Current AAV Stock Info

Advantage is expanding gas plant capacity to handle Glacier field production

Calgary-based Advantage Oil and Gas Limited (ticker: AAV) is an oil and gas development company focused on the Montney resource play in Northern Alberta. The company’s shares are traded on both the TSX and NYSE.

Advantage operates 169 wells and holds a 100% working interest in an associated gas plant in the Glacier field, which produces from the Montney formation. The plant was upgraded to its current 250 MMcf/d capacity in 2015, with plans to expand capacity to 350 MMcf/d under review. The latest plant expansion is planned to begin in early 2017.

The company announced that it increased land holdings by 150 net sections, including seven sections in the Glacier field, with a transaction for C$5.8 million in its second quarter results. This land acquisition added approximately 100 future Glacier drilling locations bringing the total to 1100.

Production increased for the company during Q2 to an average of 210.3 MMCfe/d from 164.6 MMcfe/d in the first quarter. An inventory of 22 wells not on production with 14 still uncompleted will allow the company to have control of growth based on the gas market.

Operational efficiency has been improving for the company. Advantage brought gas to market at a cash cost of C$0.59/mcfe.

Advantage Oil & Gas operational efficiencies

The company experienced a net loss of C$15 million for the first half 2016, or C$0.08 per share. For the same period in 2015, Advantage reported a net income of C$2 million. The bank debt load as of June 30, 2016 was C$194 million compared to C$286.5 million on December 31, 2015. C$84.6 million of that reduction from the net proceeds of an equity financing deal that closed March 8, 2016. This equity financing increased outstanding shares by 13.7 million to a total of 184.5 million.

A hedging position of 50% of expected production for the second half 2016 is in place at an average floor price of C$3.56/mcf. The realized hedging gains were C$20 million in Q2 2016. In addition, the company holds hedges for 41% of forecasted 2017 production and 17% of forecasted 2018 production both at floor pricing above C$3.00/mcf.

Capital expenditures were C$18 million for the second quarter and were in line with expectations, which includes previously mentioned acquisition activity during the first half, with a yearly capex budgeted at C$125 million.

“The low total cash cost structure has resulted from ongoing successes at our Montney resource development located at Glacier, Alberta,” management said in the company’s second quarter results.

Advantage is a presenter at the EnerCom conference in Denver next week. Advantage presents on Monday, Aug. 15. You can find registration details for the conference are here.


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