CALGARY, ALBERTA–(Marketwired – May 8, 2017) – Raging River Exploration Inc. (the “Company” or “Raging River”) (TSX:RRX) announces its operating and financial results for the three months ended March 31, 2017. Selected financial and operational information is outlined below and should be read in conjunction with the unaudited interim financial statements and the related management’s 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 | ||||||||
| 2017 | 2016 | ||||||||
| Financial (thousands of dollars except share data) | |||||||||
| Petroleum and natural gas revenue | 112,017 | 50,382 | 122 | ||||||
| Funds from operations (1) | 72,752 | 29,904 | 143 | ||||||
| Per share – basic | 0.31 | 0.14 | 121 | ||||||
| – diluted | 0.31 | 0.14 | 121 | ||||||
| Net earnings (loss) | 15,343 | (7,852) | 295 | ||||||
| Per share – basic | 0.07 | (0.04) | 275 | ||||||
| – diluted | 0.07 | (0.04) | 275 | ||||||
| Development capital expenditures | 112,685 | 37,380 | 201 | ||||||
| Net debt(1)(3) | 249,475 | 44,564 | 460 | ||||||
| Shareholders’ equity | 917,366 | 817,839 | 12 | ||||||
| Weighted average shares (thousands) | |||||||||
| Basic | 231,152 | 216,493 | 7 | ||||||
| Diluted | 231,501 | 216,493 | 7 | ||||||
| Shares outstanding, end of period (thousands) | |||||||||
| Basic | 231,156 | 226,014 | 2 | ||||||
| Diluted | 236,603 | 232,741 | 2 | ||||||
| Operating (6:1 boe conversion) | |||||||||
| Average daily production | |||||||||
| Crude oil and NGLs (bbls/d) | 19,476 | 15,034 | 30 | ||||||
| Heavy crude oil (bbls/d) | 1,419 | 154 | 821 | ||||||
| Natural gas (mcf/d) | 11,161 | 7,900 | 41 | ||||||
| Barrels of oil equivalent (2)(boe/d) | 22,755 | 16,505 | 38 | ||||||
| Netbacks ($/boe) | |||||||||
| Operating | |||||||||
| Oil and gas sales(3) | 54.70 | 33.54 | 63 | ||||||
| Royalties | (5.22) | (3.27) | 60 | ||||||
| Operating expenses | (10.50) | (8.95) | 17 | ||||||
| Transportation expenses | (1.45) | (1.37) | 6 | ||||||
| Field netback(1) | 37.53 | 19.95 | 88 | ||||||
| Realized gain on commodity contracts | 0.13 | 0.14 | (7) | ||||||
| Operating netback | 37.66 | 20.09 | 87 | ||||||
| General and administrative expense | (1.02) | (1.26) | (19) | ||||||
| Financial charges | (0.99) | (0.82) | 21 | ||||||
| Asset retirement expenditures | (0.12) | (0.03) | 300 | ||||||
| Current taxes recovery | – | 1.93 | (100) | ||||||
| Funds flow netback(1) | 35.53 | 19.91 | 78 | ||||||
| Net earnings (loss) per boe | 7.48 | (5.23) | 243 | ||||||
| Wells drilled(4) | |||||||||
| Gross | 99 | 57 | 74 | ||||||
| Net | 94.5 | 56.5 | 67 | ||||||
| Success | 99% | 100% | (1) | ||||||
| (1) See “Non-IFRS Measures.” | |||||||||
| (2) See ‘”Barrels of Oil Equivalent.” | |||||||||
| (3) Excludes unrealized risk management contracts. | |||||||||
| (4) Excludes injection and service wells. | |||||||||
FIRST QUARTER 2017 HIGHLIGHTS
- Achieved another quarterly production record with average production of 22,755 boe/d (92% oil), an increase of 38% over the comparable period in 2016. This represents a 29% production per share increase from the comparable period of 2016.
- The Company’s capital expenditures were $112.7 million inclusive of $25 million on waterflood initiatives, $6 million on land and $81.7 million of development capital resulting in the drilling of 94.5 net Viking horizontal wells at a 99% success rate.
- Achieved record funds flow from operations (“FFO”) of $72.8 million ($0.31/share basic), an increase of 143% from the first quarter of 2016.
- Generated first quarter net earnings of $15.3 million, an increase of 295% from the first quarter 2016.
- The Company generated field operating netbacks of $37.53/boe and funds flow netbacks of $35.53/boe.
- Continued diligent cost control with top decile general and administrative costs of $1.02/boe, a reduction of 19% from the comparable period in 2016.
- Maintained balance sheet strength with first quarter exit net debt of $249.5 million representing 0.9 times debt to the first quarter annualized FFO.
REAFFIRMS CREDIT FACILITIES
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 $400 million, on similar terms. The next borrowing base redetermination is scheduled for October 2017.
UPDATED 2017 GUIDANCE
The board of directors have approved an updated capital budget of $340 million, an increase of 10% from the previously approved $310 million budget. The continued strength of the balance sheet has given the Company the flexibility to increase the budget to fund several key initiatives including:
- $10 million of incremental capital to fund water handling facilities in our Gleneath and Eureka areas. The result of these expenditures are expected to reduce corporate operating costs in 2018 and beyond by an estimated $0.40/boe.
- $10 million of incremental capital for new play development. These funds will be primarily allocated towards incremental undeveloped land acquisitions.
- $10 million of incremental developmental capital resulting in increased 2017 average production guidance to 22,750 boe/d from 22,500 boe/d.
OPERATIONS UPDATE
Break-up conditions to date have been normal. Three of 31 drilled but uncompleted wells were completed in mid-April and are currently on-stream. We anticipate that completion activities on the remaining drilled but uncompleted wells will begin around May 15th. Raging River’s four operated drilling rigs are expected to commence operations prior to June 1st.
With limited new production additions not expected until late in the second quarter of 2017, we estimate that the second quarter production levels will be approximately 3% lower than first quarter production levels with significant growth in the second half of 2017.
Extended reach horizontal (“ERH”) well results continue to be strong. To date, the Company has placed 73.3 net ERH wells on production with 50% of the wells on stream for six months. Average per well results show a 1.8 to 2.0 times improvement over the comparable offsetting short lateral wells. As a result of the ERH success, we continue to optimize our drilling program and expect that 50% of the remaining wells drilled in 2017 will now be ERH wells.
OUTLOOK
Raging River has successfully adjusted for the new paradigm in long term WTI crude oil prices of approximately US$50/bbl. From January 2015 through to March 2017, WTI crude oil prices have averaged US$46.70/bbl. During this period of time Raging River has:
- Increased production per share by 45%.
- Increased FFO per share by 85%.
- Increased the economic drilling inventory to greater than 3,000 horizontal locations.
- Maintained net debt/FFO at approximately 0.9 times.
Although the equity markets have not been kind to most western Canadian energy companies in the first quarter of 2017, including Raging River, we are committed to our continued track record of sustainable per share production, earnings and reserves growth while maintaining a pristine balance sheet.
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 the anticipated timing associated with certain drilling and completion activities, anticipated number of wells to be drilled throughout the balance of the year, anticipated second quarter 2017 production levels, anticipated growth in production in the second half of 2017, the expected initiatives to be funded with the increased 2017 capital budget, the expected impact on operating costs in 2018 from certain facilities and projects, expectation of full year 2017 production guidance based on the Company’s revised capital budget, expectation of percentage of ERH wells to be drilled in 2017, anticipated future drilling locations and Raging River’s intent to continue its track record of sustainable per share production, earnings and reserves growth while maintaining a pristine balance sheet. 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 6, 2017, 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.
NON-IFRS MEASURES: This document contains the terms “funds flow 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 flow 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.
CAUTION RESPECTING DRILLING LOCATIONS: This press release discloses drilling locations in three categories: (i) proved locations; (ii) probable locations; and (iii) unbooked locations. Proved locations and probable locations are derived from the Company’s most recent independent reserves evaluation as prepared by Sproule as of December 31, 2016 and account for drilling locations that have associated proved and/or probable reserves, as applicable. Unbooked locations are internal estimates based on the Company’s prospective acreage and an assumption as to the number of wells that can be drilled per section based on industry practice and internal review. Unbooked locations do not have attributed reserves or resources. Of the 3,153 drilling locations of the Company identified herein, 1,104 are proved locations, 75 are probable locations and 1,974 are unbooked locations. Unbooked locations have been identified by management as an estimation of our multi-year drilling activities based on evaluation of applicable geologic, seismic, engineering, production and reserves information. In Raging River’s most recent Annual Information Form dated March 6, 2017 the Company had disclosed that it had 3,600 future drilling locations as at December 31, 2016; this number has been reduced as a result of drilling on Raging River’s properties since December 31, 2016 and due to the Company expecting to drill more ERH wells in its future development plans (the Company expects that fewer ERH wells are required than short lateral wells to recover the same resources). There is no certainty that the Company will drill all unbooked drilling locations and if drilled there is no certainty that such locations will result in additional oil and gas reserves, resources or production. The drilling locations on which we actually drill wells will ultimately depend upon the availability of capital, regulatory approvals, seasonal restrictions, oil and natural gas prices, costs, actual drilling results, additional reservoir information that is obtained and other factors. While certain of the unbooked drilling locations have been derisked by drilling existing wells in relative close proximity to such unbooked drilling locations, the majority of other unbooked drilling locations are farther away from existing wells where management has less information about the characteristics of the reservoir and therefore there is more uncertainty whether wells will be drilled in such locations and if drilled there is more uncertainty that such wells will result in additional oil and gas reserves, resources or production.
INITIAL RATES OF PRODUCTION: References in this press release to performance and production rates associated with ERH wells are useful in confirming the presence of hydrocarbons, however such rates are not determinative of: the future production and decline rates of such ERH wells, the rates other ERH wells to be drilled by the Company will commence production and decline thereafter, and are not indicative of long term performance or of ultimate recovery. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production for the Company. The Company cautions that such production rates should be considered to be preliminary.
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
