CALGARY, ALBERTA–(Marketwired – May 13, 2013) – RMP Energy Inc. (“RMP” or the “Company“) (TSX:RMP) is pleased to report its financial and operating results for the first quarter of 2013. For the three months ended March 31, 2013, RMP reported funds from operations of $20.1 million ($0.19 per basic share) on revenue of $32.6 million and record-setting average daily production of 6,727 barrels of oil equivalent (weighted 55% light oil and NGLs). Highlights and detailed results are as follows:
|Financial Highlights||Quarterly Summary|
|(thousands except share and per boe data) (6:1 oil equivalent conversion)||March 31, 2013||March 31, 2012||% change|
|P&NG revenue (1)||32,597||19,174||70|
|Funds from operations (2)||20,128||10,316||95|
|Per share – basic||0.19||0.11||73|
|Per share – diluted||0.18||0.11||64|
|Per share – basic||0.02||0.03||(33||)|
|Per share – diluted||0.02||0.03||(33||)|
|Total capital expenditures||39,128||18,982||106|
|Net debt (3) – period end||95,667||57,753||66|
|Weighted average basic shares||104,281,424||96,647,655||8|
|Weighted average diluted shares||108,889,264||96,647,655||13|
|Issued and outstanding shares (4)||104,281,424||96,647,655||8|
|Average daily production:|
|Natural gas (Mcf/d)||18,274||17,859||2|
|Liquids (Oil and NGLs)(bbls/d)||3,681||2,050||80|
|% Liquids (Oil and NGLs)||55||%||41||%||34|
|Oil equivalent (boe/d)||6,727||5,026||34|
|Average sales price (1):|
|Natural gas ($/Mcf)||3.50||2.33||50|
|Liquids (Oil & NGLs) ($/bbl)||81.04||82.45||(2||)|
|Oil equivalent ($/boe)||53.85||41.92||28|
|Operating expenses ($/boe)||7.93||8.66||(8||)|
|Operating netback (5) ($/boe)||36.69||26.41||39|
|Wells drilled: gross (net)||6 (6.0||)||5 (5.0||)||20|
|(1)||Petroleum and natural gas (“P&NG“) revenue and average sales pricing includes: any realized gains or losses from risk management commodity contract settlements.|
|(2)||Funds from operations does not have any standardized meaning prescribed by International Financial Reporting Standards (“IFRS“). Please refer to the Reader Advisories at the end of the news release.|
|(3)||Net debt is not a recognized measure under IFRS. Please refer to the Reader Advisories at the end of the news release.|
|(4)||As of May 13, 2013, common shares outstanding are 107,681,424.|
|(5)||Operating netback is not a recognized measure under IFRS. Please refer to the Reader Advisories at the end of the news release.|
First Quarter 2013 Operating and Financial Highlights
- Record-setting quarterly average daily production of 6,727 boe/d, weighted 55% towards light oil and NGLs, representing a 34% increase over the first quarter 2012 level of 5,026 boe/d. In the first quarter of 2013, RMP achieved its highest quarterly production level in spite of third-party-operated outages on an oil sales pipeline which impacted production at Waskahigan and at a mid-stream operated Kaybob gas plant, which curtailed the Company’s gas production in the area.
- Petroleum and natural gas revenue for the first quarter amounted to $32.6 million (including a realized gain on oil risk management commodity contracts of $335 thousand), of which 82% was derived from crude oil and NGL sales ($26.8 million). The Company’s realized crude oil discount differential to the Canadian-dollar converted WTI price averaged approximately $13.50/bbl during the quarter, as compared to $15.35/bbl in the first quarter of 2012. Differentials have subsequently tightened in the forward market for the Company’s Waskahigan and Ante Creek crude oil pricing, with pricing at a current average discount of approximately $9.00/bbl estimated for the balance of this year.
- In the first quarter, the Company incurred capital expenditures of $39.1 million. RMP successfully drilled and completed six (6.0 net) horizontal oil wells. Three of these wells were drilled at Waskahigan, two wells at Ante Creek and one well at Grizzly. The Company also completed the expansion of both the Waskahigan and Ante Creek oil battery facilities and increased its Grizzly-area working interest position to 100% with the acquisition of a partner’s 30% working interest.
- Net debt as of March 31, 2013 was $95.7 million, representing 1.2 times net debt-to-annualized first quarter funds from operations. The Company has a recently-expanded bank line of $140 million, of which only approximately $91 million is presently drawn.
- RMP reported funds from operations of $20.1 million ($0.19 per basic share) for the three months ended March 31, 2013, a 95% increase (73% per share) from the funds from operations for the first quarter of 2012.
- Net income for the first quarter amounted to $1.7 million, as compared to $2.6 million of net earnings in the first quarter of 2012. In the comparable quarter ended March 31, 2012, a non-cash gain on a property disposition of $5.8 million was recognized, increasing the realized income for that period and thus skewing the quarterly income comparison.
- Corporate operating costs of $7.93/boe decreased by 8% on a per boe basis, when compared to operating costs for the first quarter 2012 period of $8.66/boe. In the first quarter of this year, operating costs were impacted by approximately $263 thousand ($0.43/boe) due to a thirteenth-month equalization charge at the mid-stream-operated Kaybob gas plant.
First Quarter 2013 Operations Update
At Waskahigan, RMP drilled three, 100% working interest Montney horizontal light oil wells (two infill and one step-out) in the first quarter. All three wells were brought on-stream after the Peace Pipeline crude oil system re-commenced service on March 15, 2013. For the balance of this year, the Company intends to drill an additional five to six, 100% working interest horizontal light oil wells. The Company’s acreage position at Waskahigan encompasses 37 contiguous sections at 100% working interest, providing for a future light oil drilling inventory of approximately 120 locations.
Ante Creek Operations
At Ante Creek, during the first quarter, the Company successfully drilled and completed an additional two, 100% working interest Montney horizontal light oil wells (13-27-66-24W5 and 5-35-66-24W5). Overall, the Company has drilled a total of five (5.0 net), highly productive Montney horizontal oil wells at Ante Creek. For the balance of this year, the Company intends to drill an additional three (3.0 net) horizontal light oil wells at Ante Creek.
In February 2013, the expansion of both RMP’s Ante Creek oil battery and the non-operated, solution gas gathering line downstream of the battery was completed. As previously disclosed, RMP secured firm service capacity at an area operator’s gas plant, providing for the processing of a portion of its Montney solution gas production. Firm service of 3.5 MMcf/d has been negotiated for calendar 2013, with 2.0 MMcf/d locked-in for both calendar 2014 and 2015. Solution gas handling at these levels, however, is insufficient to facilitate the concurrent production of all five of RMP’s wells. As such, the Company has been producing only two wells concurrently under this operating environment, essentially on a preferential basis in order to maximize oil production and accelerate capital payout.
The following outlines the exceptional production results to-date of RMP’s Ante Creek wells and their current status (through to May 7, 2013):
|Well||Current Status||Cumulative Oil Production (bbls||)||Cumulative Gas Production (Mcf||)||Cumulative Boe Production (6:1||)||Days Produced||Current Oil Production (bbls/d||)||Current Flowing Tubing Pressure (kPa||)|
|(1)||4-35 well was shut-in on November 14, 2012; at that time it was producing 1,000 bbls/d of oil.|
|(2)||1-36 well was shut-in on March 26, 2013; at that time it was producing 1,200 bbls/d of oil.|
|(3)||13-27 well flow tested new oil at 1,150 bbls/d and 3.0 MMcf/d of associated solution gas (final 24 hours of flow test), as previously disclosed on March 13, 2013. Reported production in table reflects new oil produced during flow test.|
As a result of the Company’s strategic Ante Creek undeveloped land acquisition, as previously announced on May 10, 2013, RMP has now established ‘critical mass’ in the area for the purpose of future delineation and development drilling activities. The Company’s acreage position at Ante Creek encompasses 28.75 sections (22.0 net), providing for a significant, future light oil drilling inventory.
At Grizzly, to the southeast of Waskahigan, RMP successfully drilled and completed its second, 100% working interest Montney horizontal oil well (4-5-63-22W5) in the first quarter. The well is presently pipeline-connected to an area operator’s oil battery facility, however, solution gas handling issues at a gas plant downstream of this battery is preventing RMP’s well from commencing production. The Company expects this well to be on production by the fourth quarter of 2013, based on indications from the gas plant operator. At Grizzly, RMP holds a 100% working interest position on 12.25 sections of acreage, providing the Company with another Montney light oil resource project to delineate and develop.
Ante Creek Pipeline Project
As a result of exceptional drilling and production results achieved at Ante Creek, the Company will proceed with the installation of a wholly-owned pipeline inter-connect between its Ante Creek and Waskahigan properties, including the expansion of the Company’s Ante Creek surface field facilities. The pipeline will connect RMP’s Ante Creek 4-36-66-24W5 Battery facility to its Waskahigan 12-7-64-23W5 Battery, which has direct tie-in to third-party crude oil and associated solution gas sales pipelines. The Ante Creek pipeline portion of this capital project will cover approximately 35 kilometres of right-of-way and will consist of a six inch diameter oil pipeline and an eight inch diameter associated solution gas line. Oil fluid handling capacity at RMP’s Ante Creek 4-36 Battery will be expanded to 10,000 bbls/d, with solution gas handling increased to 20 MMcf/d. Barring any unforeseen delays, the pipeline inter-connect and related field equipment is scheduled to be commissioned and operational in late-February 2014.
The estimated capital cost of this strategic investment is approximately $34 million, forecasted as staged capital expenditures to be incurred over the next eight months based on scheduled progress. A total of $28 million is anticipated to be incurred by December 31, 2013, with the residual $6 million expended in the first quarter of 2014. The Company’s total capital program for 2013 is now forecasted to aggregate to approximately $127 million, comprised of an unchanged $85 million exploration and development program, $13.5 million for the Ante Creek land expansion purchased for RMP common shares, and the forecasted $28 million associated with the pipeline project and field facilities.
Given RMP’s significant financial strength and cash flow generating capabilities, both presently and upon commissioning of the Ante Creek pipeline, the Company intends to finance this capital project with bank debt, which presently has a debt servicing cost of only 3.5% per annum (before-tax). As previously disclosed, RMP’s bank facility was recently increased to $140 million, providing for ample funding support for this key project. Net debt at December 31, 2013 is estimated to be approximately $105 million after funding most of the Ante Creek project, providing for $35 million of projected, un-utilized borrowing capacity entering 2014.
Upon commissioning of the Ante Creek pipeline in February 2014, the Company anticipates corporate productive capacity to aggregate to at least 9,000 boe/d, weighted approximately 70% to light oil. Assuming a field operating netback of $40/boe, annualized ‘run rate’ field operating cash flow of approximately $130 million is anticipated to be generated.
The Ante Creek pipeline project will provide RMP with the following operational advantages:
- Strategic infrastructure support for delineation and development activities undertaken on its Montney asset base;
- Ability to produce ‘stranded’, behind-pipe production.
- Approximately 3,300 bbls/d of oil is shut-in due to insufficient gas handling capacity;
- Year-round production capability;
- Substantially greater crude oil and solution gas handling capacity;
- Direct tie-in to an independent oil sales pipeline, thus precluding the need to exclusively truck crude oil to handling facilities;
- Improved operating conditions through a pipeline system utilizing company-operated infrastructure; and,
- Operational control of area infrastructure.
Annual Shareholders Meeting Notice
RMP’s annual meeting of shareholders is scheduled for 3:00 p.m. on Tuesday, June 4th, 2013 in the McMurray Room of the Calgary Petroleum Club, located at 319 – 5th Avenue S.W., Calgary, Alberta.
The Company’s interim condensed consolidated financial statements and associated Management’s Discussion and Analysis (“MD&A“) for the three months ended March 31, 2013 are available on RMP’s website at www.rmpenergyinc.com within “Investors” under “Financials”. Additionally, these documents have been filed by the close of business today, on the Company’s profile on the System for Electronic Document Analysis and Retrieval (“SEDAR“). 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.
|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||Mcf||thousand 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/d||Gigajoules per day|
|WTI||West Texas Intermediate|
Any references in this news release to initial and/or final raw test or production rates and/or “flush” production rates are useful in confirming the presence of hydrocarbons, however, such rates are not determinative of the rates at which such wells will commence production and decline thereafter. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production for the Company.
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: forward market pricing discount for the Company’s Waskahigan and Ante Creek crude oil; the number of drilling locations remaining to be drilled this year in 2013 both at Waskahigan and Ante Creek; the number of future drilling locations in the Waskahigan drilling inventory; the current production of the Ante Creek wells; the timing for bringing the Company’s well at Grizzly on production; the Company’s estimated crude oil and solution gas handling capacity at the Ante Creek 4-36 Battery following the proposed expansion of field infrastructure and pipeline installation; the total capital cost of this expansion and pipeline and the staged timing of the capital expenditures; the intended source of funding of the Ante Creek pipeline and related field infrastructure capital project; estimated net debt and un-utilized borrowing capacity as at December 31, 2013; the estimated commissioning and operational date of the Ante Creek pipeline and related field infrastructure expansion; the Company’s corporate productive capacity upon commissioning of the Ante Creek pipeline in 2014 and the forecasted light oil weighting of such, the estimated field operating netback and aggregate annualized ‘run rate’ field operating cash flow; the operational advantages of the Ante Creek pipeline project; and the Company’s estimate of its currently ‘stranded’, behind-pipe production at Ante Creek.
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; volatility in market prices for crude oil, natural gas and NGLs; foreign exchange currency and interest rate fluctuation; stock market volatility and market valuations; 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; and obtaining required approvals of regulatory authorities. 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.
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. Funds from operations, as disclosed within this news release, represents cash flow from operating activities before: decommissioning obligation cash expenditures and changes in non-cash working capital from operating activities. The Company presents funds from operations per share whereby per share amounts are calculated consistent with the calculation of earnings per share.
Net debt refers to outstanding bank debt plus working capital deficit or less any working capital surplus (excludes current unrealized amounts pertaining to risk management commodity contracts). Net debt is not a recognized measure under IFRS and does not have a standardized meaning.
Field operating netback or operating netback refers to realized wellhead revenue less royalties, operating expenses and transportation costs per boe. Field operating netback or operating netback is not a recognized measure under IFRS and does not have a standardized meaning.