TORC Oil & Gas Ltd. Announces Third Quarter 2014 Financial & Operational Results; A Series of Strategic Acquisitions; And Increase to 2014 Production Guidance

CALGARY, Nov. 13, 2014 /CNW/ - TORC Oil & Gas Ltd. ("TORC" or the "Company") (TSX: TOG) is pleased to announce its financial and operating results for the three and nine months ended September 30, 2014.  The associated Management's Discussion and Analysis ("MD&A") and unaudited interim financial statements as at and for the three and nine months ended September 30, 2014 can be found at www.sedar.com and www.torcoil.com.

PRESIDENT'S MESSAGE

The Company's key achievements in the third quarter of 2014 included the following:

• Achieved record quarterly production of 11,436 boepd in the third quarter of 2014, up from 11,116 boepd in the second quarter of 2014 and 5,706 boepd in the third quarter of 2013;
  
  
• Generated cash flow of $49.0 million relative to $50.7 million in the second quarter of 2014 and $23.9 million in the third quarter of 2013;
  
  
• Cash flow per share was $0.52 per basic share in the third quarter of 2014 compared to $0.55 in the second quarter of 2014 and $0.48 per share in the third quarter of 2013;
  
  
• Drilled 16 (10.9 net) wells in the third quarter of 2014 with 100% success;
  
  
• At quarter end, the Company was drawn $141 million on an available $375 million credit facility, with total net debt of approximately $213 million;
  
  
• Net debt to annualized third quarter cash flow was 1.1 times;
  
  
• Paid dividends of $0.135 per share to shareholders in the third quarter of 2014;
  
  
• Entered into several tuck-in asset acquisitions in TORC's core Cardium and southeast Saskatchewan areas adding high netback production and high quality development drilling locations along with additional prospective acreage in the emerging Torquay/Three Forks play;
  
  
• Subsequent to quarter end, the Company expanded its available credit facility to $425 million from $375 million;
  
  
• Subsequent to quarter end, the Company successfully completed a non-brokered private placement of flow-through common shares for gross proceeds of $19.7 million;
  
  
• With continued operational outperformance and subsequent tuck‐in acquisition activity, the Company is increasing its 2014 average production forecast to more than 11,200 boepd (~85% light oil and liquids) from the previous 11,050 boepd estimate and 2014 exit production forecast to more than 11,900 boepd (~85% light oil and liquids) from the previous guidance of 11,400 boepd.

OPERATIONAL UPDATE

With continued success of the 2014 capital program and the Company's solid underlying base production profile, TORC achieved record production of 11,436 boepd in the third quarter.

TORC's capital program in the third quarter represented the most active in the Company's history, with spending of $49.5 million including the drilling of 16 (10.9 net) wells.  Year to date, TORC has successfully drilled 33 (22.2 net) wells.  TORC is well positioned to execute an active winter drilling program and will continue to focus on capital efficiencies and optimized drilling and completion techniques in its core development areas while continuing to expand the Company's drilling inventory by strategically delineating the Company's large portfolio of light oil prospects.

TORC has entered into a series of strategic acquisitions in its core areas for an aggregate acquisition price of $65 million.  Through five separate transactions, TORC will add approximately 500 boepd (>85% light oil and liquids) in both its west central Alberta Cardium and southeast Saskatchewan core areas.  The acquisitions include working interest top-ups in a number of TORC's key producing properties as well as strategic offsetting acreage providing additional high quality development light oil drilling locations.  In addition, the acquisitions further expand TORC's footprint in the emerging Torquay/Three Forks light oil play in southeast Saskatchewan adding 15 net sections of land with Torquay/Three Forks potential. TORC attributed $15 million of value to this undeveloped land.  Two of the five acquisitions closed in the latter part of the third quarter and three will close in the fourth quarter.

CARDIUM

TORC plans to drill approximately 15 net wells in the Cardium in 2014.  In the third quarter, TORC drilled 5 (3.6 net) Cardium wells across its Cardium land base with 100% success.  To the end of the third quarter, TORC had drilled 10.1 net Cardium wells with 100% success.  TORC is actively executing the remaining program for 2014 which will continue to focus on improving capital efficiencies through cost improvements and the optimization of completion techniques.

To date in 2014, through both tuck-in transactions as well as through continued strategic farm in activity, TORC has more than replaced the 15 net wells scheduled to be drilled in 2014.  TORC's current inventory of undrilled Cardium development locations is approximately 290 net wells.  The 2014 budget of approximately 15 net wells represents approximately 5% of this high quality development inventory.  The size of this inventory and the continued commitment to growing this inventory uniquely positions TORC with years of lower risk, high quality drilling locations to support the long term sustainability of the business model.

MONARCH

TORC has identified an area in the heart of the Monarch play which is the focus of the Company's initial development efforts.  TORC's initial 2014 capital plan included the drilling of three development wells focused on this initial 20 net section development area.  All three wells have now been drilled and completed with two wells (2.0 net) recently on production with encouraging results.  The third well (1.0 net) is expected to be brought on production before year end.  All three wells were drilled from multi-well pads with resulting all in costs at or below TORC's estimated development capital costs of $7 million per well.  TORC expects continued operational efficiencies will result as development activity accelerates at Monarch.

In the initial 20 net section development area TORC estimates there are more than 75 net potential development locations.  Supported by continued operational success, TORC will drill an additional well (1.0 net) in the Monarch area in the fourth quarter with the intention of expanding the initial development area to greater than 20 net sections.  Monarch continues to evolve into a light oil development area for TORC where, in aggregate, TORC has exposure to approximately 150 net sections of land. 

SOUTHEAST SASKATCHEWAN

TORC successfully drilled 9 (5.3 net) southeast Saskatchewan wells in the third quarter of 2014 including 8 (4.8 net) conventional light oil wells and 1 (0.5 net) Torquay/Three Forks well.

In 2014, TORC plans to drill approximately 10 net conventional wells in southeast Saskatchewan. Through tuck-in transactions in 2014 TORC has more than replaced the wells scheduled to be drilled in 2014.  TORC's 2014 budget represents less than 10% of the Company's currently identified conventional development drilling inventory of approximately 150 net locations. These wells are characterized by their lower risk nature and high rates of return driven by their lower capital costs, high netbacks and the favorable royalty regime in Saskatchewan.

In the emerging Torquay/Three Forks play, TORC expanded its undeveloped land position with the strategic acquisition of 15 additional net prospective sections.  TORC is budgeting to drill 3.5 net delineation wells in this play during 2014 while continuing to monitor industry activity offsetting TORC's acreage.  It is expected that TORC will begin to drill development wells along with additional delineation wells into the Torquay/Three Forks in 2015 as this light oil resource play evolves into the development phase.   Pro forma the strategic acquisition, TORC holds approximately 85 net sections with Torquay/Three Forks potential providing significant exposure to this emerging play.

INCREASED PRODUCTION GUIDANCE

With the continued outperformance of TORC's core assets and an active third quarter strategic acquisition program, TORC is increasing its 2014 average production forecast to more than 11,200 boepd (~85% light oil and liquids) from 11,050 boepd and 2014 exit production to more than 11,900 boepd (~85% light oil and liquids) from 11,400 boepd while maintaining TORC's 2014 capital expenditure program at $135 million. This upward revision to production guidance represents the fourth increase to guidance to date in 2014.  As the tuck-in acquisition activity to date has focused on lower decline, high netback assets with high quality inventory, TORC has been able to maintain a 25% corporate decline profile despite this increased growth profile while replenishing its drilling inventory to further strengthen the business model. TORC anticipates announcing its 2015 capital budget and production guidance in mid-December.

DIVIDENDS

TORC paid dividends totaling $0.135 per share in the third quarter of 2014. The Board of Directors has confirmed a dividend of $0.045 per common share to be paid on November 17, 2014 to common shareholders of record on October 31, 2014.

TORC's shareholders may receive dividend payments in the form of cash or may elect to receive dividend payments in the form of common shares through the Company's Stock Dividend Plan ("SDP").  Participation in the SDP is optional.  Shareholders, wherever resident, are encouraged to consult their own tax advisors regarding the tax consequences to them of receiving cash or stock dividends.

During the first nine months of 2014 TORC paid dividends totaling $37.4 million, of which $11.4 million was issued under the SDP.

FINANCING

Subsequent to quarter end, the Company successfully completed a non-brokered private placement of 1.4 million flow-through common shares for gross proceeds of $19.7 million.  The flow-through common shares were a combination of both Canadian Development Expense and Canadian Exploration Expense.

The placement of shares closed on October 29, 2014 and has received the customary regulatory approvals including the approval of the Toronto Stock Exchange (the "TSX"). Following the closing of the Offering, TORC has approximately 96.5 million common shares outstanding.

OUTLOOK

TORC has built a sustainable growth platform of light oil focused assets. The stability of the high quality, low decline, light oil assets in southeast Saskatchewan, combined with the low risk Cardium development inventory in central Alberta and exposure to the emerging light oil resource play at Monarch in southern Alberta and to the Torquay/Three Forks play in southeast Saskatchewan, positions TORC for value creation through a disciplined growth strategy and a sustainable dividend policy.

With a 25% decline profile and based on $40,000 per boepd estimated full cycle capital efficiency, TORC estimates that its maintenance capital expenditure requirement to keep production flat at its 2014 exit guidance rate of 11,900 boepd is approximately $119 million. With an annual cash dividend of approximately $39 million, TORC requires $158 million to sustain production and pay its dividend. Based on run rate production of 11,900 boepd, C$90 Edmonton light oil and C$3.50 AECO pricing, cash flow is approximately $189 million providing significant free cash flow for growth.  At current Edmonton light oil pricing of approximately C$85, TORC's run rate cash flow is approximately $174 million and thus, the Company is still well positioned with free cash flow for growth.

Net debt at the end of the third quarter was approximately $213 million.  Pro forma the closing of all announced tuck-in acquisitions and the closing of the flow-through financing, net debt is estimated to be approximately $240 million on an upwardly revised bank line of $425 million, providing significant financial flexibility.

To provide additional certainty around its guidance, TORC has undertaken an active commodity hedging program to further protect its core capital spending requirements and dividend policy and currently has an average of 4,250 boepd hedged for the fourth quarter of 2014 and 2,600 boepd hedged for 2015.  A complete list of the Company's hedges can be found in the updated corporate presentation located at www.torcoil.com.

The quality of TORC's underlying high netback production base, high quality drilling inventory, financial flexibility, hedge portfolio, strategic relationship with CPP Investment Board and management and board experience differentiates TORC in periods of volatile market conditions and positions the Company to take advantage of opportunities that arise in these environments to continue to build the business on a cost effective basis.

TORC has the following key operational and financial attributes:

TORC Oil & Gas Ltd. is a Calgary based company active in the acquisition, exploration, development and production of crude oil and natural gas in Western Canada.

SOURCE TORC Oil & Gas Ltd.

Brett Herman 
President and Chief Executive Officer 
TORC Oil & Gas Ltd. 
Telephone: (403) 930-4120 
Facsimile: (403) 930-4159 

Jason J. Zabinsky 
Vice President, Finance and Chief Financial Officer
TORC Oil & Gas Ltd.
Telephone: (403) 930-4120
Facsimile: (403) 930-4159