Advantage Oil & Gas Ltd. announced that its Board of Directors has approved a 2016 capital budget of $120 million targeting annual production per share growth of approximately 39% to 200 mmcfe/d (33,300 boe/d) and a further 6% reduction in total cash costs to $0.75/mcfe. Advantage's standing inventory of 35 completed and uncompleted wells are capable of achieving and sustaining 2016 production levels through to early 2017 without the need for drilling any new wells. To support 2016 production, Advantage's 100% owned Glacier gas plant was expanded in 2015 with additional capacity to accommodate 2016 and 2017 growth and the Corporation previously executed firm service transportation agreements with TransCanada Pipeline Limited for 97% of its production target.

The corporation's 2016 capital program of $120 million is expected to generate surplus cash flow, enhance financial flexibility and continue growth in 2017. Based on an average 2016 natural gas price of Aeco CAD 2.50/mcf including Advantage's hedging positions, annual cash flow is estimated to be approximately $160 million with year-end total debt to trailing cash flow of approximately 1.6 times. Based on an average 2016 natural gas price of Aeco CAD 2.00/mcf and Advantage's current hedge positions, annual cash flow is estimated to be approximately $143 million with year-end total debt to trailing cash flow of approximately 1.9 times.

The resilience to commodity prices in Advantage's 2016 budget is supported by having 52% of its 2016 production hedged at $3.62/mcf, an industry leading low total cash cost structure of $0.75/mcfe ($4.50/boe) and capital investment efficiency. Advantage's $120 million capital Budget supports 2016 production growth and sets the stage for 2017. The planned $120 million capital program includes completion and tie-ins of 13 standing uncompleted wells to maintain production through to early 2017, looping of Advantage's sales pipeline to increase takeaway capacity to 400 mmcf/d for delivery into TCPL, the installation of back-up plant utility systems and the drilling of one of two future ten-well pads required to support 2017 production.

Drilling of the first ten-well pad is scheduled to commence in July 2016. Glacier outperformance enables reduced 2016 capital expenditure level. Advantage's planned 2016 capital program is reduced from earlier Management estimates of $240 million to $120 million.