CALGARY, ALBERTA–(Marketwired – Aug. 3, 2017) – Raging River Exploration Inc. (the “Company” or “Raging River”) (TSX:RRX) announces its operating and financial results for the three and six months ended June 30, 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
|Percent Change||Six months ended
|Financial (thousands of dollars except share data)|
|Petroleum and natural gas revenue||105,982||67,528||57||217,999||117,909||85|
|Funds from operations (1)||64,965||43,999||48||137,717||73,901||86|
|Per share – basic||0.28||0.19||47||0.60||0.33||82|
|Net earnings (loss)||18,595||5,320||250||33,938||(2,534)||1439|
|Per share – basic||0.08||0.02||300||0.15||(0.01)||1600|
|Development capital expenditures||68,640||38,602||78||181,323||75,982||139|
|Property and corporate acquisitions||–||25,125||(100)||–||25,125||(100)|
|Total capital expenditures||68,640||63,727||8||181,323||101,107||79|
|Weighted average shares (thousands)|
|Shares outstanding, end of period (thousands)|
|Operating (6:1 boe conversion)|
|Average daily production|
|Crude oil and NGLs (bbls/d)||18,795||14,603||29||19,134||14,818||29|
|Heavy crude oil (bbls/d)||1,189||171||595||1,303||163||699|
|Natural gas (mcf/d)||12,185||7,368||65||11,676||7,634||53|
|Barrels of oil equivalent (2)(boe/d)||22,015||16,002||38||22,383||16,253||38|
|Oil and gas sales(3)||52.90||46.37||14||53.81||39.86||35|
|Realized gain (loss) on commodity contracts||(0.37)||0.11||(436)||(0.12)||0.12||(200)|
|General and administrative expense||(1.05)||(1.20)||(13)||(1.04)||(1.23)||(15)|
|Asset retirement expenditures||(0.15)||(0.04)||275||(0.13)||(0.04)||225|
|Current taxes recovery||–||0.34||(100)||–||1.15||(100)|
|Funds flow netback(1)||32.42||30.21||7||33.98||24.98||36|
|Net earnings (loss) per boe||9.28||3.66||154||8.36||(0.86)||1072|
|(1) See “Non-IFRS Measures.”|
|(2) See ‘”Barrels of Oil Equivalent.”|
|(3) Excludes unrealized risk management contracts.|
|(4) Excludes injection and service wells.|
SECOND QUARTER 2017 HIGHLIGHTS
- Achieved quarterly average production of 22,015 boe/d (91% oil), an increase of 38% over the comparable period in 2016. This represents a 35% production per share increase from the comparable period of 2016.
- The Company’s capital expenditures were $68.6 million inclusive of $9 million on land and $59.6 million of development capital resulting in the drilling of 60.6 net Viking horizontal wells at a 97% success rate.
- Achieved funds flow from operations (“FFO”) of $65 million ($0.28/share basic), an increase of 48% from the second quarter of 2016.
- Generated second quarter net earnings of $18.6 million ($0.08/share basic), an increase of 250% from the second quarter 2016.
- The Company generated field operating netbacks of $35.13/boe and funds flow netbacks of $32.42/boe.
- Continued diligent cost control with top decile general and administrative costs of $1.05/boe, a reduction of 13% from the comparable period in 2016.
- Maintained balance sheet strength with second quarter exit net debt of $253.1 million representing 1.0 times debt to the second quarter annualized FFO.
CREDIT FACILITY EXPANSION
As a result of the Company’s continued operational success, effective July 31, 2017, Raging River’s borrowing base on its credit facilities was increased to $500 million from $400 million. The increased credit facilities are comprised of a $50 million non-syndicated operating facility and a $450 million syndicated extendible revolving facility, on similar terms and conditions to the pre-existing facilities.
Our commitment to balance sheet strength remains paramount with the Company now anticipating exit 2017 net debt of approximately $285 million representing a net debt to expected trailing fourth quarter FFO of approximately 1.1 times based on current strip WTI pricing of approximately US$49.80/bbl.
In the second quarter of 2017, field conditions were very cooperative and the Company had timely access to services. As a result, Raging River was able to drill 60.6 net wells, a record level of second quarter activity for the Company.
In the second quarter, of the 60.6 net wells drilled, 16 wells were extended reach horizontals (“ERH”) bringing the total producing ERH well count to 89. Average per well ERH results continue to show 1.8 – 2.0 times improvement over comparable offsetting short laterals. For the remainder of 2017, it is expected that approximately 60% of wells drilled will be ERH.
Average well costs year to date have been $670 thousand for short laterals and $900 thousand blended cost for 3/4 mile and 1 mile ERH wells. Average well costs are on budget with our anticipated 5-7% increase from the lows of 2016. We anticipate costs to remain flat through the remainder of 2017.
GUIDANCE AND OUTLOOK
Raging River’s 2017 capital budget and guidance remains unchanged with targeted annual average production of 22,750 boe/d and capital spending of $340 million.
Two key initiatives that were outlined in the May 8, 2017 press release include the allocation of: (i) $10 million of incremental capital towards waterflood related facilities at Gleneath and Eureka; and (ii) $10 million of capital to new play development. The Company has made good progress on both of these initiatives.
The Company is on track with the waterflood related facility projects which are set to commence in the third quarter of 2017 and to be completed by the year end. Operating cost savings associated with these expenditures are expected to be seen in 2018.
With respect to the new play development initiative, as disclosed in the June 5, 2017, press release, Raging River has been accumulating lands prospective for light oil in the East Duvernay Shale basin in central Alberta. We have continued to make progress with this initiative, and have increased our net land position from 100,000 to 130,000 net acres. All of the lands acquired to date are targeting the oil phase of the basin.
The Company plans to methodically evaluate this East Duvernay Shale opportunity. We are currently surveying and acquiring surface lands in multiple locations in anticipation of drilling the first evaluation well early in the fourth quarter of 2017, with anticipated production results in the first quarter of 2018. Our current plans, contemplate six evaluations wells in 2018, with two wells targeted for the first half of 2018 and the balance for the second half of 2018.
Given the progress that the Company has made towards establishing a meaningful land position in this early stage, light oil resource play, we will continue to evaluate our Duvernay development plans in the context of the prevailing commodity price environment with a goal towards accelerating our pace of activity, should commodity pricing be supportive.
We are currently evaluating anticipated 2018 capital expenditure levels which is expected to be managed to ensure net debt to trailing FFO does not exceed 1.5 times. The board of directors continuously reviews our long term strategic plan and continues to be supportive of balanced per share growth and new play development while maintaining financial flexibility with our balance sheet.
The business approach taken by the Company since our inception over five years ago, has been to prudently manage our balance sheet while generating and maintaining meaningful per share growth while developing an enviable drilling inventory. Our established Viking drilling inventory of approximately 3,200 locations provides a robust growth and cash flow platform with in excess of 10 years of growth inventory at our current pace of development. In addition to our Viking platform, Raging River’s entrance into the emerging Duvernay light oil play in east central Alberta provides exposure to an exciting early stage opportunity that provides visibility towards additional per share value creation.
Additional corporate information can be found on our website at www.rrexploration.com.