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Northern Blizzard Resources Inc. Announces Second Quarter 2014 Results and Declares August 2014 Dividend

CALGARY, Aug. 13, 2014 /CNW/ - Northern Blizzard Resources Inc. ("Northern Blizzard" or the "Company") (TSX: NBZ) is pleased to announce its operating and financial results for the three and six months ended June 30, 2014.  First half 2014 production averaged 19,890 boe/d, a 12% growth from the same period in the previous year.  The Board of Directors has declared a dividend of $0.059 per common share for August 2014 (equal to a pro-rated monthly dividend of $0.08 per common share).

Northern Blizzard's unaudited financial statements and management's discussion and analysis ("MD&A") for the three and six months ended June 30, 2014 are available on SEDAR at www.sedar.com and on Northern Blizzard's website at www.northernblizzard.com.

FINANCIAL AND OPERATING HIGHLIGHTS



Three months ended
June 30,

Six months ended
June 30,


2014

2013

2014

2013

Financial  ($000s,except per share information)





Oil and natural gas sales

188,801

133,702

358,470

249,895

Funds from operations(1)

55,979

51,601

107,255

91,101

Per share – diluted

0.72

0.63

1.38

1.17

Net income (loss)

(14,491)

12,047

(16,396)

(11,305)

Per share – basic

(0.19)

0.16

(0.21)

(0.15)

Per share – diluted

(0.19)

0.14

(0.21)

(0.15)

Capital expenditures

54,887

37,975

126,942

107,146






Operating





Average daily production





Heavy oil (bbl/d)

17,961

16,649

18,435

16,607

Light oil & NGL (bbl/d)

549

14

276

11

Natural gas (mcf/d)

6,933

6,991

7,072

6,963

Total (boe/d)

19,665

17,828

19,890

17,778






Average realized price





Heavy oil ($/bbl)(2)

86.02

71.87

82.21

64.46

Light oil & NGL ($/bbl)

101.51

88.57

99.72

85.25

Oil & NGL ($/bbl)

86.28

71.87

82.39

64.47

Natural gas ($/mcf)

4.70

3.36

5.13

3.25

Combined ($/boe)

82.97

68.53

79.35

61.53






Netbacks ($/boe)





Average realized price

82.97

68.53

79.35

61.53

Royalties

(10.66)

(11.54)

(11.22)

(9.35)

Production and operating expenses

(21.64)

(19.38)

(20.90)

(19.78)

Transportation expenses

(1.53)

(2.17)

(1.85)

(2.00)

Operating netback(1)

49.14

35.44

45.38

30.40

Realized gains (losses) on financial derivative contracts

(9.40)

1.97

(7.40)

3.27

General and administrative expenses

(2.98)

(3.37)

(3.10)

(3.15)

Cash finance costs

(5.71)

(3.02)

(5.31)

(2.70)

Other

(0.73)

0.48

0.14

0.54

Funds from operations(1)

30.32

31.50

29.71

28.36


Notes:



(1)

Funds from operations and operating netback do not have any standardized meaning prescribed by International Financial Reporting Standards.  See "Non-IFRS Financial Measures" and "Additional IFRS Measures" in the MD&A for the three and six months ended June 30, 2014 and 2013.



(2)

Average heavy oil prices received are net of blending expenses and include the impact of physical delivery contracts.



FIRST HALF 2014 HIGHLIGHTS

The first half of 2014 was highlighted by the following:

  • Production increased 12% during the first half of 2014 to 19,890 boe/d (94% oil) from the first half of 2013. Production increases were due primarily to the drilling of new oil wells, which included the Viking light oil development at Smiley. Increases were partially offset by natural declines and seasonal maintenance at a number of areas during the second quarter of 2014.

  • Operating netback for the first half of 2014 was $45.38/boe, a 49% increase compared to the first half of 2013. The increase in the netback was primarily due to a higher average realized price driven by narrower heavy oil differentials and higher WTI prices in 2014. The average realized oil price in the first half of 2014 was $82.39/bbl compared to $64.47/bbl in the first half of 2013.

  • Funds from operations were $107.3 million, 18% higher than the first half of 2013. Stronger operating netbacks were partially offset by higher realized losses on financial derivative contracts and higher interest expense during the first half of 2014.

  • The net loss during the first half of 2014 was $16.4 million compared to $11.3 million in the first half of 2013. Higher net loss was recorded in 2014 primarily as a result of higher share-based compensation, higher losses on financial derivative contracts and higher blending expenses, partially offset by higher oil and gas sales compared to the same period in 2013.

  • Capital expenditures for the first half of 2014 totalled $126.9 million. During the first half of 2014, drilling, completion and equipping expenditures totalled $65.2 million and included the drilling of 102 (97.1 net) wells. Spending on facilities and pipelines totalled $56.0 million during the first half of 2014. Northern Blizzard's first half 2014 development program was highlighted by the following:

    • The Plover Lake steam-assisted gravity drainage ("SAGD") project was substantially completed. Steam injection commenced in July 2014. Northern Blizzard anticipates that production from the Plover SAGD project will be approximately 2,400 bbl/d by the end of 2014.

    • Polymer injections continued into the Bakken at Cactus Lake. More than 8 million barrels of polymer solution have been injected to date (as of June 30, 2014).

    • Northern Blizzard drilled its first light oil wells during the first half of 2014, with 8 (8.0 net) wells drilled in the Viking play at Smiley. In total, 27 Viking wells are planned for the year.

CORPORATE UPDATE

On August 8, 2014, the Company completed its initial public offering ("IPO") of 26,315,790 common shares at a price of $19.00 per common share for aggregate proceeds of $500 million.  The offering consisted of a $350 million treasury offering by Northern Blizzard and a $150 million secondary offering by NGP IX Northern Blizzard S.à.r.l. and R/C Canada Coöperatief U.A.

In connection with the IPO and in accordance with the terms of the indenture governing the senior notes, the Company elected to redeem 35% of the aggregate principal amount of the senior notes (US$148.8 million) using the proceeds received from the treasury offering.  The notes will be redeemed at a price equal to 107.25% of the principal amount of the notes plus accrued and unpaid interest. The redemption is expected to be completed in early September 2014.  The remaining net proceeds from the IPO were used to reduce indebtedness under the credit facility.

Net debt at June 30, 2014 of $634.9 million was reduced by approximately $292 million as a result of the IPO and related transactions. The Company has approximately $500 million available on its credit facility.

DIVIDENDS

The Board of Directors has declared a dividend of $0.059 per common share for August 2014 (equal to a pro-rated monthly dividend of $0.08 per common share), which will be paid to shareholders of record on August 31, 2014 on September 15, 2014.  The ex-dividend date is August 27, 2014.

The dividends have been designated as eligible dividends under the Income Tax Act (Canada).


Conference Call Today

9:00am MT (11:00am ET)


Northern Blizzard will host a conference call today, August 13, 2014, starting at 9:00am MT (11:00am ET), to review the Company's second quarter 2014 results. Participants can access the conference call by dialing (403) 532-5601 or toll-free (US & Canada) 1 (855) 353-9183 and entering the passcode 98589.


A recording of the conference call will be available until November 13, 2014 and can be accessed by dialing 1 (855) 201-2300 and entering the conference number 1162986 and passcode 98589.  The replay will be available approximately one hour following completion of the call.  The conference call will also be available on Northern Blizzard's website at www.northernblizzard.com.


Advisories

BOE Conversion

In this news release, barrel of equivalent amounts have been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of crude oil or natural gas liquids (6 mcf : 1 bbl), which represents an energy equivalency conversion method applicable at the burner tip and does not represent a value equivalency at the wellhead. While it is useful for comparative measures, it may not accurately reflect individual product values and may be misleading if used in isolation.

Forward-Looking Statements

This news release may contain certain forward-looking statements and forward-looking information (collectively referred to as "forward-looking statements") within the meaning of applicable Canadian securities laws. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements contain words such as "anticipate", "believe", "plan", "continuous", "estimate", "expect", "may", "will", "project", "should", or similar words suggesting future outcomes.

In particular, this news release may contain forward-looking statements pertaining to the following:

  • Business plans and strategies;
  • Capital expenditure and drilling programs;
  • Methods and ability to finance operations and capital expenditure programs;
  • Anticipated oil and natural gas production levels;
  • Timing and success of development and exploitation activities;
  • Future oil and natural gas prices;
  • Future costs including operating and administrative costs and royalty rates;
  • Future cash flows and net earnings;
  • Estimated tax pools and the Company's tax horizon;
  • Expectations regarding the Company's ability to add reserves through exploration and development;
  • Redemption of a portion of the Company's outstanding senior unsecured notes; and
  • The payment of dividends by Northern Blizzard.

In particular, the payment of dividends is dependent on the satisfaction of the applicable liquidity and solvency tests imposed by the Business Corporations Act (Alberta).  In addition, statements relating to "reserves" or "resources" are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the reserves and resources described exist in the quantities predicted or estimated and can be profitably produced in the future.

Undue reliance should not be placed on forward-looking statements, which are inherently uncertain, are based on estimates and assumptions, and are subject to known and unknown risks and uncertainties (both general and specific) that contribute to the possibility that the future events or circumstances contemplated by the forward-looking statements will not occur. There can be no assurance that the plans, intentions or expectations upon which forward-looking statements are based will be realized. Actual results will differ, and the difference may be material and adverse to the Company and its shareholders.

With respect to forward-looking statements contained in this news release, management has made assumptions regarding future production levels; future oil and natural gas prices; future operating costs; timing and amount of capital expenditures; the ability to obtain financing on acceptable terms; availability of skilled labour and drilling and related equipment; general economic and financial market conditions; continuation of existing tax and regulatory regimes; and the ability to market oil and natural gas successfully to current and new customers.  Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.

By their very nature, forward-looking statements involve inherent risks and uncertainties (both general and specific) and risks that the goals or figures contained in forward-looking statements will not be achieved. These factors include, but are not limited to, risks associated with fluctuations in market prices for crude oil, natural gas and diluent, general economic, market and business conditions, substantial capital requirements, uncertainties inherent in estimating quantities of reserves and resources, extent of, and cost of compliance with, government laws and regulations and the effect of changes in such laws and regulations from time to time, the need to obtain regulatory approvals on projects before development commences, environmental risks and hazards and the cost of compliance with environmental regulations, aboriginal claims, inherent risks and hazards with operations such as fire, explosion, blowouts, mechanical or pipe failure, cratering, oil spills, vandalism and other dangerous conditions, potential cost overruns, variations in foreign exchange rates, diluent supply shortages, competition for capital,  equipment, new leases, pipeline capacity and skilled personnel, credit risks associated with counterparties, the failure of the Company or the holder of licenses, leases and permits to meet requirements of such licenses, leases and permits, reliance on third parties for pipelines and other infrastructure, changes in royalty regimes, failure to accurately estimate decommissioning costs, inaccurate estimates and assumptions by management, effectiveness of internal controls, the potential lack of available drilling equipment and other restrictions, failure to obtain or keep key personnel, title deficiencies with the Company's assets, geo-political risks, risks that the Company does not have adequate insurance coverage, risk of litigation and risks arising from future acquisition activities. The foregoing risks and other risks are described in more detail in the Company's final prospectus dated July 31, 2014. Readers are cautioned that these factors and risks are difficult to predict and that the assumptions used in the preparation of such information, although considered reasonably accurate at the time of preparation, may prove to be incorrect. Accordingly, readers are cautioned that the actual results achieved may vary from the information provided herein and the variations could be material. Readers are also cautioned that the foregoing list of factors is not exhaustive. Consequently, there is no representation by the Company that actual results achieved will be the same in whole or in part as those set out in the forward-looking statements. Furthermore, the forward-looking statements contained in this news release are made as of the date hereof, and the Company does not undertake any obligation, except as required by applicable securities legislation, to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained herein are expressly qualified by this cautionary statement.

SOURCE Northern Blizzard Resources Inc.

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