Advantage Announces Second Quarter 2016 Results

CALGARY, Aug. 4, 2016

 (TSX: AAV, NYSE: AAV)

CALGARY, Aug. 4, 2016 /PRNewswire/ - Advantage Oil & Gas Ltd. ("Advantage" or the "Corporation") is pleased to report cash flow increased 34% to $36.9 million ($0.20/share) driven by a 68% increase in production to 210 mmcfe/d (35,048 boe/d), a 34% reduction in total corporate cash costs to $0.59/mcfe ($3.54/boe) and realized hedging gains of $20.0 million during the second quarter of 2016. Despite a 47% reduction in AECO daily natural gas prices to Cdn $1.40/mcf, the Corporation generated $19.3 million of free cash flow above capital expenditures and reduced bank debt by $8.2 million. These achievements were made possible by the continuing production outperformance of our Glacier Montney wells and structural reductions in both total well capital costs and operating costs (please refer to our operational update released on July 6, 2016).

The Corporation increased its Montney land holdings to 150 net sections (96,000 net acres) from the acquisition of 12 high-graded net sections (100% working interest) during the first half of 2016 for a total cost of $5.8 million. Eleven of the 12 new sections were acquired through Crown land sales.  At Glacier, seven new sections were added, which have immediate reserves recognition and drilling potential as they lie adjacent to existing lands containing wells previously drilled into multiple Montney layers.  Management estimates that the seven newly acquired Glacier sections may contain in excess of 15 drilling locations per section which increases the total number of future drilling locations at the Corporation's Glacier property by 10% to over 1,100 locations. The remaining five new sections, which are anticipated to also contain multi-layer production potential, were acquired to increase our Montney land holdings at Valhalla and Wembley. In conjunction with Advantage's organic growth plans, the Corporation will continue to remain highly selective and opportunistic as it reviews Montney land and business opportunities to maintain its strategy of profitable and sustainable growth.

Looking forward, Advantage is well positioned with strong operational and financial flexibility to immediately increase production during the second half of 2016 without incurring additional capital and per unit operating costs should natural gas prices continue to strengthen. The Corporation's second quarter achievements combined with its current standing inventory of 22 wells (8 completed and 14 uncompleted) and completion of its engineering design to expand the Glacier gas plant to 350 mmcfe/d (58,330 boe/d), with construction beginning in the second half of 2017, continues to advance Advantage's next chapter of growth.

Second Quarter 2016 Operating and Financial Highlights

Production increased 68% to average 210.3 mmcfe/d (35,048 boe/d) including 867% growth in natural gas liquids to 1,083 bbls/d for the second quarter of 2016 as compared to the same period in 2015. The Corporation's 2016 annual production is expected to be within our previously announced Budget production guidance range of 190 to 210 mmcfe/d generating a year-on-year production growth of approximately 40% or 34% on a per share basis.