CALGARY, ALBERTA–(Marketwired – Dec. 12, 2013) – RMP Energy Inc. (“RMP” or the “Company“) (TSX:RMP) is pleased to announce its 2014 Capital Budget and Business Plan and provide updated reserves information.
2014 Capital Budget and Business Plan
The Company’s Board of Directors has approved an exploration and development expenditures program of $130 million for 2014 (the “2014 Capital Budget“). The 2014 Capital Budget is anticipated to be fully funded by internally-generated funds from operations, which is forecasted to approximate $142 million or $1.20 per basic share, representing a significant increase of 78% and 64%, respectively, over projected 2013 funds from operations.
The Company’s 2014 capital focus will be on the continued delineation and development of its Montney light oil resource position at Ante Creek, Waskahigan and Grizzly in West Central Alberta, which currently encompasses a total of 106 sections of land (105.15 net), providing a multi-year inventory of drilling locations with the potential for high field netbacks, attractive re-cycle ratios and accelerated capital payouts. At Ante Creek, the Company plans to drill 11 wells (11.0 net) with an additional nine wells (9.0 net) planned at Waskahigan and one (1.0 net) well at Grizzly. The drilling program includes the construction of eight surface lease pads and involves drilling four long-reach horizontal wells with greater than 1,600 meters of horizontal length. The Company plans to drill six delineation wells and 15 development wells in 2014. RMP’s budgeted development drilling costs reflect capital efficiencies arising from improvements through faster drill times. Drilling times at both Ante Creek and Waskahigan have been reduced by approximately 20% with the wells now reaching total depth in 11 to 13 days, respectively.
The drilling and completion expenditure component of the Company’s 2014 Capital Budget is projected to approximate $90 million, with the remaining budgeted funds of approximately $40 million allocated towards investments in well-site and facilities infrastructure, gathering lines, seismic, undeveloped land expansion and miscellaneous well workovers. Included in this budgeted amount is approximately $10 million related to RMP’s strategic Ante Creek-to-Waskahigan pipeline inter-connect and expansion of associated oil battery infrastructure.
Fiscal 2014 is anticipated to be a transformational year as the Company is forecasting a substantial step-change in production and corresponding increased light oil weighting. RMP projects that the 2014 Capital Budget, in addition to existing ‘behind-pipe’ production at Ante Creek, is forecasted to generate 46% year-over-year production growth from fiscal 2013 (35% increase per share). Fiscal 2014 daily production is projected to average 10,000 boe/d, weighted approximately 68% light crude oil and NGLs. At Ante Creek, five horizontal light oil wells (5.0 net) presently are shut-in due to third-party capacity constraints on existing gas processing infrastructure, which will be resolved upon the start-up of RMP’s pipeline interconnect between Ante Creek and Waskahigan. In forecasting the 2014 average production, the Company has considered and assumed the following:
- Ante Creek pipeline and expanded battery infrastructure is anticipated to be in-service by March 1, 2014. As a result, first quarter 2014 production will be tempered as the third-party solution gas capacity constraint will continue during the first two months of the year. However, upon full operational commissioning of the pipeline and new battery infrastructure, the Company anticipates corporate production to exceed 10,000 boe/d.
- Upon start-up of the Ante Creek pipeline project, capacity constraints on the third-party oil sales pipeline system will require RMP to truck a portion of its Ante Creek oil. As such, trucking logistical issues are anticipated, particularly during the ‘spring break-up’ months of April and May, impacting the Company’s second quarter 2014 forecasted production level.
- Anticipated apportionment on the third-party oil sales pipeline will continue until full expansion of the oil sales system is completed, which is assumed to occur on or about October 1, 2014. Once the Peace Pipeline expansion is completed, trucked Ante Creek oil volumes will decrease as more oil is pipeline-routed and in conjunction the Company’s transportation costs will decrease correspondingly.
Upon resolution of these aforementioned issues, the Company is forecasting a significant production ramp-up during the second half of 2014.
The Company’s 2014 business plan forecasts and key assumptions are as follows:
|Average daily production:|
|Light oil and NGLs (Bbls/d)||6,830|
|Natural Gas (MMcf/d)||19.0|
|Oil equivalent (boe/d)||10,000|
|Capital expenditures (4) ($)||$ 132,000,000|
|E&D capital expenditures ($)||$ 130,000,000|
|Funds from operations (1) ($)||$ 142,000,000|
|Funds from operations (1) – per share ($)||$ 1.20|
|Year-end 2014 net debt (1) ($)||$ 106,000,000|
|Net debt-to-funds from operations ratio||0.75|
|Royalty rate (2) (%)||23%|
|Operating costs ($/boe)||$ 6.60|
|Transportation costs (3) ($/boe)||$ 2.40|
|Operating netback ($/boe)||$ 41.80|
|General and administrative expense ($/boe)||$ 2.10|
|WTI oil (US$/Bbl)||$ 94.85|
|RMP oil differential to WTI (C$/Bbl)||$ (15.00)|
|Nymex gas (US$/Mcf)||$ 4.10|
|AECO gas (C$/GJ)||$ 3.60|
|Exchange Rate (US$/C$)||0.94|
- Funds from operations and Net debt does not have any standardized meaning prescribed by International Financial Reporting Standards (“IFRS“). Refer to the Reader Advisories at the end of the news release.
- Reflects a budgeted 28% field royalty rate at Ante Creek for fiscal 2014.
- Assumes full expansion of third-party Peace Pipeline oil sales system completed October 1, 2014, with a portion of RMP’s oil production to be trucked from Ante Creek up until that time.
- Includes forecasted capitalized general and administrative costs of $2.0 million.
In order to ensure the Company’s cash flow is protected from lower-than-budgeted commodity prices, the following commodity hedge positions are presently outstanding:
|Q1 2014||Swap||1,750||WTI Nymex||C$ 99.36|
|Q2 2014||Swap||1,750||WTI Nymex||C$ 98.99|
|Q3 2014||Swap||1,750||WTI Nynex||C$ 98.99|
|Q4 2014||Swap||1,750||WTI Nymex||C$ 98.99|
|Fiscal 2014||Swap||5,000||AECO 5A||C$ 3.50|
Interim Corporate Reserves Update Information
As a result of strong Ante Creek well production performance during the year, in relation to the property’s year-end 2012 reserves bookings, the Company commissioned its independent reserves evaluator, InSite Petroleum Consultants Ltd. (“InSite“), to provide an interim reserves update evaluation as of September 30, 2013. The evaluation of the Company’s crude oil and natural gas reserves was prepared in accordance with the definitions, standards and procedures prescribed in National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (“NI 51-101“) and the Canadian Oil and Gas Evaluation Handbook. Unless stated otherwise, all reserves referred to in this news release are stated on a company gross basis (working interest before deduction of royalties and without including any royalty interests). Summarized highlights of the Company’s interim corporate reserves are as follows:
|September 30, 2013 Reserves Summary (1) (company gross reserves)|
|(Columns may not add due to rounding)||(Bcf)||(Mbbls)||(Mbbls)||(Mboe)(6:1)|
|Proved developed producing||31.275||3,808.6||469.0||9,490.0|
|Proved developed non-producing||3.855||428.3||21.4||1,092.1|
|Total Proved plus Probable||95.051||17,291.6||1,083.4||34,216.9|
|Note (1) Estimated using InSite’s forecast prices and costs as of September 30, 2013|
At Ante Creek, a total of 12.23 million boe of proved plus probable reserves (5.52 million boe proved) have been assigned as at September 30, 2013, as comparedto 4.46 million