CALGARY, ALBERTA–(Marketwired – May 9, 2016) – Raging River Exploration Inc. (the “Company” or “Raging River”) (TSX:RRX) announces its operating and financial results for the three months ended March 31, 2016. Selected financial and operational information is outlined below and should be read in conjunction with the unaudited interim financial statements and the related management, discussion and analysis (“MD&A”). These filings will be available at www.sedar.com and the Company’s website at www.rrexploration.com.
Financial and Operating Highlights
| Three months ended March 31, |
Percent Change |
|||||||
| 2016 | 2015 | |||||||
| Financial (thousands of dollars except share data) | ||||||||
| Petroleum and natural gas revenue | 50,382 | 55,006 | (8 | ) | ||||
| Funds from operations (1) | 29,904 | 33,480 | (11 | ) | ||||
| Per share | ||||||||
| – basic | 0.14 | 0.18 | (22 | ) | ||||
| – diluted | 0.14 | 0.17 | (18 | ) | ||||
| Net earnings (loss) | (7,852 | ) | 760 | (1,133 | ) | |||
| Per share | ||||||||
| – basic | (0.04 | ) | 0.00 | 100 | ||||
| – diluted | (0.04 | ) | 0.00 | 100 | ||||
| Development capital expenditures | 37,380 | 48,377 | (23 | ) | ||||
| Property acquisitions | – | 35,729 | (100 | ) | ||||
| Total capital expenditures | 37,380 | 84,106 | (56 | ) | ||||
| Net debt(1)(3) | 44,564 | 115,841 | (62 | ) | ||||
| Shareholders’ equity | 817,839 | 587,903 | 39 | |||||
| Weighted average shares (thousands) | ||||||||
| Basic | 216,493 | 190,207 | 14 | |||||
| Diluted | 216,493 | 194,986 | 11 | |||||
| Shares outstanding, end of period (thousands) | ||||||||
| Basic | 226,014 | 197,206 | 15 | |||||
| Diluted | 235,896 | 209,692 | 12 | |||||
| Operating (6:1 boe conversion) | ||||||||
| Average daily production | ||||||||
| Crude oil and NGLs (bbls/d) | 15,188 | 12,870 | 18 | |||||
| Natural gas (mcf/d) | 7,900 | 2,641 | 199 | |||||
| Barrels of oil equivalent (2)(boe/d) | 16,505 | 13,310 | 24 | |||||
| Netbacks ($/boe) | ||||||||
| Operating | ||||||||
| Oil and gas sales(3) | 33.54 | 45.92 | (27 | ) | ||||
| Royalties | (3.27 | ) | (4.83 | ) | (32 | ) | ||
| Operating expenses | (8.95 | ) | (11.36 | ) | (21 | ) | ||
| Transportation expenses | (1.37 | ) | (1.35 | ) | 1 | |||
| Field netback(1) | 19.95 | 28.38 | (30 | ) | ||||
| Realized gain on commodity contracts | 0.14 | 1.59 | (91 | ) | ||||
| Operating netback | 20.09 | 29.97 | (33 | ) | ||||
| General and administrative expense | (1.26 | ) | (1.37 | ) | (8 | ) | ||
| Financial charges | (0.82 | ) | (0.63 | ) | 30 | |||
| Asset retirement expenditures | (0.03 | ) | (0.02 | ) | 50 | |||
| Current taxes recovery | 1.93 | – | 100 | |||||
| Funds flow netback(1) | 19.91 | 27.95 | (29 | ) | ||||
| Net earnings (loss) per boe | (5.23 | ) | 0.64 | (917 | ) | |||
| Wells drilled | ||||||||
| Gross | 57 | 60 | (5 | ) | ||||
| Net | 56.5 | 53.3 | 6 | |||||
| Success | 100 | % | 100 | % | – | |||
| (1) | See “Non-IFRS Measures” |
| (2) | Boe conversion ratio for natural gas of 1 Boe: 6 Mcf has been used, which is based on an energy equivalency conversion method primarily applicable at the burner tip and does not necessarily represent a value equivalency at the wellhead. As the value ratio between natural gas and crude oil based on the current prices of natural gas and crude oil is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value. |
| (3) | Excludes unrealized risk management contracts. |
FIRST QUARTER 2016 HIGHLIGHTS
- Achieved another quarterly production record with average production of 16,505 boe/d (92% oil) representing an increase of 24% over the comparable period in 2015. This represents a 9% production per share increase from the comparable period of 2015 and a 5% increase from the fourth quarter of 2015.
- The Company’s capital expenditures were $37.4 million. Capital expenditures during the quarter consisted of $27.6 million on drilling and completions, $6 million on equipping and $3.8 million on waterflood expansion and land purchases.
- A total of 56.5 net Viking horizontal wells were drilled at a 100% success rate. Average on-stream capital costs during the quarter achieved a new record low for Raging River of $650,000 per well with average drilling and completion costs of $530,000 per well.
- On an unhedged basis, the Company generated industry leading operating netbacks of $19.95/boe and funds flow netbacks of $19.77/boe.
- Completed a bought deal financing for gross proceeds of $108.1 million, issuing 12.5 million common shares at a price of $8.65 per share.
- Maintained balance sheet strength with first quarter exit net debt of $44.6 million representing 0.4 times debt to the first quarter annualized cash flow.
- Subsequent to quarter end, Raging River has reaffirmed its existing $300 million credit facilities.
CREDIT FACILITY
Raging River’s borrowing base was reviewed and we are pleased to announce that the syndicate of lenders underwriting the Company’s credit facilities have unanimously reaffirmed the borrowing base at $300 million. The next borrowing base redetermination is scheduled for October 2016. In these challenging times, Raging River is especially pleased with the support of our lending syndicate which reflects the high quality and growth of our asset base.
INCREASED 2016 BUDGET AND GUIDANCE
Since our last guidance update in January 2016, oil prices both current and futures, have strengthened. Utilizing updated average strip pricing of US$45.37/bbl WTI for the last three quarters of 2016 versus our prior forecast of US$34.15/bbl WTI for the same period results in an approximate $40 million increase to our expected 2016 funds flow from operations.
As a result of the improved outlook, the board of directors has approved a $20 million increase to our capital budget to $175 million from $155 million. Approximately $16 million of the increase will be allocated towards additional drilling opportunities with the balance being added to waterflood initiatives. With the expanded budget and lower current per well costs, we now anticipate drilling approximately 215 to 220 wells versus prior expectations of 180 to185 wells.
The increased capital is expected to increase 2016 average production from 16,500 boe/d to 16,750 boe/d. More importantly, the Company is positioned for strong growth into 2017 with an increase in the exit guidance to 18,000 boe/d from the previous exit guidance of 17,000 boe/d.
2016 Increased Guidance
| Average daily production | |||
| Crude oil and NGLs (bbls/d) | 15,500 | ||
| Natural gas (mcf/d) | 7,500 | ||
| Barrels of oil equivalent (boe/d) | 16,750 | ||
| Pricing | |||
| Crude oil – WTI | 42.40 | ||
| Exchange rate ($Cdn/$US) | 1.29 | ||
| Natural gas – AECO ($/mcf) | 1.76 | ||
| Cdn Light Sweet ($Cdn/bbl) | 49.80 | ||
| Financial | |||
| Operating cashflow ($000) | 169,500 | ||
| G&A ($000) | 8,400 | ||
| Financial charges ($000) | 2,900 | ||
| Cash taxes recovery ($000) | (2,900) | ||
| Funds flow from operations ($000) | 161,100 | ||
| Per share – basic | 0.72 | ||
| 2016 exit net debt ($000) | 50,000 | ||
| 2016 exit net debt to funds flow from operations | 0.3:1 | ||
| Netbacks ($/boe) | |||
| Oil and gas sales | 42.50 | ||
| Royalties | 4.20 | ||
| Operating expense | 9.30 | ||
| Transportation expense | 1.35 | ||
| Hedging gain | (0.05) | ||
| Operating netback | 27.70 | ||
| G&A | 1.30 | ||
| Financial charges | 0.45 | ||
| Cash taxes recovery | (0.45) | ||
| Funds flow netback | 26.40 | ||
| Capital expenditures | |||
| Drilling, completion & equipping ($000) | 162,000 | ||
| Land, seismic and maintenance ($000) | 6,000 | ||
| Waterflood ($000) | 7,000 | ||
| Total ($000) | 175,000 | ||
OUTLOOK AND OPERATIONS UPDATE
With first quarter commodity prices averaging levels not seen since 2003, Raging River elected to shut- in approximately 600 mcf/d of uneconomic non-associated gas production in addition to leaving approximately 30 wells drilled and uncompleted. With oil prices strengthening and favorable weather conditions we were able to re-start completion activities in mid-April. To date, 28 wells have been completed in the second quarter. The wells are in various stages of equipping with the first new oil production now on-stream. If weather conditions remain favorable, drilling operations are expected to commence in early June with up to three drilling rigs. Capital expenditures in the second quarter are expected to be approximately $30 to $40 million.
The consensus view is that oil prices will continue to modestly strengthen into 2017. Although we cannot accurately predict what the future may bring for oil prices, we can and have set up the Company to succeed in the current commodity price environment. Assuming oil prices continue to be range bound between US$45/bbl to US$50/bbl WTI for the next four years we expect to generate production and cashflow per share growth of 10 to 15% per year.
Additional corporate information can be found in our corporate presentation on our website at www.rrexploration.com.
FORWARD-LOOKING STATEMENTS: This press release contains forward-looking statements. More particularly, this press release contains statements concerning Raging River’s expectations regarding anticipated reduced service costs, plans and timing of execution of capital activities, Raging River growth strategy, the Company’s ability to provide per share growth, anticipated growth plans for 2016, anticipated 2016 funds flow from operations, the allocation of funds from the increased budget, the number of wells to be drilled in 2016, the expected 2016 average production, the anticipated 2017 exit production, the timing of commencement of drilling operations following spring break-up and future commodity prices. In addition, the use of any of the words “guidance”, “initial, “scheduled”, “can”, “will”, “prior to”, “estimate”, “anticipate”, “believe”, “potential”, “should”, “unaudited”, “forecast”, “future”, “continue”, “may”, “expect”, “project”, and similar expressions are intended to identify forward-looking statements.
The forward-looking statements contained herein are based on certain key expectations and assumptions made by the Company, including but not limited to expectations and assumptions concerning the success of optimization and efficiency improvement projects, the availability of capital, current legislation, receipt of required regulatory approval, the success of future drilling and development activities, the performance of existing wells, the performance of new wells, Raging River’s growth strategy, general economic conditions, availability of required equipment and services and prevailing commodity prices. Although the Company believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because the Company can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; as the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), commodity price and exchange rate fluctuations, changes in legislation affecting the oil and gas industry and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures. Refer to Raging River’s most recent Annual Information Form dated March 15, 2016, on SEDAR at www.sedar.com, and the risk factors contained therein.
The forward-looking statements contained in this press release are made as of the date hereof and 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.
FUTURE ORIENTED FINANCIAL INFORMATION: Any financial outlook or future oriented financial information in this press release, as defined by applicable securities legislation, has been approved by management of Raging River. Readers are cautioned that any such future-oriented financial information contained herein should not be used for purposes other than those for which it is disclosed herein. The Company and its management believe that the prospective financial information as to the anticipated results of its proposed business activities for the years of 2016 and 2017 has been prepared on a reasonable basis, reflecting management’s best estimates and judgments, and represent, to the best of management’s knowledge and opinion, the Company’s expected course of action. However, because this information is highly subjective, it should not be relied on as necessarily indicative of future results.
NON-IFRS MEASURES: This document contains the terms “funds from operations” (or “cash flow”), “net debt”, “field netback”, “operating netback” and “funds flow netback”, which do not have a standardized meaning prescribed by International Financial Reporting Standards (“IFRS”) and therefore may not be comparable with the calculation of similar measures by other companies. Management uses funds from operations to analyze operating performance and leverage. Management believes “net debt” is a useful supplemental measure of the total amount of current and long-term debt of the Company. Mark-to-market risk management contracts are excluded from the net debt calculation. Management believes “field netback”, “operating netback” and “funds flow netback” are useful supplemental measures of firstly, the amount of revenues received after royalties and operating and transportation costs, secondly, the amount of revenues received after royalties, operating, transportation costs and realized gain (loss) on derivatives, and thirdly, the amount of revenues received after royalties, operating, transportation costs, realized gain (loss) on derivatives, general and administrative costs, financial charges and asset retirement obligations. Additional information relating to certain of these non-IFRS measures, including the reconciliation between funds from operations and cash flow from operating activities, can be found in the MD&A.
BARRELS OF OIL EQUIVALENT: The term “boe” or barrels of oil equivalent may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one barrel of oil equivalent (6 Mcf: 1 bbl) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Additionally, given that the value ratio based on the current price of crude oil, as compared to natural gas, is significantly different from the energy equivalency of 6:1; utilizing a conversion ratio of 6:1 may be misleading as an indication of value.
Mr. Neil Roszell
President and Chief Executive Officer
403-767-1250
403-387-2951 (FAX)
Raging River Exploration Inc.
Mr. Jerry Sapieha, CA
Vice President, Finance and Chief Financial Officer
403-767-1265
403-387-2951 (FAX)
www.rrexploration.com