

SE Saskatchewan

• TORC drilled 1 (1.0 net) southeast Saskatchewan Torquay/Three Forks delineation well in the second quarter of 2015. Additional activity included the completion of two wells which were drilled in the first quarter. These wells were brought on production in the third quarter.
• With continued success in the Torquay/Three Forks delineation program, TORC is expanding its originally planned drilling in the Torquay/Three Forks play in 2015 with an additional 1.5 net wells bringing the total 2015 Torquay/Three Forks drilling program to 9 (6.5 net) wells with an increased focus on development projects.
• With the expansion of the southeast Saskatchewan core area from two strategic acquisitions in the first half of 2015, which included a significant inventory of high quality conventional locations, the Company now plans to drill 15 net additional southeast Saskatchewan/Manitoba conventional wells in 2015, bringing the total number of planned conventional wells to 21 net. Pro forma the two strategic acquisitions, TORC has now identified over 360 net undrilled conventional locations in southeast Saskatchewan providing numerous years of high quality drilling inventory.

Cardium

• In 2015, the Company has budgeted to drill 12.8 net Cardium wells representing less than 5% of TORC's identified undrilled inventory. As planned, no Cardium wells were drilled in the second quarter. TORC has begun actively executing its remaining 2015 Cardium program which includes 9 (7.7 net) wells spread across TORC's land position.
• A portion of TORC's Cardium production in the Brazeau area was affected in the second quarter as a result of outages on the TransCanada Pipeline system. These outages are expected to continue into the second half of the year. Despite these shut in volumes, the Company is positioned to meet yearly and exit production guidance as a result of strong performance from the Company's underlying asset base.
• With TORC having greater than 95 net light oil sections in the Cardium trend where the Company has identified more than 290 net undrilled locations, TORC has several years of high quality, lower risk drilling locations on a maturing asset to continue to drive free cash flow growth inside TORC's disciplined growth plus dividend model.

Monarch

• As planned in the original 2015 budget, there have been no capital activities in the first half of 2015 at Monarch. As a result of the uncertainty of the current commodity price environment and its impact on relative economics at Monarch compared to other assets in the Company's portfolio, the Company plans to defer capital activity at Monarch into 2016 and reallocate this capital to projects with lower up front capital costs.

Strategic Acquistions

• During the second quarter, TORC completed the acquisition of complementary light oil assets in southeast Saskatchewan. The strategic acquisition included 4,750 boepd (~98% light oil and liquids) of operated, low decline, high netback, light oil producing assets. In addition, the acquisition included ownership of freehold mineral title on more than 80 net sections of land in southeast Saskatchewan. This strategic transaction has expanded TORC's southeast Saskatchewan core area to approximately 70% of the Company's total production base.
• With TORC's experience and established operations in southeast Saskatchewan, the integration of the assets has been very smooth and the complementary acquisition has strengthened and enhanced TORC's business model which is focused on delivering disciplined growth and a sustainable dividend to shareholders.

Capital and Production Guidance

• TORC has achieved 50% growth in production since the beginning of the year through opportunistic acquisitions. TORC intends to maintain the previously announced capital budget of $125 million in order to maintain financial flexibility and sustainability. TORC's underlying asset base continues to exhibit strong performance and provides a position of strength during this phase in the cycle. TORC continues to focus on initiatives to preserve financial flexibility and improve capital efficiencies and operating costs. Service cost reductions experienced in early 2015 ranged between 5-10%. Further cost savings coupled with improved operational efficiencies are expected in the second half of 2015. TORC will incorporate those reductions in the budgeted capital program as they are realized during the second half of the year.
• With more than 60% of TORC's capital budget to be spent in the second half of the year, TORC remains in a strong position to achieve production guidance of 15,400 boepd (87% light oil and liquids) and an exit rate of greater than 18,200 boepd (89% light oil and liquids).