LXE Leucrotta Exploration Inc

LEUCROTTA EXPLORATION INC. (TSXV:LXE) (“Leucrotta” or the “Company”) is pleased to announce its financial and operating results for the three months ended March 31, 2017.   All dollar figures are Canadian dollars unless otherwise noted.

HIGHLIGHTS

• Brought four previously drilled wells on-stream in Q1 2017.  Increased production 128% to 1,881 boe/d in Q1 2017 from 824 boe/d in Q4 2016. Exit production at March 31, 2017 was approximately 3,000 boe/d. 
• Subsequent to quarter-end: 
  • Increased borrowing base on revolving credit facility to $20.0 million. 
  • Closed acquisition of certain lands located within the Company’s core Doe/Mica area for an aggregate cash purchase price of approximately $36.0 million.     
  • Closed offering of common shares and flow-through common shares by way of a short form prospectus for gross proceeds of $80.0 million (33,333,400 common shares at a price of $2.25 per common share and 1,852,000 common shares on a flow-through basis at a price of $2.70 per flow-through common share).

FINANCIAL RESULTS
	Three Months Ended March 31
($000s, except per share amounts)	2017		2016		% Change
Oil and natural gas sales	4,883		2,301		112
Funds from (used in) operations (1)	1,296		(283	)	558
Per share - basic and diluted	0.01		-		100
Net loss	(878	)	(2,773	)	(68	)
Per share - basic and diluted	(0.01	)	(0.02	)	(50	)
Capital expenditures and acquisitions	18,518		4,398		321
Working capital	8,889		40,952		(78	)
Common shares outstanding (000s)
Weighted average - basic and diluted	165,239		165,227		-
End of period - basic	165,261		165,227		-
End of period - diluted	189,297		189,279		-

(1) See “Non-GAAP Measures” section.

OPERATING RESULTS (1)	Three Months Ended March 31
	2017		2016		% Change
Daily production
Oil and NGLs (bbls/d)	514		412		25
Natural gas (mcf/d)	8,197		5,031		63
Oil equivalent (boe/d)	1,881		1,251		50
Revenue
Oil and NGLs ($/bbl)	57.92		37.21		56
Natural gas ($/mcf)	2.98		1.98		51
Oil equivalent ($/boe)	28.85		20.22		43
Royalties
Oil and NGLs ($/bbl)	3.46		3.06		13
Natural gas ($/mcf)	0.15		-		100
Oil equivalent ($/boe)	1.59		1.02		56
Operating expenses
Oil and NGLs ($/bbl)	11.86		13.98		(15	)
Natural gas ($/mcf)	1.21		1.09		11
Oil equivalent ($/boe)	8.52		8.98		(5	)
Transportation expenses
Oil and NGLs ($/bbl)	3.73		4.65		(20	)
Natural gas ($/mcf)	0.96		0.43		123
Oil equivalent ($/boe)	5.21		3.26		60
Operating netback (2)
Oil and NGLs ($/bbl)	38.87		15.52		150
Natural gas ($/mcf)	0.66		0.46		43
Oil equivalent ($/boe)	13.53		6.96		94
Depletion and depreciation ($/boe)	(10.38	)	(11.89	)	(13	)
General and administrative expenses ($/boe)	(6.40	)	(10.73	)	(40	)
Share based compensation ($/boe)	(2.24	)	(9.68	)	(77	)
Finance expense ($/boe)	(0.23	)	(0.35	)	(34	)
Finance income ($/boe)	0.53		1.34		(60	)
Net loss ($/boe)	(5.19	)	(24.35	)	(79	)

(1) See “Frequently Recurring Terms” section.

(2) See “Non-GAAP Measures” section.

Selected financial and operational information outlined in this news release should be read in conjunction with Leucrotta’s unaudited condensed interim financial statements and related Management’s Discussion and Analysis (“MD&A”) for the three months ended March 31, 2017, which are available for review at www.sedar.com.

PRESIDENT’S MESSAGE

In Q1 2017 Leucrotta completed its infrastructure project to tie-in four previously drilled delineation wells and completed additional step-out/delineation wells that materially extended the productive boundaries of the Company’s Lower Montney Turbidite Light Oil Resource Play.

As a result of the tie-in of four wells, Leucrotta had increased production to over 3,000 boe/d at March 31, 2017. This excludes two new Montney wells (8-04 and 12-06) that are tested but not tied-in, one well (13-07) that is temporarily shut-in due to third party restrictions and one development well that is drilled but not completed (A8-22).  Current production is approximately 2,700 boe/d.

The A8-22 well is scheduled to be completed in early June and Leucrotta plans increase the frac intensity on this well as compared to all the previous wells completed in the Lower Montney Turbidite by the Company.  The A8-22 will be placed on production immediately after the completion and testing of the well and used as a comparison to the previous completion method.

Subsequent to quarter-end, Leucrotta closed the previously announced land acquisitions and an $80 million bought deal financing.  Leucrotta currently has approximately $50 million of positive working capital, no debt, and a $20 million undrawn bank credit facility. 

On a go forward basis, Leucrotta is well financed to continue with its business plan focused on the delineation and development of the Lower Montney Turbidite Play in its Doe/Mica core area.

Frequently Recurring Terms

The Company uses the following frequently recurring industry terms in this news release: “bbls” refers to barrels, “mcf” refers to thousand cubic feet, and “boe” refers to barrel of oil equivalent. Disclosure provided herein in respect of a boe may be misleading, particularly if used in isolation.  A boe conversion rate of six thousand cubic feet of natural gas to one barrel of oil equivalent has been used for the calculation of boe amounts in this news release.  This boe conversion rate is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Non-GAAP Measures

This news release refers to certain financial measures that are not determined in accordance with IFRS (or “GAAP”). This news release contains the terms “funds from (used in) operations”, “funds from (used in) operations per share”, and “operating netback” which do not have any standardized meaning prescribed by GAAP and therefore may not be comparable to similar measures used by other companies. The Company uses these measures to help evaluate its performance.

Management uses funds from (used in) operations to analyze performance and considers it a key measure as it demonstrates the Company’s ability to generate the cash necessary to fund future capital investments and to repay debt. Funds from (used in) operations is a non-GAAP measure and has been defined by the Company as cash flow from operating activities excluding the change in non-cash working capital related to operating activities and expenditures on decommissioning obligations. The Company also presents funds from (used in) operations per share whereby amounts per share are calculated using weighted average shares outstanding, consistent with the calculation of loss per share. Funds from (used in) operations is reconciled from cash flow from operating activities under the heading “Funds from (used in) Operations” in the Company’s MD&A for the three months ended March 31, 2017, which is available on SEDAR at www.sedar.com. 

Management considers operating netback an important measure as it demonstrates its profitability relative to current commodity prices.  Operating netback, which is calculated as average unit sales price less royalties, production expenses, and transportation expenses, represents the cash margin for every barrel of oil equivalent sold.  Operating netback per boe is reconciled to net loss per boe under the heading “Operating Netback” in the Company’s MD&A for the three months ended March 31, 2017, which is available on SEDAR at www.sedar.com.

Forward-Looking Information

This news release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words “expect”, “anticipate”, “continue”, “estimate”, “may”, “will”, “should”, “believe”, “intends”, “forecast”, “plans”, “guidance” and similar expressions are intended to identify forward-looking statements or information.

More particularly and without limitation, this news release contains forward looking statements and information relating to the Company’s oil, NGLs, and natural gas production, capital programs, and working capital.  The forward-looking statements and information are based on certain key expectations and assumptions made by the Company, including expectations and assumptions relating to prevailing commodity prices and exchange rates, applicable royalty rates and tax laws, future well production rates, the performance of existing wells, the success of drilling new wells, the availability of capital to undertake planned activities, and the availability and cost of labour and services.

Although the Company believes that the expectations reflected in such forward-looking statements and information are reasonable, it can give no assurance that such expectations will prove to be correct. Since forward-looking statements and information address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, the risks associated with the oil and gas industry in general such as 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 estimates and projections relating to production rates, costs, and expenses, commodity price and exchange rate fluctuations, marketing and transportation, environmental risks, competition, the ability to access sufficient capital from internal and external sources and changes in tax, royalty, and environmental legislation. The forward-looking statements and information contained in this document are made as of the date hereof for the purpose of providing the readers with the Company’s expectations for the coming year. The forward-looking statements and information may not be appropriate for other purposes. 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.

Leucrotta is an oil and natural gas company, actively engaged in the acquisition, development, exploration, and production of oil and natural gas reserves in northeastern British Columbia, Canada.

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

 

Further Information

For additional information, please contact:

Mr. Robert J. Zakresky
President and Chief Executive Officer
(403) 705-4525

Mr. Nolan Chicoine
Vice President, Finance and Chief Financial Officer
(403) 705-4525

Leucrotta Exploration Inc.
Suite 700, 639 – 5th Avenue SW
Calgary, Alberta T2P 0M9
Phone:  (403) 705-4525
Fax:  (403) 705-4526