OIL

CALGARY, Aug. 18, 2015 /CNW/ - LGX Oil + Gas Inc. ("LGX" or the "Company") (TSXV:OIL) is pleased to announce it has filed on SEDAR its unaudited financial statements and related Management's Discussion and Analysis ("MD&A") for the three and six months ended June 30, 2015.  Selected financial and operational information is outlined below and should be read in conjunction with LGX's unaudited financial statements and the related MD&A which are available for review at www.lgxoil.com or www.sedar.com.

ACCOMPLISHMENTS

• Continued to reduce operating and transportation costs from $33.41 per Boe in the second quarter of 2014 to $26.43 per Boe in the second quarter of 2015 (21 percent decrease)
• Reduced operating and transportation costs from $27.94 per Boe in the first quarter of 2015 to $26.43 per Boe in the second quarter of 2015 (5 percent decrease)
• Reduced general and administrative expenses from $9.45 per Boe in the second quarter of 2014 to $3.27 per Boe in the second quarter of 2015 (64 percent decrease)
• Re-completed the well at 6-36-8-24 W4M in the Banff Formation, resulting in an average daily rate of approximately 315 Bbl oil per day in its first 60 days of production

OUTLOOK

Late in the quarter the Big Valley (Three Forks) Formation production from the horizontal well at 6-36-8-24 W4M was isolated and the Banff Formation was completed with a 6 m perforated interval in the build section of the intermediate casing and stimulated with a small volume acid job. The first 60 days of production averaged daily rates of approximately 315 Bbl oil per day and produced in excess of 18,125 barrels of oil. The 6-36 well is still producing in excess of 325 Bbl of oil per day with less than a one percent water cut and a high fluid level from the un-frac'd Banff Formation. LGX has a 100 percent interest in the well prior to recovery of 200 percent of the drilling, completion, equipping and tie-in costs, at which point its interest will revert to 80 percent.

The Company is currently producing 880 Boe per day corporately. The positive test results from the 6-36 Banff completion, sustained production from recent competitor offsets and the number of Banff oil shows and tests from previously drilled wells across the area have validated the geophysical and geological model for the play. LGX estimates that up to 40 sections of LGX land offsetting the 6-36 well may be prospective for Banff oil production as well as for the established Big Valley play.

The Company has proven the concept of an over-pressured, oil saturated, light oil resource play over a broad area on its lands in the Big Valley and Banff formations. Capital cost reductions have been demonstrated through the course of the 2014 program and additional savings are anticipated in the current low commodity price environment. The Company has significant exposure to the upside of both plays and only a small portion of the potential has been recognized in the Company's reserve report.

The Company's credit facilities are currently subject to their annual review by the lender. LGX was not in compliance with the existing financial covenants under the credit facilities as at June 30, 2015. The lender has not demanded repayment of the senior, demand portion of the credit facilities or accelerated repayment of the junior, term portion as a result of LGX not being in compliance with the covenants. LGX is in discussions with the lender with respect to the terms of a renewal or replacement of the senior portion of the facility and a relaxation or waiver of the financial covenants thereunder and under the junior portion of the facility. The results of such discussions, including any relaxation or waiver of financial covenants, are uncertain and there is no guarantee that LGX will be in compliance with the current or any revised financial covenants in the future or that the facilities will be maintained at their current levels.

The Company continues to work in accordance with the provisions of the previously announced order for the protection of the Greater Sage-Grouse (the "Emergency Order") and is continuing to work with Environment Canada to get additional clarity on the practical application of the Emergency Order.

With cash flows impacted by oil prices at six year lows, LGX is working proactively to ensure it has the ability to meet its financial obligations under its credit facilities. 

EVENTS AFTER THE REPORTING PERIOD

Pursuant to the previously announced agreement between LGX and Kainai Energy Limited Partnership by its general partner Kainai Energy Corp. ("Kainai"), LGX received notice from Kainai that the Blood Tribe Chief & Council and Indian Oil and Gas Canada had both agreed to amend Petroleum and Natural Gas Lease # OL-6360 ("Blood Lease") to provide for a payment, waiver, or other forbearance to be made in lieu of the obligation to commence drilling two wells on the Blood Lease on or before September 30, 2015. LGX has received confirmation that Kainai has satisfied the revised terms of the Blood Lease. Accordingly, on August 15, 2015 LGX assigned Kainai an additional 30 percent working interest in an undeveloped portion of the Blood Lease excluding thereout all production and reserves in exchange for the successful amendment to the Blood Lease. LGX will retain a 100 percent working interest (80 percent after a 200 percent payout) in the production and reserves, retain an 80 percent working interest in the 16.75 sections of land surrounding the Company's drilling activity and a 50 percent working interest in the remaining 78 sections of the Blood Lease.

LGX and Kainai will cooperate in seeking approval for continuation of the contiguous 94.75 section Blood Lease beyond the end of its primary term of September 30, 2015 for a further five year term, which is subject to final Indian Oil and Gas Canada approval. 

On July 6, 2015, LGX announced the addition of John Gunton to the board of directors. Dr. Gunton is an independent businessman. He has over 40 years of industry experience in the search for and production of oil and natural gas throughout Canada and globally. His Canadian experience in the Western Canada Sedimentary Basin, the Williston Basin and the East Coast Offshore includes positions held at Shell Canada, Imperial Oil and several junior Canadian oil and gas companies. He also served as Managing Director, Geoscience of Waterous Securities Inc. (currently Scotia Waterous). Dr. Gunton formed Discovery International Geoconsulting Inc., an advisory company that provided advisory services for 19 exploration and production projects in Canada and internationally from 1997 to 2012. Dr. Gunton is a geologist and holds a B.Sc. degree in geology (honours) from Durham University and a Ph.D. in geology from Queens University.

The Company has received termination notice of the Management, Administrative and Technical Services Agreement from Crescent Point Energy Corp. as successor to Legacy Oil + Gas Inc. Obligations under this agreement terminate September 29, 2015, after which LGX intends to have in place the necessary staff and contractors to manage the daily operations of the Company. Also, LGX announced the resignations of James Pasieka, the chairman and director of the Company, and Mark Franko, Vice President, Legal and General Counsel.

LGX is a uniquely positioned, technically driven, junior oil and natural gas company with a proven management team committed to aggressive, cost-effective growth of light oil reserves and production combined with high impact exploration potential in southern Alberta. LGX's common shares trade on the TSX Venture Exchange under the symbol OIL.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Reader Advisories

Caution Respecting Initial Production Results - The production test results for the Banff Formation completion at the 6-36 well disclosed in this press release are initial results for the first 60 days of production only and are not determinative of the rates at which such well will continue production and decline thereafter. Due to the likelihood of high initial declines from the tested rates, the test results are not indicative of long-term performance or ultimate recovery from the well. Readers are cautioned not to place undue reliance on such rates in considering the long-term performance of the well or the aggregate production of the Company.

This press release contains forward-looking statements. More particularly, it contains forward-looking statements concerning: (i) the prospectivity of LGX's properties with respect to the Big Valley and Banff Formation and (ii) the anticipated future capital cost reductions.

The forward-looking statements contained in this press release are based on certain key expectations and assumptions made by LGX, including the assumptions specifically set out in this press release and expectations and assumptions concerning: (i) prevailing commodity prices; (ii) the availability and cost of capital, labour and services; (iii) the effectiveness of cost reduction initiatives; (iv) the performance of existing wells, (v) the availability and performance of facilities and pipelines, (vi) the geological characteristics of LGX's properties, (vii) prevailing weather and break-up conditions, royalty regimes and exchange rates, (viii) the application of regulatory and licensing requirements, and (ix) the application of the previously announced emergency order for the protection of the Greater Sage-Grouse (the "Emergency Order") and the Species at Risk Act (Canada) at LGX's Manyberries property.

Although LGX believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because LGX can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks, including but not limited to, fluctuations in prevailing commodity prices, risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses; and health, safety and environmental risks), uncertainty as to the availability and cost of capital, labour and services, exchange rate fluctuations, fluctuations in oil price differentials, unexpected adverse weather conditions and changes to existing laws and regulations. These and other risks are set out in more detail in the AIF.

The forward-looking statements contained in this press release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

Caution Respecting Boe

Meaning of Boe - Boe means barrel of oil equivalent. All Boe conversions in this report are derived by converting natural gas to oil equivalent at a ratio of six thousand cubic feet of natural gas to one barrel of oil equivalent. Boe may be misleading, particularly if used in isolation. A Boe conversion rate of 1 Boe: 6 Mcf is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio of oil compared to natural gas based on currently prevailing prices is significantly different than the energy equivalency ratio of 1 Boe : 6 Mcf, utilizing a conversion ratio of 1 Boe : 6 Mcf may be misleading as an indication of value.

SOURCE LGX Oil + Gas Inc.