CALGARY, ALBERTA–(Marketwired – Nov. 14, 2016) – RMP Energy Inc. (“RMP” or the “Company“) (TSX:RMP) today announces for the three months ended September 30, 2016 funds from operations of $9.3 million ($0.06 per basic share) on revenue of $22.0 million and average daily production of 8,119 barrels of oil equivalent (weighted 40% crude oil and NGLs). Detailed financial and operating results are as follows:
| Financial Highlights |
Three Months Ended Sep. 30, |
Nine Months ended Sep. 30, |
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| (thousands except share and per boe data) (6:1 oil equivalent conversion) | 2016 | 2015 | % Change |
2016 | 2015 | % Change |
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| Petroleum and natural gas revenue (1) | 22,015 | 35,852 | (39 | ) | 63,951 | 127,455 | (50 | ) | ||||
| Funds from operations (2) | 9,290 | 17,001 | (45 | ) | 26,211 | 73,727 | (64 | ) | ||||
| Per share – basic and diluted | 0.06 | 0.14 | (57 | ) | 0.18 | 0.60 | (70 | ) | ||||
| Net loss | (4,469) | (45,307 | ) | (90 | ) | (20,511 | ) | (52,415 | ) | (61 | ) | |
| Per share – basic and diluted | (0.03) | (0.37 | ) | (92 | ) | (0.14 | ) | (0.43 | ) | (67 | ) | |
| Total capital expenditures | 8,103 | 28,075 | (71 | ) | 43,879 | 84,995 | (48 | ) | ||||
| Net debt (3) – period end | 103,343 | 129,711 | (20 | ) | 103,343 | 129,711 | (20 | ) | ||||
| Weighted average basic shares | 150,970,068 | 123,640,011 | 22 | 143,550,050 | 122,691,384 | 17 | ||||||
| Weighted average diluted shares | 150,970,068 | 123,640,011 | 22 | 143,550,050 | 122,691,384 | 17 | ||||||
| Issued and outstanding shares (4) | 150,970,068 | 123,756,173 | 22 | 150,970,068 | 123,756,173 | 22 | ||||||
| Operating Highlights | ||||||||||||
| Average daily production: | ||||||||||||
| Natural gas (Mcf/d) | 29,163 | 34,650 | (16 | ) | 31,121 | 39,366 | (21 | ) | ||||
| Crude oil (bbls/d) | 2,924 | 4,955 | (41 | ) | 3,482 | 5,442 | (36 | ) | ||||
| NGLs (bbls/d) | 335 | 270 | 24 | 316 | 283 | 12 | ||||||
| Oil equivalent (boe/d) | 8,119 | 11,000 | (26 | ) | 8,984 | 12,285 | (27 | ) | ||||
| % Liquids (Oil and NGLs) | 40% | 47 | % | (15 | ) | 42 | % | 47 | % | (11 | ) | |
| Average sales price (1) : | ||||||||||||
| Natural gas ($/Mcf) | 2.64 | 3.47 | (24 | ) | 2.11 | 3.34 | (37 | ) | ||||
| Crude oil ($/bbl) | 52.85 | 53.46 | (1 | ) | 46.22 | 60.23 | (23 | ) | ||||
| NGLs ($/bbl) | 22.96 | 16.54 | 39 | 21.38 | 26.60 | (20 | ) | |||||
| Oil equivalent ($/boe) | 29.47 | 35.43 | (17 | ) | 25.98 | 38.00 | (32 | ) | ||||
| Operating expenses ($/boe) | 5.58 | 5.60 | – | 5.27 | 4.99 | 6 | ||||||
| Operating netback (5) ($/boe) | 15.90 | 19.34 | (18 | ) | 13.68 | 24.48 | (44 | ) | ||||
| Wells drilled: gross (net) | 1 (1.0) | 7 (7.0 | ) | (86 | ) | 8 (8.0 | ) | 13 (13.0 | ) | (38 | ) | |
- Petroleum and natural gas revenue and pricing includes realized gains or losses from risk management commodity contracts.
- Funds from operations does not have any standardized meaning prescribed by International Financial Reporting Standards (“IFRS“). Please refer to the Reader Advisories hereinafter.
- Net debt is not a recognized measure under IFRS. Please refer to the Reader Advisories hereinafter.
- As of November 14, 2016, there are 150,970,068 million common shares outstanding.
- Operating netback is not a recognized measure under IFRS. Please refer to the Reader Advisories hereinafter.
Third Quarter 2016 Highlights
- For the third quarter, RMP’s average daily production was 8,119 boe/d (weighted 40% crude oil and NGLs). Scaled-back capital spending resulting in reduced drilling activity, in conjunction with natural field declines, curbed production growth from the comparative third quarter of 2015 and the preceding second quarter of 2016.
- Third quarter petroleum and natural gas revenue amounted to $22.0 million (68% from crude oil and NGL sales), as compared to $35.9 million (69% of crude oil and NGL sales) in the third quarter of 2015 and $20.3 million (79% of crude oil and NGL sales) in the preceding second quarter of 2016.
- Third quarter petroleum and natural gas royalties amounted to $3.4 million (15% of petroleum and natural gas revenue, excluding realized amounts on risk management commodity contracts), as compared to $5.7 million (16% of petroleum and natural gas sales) in the comparative third quarter of 2015 and $3.7 million (18% of petroleum and natural gas sales) in the preceding second quarter of 2016. The Alberta Government’s new Modernized Royalty Framework (“MRF“) and Emerging Resources Program (“ERP“) are expected to have a significant, positive impact on the well economics of the Company’s Montney drilling inventory.
- Third quarter field operating costs on a per-unit basis were $5.58/boe, on-par with the operating expenses for the comparative third quarter of 2015 ($5.60/boe). The third quarter 2016 transportation cost of $3.51/boe was lower than the $4.85/boe recognized for the comparative third quarter of 2015. The per-unit transportation cost in that comparative quarter of 2015 was higher due to pipeline maintenance activities during that period which caused capacity restrictions and widened the gas price transportation differential. Third quarter 2016 general and administrative expenses (“G&A“) of $1.6 million were the same as the comparative third quarter 2015 expensed G&A amount of $1.6 million and was higher than the $1.4 million incurred in the preceding second quarter 2016 as a result of preliminary costs incurred in respect of the Company’s strategic review process.
- Third quarter 2016 funds from operations amounted to $9.3 million ($0.06 per basic share). The Company’s field operating netback was $15.90/boe for the third quarter. Controllable cash costs of $9.04/boe (operating expenses, G&A expenses and bank interest) for the third quarter augmented RMP’s realized funds from operations in the quarter.
- In the third quarter, the Company incurred $8.1 million in property, plant and equipment and exploration and evaluation net capital expenditures. The third quarter capital program consisted of the drilling of: i) one (1.0 net) Waskahigan Montney horizontal oil well, ii) hybrid slick-water completion operations on three (3.0 net) Waskahigan horizontal well bores, and iii) the corresponding field tie-in of these wells. During the first nine months of 2016, a total of eight horizontal Montney oil wells (8.0 net) were drilled by RMP, as compared to a total of 13 (13.0 net) horizontal wells drilled during the same period in 2015.
- As at September 30, 2016, the Company’s net debt amounted to $103.3 million, a 12% decrease from the year-end 2015 net debt of $118.0 million and a 20% decrease from the comparative third quarter ended September 30, 2015 net debt of $129.7 million. Bank interest expense in the third quarter of 2016 was $986 thousand or $1.32/boe. In the third quarter, the borrowing base re-determination of RMP’s bank credit facility (the “Credit Facility“) was completed with a maximum borrowing limit set at $120.0 million and a scheduled step-down to $100.0 million on October 31, 2016. The lenders have subsequently extended the timing of the scheduled Credit Facility step-down to the earlier of: i) the closing date of the Ante Creek Disposition (as defined below) and, ii) November 30, 2016. The lenders have also extended the timing of the next scheduled borrowing base re-determination to be completed by no later than November 18, 2016.
- Subsequent to the end of the third quarter, on October 31, 2016 the Company announced it entered into a definitive purchase and sale agreement for the strategic disposition of all of its crude oil and natural gas interests in the Ante Creek area of West Central Alberta for cash consideration of $114.3 million, subject to normal and customary closing adjustments (the “Ante Creek Disposition“). The effective date of the Ante Creek Disposition is September 1, 2016 with an anticipated closing date on November 15, 2016. The net cash proceeds to be received at closing of the Ante Creek Disposition will be used to eliminate outstanding bank indebtedness. The disposition of RMP’s Ante Creek asset is transformational in nature and strategically re-positions the Company with a capital structure conducive to the systematic and staged delineation of its highly prospective Gold Creek Montney asset in conjunction with its low-risk development of its Waskahigan Montney asset, both of which are key core areas for the Company.
RMP’s interim condensed consolidated financial statements and Management’s Discussion and Analysis for the three and nine months ended September 30, 2016 are available on RMP’s website at www.rmpenergyinc.com within “Investors” under “Financials”. Additionally, these documents will be filed later today on the System for Electronic Document Analysis and Retrieval (“SEDAR“). After such filing, these documents can be retrieved electronically from the SEDAR system by accessing RMP’s public filings under “Search for Public Company Documents” within the “Search Database” module at www.sedar.com.
Abbreviations
| bbl or bbls | barrel or barrels | Mcf/d | thousand cubic feet per day |
| Mbbl | thousand barrels | MMcf/d | million cubic feet per day |
| bbls/d | barrels per day | MMcf | Million cubic feet |
| boe | barrels of oil equivalent | Bcf | billion cubic feet |
| Mboe | thousand barrels of oil equivalent | psi | pounds per square inch |
| boe/d | barrels of oil equivalent per day | kPa | kilopascals |
| NGLs | natural gas liquids | GJ | Gigajoule |
| WTI | West Texas Intermediate | GJ/d | Gigajoules per day |
Reader Advisories
The information in this news release contains certain forward-looking statements. These statements relate to future events or our future performance. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as “seek”, “anticipate”, “budget”, “plan”, “continue”, “estimate”, “approximate”, “expect”, “may”, “will”, “project”, “predict”, “potential”, “targeting”, “intend”, “could”, “might”, “should”, “believe”, “would” and similar expressions. More particularly and without limitation, this news release contains forward-looking information relating to, the Ante Creek Disposition, including the use of proceeds therefrom and the anticipated closing date; the Company’s expectation that the proceeds from the Ante Creek Disposition will eliminate the Company’s bank indebtedness; the anticipated timing of the scheduled Credit Facility step-down; and, the anticipated expectation and effect of the MRF and ERP on RMP’s Montney drilling inventory well economics.
With respect to forward-looking statements contained in this news release, RMP has made assumptions regarding, but not limited to: conditions in general economic and financial markets; effects of regulation by governmental agencies; current and future commodity prices and royalty regimes; future exchange rates; royalty rates; future operating costs; availability of skilled labor; availability of drilling and related equipment; timing and amount of capital expenditures; the impact of increasing competition; the price of crude oil and natural gas; that the Ante Creek Disposition will be completed on the terms and timing anticipated; that the Company will have sufficient cash flow, debt or equity sources or other financial resources required to fund its capital and operating expenditures and requirements as needed; that the Company’s conduct and results of operations will be consistent with its expectations; available pipeline capacity; that the Company will have the ability to develop the Company’s properties in the manner currently contemplated; that the Company will be able to drill, complete and tie-in wells in the manner and on the timing described herein; current or, where applicable, proposed assumed industry conditions, laws and regulations will continue in effect or as anticipated; and the estimates of the Company’s production and reserves volumes and the assumptions related thereto (including commodity prices and development costs) are accurate in all material respects.
These statements involve substantial known and unknown risks and uncertainties, certain of which are beyond the Company’s control, including: the impact of general economic conditions; industry conditions; changes in laws and regulations including the adoption of new environmental laws and regulations and changes in how they are interpreted and enforced; fluctuations in commodity prices and foreign exchange and interest rates; stock market volatility and market valuations; volatility in market prices for oil and natural gas; liabilities inherent in oil and natural gas operations; changes in income tax laws or changes in tax laws and incentive programs relating to the oil and gas industry; geological, technical, drilling and processing problems and other difficulties in producing petroleum reserves; obtaining required approvals of regulatory authorities; that the Ante Creek Disposition does not close on the terms or timing anticipated; that the Company is not bank debt free upon completion of the Ante Creek Disposition; unexpected drilling results; the Company’s is unable to achieve its objectives; that the anticipated resource potential in the Gold Creek area is not achieved; changes in capital expenditures, reserves or reserves estimates and debt service requirements; the occurrence of unexpected events involved in the exploration for, and the operation and development of, oil and gas properties, including hazards such as fire, explosion, blowouts, cratering, and spills, each of which could result in substantial damage to wells, production facilities, other property and the environment or in personal injury; changes or fluctuations in production levels; delays in anticipated timing of drilling and completion of wells; lack of available capacity on pipelines; the lack of availability of qualified personnel; uncertainties associated with estimating oil and natural gas reserves; and ability to access sufficient capital from internal and external sources. Many of these risks and uncertainties and additional risk factors are described in the Company’s Annual Information Form which is available at www.sedar.com.
The Company’s actual results, performance or achievement could differ materially from those expressed in, or implied by, such forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur or, if any of them do, what benefits that the Company will derive from them. The Company’s forward-looking statements are expressly qualified in their entirety by this cautionary statement. Except as required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statements.
In this news release RMP has adopted a standard for converting thousands of cubic feet (“mcf“) of natural gas to barrels of oil equivalent (“boe“) of 6 mcf:1 boe. Use of boes may be misleading, particularly if used in isolation. The boe rate is based on an energy equivalent conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different than the energy equivalency of the 6:1 conversion ratio, utilizing the 6:1 conversion ratio may be misleading as an indication of value.
This news release contains certain oil and gas metrics, including field operating netback (or operating netback) or net debt, which do not have standardized meanings or standard methods of calculation nor are recognized measures under International Financial Reporting Standards (“IFRS“) and therefore such measures may not be comparable to similar measures used by other companies and should not be used to make comparisons. Such metrics have been included herein to provide readers with additional measures to evaluate the Company’s performance; however, such measures are not reliable indicators of the future performance of the Company and future performance may not compare to the performance in previous periods and therefore such metrics should not be unduly relied upon. Field operating netback or operating netback refers to realized wellhead revenue less royalties, operating expenses and transportation costs per barrel of oil equivalent. The Company believes that this financial netback measure is useful supplemental information to analyze operating performance and provide an indication of the results generated by the Company’s principal business activities. Investors should be cautioned that this measure should not be construed as an alternative to other measures of financial performance as determined in accordance with IFRS. Net debt refers to outstanding bank debt less deferred charge plus working capital deficiency (or minus working capital surplus), excluding unrealized amounts pertaining to risk management contracts. Net debt is not a recognized measure under IFRS and does not have a standardized meaning. The Company’s method of calculating net debt may differ from other companies, and accordingly, they may not be comparable to similar measures used by other companies.
As an indicator of the Company’s performance, the term funds from operations contained within this news release should not be considered as an alternative to, or more meaningful than, cash flow from operating, financing or investing activities, as determined in accordance with IFRS. This term is not a recognized measure, does not have a standardized meaning nor is it a financial measure under IFRS. Funds from operations is widely accepted as a financial indicator of an exploration and production company’s ability to generate cash which is used to internally fund exploration and development activities and to service debt. This measure is widely used by shareholders and investors in the valuation, comparison and investment recommendations of companies within the natural gas and crude oil exploration and production industry. As disclosed within this news release, funds from operations represents cash flow from operating activities before: expensed corporate acquisition-related costs, decommissioning obligation cash expenditures, changes in non-cash working capital from operating activities and non-cash changes in deferred charge. The Company presents funds from operations per share whereby per share amounts are calculated consistent with the calculation of earnings per share.
John Ferguson
President and Chief Executive Officer
(403) 930-6303
john.ferguson@rmpenergyinc.com
RMP Energy Inc.
Dean Bernhard
Vice President, Finance and Chief Financial Officer
(403) 930-6304
dean.bernhard@rmpenergyinc.com