CALGARY, ALBERTA–(Marketwired – Feb. 3, 2016) – Raging River Exploration Inc. (“Raging River” or the “Company“) (TSX:RRX) is pleased to present the results of the independent reserves report (the “Sproule Report”) prepared by Sproule Associates Ltd. (“Sproule”) as of December 31, 2015. Sproule evaluated 100% of the Company’s reserves in 2015 as they have done since the Company’s inception in 2012.
During 2015, the Company invested $340 million (unaudited) consisting of $169 million of acquisition capital and $171 million of development capital into the expansion and development of the Viking play. This invested capital resulted in average annual production of 13,715 boe/d representing year over year production per share growth of 20%. Exit production of 17,000 boe/d was achieved which represents a 17% per share increase over the comparable 2014 exit rate.
A recycle ratio of 2.14 was achieved in 2015 despite average commodity prices being 40% below those recorded in 2014. Proved plus Probable (“P+P”) Finding Development and Acquisition (“FD&A”) costs including changes in Future Development Capital (“FDC”) were $16.63/boe in 2015.
- Since our inception in 2012 Raging River has invested a total of $1.05 billion expanding and developing the Viking play. During this time Raging River has generated approximately $540 million of funds flow from operations and, on a P+P basis achieved a cumulative reserves per share growth of 271%.
- During that time producing reserves of 39.7 million boe were added at an FD&A cost of $26.33 per boe. Over that same period our weighted average operating netback has been $50.73/boe resulting in a full cycle cumulative recycle ratio of 1.93.
- Raging River has significantly expanded its drilling inventory during this time. The Company has in excess of 3,800 remaining drilling locations of which approximately 74% are not currently booked.
- At inception, Raging River had approximately 1,000 bbls/d of Viking oil production and 85 net sections of prospective acreage with 300 potential drilling locations. After four years of focusing on this singular play, we have drilled or acquired 911 net horizontal Viking oil wells and expanded our land base to include approximately 3,800 remaining drilling locations on 390 net prospective sections of land.
YEAR END 2015 RESERVES
The following summarizes certain information contained in the Sproule Report. The Sproule Report was prepared in accordance with the definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook (the “COGE Handbook”) and National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities (“NI 51-101”). Additional reserve information as required under NI 51-101 will be included in the Company’s Annual Information Form which will be filed on SEDAR by the end of March 2016.
Reserve Report Highlights:
- Added 17.8 million boe of P+P reserves (12.5 million boe Total Proven (“TP”)) in 2015 for a P+P reserve replacement ratio of 356% (249% TP).
- Increased P+P reserves by 20% to 76.4 mmboe (90% oil) and TP reserves by 15% to 57.4 mmboe (92% oil).
- Increased Proven Developed Producing (“PDP”) reserves by 5.4 mmboe which replaced production by 208%.
- FD&A costs including the change in FDC are $16.63 per boe on a P+P basis which results in a recycle ratio of 2.14 times
- FD&A costs including the change in FDC are $21.89 per boe on a TP basis which results in a recycle ratio of 1.62 times
- FD&A costs are $32.59 per boe on a PDP basis which results in a recycle ratio of 1.09 times
- TP reserves (57.4 mmboe) represents 75% of P+P reserves as at December 31, 2015.
- The reserves life index (“RLI”) is 12.3 years using P+P reserves and based on exit 2015 production of 17,000 boe/d.
- As at December 31, 2015, the Company has a total of 911 net Viking horizontal oil wells included in PDP reserves.
Corporate Reserves Information:
|December 31, 2015|
|Proved developed producing||22,432||12,592||24,530||603,331||–||–|
|Proved developed non-producing||24||24||590||238||–|
|Probable developed producing||5,876||3,275||6,421||146,287||–||–|
|Probable developed non-producing||28||–||28||885||238||–|
|Total proven plus probable||69,847||39,089||76,362||1,466,881||746,832||979|
- “Oil” values include all light & heavy oil volumes, and natural gas liquids volumes.
- Reserves have been presented on gross basis which are the Company’s total working interest share before the deduction of any royalties and without including any royalty interests of the Company.
- Based on Sproule’s December 31, 2015 escalated price forecast.
- It should not be assumed that the present worth of estimated future net revenue presented in the tables above represents the fair market value of the reserves. There is no assurance that the forecast prices and costs assumptions will be attained and variances could be material. The recovery and reserves estimates of Raging River’s crude oil, natural gas liquids and natural gas reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual crude oil, natural gas and natural gas liquids reserves may be greater than or less than the estimates provided herein.
- All future net revenues are stated prior to provision for interest, general and administrative expenses and after deduction of royalties, operating costs, estimated well abandonment and reclamation costs and estimated future capital expenditures. Future net revenues have been presented on a before tax basis.
- Totals may not add due to rounding.
- Pursuant to section 5.4.3 “Levels of Certainty for Reported Reserves” of the COGE Handbook, reported reserves should target at least a 90 percent probability that the quantities actually recovered will be equal to or exceed the estimated proved reserves and that at least a 50 percent probability that the quantities actually recovered will equal or exceed the sum of the estimated proved plus probable reserves.
Net Asset Value
|December 31, 2015|
|NPV 5%||NPV 10%|
|P+P NPV (1,2)||1,940,250||8.97||1,466,881||6.78|
|Undeveloped acreage (3)||135,000||0.63||135,000||0.63|
|Net debt (4)||(140,000)||(0.65)||(140,000)||(0.65)|
|Proceeds from stock options (5)||15,600||0.07||15,600||0.07|
|Net Asset Value (fully-diluted)||1,950,850||9.02||1,477,481||6.83|
- Evaluated by Sproule as at December 31, 2015. Net present value of future net revenue does not represent fair market value of the reserves.
- Net present values (“NPV“) equals net present value of future net revenue before taxes based on Sproule’s forecast prices and costs as of December 31, 2015.
- Internally evaluated with an average value of $480 per acre for 280,000 undeveloped acres.
- Net debt as at December 31, 2015, including working capital deficit (unaudited).
- Fully-diluted shares at December 31, 2015 total: including outstanding common shares of 213.4 million and 2.9 million stock options that are in-the-money as at December 31, 2015.
- Per share figures based on fully-diluted shares outstanding as at December 31, 2015 – see note 5.
Future Development Costs
The following is a summary of the estimated FDC required to bring P+P undeveloped reserves on production.
|Future Development Capital Costs|
|(amounts in $000s)||Total Proved||Total Proved +
|Total undiscounted FDC||676,821||746,832|
|Total discounted FDC at 10% per year||574,758||632,709|
|Average crude oil price WTI US$/bbl||48.80||93.00||97.98||94.19|
|Operating netback $/boe||35.52||64.51||60.07||54.76|
|Total Reserves mboe||24,530||19,103||12,004||4,473|
|Reserves additions mboe||10,431||11,024||9,599||3,054|
|Proved Plus Probable Producing|
|Total Reserves mboe||30,952||23,873||16,908||6,258|
|Reserves additions mboe||12,083||10,890||12,717||4,006|
|Total Reserves mboe||57,391||49,928||31,376||11,544|
|Reserves additions mboe||12,467||22,466||21,851||8,451|
|Change in FDC ($000)||(67,100)||262,071||298,429||129,698|
|Proven Plus Probable|
|Total Reserves mboe||76,361||63,565||42,729||17,164|
|Reserves additions mboe||17,800||24,750||27,619||12,380|
|Change in FDC ($000)||(43,900)||305,248||259,940||166,435|
- Financial and production information is per the Company’s 2015 preliminary unaudited financial statements and is therefore subject to audit.
- FD&A costs are used as a measure of capital efficiency. The calculation includes all capital costs for that period plus the change in FDC for that period. This total capital including the change in the FDC is then divided by the change in reserves for that period incorporating all revisions and production for that same period. For example: 2015 Total Proven = (339,950-67,100) / (57,391-49,928+5,004) = $21.89 per boe.
- Recycle Ratio is calculated by dividing the operating netback per boe by the FD&A costs for that period. For example: 2015 Total Proven = (35.52/21.89) = 1.62. The recycle ratio compares netback from existing reserves to the cost of finding new reserves and may not accurately indicate the investment success unless the replacement reserves are of equivalent quality as the produced reserves.
- The reserves replacement ratio is calculated by dividing the yearly change in reserves before production by the actual annual production for that year. For example: 2015 Total Proven = (57,391-49,928+5,004)/5,004 = 249%.
- RLI is calculated by dividing the reserves in each category by the average annual production for that period. For example 2015 Total Proven = (57,391) / (13,709*.365) = 11.5 years.
The following tables set forth the benchmark reference prices, as at December 31, 2015, reflected in the Sproule Report. These price assumptions were provided to Raging River by Sproule and were Sproule’s then current forecast at the date of the Sproule Report.
|SUMMARY OF PRICING AND INFLATION RATE ASSUMPTIONS(1)|
|as of December 31, 2015|
|FORECAST PRICES AND COSTS|
LSB 35° API
|Natural Gas AECO-C Spot
Edmonton Pentanes Plus
|NGLs Edmonton Butanes
|Operating Cost Inflation Rates
|Capital Cost Inflation Rates
|Exchange Rate(2) ($Cdn/$US)|
|Thereafter||Escalation rate of 1.5%|
- This summary table identifies benchmark reference pricing schedules that might apply to a reporting issuer.
- The exchange rate used to generate the benchmark reference prices in this table.
- As at December 31, 2015.
UPDATED 2016 GUIDANCE
The Company has reduced its commodity price expectations for 2016. We are now budgeting a commodity price forecast of US$32.50/bbl WTI for the first half of 2016 and US$35/bbl WTI for the second half of 2016. AECO natural gas prices are forecast to be $2.35/mcf for all of 2016. As a result of the commodity price collapse that has been witnessed in 2016, we are reducing our capital budget from $190 million to a range of $150-$160 million.
During the first half of 2016, capital expenditures are anticipated to be approximately $50-$60 million with the lower end of the range equating to budgeted funds flow from operations at US$30/bbl WTI. Total 2016 funds flow from operations are forecast to be approximately $121 million.
The revised 2016 capital program of $150-$160 million consists of 180-185 net wells which is expected to generate 2016 average daily production of 16,500 boe/d (91% oil), a 20% (13.5% per share) increase over 2015 production. The revised budget contemplates 2016 exit production of 17,000 boe/d.
Raging River expects to maintain its strong balance sheet with exit 2016 net debt now estimated at $170 million (equating to a trailing net debt to funds flow ratio of approximately 1.4:1).
Raging River continues its focus on enhancing its prospective acreage through swaps, crown land sales, freehold leasing opportunities and purchases of additional acreage and production in our core area. The weakness in commodity prices continues to present unique opportunities to continue to consolidate quality assets. In 2016, we have already expanded our net prospective Viking acreage by 11 sections.