CALGARY, ALBERTA–(Marketwired – Dec. 10, 2015) – Raging River Exploration Inc. (“Raging River” or the “Company“) (TSX:RRX) announces that it has entered into a definitive agreement to acquire Anegada Energy Corp. (“Anegada”), a privately held corporation with 2,750 boe/d of high quality Viking light oil assets that are complementary to Raging River’s existing Viking assets in southwestern Saskatchewan and southeastern Alberta (“the “Acquisition”).
Raging River also announces that the Company’s board of directors (the “Board”) has approved a 2016 capital budget of $190 million. The combination of the Acquisition and budgeted capital expenditures is expected to result in year over year production per share growth of 19% in 2016. This growth is expected to be accomplished while continuing to align capital expenditures with forecast cashflow and maintaining the balance sheet at 0.9 times debt to trailing cashflow at a US$42.50/bbl WTI oil forecast.
The Acquisition includes 2,750 boe/d (58% light oil) of expected average 2016 production and 50 net sections of highly prospective land targeting Viking oil in areas complementary to Raging River’s existing Viking production. The drilling inventory associated with the Acquisition includes over 280 net drilling locations of which approximately 68% are currently unbooked.
Based on Raging River’s closing share price on December 9, 2015 of $8.15 per share the total consideration for the Acquisition is approximately $126 million. The consideration for the Acquisition is comprised of the issuance of approximately 11.7 million common shares of Raging River (“Common Shares“) and the assumption of approximately $30 million of net debt. The shareholders of Anegada receiving the Common Shares pursuant to the Acquisition are a small group of primarily sophisticated investors.
The Acquisition is being completed by way of an exempt takeover bid and closing is expected to occur prior to December 31, 2015. Completion of the Acquisition is subject to certain closing conditions, including receipt of the approval of the Toronto Stock Exchange and certain other third party approvals.
|Production(1):||1,600 bbls/d Viking light oil|
|6,900 mcf/d Viking gas|
|Proved plus Probable reserves(2):||10.0 MMboe (58% Viking light oil)|
|Land prospective for Viking oil:||32,000 net acres|
|Total land:||69,000 net acres|
|Total risked drilling locations:||280 net horizontal wells (68% unbooked)|
|Operating netback (3):||$21.50/boe|
- Based on Raging River’s forecasted average volumes for 2016. Gross production before the deduction of royalties and without including any royalty interest.
- Gross Company Reserves. Reserves are prepared by Sproule Associates Limited (“Sproule”) effective December 31, 2015 using the Sproule October 31, 2015 forecast prices and costs in accordance with National Instrument 51‐101 – Standards of Disclosure of Oil and Gas Activities and the Canadian Oil and Gas Evaluation Handbook. Gross Company Reserves means the company’s working interest reserves before the calculation of royalties, and before the consideration of the company’s royalty interests.
- Based on Raging River’s forecast WTI of US$42.50/bbl, FX of 0.74 CAD/US and $2.35 /mcf for natural gas
|Production(1):||$45,645 per producing boe|
|Proved plus Probable Reserves(2):||$12.55 per boe|
|Cash Flow Multiple @ US $40/bbl WTI:||5.8 times|
- Based on forecasted average volumes for 2016. Gross production before the deduction of royalties and without including any royalty interest.
- Reserves as disclosed above.
FirstEnergy Capital Corp. acted as Raging River’s sole financial advisor in regards to the Acquisition.
Despite what has been a trying year for the entire energy sector, Raging River has achieved an exceptional year. By continuing our disciplined approach on balance sheet management and operational excellence the Company achieved a year over year production per share growth of greater than 14% while only spending approximately 100% of cash flow on drilling, completion and waterflood activities.
The Company is planning for the supply and demand imbalance that exists in oil and natural gas to persist throughout 2016. As such, we are taking a cautious approach with our commodity price forecast and utilizing US$40/bbl WTI for the first half of 2016 and US$45/bbl WTI for the second half of 2016. AECO natural gas prices are assumed to be $2.35/mcf for all of 2016.
During the first half of 2016, capital expenditures are anticipated to be approximately $75 million equating to budgeted cashflow at US$40/bbl WTI. Total 2016 funds flow from operations are forecast to be $172 million.
The Board has approved a 2016 capital program of $190 million that is expected to consist of 220 net wells and generate 2016 average daily production of 17,000 boe/d (91% oil), a 25% (19% per share) increase over 2015 production. Raging River expects to maintain its strong balance sheet with exit 2016 net debt estimated at $160 million (equating to a trailing net debt to funds flow ratio of approximately 0.9:1).
|Average daily production|
|Crude oil and NGL’s (bbls/d)||15,400|
|Natural gas (mcf/d)||9,500|
|Barrels of oil equivalent (boe/d)||17,000|
|Crude oil – WTI ($US/bbl)||42.50|
|Exchange rate ($Cdn/$US)||1.35|
|Natural gas – AECO ($/mcf)||2.35|
|Cdn Light Sweet ($Cdn/bbl)||52.79|
|Operating cashflow ($000)||186,400|
|Financial charges ($000)||6,000|
|Cash taxes ($000)||–|
|Funds flow from operations ($000)||172,300|
|Per share – basic||0.81|
|2016 exit net debt ($000)||160,000|
|2016 exit net debt to funds flow from operations||0.8:1|
|Oil and gas sales||45.24|
|Funds flow netback||27.61|
|Drilling, completion & equipping ($000)||168,000|
|Land, seismic and maintenance ($000)||6,000|
Raging River has continued to focus on expanding our Viking footprint. The Acquisition establishes a core Viking area in Alberta comprised of over 70 net oil prone sections of land in addition to 375 drilling locations (approximately 82% unbooked), which includes Raging River’s existing lands and drilling locations in the Viking area in Alberta. When combined with our already dominant position in the southwestern Saskatchewan Viking fairway, the Acquisition solidifies Raging River as the largest land holder and Viking light oil producer in Western Canada.
The business approach taken by the Company since our inception four years ago has been to prudently manage our balance sheet and maintain significant per share growth while establishing an extensive drilling inventory. Pro forma the Acquisition, our drilling inventory of approximately 3,800 locations (approximately 76% unbooked) is expected to provide stable per share growth for in excess of 10 years.
The forward-looking statements contained in this press release are made as of the date hereof and the Company undertakes no 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.
NON-IFRS MEASURES: This document contains the terms “funds flow from operations”, “net debt”, “operating netback” and “funds flow netback’, which do not have a standardized meaning prescribed by International Financial Reporting Standards (“IFRS”) and therefore may not be comparable with the calculation of similar measures by other companies. Management uses funds generated by operations to analyze operating performance and leverage. Management believes “net debt” is a useful supplemental measure of the total amount of current and long-term debt of the Company. Mark-to-market risk management contracts are excluded from the net debt calculation. Management believes “operating netback” and “funds flow netback” are useful supplemental measures of firstly, the amount of revenues received after royalties and operating and transportation costs and secondly, the amount of revenues received after the royalties, operating, transportation costs, general and administrative costs, financial charges and asset retirement obligations. Additional information relating to these non-IFRS measures, including the reconciliation between funds from operations and cash flow from operating activities, can be found in the Company’s most recent management’s discussion and analysis MD&A, which may be accessed through the SEDAR website (www.sedar.com).
BARRELS OF OIL EQUIVALENT: The term “boe” or barrels of oil equivalent may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one barrel of oil equivalent (6 Mcf: 1 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. Additionally, 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 ratio of 6:1 may be misleading as an indication of value.
DRILLING LOCATIONS: This presentation discloses drilling locations in two categories: (i) booked locations; and (ii) unbooked locations. Booked locations are proved locations and probable locations derived from the Company’s most recent independent reserves evaluation as prepared by Sproule as of December 31, 2014 (or in respect of the drilling locations associated with the Acquisition the independent reserves evaluation as prepared by Sproule as of December 31, 2015 in respect of the assets associated with the Acquisition) and account for drilling locations that have associated proved and/or probable reserves, as applicable. Unbooked locations are internal estimates based on prospective acreage and an assumption as to the number of wells that can be drilled per section based on industry practice and internal review. Unbooked locations do not have attributed reserves or resources. Unbooked locations have been identified by management as an estimation of our multi-year drilling activities based on evaluation of applicable geologic, seismic, engineering, production and reserves information. There is no certainty that the Company will drill all unbooked drilling locations and if drilled there is no certainty that such locations will result in additional oil and gas reserves, resources or production. The drilling locations on which we actually drill wells will ultimately depend upon the availability of capital, regulatory approvals, seasonal restrictions, oil and natural gas prices, costs, actual drilling results, additional reservoir information that is obtained and other factors. While certain of the unbooked drilling locations have been derisked by drilling existing wells in relative close proximity to such unbooked drilling locations, the majority of other unbooked drilling locations are farther away from existing wells where management has less information about the characteristics of the reservoir and therefore there is more uncertainty whether wells will be drilled in such locations and if drilled there is more uncertainty that such wells will result in additional oil and gas reserves, resources or production.
Raging River Exploration Inc.
Mr. Neil Roszell, P. Eng.
President and Chief Executive Officer
Raging River Exploration Inc.
Mr. Jerry Sapieha, CA
Vice President, Finance and Chief Financial Officer