In addition Renegade is pleased to announce that it has made a successful transition to a dividend paying corporation. We believe that our assets are ideally suited for an income plus growth model based on the following attributes:
| • Profitability | – 95% light-oil with > $50/boe operating netbacks | |
| • Sustainability | – 25% corporate declines – Strong capital efficiencies in core areas |
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| • Hedging | – 65% of 2013 production hedged at WTI CDN$93.67 (1) – 3,000 bbl/d of 2014 production hedged at WTI CDN$91.28 |
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| • Sustainable Dividend | – 36% dividend payout ratio – 98.4% all-in payout ratio |
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| • Long-Term Growth | – 900+ net light-oil development drilling locations |
| (1) | Represents 4,458 bbl/d (65% of production, net of royalties) of 2013 production hedged |
OPERATIONAL UPDATE
During the fourth quarter of 2012, Renegade began its transition to a dividend paying corporation. The key focus was to manage our capital program in areas that provided predictable results and strong capital efficiencies. As such, our drilling program concentrated on our core assets in southeast Saskatchewan and our Viking assets in west central Saskatchewan.
Southeast Saskatchewan
Renegade drilled 6 gross (5.0 net) wells in the fourth quarter of 2012, bringing the year to date total to 32 gross (23.8 net) wells. Renegade continued to focus on both the Frobisher and Souris Valley trends with further drilling plans continuing into 2013.
During the fourth quarter of 2012, Renegade drilled and completed 2 gross (2.0 net) wells in the Wordsworth and Queensdale areas targeting the Frobisher formation. In the Wordsworth area, 1 gross (1.0 net) horizontal well was drilled yielding a 30 day initial oil production average of over 180 bbls/day. This well offsets the strong results noted in the third quarter. Renegade drilled 1 gross (1.0 net) horizontal well in the Queensdale east area which showed promising results during drilling and will be evaluated further in the first quarter of 2013.
Renegade drilled 1 gross (0.5 net) well in the Crystal Hills area of southeast Saskatchewan in the fourth quarter of 2012 which yielded a 30 day initial unoptimized oil production rate of over 200 bbls/day. Renegade has additional plans to continue drilling in this area throughout 2013.
During the third quarter, Renegade drilled 3 gross (2.5 net) wells in the Redvers/Mair area of southeast Saskatchewan. The most recent 2 gross (1.5 net) wells had an average 30 day initial oil production rate of over 85 bbls/day.
West Central Saskatchewan
Renegade’s continues to be an industry leading producer in the west central Saskatchewan Viking play with cumulative recovery results which exceed our independent reserve evaluator type curves. Renegade continues to experience all-in costs of approximately $950 thousand per well.
Renegade drilled 6 gross (6.0 net) wells in the fourth quarter of 2012. Renegade has now drilled and brought onto production 14 gross (14.0 net) wells based on 40 acre spacing. The production results continue to show a strong correlation to the offset 80 acre spacing well type curves.
2013 GUIDANCE
The 2013 capital program is designed to position Renegade for long-term sustainable production, reserves and funds flow from operations while the Company enters its transitional year from a high growth company to an income plus growth company, with a focus on sustainable dividend payments.
The Company is pleased to announce that its Board of Directors has approved a 2013 capital development budget of $79.6 million. The $79.6 million capital program and the expected dividend payment of $46.7 million are forecasted to be funded through the Company’s funds flow from operations with an all-in annual payout ratio estimated at 98.4%.
Management is pleased to provide the following estimated 2013 guidance:
| Average Production (boe/d) | 8,000 | |
| Exit Production (boe/d) | 8000 – 8,200 | |
| Percentage Light-Oil Weighting (%) | 95% | |
| Funds Flow From Operations ($000)(1) | 128.3 | |
| Funds Flow From Operations Per Diluted Share ($)(2) | 0.60 | |
| Capital expenditures(3) | ||
| Southeast Saskatchewan – 65% ($000) | 51.4 | |
| West Central Saskatchewan – 35% ($000) | 28.2 | |
| Total Capital Expenditures ($000) | 79.6 | |
| Annual Cash Dividends ($000)(4) | 46.7 | |
| Annual Cash Dividends Per Basic Share ($)(4) | 0.23 | |
| Total All-In Payout Ratio (%) | 98.4 | |
| (1) | 2013 funds flow from operations and operating netback assumes a realized AECO gas price of CAD$3.00 and a realized oil price of CAD$85.00/bbl with 4,458 bbl/d (65% of production, net of royalties) of 2013 production hedged at an average price of C$93.67. | |
| (2) | Based on 215.2 million fully diluted shares currently outstanding. | |
| (3) | Excludes corporate or land acquisitions. | |
| (4) | Based 202.9 basic shares currently outstanding. |
The Company continues to expand on its disciplined hedging program in order to provide certainty over the funds flow from operations used to fund future capital programs and protect the long-term viability of its dividend payments. To date, Renegade has hedged 4,458 bbl/d of 2013 production (65% of production, net of royalties) at WTI CDN$93.67 and 3,000 bbl/d of 2014 production at WTI CDN$91.28 per barrel.
DIVIDEND
Renegade is pleased to announce that it paid its first dividend of $0.019167 ($0.23 annualized) today, to shareholders of record on December 31, 2012.
Renegade is also pleased to announce that the cash dividend to be paid on February 15, 2013, in respect of January 2013 operations, for shareholders of record on January 31, 2013, will be $0.019167 per share ($0.23 annualized). This represents a 9.4% yield based on the January 14, 2013 closing price of $2.44 per common share. The ex-dividend date is January 29, 2013.
These dividends are designated as “eligible dividends” for Canadian income tax purposes.
MANAGEMENT CHANGES
Consistent with Renegade’s shift to an income plus growth model, the Company’s Board of Directors and management team are pleased to announce the appointment of Mr. Brad Wakefield as Vice President, Exploitation effective January 14, 2013. Mr. Wakefield brings over 20 years of oil and gas experience to Renegade and has a strong exploitation and development background. Mr. Wakefield has worked for Talisman Energy over the past 13 years commencing as an operations engineer in the Chauvin oil field, then progressed through the organization in various management roles. In his capacity as a Business Unit Manager, Mr. Wakefield was responsible for all technical functions of Talisman’s conventional oil business unit that included all disciplines from the southeast Saskatchewan asset team comprised of engineering, operations and the geological and geophysical departments. Mr. Wakefield was most recently the Vice President, Conventional Operations where he was responsible for over 70,000 boe/d of production.
Renegade’s Board of Directors and management team are very pleased to have Mr. Wakefield join Renegade’s executive team and are confident that his wealth of both technical and operational knowledge will be a key component to Renegade’s recent transformation into a successful income plus growth company.
In addition, Renegade announces the departure of Mr. Josh McDonald as Vice President, Exploration effective January 18, 2013. Mr. McDonald contributed to the development and further consolidation of Renegade’s core focus areas which will assist with the Company’s ability to execute on its go forward strategy. The Board of Directors and management of Renegade thank Mr. McDonald for his contributions and wish him continued success in the future.
CORPORATE INFORMATION
Renegade’s common shares trade on the TSX Venture Exchange under the symbol “RPL”. Renegade has approximately 202.9 million common shares outstanding and 215.2 million fully-diluted common shares.
Renegade is also pleased to announce that it has updated its corporate presentation which is available at www.renegadepetroleum.com.
READER ADVISORIES
Forward-Looking Statements
This press release contains forward-looking statements. More particularly, this press release contains statements concerning Renegade’s capital expenditure program, Renegade’s drilling plans, the expected ability of Renegade to execute on its exploration and development program, potential drilling locations, expected well economics, dividend payments, reserves information, commodity pricing and Renegade’s anticipated production (both in terms of quantity and raw attributes), funds flow from operations, operating net backs, pay-out ratio and other similar matters.
The forward-looking statements contained in this document are based on certain key expectations and assumptions made by Renegade, including: (i) with respect to capital expenditures, generally, and at particular locations, the availability of adequate and secure sources of funding for Renegade’s proposed capital expenditure program and the availability of appropriate opportunities to deploy capital; (ii) with respect to drilling plans, the availability of drilling rigs, expectations and assumptions concerning the success of future drilling and development activities and prevailing commodity prices; (iii) with respect to Renegade’s ability to execute on its exploration and development program, the performance of Renegade’s personnel, the availability of capital and prevailing commodity prices; (iv) with respect to anticipated production, the ability to drill and operate wells on an economic basis, the performance of new and existing wells and risks typically associated with oil and gas exploration and production; (v) oil prices; (vi) currency exchange rates; (vii) royalty rates; (viii) operating costs; and (ix) transportation costs.
Although Renegade 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 Renegade 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, the failure to obtain necessary regulatory approvals, 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; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses; health, safety and environmental risks; commodity price and exchange rate fluctuations; and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures).
Any references in this news release to 30 day initial production rates are useful in confirming the presence of hydrocarbons, however, such rates are not determinative of the rates at which such wells will continue production and decline thereafter. Additionally, such rates may also include recovered “load oil” fluids used in well completion stimulation. Such rates are not necessarily indicative of long-term performance of the relevant well or fields or of ultimate recovery of hydrocarbons. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production for the Company.
The forward-looking statements contained in this document are made as of the date hereof and Renegade is not under any 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. Please refer to Renegade’s Annual Information Form dated April 27, 2012 and Renegade’s (final) short form prospectus dated November 9, 2012 for additional risk factors relating to Renegade, both of which are available for viewing on www.sedar.com.
This news release shall not constitute an offer to sell or the solicitation of an offer to buy any securities nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. The securities issued pursuant to the plan of arrangement and financing described herein have not been and will not be registered under the United States Securities Act of 1933 and may not be offered or sold in the United States except in transactions exempt from such registration.
Dividends
The payment and the amount of dividends declared in any month will be subject to the discretion of the board of directors and will depend on the board of director’s assessment of Renegade’s outlook for growth, capital expenditure requirements, funds from operations, potential acquisition opportunities, debt position and other conditions that the board of directors may consider relevant at such future time. The amount of future cash dividends, if any, may also vary depending on a variety of factors, including fluctuations in commodity prices and differentials, production levels, capital expenditure requirements, debt service requirements, operating costs, royalty burdens and foreign exchange rates.
Conversion
The term barrels of oil equivalent (“boe”) may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one boe (6 mcf/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. All boe conversions in this report are derived from converting gas to oil in the ratio of six thousand cubic feet of gas to one barrel of oil. 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 on a 6:1 basis may be misleading as an indication of value.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.