CALGARY, Alberta, Nov. 14, 2017 (GLOBE NEWSWIRE) — RMP Energy Inc. (the “Company”) (TSX:RMP) today announces its intention to commence a share-repurchase program, provides an Elmworth Montney operations update, and reports its financial and operating results for the third quarter of 2017. The Company is changing its corporate name to “Iron Bridge Resources Inc.“. The name change is expected to become effective later this month.The ticker symbol “IBR” has been reserved by the Toronto Stock Exchange (“TSX”) for the Company’s use following the name change becoming effective.
The Company’s Board of Directors has authorized a share-repurchase program to be facilitated through a normal course issuer bid (the “NCIB”). The Company believes its share price does not always reflect the underlying intrinsic value of its Elmworth asset base and as such, the Company intends to apply to implement a NCIB through the facilities of the TSX and alternative Canadian trading platforms, pursuant to which the Company would have the ability to repurchase, from time-to-time, its outstanding shares for cancellation. This NCIB is expected to commence in due course following the acceptance of the Company’s notice of intention to commence a NCIB, and approval of such, by the TSX, and will terminate one year later or such earlier time as the NCIB is completed or terminated at the option of the Company. The Company will implement a restriction on the maximum aggregate value of shares to be purchased during the term of the NCIB of $7.5 million.
Elmworth Montney Update
For the month of October 2017, the Company produced approximately 2,100 boe/d on average from its Elmworth Montney asset, reflecting a 40% increase over the approximate 1,500 boe/d produced in the month of September 2017. Current production is approximately 2,100 boe/d (based on field estimates), with a light oil and NGLs weighting between 30% and 33%. The Company has recently commenced its winter drilling program at Elmworth. The first of five wells will spud this week. A total of five, 100% working interest wells are budgeted to be drilled this winter, encompassing: i) a brine disposal well; ii) two horizontal development wells; and, iii) two delineation, land-holding horizontal wells. The two development wells will be completed and tied into the Company’s Elmworth 2-23 Facility prior to ‘spring break-up’. Drilling of the two step-out delineation wells is scheduled for early-2018 and is expected to continue 41 sections of prospective acreage past its primary expiry date through to the year 2020. Completion operations on these two well bores is budgeted to be undertaken in the second half of the year.
The two development wells, to be drilled from the Company’s 2-23 Facility pad site, will each be approximately 2,400 meters (7,900 feet) in lateral length. The Company’s technical team plans to continue to optimize its completion technique and in this regard will be further decreasing the stage spacing and increasing the number of frac stages to approximately 80 on each of these two well bores. The Company anticipates an increase in well productivity from this completion change and potentially lower gas-to-oil ratios and reduced water-cuts. Completion operations on these two development wells are scheduled for January 2018.
The Company has significant financial flexibility and full funding capability to carry out its winter drilling capital expenditures budget of approximately $25 million and fund the aforementioned share-repurchase program. Exiting 2017, the Company is forecasting approximately $33 million of liquidity (positive working capital plus equity investment) and an undrawn credit facility of $5 million.
At Elmworth, the Company holds a large undeveloped land base consisting of 84 (83.5 net) sections (53,440 net acres) of operated acreage, with substantial resource potential. Asset development of the Montney formation will be focused on extended-reach horizontals with increased frac and proppant intensity. These technical enhancements, coupled with operational efficiencies in spud-to-on-stream cycle times, emulsion management and infrastructure optimization, will provide the key to unlocking the vast potential of the Company’s Elmworth Montney asset.
Third Quarter 2017 Results Commentary
The Company’s reported third quarter 2017 results include operational and financial contribution from the recently divested Waskahigan, Grizzly, Kaybob, Gilby, Pine Creek fields, and other minor Alberta properties (the “Disposition Assets”). On September 1, 2017, the Company announced a definitive purchase and sale agreement for the disposition of these assets (the “Disposition”). Holders of common shares of the Company approved by overwhelming majority (over 99%) the Disposition at a special shareholders meeting held on October 13, 2017, in addition to approving a corporate name change to “Iron Bridge Resources Inc.”. The Disposition transaction closed on October 17, 2017. The Company recognizes the results of operations from the Disposition Assets up to the date of closing, when control transferred.
The Disposition, after closing, has resulted in the Company transforming to a geographically and geologically focused Montney producer at Elmworth in West Central Alberta. As such, the reported results for the three months ended September 30, 2017 are not indicative of the Company’s current nor go-forward operational and financial performance. The following commentary summarizes the Company’s third quarter 2017 results and provides certain forward-looking information relating to its Elmworth asset:
- As a result of the strategic Disposition, the Company has bolstered its balance sheet with significant financial liquidity and the requisite capital resources with which to carry out the continued delineation and disciplined development of its core Elmworth Montney asset. The Company currently has approximately $33 million of cash on-deposit, a $9 million equity investment in shares of the purchaser of the Disposition Assets, and an undrawn $5 million credit facility.The Company estimates it will exit this current year with approximately $33 million of liquidity (positive working capital plus equity investment) and no bank debt outstanding.
- Average daily production was 4,010 boe/d (weighted 31% crude oil and NGLs), which included approximately 2,600 boe/d of production from the Disposition Assets. The Company’s Elmworth Montney property produced 1,410 boe/d on average for the third quarter, with a light oil and NGLs weighting of approximately 30%. Only two (2.0 net) of the Company’s Elmworth drilled-wells produced concurrently during the third quarter due to gas compression capacity restrictions at its 2-23 Facility. In early-October 2017, however, additional compression was installed and as a result the Elmworth 2-23 Facility is presently handling the crude oil, emulsion and natural gas production from three (3.0 net) of the Company’s Montney horizontal wells (3-22, 4-18 and 15-23). This oil battery now has capacity to handle 1,500 bbls/d of crude oil, approximately 16 MMcf/d of natural gas and 7,500 bbls/d of emulsion. The Company’s current production at Elmworth is approximately 2,100 boe/d (based on field estimates).
- Petroleum and natural gas (“P&NG”) revenue realization in the third quarter was impacted by significant weakness in AECO natural gas prices. AECO benchmark pricing was 41% lower than the preceding second quarter and 31% lower than the comparative third quarter of 2016. However, WTI oil prices were stable in comparison to the preceding second quarter and 7% higher than the comparative third quarter of 2016. Within this commodity price environment, the Company’s P&NG revenue amounted to $8.1 million in the third quarter (65% derived from crude oil and NGL sales). The Company’s realized crude oil sales price in the third quarter, from its Waskahigan, Grizzly and Elmworth oil sales, was $53.93/bbl, which reflects an oil quality discount to the Canadian-dollar converted WTI price of $6.47/bbl. At Elmworth, the Company’s realized oil sales price for its Montney light sweet crude product was approximately $56.78/bbl in the third quarter, reflecting an oil quality discount to the Canadian-dollar converted WTI price of $3.62/bbl.
- P&NG royalties in the third quarter amounted to $799 thousand (10% of P&NG revenue excluding realized amounts on risk management contracts), as compared to royalties of $3.4 million (15% of P&NG revenue) for the comparative third quarter of 2016. At Elmworth, the Company’s field royalty rate was approximately 4% in the third quarter. For 2018, the Company is expecting a corporate royalty rate of between 7% and 8%, based on forecasted commodity prices and anticipated productivity of its Elmworth Montney wells. The Alberta Government’s Modernized Royalty Framework is expected to have a significant, positive impact on the well economics of the Company’s Elmworth Montney drilling inventory.
- Field operating costs on an oil equivalent basis were $13.25/boe in the third quarter. A higher level of well workovers, pump replacement activity and compressor maintenance at Waskahigan and Kaybob, in addition to prior period third-party gas plant adjustments at Kaybob, resulted in higher per-unit operating costs in comparison to the preceding second quarter of 2017, wherein limited workover activity is conducted due to challenging ‘spring break-up’ surface conditions. Field operating costs at Elmworth were approximately $8.50/boe in the third quarter of 2017. Per-unit operating expenses at Elmworth for 2018 are expected to decrease and approximate $7.00/boe, reflecting the concentrated and operated nature of this asset, anticipated production growth and ongoing field optimization at Elmworth.
- Per-unit transportation costs were $6.03/boe in the third quarter of 2017. On July 1, 2017, upon the completion and in-service of the Pembina Peace Pipeline Phase III expansion, the Company’s contracted firm service oil transportation volumes increased. The associated ‘take-or-pay’ charges resulted in higher per-unit transportation costs in the third quarter. However, in conjunction with the aforementioned Disposition, a significant portion of these commitments were permanently assigned to the purchaser at closing of the Disposition, thus mitigating the go-forward financial obligations for the Company. Per-unit transportation costs at Elmworth for 2018 is expected to approximate $5.00/boe, which primarily will relate to pipeline tolls on the Pembina Peace Pipeline and Alliance Pipeline Systems in addition to trucking charges of its NGLs to a sales terminal.
- Third quarter 2017 general and administrative expenses (“G&A”) of $3.3 million include approximately $2.0 million of costs incurred in connection with the Company’s executive management restructuring undertaken on August 1, 2017, including related retiring allowances and financial advisory and legal fees associated with the restructuring. For 2018, the Company is estimating G&A expenses to average approximately $1.0 million per quarter, representing a 20% to 25% decrease from historical levels (adjusted for non-recurring G&A items as discussed), and reflecting cost optimization measures already undertaken or those expected to be undertaken in due course.
- In the third quarter of 2017, the Company invested approximately $7.8 million in capital expenditures. Drilling and completion costs were $4.1 million, primarily relating to one (1.0 net) Elmworth Montney horizontal well drilled and completed in the quarter (the 15-23 well). Field facilities and well equipment costs were $2.8 million, primarily pertaining to residual construction costs of the Elmworth 2-23 Facility and additional expansion costs of such for increased compression and inlet separation, in addition to the tie-in of the Elmworth 15-23 well. The Company spent $0.8 million on Montney land investment in the third quarter at Elmworth.
Please refer to the Company’s interim condensed consolidated financial statements and the Management’s Discussion and Analysis for the three months ended September 30, 2017 for detailed financial and operational results. These documents 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.