CALGARY, ALBERTA–(Marketwired – Nov. 8, 2016) – Raging River Exploration Inc. (the “Company” or “Raging River”) (TSX:RRX) announces its operating and financial results for the three and nine months ended September 30, 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 September 30, |
Percent Change | Nine months ended September 30, |
Percent Change | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||||
| Financial (thousands of dollars except share data) | ||||||||||||||||||
| Petroleum and natural gas revenue | 80,632 | 63,518 | 27 | 198,541 | 191,989 | 3 | ||||||||||||
| Funds from operations (1) | 49,726 | 43,630 | 14 | 123,628 | 126,644 | (2 | ) | |||||||||||
| Per share – basic | 0.22 | 0.22 | – | 0.55 | 0.65 | (15 | ) | |||||||||||
| – diluted | 0.22 | 0.22 | – | 0.55 | 0.64 | (14 | ) | |||||||||||
| Net earnings | 6,758 | 10,893 | (38 | ) | 4,227 | 23,798 | (82 | ) | ||||||||||
| Per share – basic | 0.03 | 0.05 | (40 | ) | 0.02 | 0.12 | (83 | ) | ||||||||||
| – diluted | 0.03 | 0.05 | (40 | ) | 0.02 | 0.12 | (83 | ) | ||||||||||
| Development capital expenditures | 58,916 | 45,545 | 29 | 134,898 | 127,340 | 6 | ||||||||||||
| Property acquisitions | – | 4,215 | (100 | ) | 25,125 | 39,944 | (37 | ) | ||||||||||
| Corporate acquisition | 61,263 | – | 100 | 61,263 | – | 100 | ||||||||||||
| Total capital expenditures | 120,179 | 49,760 | 142 | 221,286 | 167,284 | 32 | ||||||||||||
| Net debt (1)(3) | 140,187 | 103,659 | 35 | |||||||||||||||
| Shareholders’ equity | 877,442 | 616,834 | 42 | |||||||||||||||
| Weighted average shares (thousands) | ||||||||||||||||||
| Basic | 230,227 | 199,576 | 15 | 224,210 | 195,923 | 14 | ||||||||||||
| Diluted | 231,154 | 201,648 | 15 | 224,675 | 198,099 | 13 | ||||||||||||
| Shares outstanding, end of period (thousands) | ||||||||||||||||||
| Basic | 231,038 | 200,319 | 15 | |||||||||||||||
| Diluted | 240,570 | 211,265 | 14 | |||||||||||||||
| Operating (6:1 boe conversion) | ||||||||||||||||||
| Average daily production | ||||||||||||||||||
| Crude oil and NGLs (bbls/d) | 17,381 | 13,009 | 34 | 15,787 | 12,912 | 22 | ||||||||||||
| Natural gas (mcf/d) | 7,385 | 2,454 | 201 | 7,550 | 2,680 | 182 | ||||||||||||
| Barrels of oil equivalent (2)(boe/d) | 18,612 | 13,418 | 39 | 17,045 | 13,359 | 28 | ||||||||||||
| Netbacks ($/boe) | ||||||||||||||||||
| Operating | ||||||||||||||||||
| Oil and gas sales (3) | 47.09 | 51.45 | (8 | ) | 42.51 | 52.64 | (19 | ) | ||||||||||
| Royalties | (4.55 | ) | (4.52 | ) | 1 | (4.13 | ) | (5.07 | ) | (19 | ) | |||||||
| Operating expenses | (10.15 | ) | (9.14 | ) | 11 | (9.40 | ) | (10.39 | ) | (10 | ) | |||||||
| Transportation expenses | (1.46 | ) | (1.37 | ) | 7 | (1.41 | ) | (1.37 | ) | 3 | ||||||||
| Field netback | 30.93 | 36.42 | (15 | ) | 27.57 | 35.81 | (23 | ) | ||||||||||
| Realized gain (loss) on commodity contracts | (0.05 | ) | 0.80 | (106 | ) | 0.06 | 0.92 | (93 | ) | |||||||||
| Operating netback | 30.88 | 37.22 | (17 | ) | 27.63 | 36.73 | (25 | ) | ||||||||||
| General and administrative expense | (1.15 | ) | (1.18 | ) | (3 | ) | (1.20 | ) | (1.28 | ) | (6 | ) | ||||||
| Financial charges | (0.63 | ) | (0.71 | ) | (11 | ) | (0.64 | ) | (0.72 | ) | (11 | ) | ||||||
| Asset retirement expenditures | (0.05 | ) | – | (100 | ) | (0.04 | ) | (0.01 | ) | 300 | ||||||||
| Current taxes recovery | – | – | – | 0.73 | – | 100 | ||||||||||||
| Funds flow netback (1) | 29.05 | 35.33 | (18 | ) | 26.48 | 34.72 | (24 | ) | ||||||||||
| Net earnings | 3.96 | 8.81 | (55 | ) | 0.92 | 6.52 | (86 | ) | ||||||||||
| Wells drilled (4) | ||||||||||||||||||
| Gross | 85 | 67 | 27 | 182 | 163 | 12 | ||||||||||||
| Net | 71.0 | 64.6 | 10 | 167.4 | 153.9 | 9 | ||||||||||||
| Success | 100 | % | 99 | % | 1 | 99 | % | 99 | % | – | ||||||||
| (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. |
| (4) Excludes service wells. |
THIRD QUARTER 2016 HIGHLIGHTS
- Achieved average quarterly production of 18,612 boe/d (93% oil) representing a 20% production per share increase over the comparable period in 2015.
- The Company’s exploration and development expenditures were $58.9 million including $58.4 million on drilling, completing and equipping activities and $0.5 million on land. A total of 71.0 net Viking horizontal wells were drilled at a 100% success rate.
- The Company generated industry leading operating netbacks of $30.93/boe and funds flow netbacks of $29.10/boe on an unhedged basis.
- Recorded net earnings of $6.8 million or $3.96 per boe.
- Maintained balance sheet strength with third quarter exit net debt of $140.2 million representing 0.7 times net debt to the third quarter annualized cash flow.
- Closed the $109.3 million previously announced corporate acquisition of Rock Energy Inc. The acquisition included 2,550 boe/d (95% oil) of production and approximately 25 net sections of highly prospective land targeting Viking light oil in the Kerrobert area of southwest Saskatchewan.
CREDIT FACILITY REAFFIRMED
Raging River’s credit facilities were reviewed by the lenders subsequent to September 30, 2016, and despite the current commodity price environment, the Company was offered a material increase to its credit facilities. The Company’s lenders provided indications of lending value of up to $400 million. The Company has elected to maintain the credit facilities at the current $300 million level as that provides ample flexibility to meet the Company’s current business objectives and reduces bank fees.
OPERATIONS UPDATE
Record rainfall through July and early August slowed down capital operations considerably during the third quarter resulting in a reduction of approximately 15 net wells for the quarter from the 80 to 90 net wells that were expected. Despite the delays caused by the weather, the efforts of our field operations staff resulted in the Company exceeding its internal production estimates for the quarter of 18,500 boe/d.
An early snow storm at the start of October created a very challenging start to capital operations in the fourth quarter. Access for movement of crude oil, service rigs and drilling rigs was extremely limited for most of October. On average, Raging River had approximately 2,000 boe/d of production shut-in for the month of October. As of November 8th, all production has been restored and new production additions are ramping up. Current corporate production levels are back to 19,000-19,500 boe/d.
With the return to normal weather we currently have 5 gross (4.5 net) drilling rigs in operation. Quarter to date, we have drilled 37 (35.0 net) and completed 30 (25.5 net) wells. Despite the October production curtailment, our overall 2016 average guidance has had a nominal reduction of approximately 1%. Our December average production guidance is expected to be ahead of previous guidance at 21,000 boe/d.
Since July, we have drilled and brought on-stream a total of 26 extended reached horizontal (“ERH”) wells. Although several months of data will ultimately be required to validate the long term improvements of the ERH wells, the initial 15-45 day rates have been approximately 1.5-2.0 times the rate of the comparable offset producers.
A focus on long term value creation continues to be a priority with continuous efforts and capital allocation to enhanced oil recovery (“EOR”). Currently, in excess of 20% of our corporate production is under EOR. In the fourth quarter, the Company has plans to implement through conversions and new drills, a total of 30 additional water injection wells to continue the expansion of our EOR efforts.
OUTLOOK
Capital operations are back on track. Raging River anticipates drilling approximately 75 wells in the fourth quarter of 2016, inclusive of 7 horizontal wells drilled as new injection wells. Although operations were delayed in October, the deployment of an additional drilling rig will allow us to meet our year end targets.
With the continued volatility in commodity prices, formal guidance for 2017 will not be released until mid-December. The multi-year strategic plan first mentioned in the third quarter of 2016 continues to provide the framework for 2017 and beyond. The framework for the multi-year plan is to achieve 10% to 15% per share growth while maintaining a balance sheet with a debt to cash flow ratio of less than 1.0 times. Utilizing this framework and an oil price range of US$45-55/bbl WTI, we expect to spend approximately $300 million in 2017, which will provide per share growth at or above the upper end of our targets.
MANAGEMENT UPDATE
Raging River announces that Mr. Chad Lundberg has been appointed to Vice President Operations. Chad was most recently with a senior Canadian energy producer and brings with him in excess of 15 years of technical and senior management experience. Chad’s skills will be instrumental in assisting Raging River achieve future years of growth and shareholder value creation.
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, plans and timing of execution of capital activities, the expectation that the Company’s credit facility will provide ample flexibility for the Company to meet its current business objectives, expected 2016 average production, expected 2016 exit production, expectations on drilling ERH wells, expectations of implementing EOR plans, expectations on the number of wells to be drilled in the fourth quarter, details of our expected multi-year strategy including the objectives of such strategy, expectations of the our approximate capital budget for 2017 and expectations of per share growth resulting from such budget. 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, prevailing equipment and services costs 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 as of the date hereof. 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 2016 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.
INITIAL RATES OF PRODUCTION: References in this press release to initial production rates associated with certain ERH wells are useful in confirming the presence of hydrocarbons, however such rates are not determinative of the rates at which such wells 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.
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 standardized meanings 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)
