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Shoreline Energy Corp. Announces Financial and Operating Results for the Second Quarter 2014 and Corporate Update

CALGARY, ALBERTA -- (Marketwired) -- 08/14/14 -- Shoreline Energy Corp. (TSX: SEQ) ("Shoreline" or the "Corporation") today announced its financial and operating results from the second quarter 2014 and is pleased to provide a corporate update following a series of corporate events, asset sales and significant debt reduction. A complete copy of the financial statements and management's discussion and analysis may be obtained at www.sedar.com or on the Corporation's website at www.shorelineenergy.ca.

Trevor Folk, Shoreline's Chief Executive Officer commented, "Having divested of assets for proceeds of $29,800,000 at fair market value and fully repaying our senior lender ATB Financial, we are pleased with the progress and results of the RBC Capital Markets led strategic review and sales process. The Board of Directors and Management look forward to the continuing the process and further reducing debt."

The strategic alternatives process will continue to provide interested parties the opportunity to pursue transactions across Shoreline's remaining assets and Shoreline believes that, given its asset valuation as disclosed in its financial statements, current strong commodity prices, and the positive progress to date on its strategic alternatives process, the process will provide satisfactory results to stakeholders.

Second Quarter Financial and Operating Highlights


--  Revenues for the second quarter were $6.2 million, a decrease of $1.1
    million from the first quarter ended March 31, 2014 as the result of
    lower commodity prices.

--  Net funds flow from operations resulted in a loss of $0.7 million, a
    decrease of $1.9 million from the first quarter ended March 31, 2014 as
    the result of lower netbacks, higher finance fees and increased interest
    expenses.

--  Sales volumes remained consistent and averaged 1,528 barrels of oil
    equivalent per day (boe/d) in comparison to 1,541 boe/d in the first
    quarter of 2014

--  Oil and NGL production as a percentage of total production remained
    consistent with the first quarter of 2014 at 29%.

--  After a year of rigorously defending a title dispute in the state of
    Colorado, Shoreline executed a favorable settlement agreement relating
    to the title dispute with a vendor of certain Wattenberg working
    interest assets. The settlement will allow the Corporation to receive
    past due revenue from these assets and be recognized as a non-operated
    partner. As a result of concluding the dispute, the Corporation is now
    able to efficiently market Wattenburg working interest assets, along
    with the other assets under the strategic alternatives process.

--  Capital expenditures for the second quarter of 2014 totaled $1.0 million
    and related mainly to non-operated drilling and completions in the
    Wattenberg area of Colorado.

Corporate and Subsequent events


--  On April 11, 2014, after the termination of the merger negotiations with
    Lillis Energy, Inc., the Board of Directors initiated a strategic review
    process to identify, examine and consider strategic and financial
    alternatives available to Shoreline with a view to enhancing shareholder
    value.

--  Shoreline received notice from its primary lender on April 17, 2014 that
    it intended to accelerate repayment of its credit facility.
    Subsequently, Shoreline entered into forbearance agreements with its
    secured lenders effective until September 8, 2014. The forbearance
    waives certain covenants and provides Shoreline with continued access to
    the credit facilities so as to allow the strategic alternatives process
    to continue.

--  On July 31, 2014 the Corporation sold certain Canadian royalty interests
    for gross proceeds of $9.0 million and on August 8, 2014, the
    Corporation sold its Canadian Progress and Valhalla area petroleum and
    natural gas properties for gross proceeds of $20.8 million. These
    transactions represent sales values of approximately $84,000 per flowing
    boe and $40,000 per flowing boe respectively.

--  On August 8th, 2014, Shoreline fully repaid its bank debt of
    approximately $20.5 million to its senior lender from proceeds of
    Canadian asset sales. The Corporation intends to use the remaining
    proceeds to meet its current obligations and further reduce corporate
    indebtedness.

--  The Corporation has terminated the majority of its financial and
    physical natural gas price hedges.

--  The notice from Shoreline's primary lender also triggered a default on
    the Corporations unsecured convertible debenture and the trustee has
    been notified of this default. As of August 14, 2014, the trustee had
    not issued a notice to accelerate repayment of the debenture.

--  Shoreline continues to work with its other secured lenders under the
    terms of the previously announced forbearance agreements and is
    reviewing its obligations to its unsecured lenders.

--  The Corporation continues to review its operating expenses and general
    and administrative expenses, and make the appropriate reductions in line
    with current production rates.

--  After selling the aforementioned assets in Canada for proceeds of $29.8
    million, Shoreline continues to own 128,719 net acres in the Peace River
    Arch and all of its Wattenburg royalty and non-operated working interest
    acreage and assets, with the following highlights;

    --  Average field estimate production of 920 boe/d (800 boe/d net
        production in the Peace River Arch area, and 120 boe/d net
        production in Wattenburg).

    --  Expected annualized gross revenues of approximately $14.4 million.

    --  Expected annualized cash flows of approximately $3.0 million.

Financial Tables


                                           ---------------------------------
                                             Three months ended
                                              June 30,  March 31,
                                                  2014       2014    Change
----------------------------------------------------------------------------
Capital expenditures (excluding
 acquisitions)                                   1,031        788        31%
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Total assets                                   110,450    116,964        -6%
----------------------------------------------------------------------------
Working capital (deficiency)                   -60,920    -40,870        49%
----------------------------------------------------------------------------
Shareholders' equity                            22,743     30,700       -26%
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Weighted average common shares outstanding
----------------------------------------------------------------------------
  Basic and diluted(2)                           9,041      9,041         0%
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Operating
----------------------------------------------------------------------------
Production
----------------------------------------------------------------------------
Oil & NGL's (bbls/d)                               446        448         0%
----------------------------------------------------------------------------
Gas (mcf/d)                                      6,492      6,563        -1%
----------------------------------------------------------------------------
Total (boe/d) (3)                                1,528      1,541        -1%
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Average realized prices
----------------------------------------------------------------------------
Oil & NGL's ($/bbl)                              90.14      90.95        -1%
----------------------------------------------------------------------------
Gas ($/mcf)                                       4.04       5.93       -32%
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Operating netbacks ($/boe)
----------------------------------------------------------------------------
  Petroleum and natural gas sales                44.80      52.50       -15%
----------------------------------------------------------------------------
    Realized gain (loss) on financial
     instrument                                  -0.63      -1.23       -49%
----------------------------------------------------------------------------
  Royalties                                     -10.18      -7.03        45%
----------------------------------------------------------------------------
  Operating expenses                            -19.78     -18.03        10%
----------------------------------------------------------------------------
  Transportation expenses                        -1.29      -0.91        42%
----------------------------------------------------------------------------
Operating netback                                12.92      25.30       -49%
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Drilling activity
----------------------------------------------------------------------------
Gross wells                                          8          4       100%
----------------------------------------------------------------------------
Net interest wells                                 0.2        0.2         0%
----------------------------------------------------------------------------
(1) See "Non-GAAP Terms".
(2) The effect of outstanding options and warrants on loss per share for the
 three month periods ended June 30, 2014 and March 31, 2014 is anti-
 dilutive.
(3) Boe means barrels of oil equivalent. Boe may be misleading, particularly
 is 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

Annual General and Special Meeting

The Corporation will hold its Annual General and Special Meeting at 3pm MST on September 30, 2014 at Suite 200, 500 - 4th Avenue SW, Calgary Alberta T2P 2V6, for shareholders of record on August 21, 2014.

Investor Information

Shoreline is a Calgary Alberta based corporation engaged in the exploration, development and production of petroleum and natural gas. Shoreline offers investors a combination of value growth via lower risk development of additional oil reserves and production on its current lands. The Common Shares are currently listed on the TSX under the trading symbol "SEQ" and the debentures under the trading symbol "SEQ.DB". Additional information regarding Shoreline is available under the Corporation's profile at www.sedar.com or at the Corporation's website, www.shorelineenergy.ca.

Forward Looking and Cautionary Statements

This news release contains forward-looking statements relating to the Corporation's plans and other aspects of the Corporation's anticipated future operations, strategies, financial and operating results and business opportunities. These forward-looking statements may include opinions, assumptions, estimates, management's assessment of value, reserves, future plans and operations.

Forward-looking statements typically use words such as "will," "anticipate," "believe," "estimate," "expect," "intend," "may," "project," "should," "plan," and similar expressions suggesting future outcomes, and include statements that actions, events or conditions "may," "would," "could," or "will" be taken or occur in the future. The forward-looking statements are based on various assumptions including expectations regarding the success of current or future drill wells; the outlook for petroleum and natural gas prices; estimated amounts and timing of capital expenditures; estimates of future production; assumptions concerning the timing of regulatory approvals; the state of the economy and the exploration and production business; results of operations; business prospects and opportunities; future exchange and interest rates; the Corporation's ability to obtain equipment in a timely manner to carry out development activities; and the ability of the Corporation to access capital and credit. While the Corporation considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.

Forward-looking statements are subject to a wide range of assumptions, known and unknown risks and uncertainties and other factors that contribute to the possibility that the predicted outcome will not occur, including, without limitation: risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation; loss of markets; volatility of commodities prices; currency fluctuations; imprecision of reserves estimates; environmental risks; competition from other producers; inability to retain drilling rigs and other services; incorrect assessment of the value of acquisitions; failure to realize the anticipated benefits of acquisitions; general economic conditions; delays resulting from or inability to obtain required regulatory approvals and to satisfy various closing conditions; and ability to access sufficient capital from internal and external sources. Readers are cautioned that the foregoing list of factors is not exhaustive.

Although Shoreline believes that the expectations represented by such forward-looking statements are reasonable, there can be no assurance that such expectations will be realized. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements and you should not rely unduly on forward-looking statements. The forward-looking statements contained in this news release are made as of the date of this news release. Except as required by applicable law, Shoreline does not undertake any obligation to publicly update or revise any forward-looking statements.

Strategic Process Disclaimer

The Corporation cautions that there are no assurances or guarantees that (i) the strategic alternatives process will result in a transaction; (ii) if a transaction is undertaken, the terms or timing of such transaction will be positive results to all stakeholders; (iii) the ongoing conditions of existing forbearance will be met to the satisfaction of the counterparties; or (iv) negotiations currently underway with the existing creditors agreements other lenders will yield satisfactory results.

Non-GAAP Financial Measures

This press release contains references to measures used in the oil and natural gas industry such as "netback" and "net debt". These measures do not have any standardized meanings within International Financial Reporting Standards ("IFRS") and, therefore, reported amounts may not be comparable to similarly titled measures reported by other companies. These measures have been described and presented in this press release in order to provide shareholders and potential investors with additional information regarding Shoreline's liquidity and its ability to generate funds to finance its operations.

Netback, as used in this press release, denotes net earnings plus non-cash items, including future income taxes expense (less any recovery), depletion, depreciation and accretion expense and non-cash stock-based compensation expense.

Shoreline uses net debt as a measure to assess its financial position. Net debt includes current liabilities (including Shoreline's credit facility and excluding the current portion of decommissioning obligations) less current assets (excluding property, plant and equipment, held for sale and risk management contracts).

Note Regarding BOEs

The term barrel of oil equivalent ("boe") may be misleading, particularly if used in isolation. A conversion ratio for gas of 6 mcf:1 boe 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 based on the current price of crude oil as compared to natural gas is significantly equivalency conversion ratio of 6:1, utilizing a conversion on a 6:1 basis is misleading as an indication of value.

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