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
|Percent Change||Nine months ended
|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||)|
|Per share – basic||0.03||0.05||(40||)||0.02||0.12||(83||)|
|Development capital expenditures||58,916||45,545||29||134,898||127,340||6|
|Total capital expenditures||120,179||49,760||142||221,286||167,284||32|
|Net debt (1)(3)||140,187||103,659||35|
|Weighted average shares (thousands)|
|Shares outstanding, end of period (thousands)|
|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|
|Oil and gas sales (3)||47.09||51.45||(8||)||42.51||52.64||(19||)|
|Realized gain (loss) on commodity contracts||(0.05||)||0.80||(106||)||0.06||0.92||(93||)|
|General and administrative expense||(1.15||)||(1.18||)||(3||)||(1.20||)||(1.28||)||(6||)|
|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||)|
|Wells drilled (4)|
|(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.
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.
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.
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.