CALGARY, ALBERTA–(Marketwired – July 20, 2016) – Raging River Exploration Inc. (“Raging River” or the “Company“) (TSX:RRX) is pleased to announce that the shareholders of Rock Energy Inc. (“Rock“) have voted to approve the acquisition of Rock by Raging River pursuant to a plan of arrangement under the Business Corporations Act (Alberta) (the “Acquisition” or the “Arrangement“), with shareholders of Rock holding in excess of 97% of the common shares of Rock (the “Rock Shares“) represented in person or by proxy at the Meeting voting in favour of the Arrangement. In addition, Rock has received the final approval of the Court of Queen’s Bench of Alberta of the Arrangement and as a result closing of the Arrangement is expected to occur on July 21, 2016. Under the terms of the Acquisition, Rock shareholders will receive, for each Rock Share held, 0.082 of a Raging River common share. The aggregate consideration for the Acquisition is comprised of the issuance of 3.896 million common shares of Raging River and the assumption of approximately $70 million of net debt and assumed liabilities inclusive of bank debt, estimated working capital deficiency and Rock’s expected transaction costs including severance obligations.
Operations Update
Based on field estimates, Raging River was able to achieve a strong second quarter:
- Average production of approximately 16,000 boe/d consisting of 14,800 bbls/d of oil and 7.4 mmcf/d of natural gas.
- Exploration and development capital expenditures of approximately $38 million.
- Acquisition capital expenditures of $25 million.
- Drilled 40 net wells at a 98% success rate.
Significant rainfall in the first three weeks of July has moderately impacted operations with drilling about 10 days behind our expectations. Three drilling rigs are currently operating and with the improved forecast we anticipate making up the lost 10 days by the end of the third quarter. Assuming the closing of the Acquisition, it is estimated that our August average production levels will be approximately 19,500 boe/d.
Forgan Land Consolidation
During the second quarter, Raging River continued its consolidation efforts of the Saskatchewan Viking fairway by acquiring 30 net sections of crown land and 100 bbls/d of Viking light oil production for total consideration of $25 million.
The acquired assets are immediately adjacent to Raging River’s existing Forgan lands and include approximately 100 net high quality Viking drilling locations.
Increased 2016 Guidance
The board of directors have approved a second increase to our 2016 capital expenditure budget. Excluding the Acquisition of Rock, Raging River’s capital budget has been increased to $220 million consisting of $195 million of development expenditures in addition to $25 million of acquisitions (the Forgan Land Consolidation).
Approximately $12 million of the $20 million increase in development expenditures will be allocated to additional drilling with the other $8 million allocated to additional water flood expenditures.
We have revised our drilling program to include the drilling of 30 – 40 longer lateral wells to continue to enhance the economics of the Viking play. The total expected well count inclusive of our longer lateral tests is now 230 which is an increase of 10 wells from our prior guidance.
Assuming the closing of the Rock Acquisition and the increased development expenditures, we are now forecasting 2016 average production to be 18,000 boe/d with an increased exit guidance of 20,500 boe/d. The revised guidance represents a per share production increase of approximately 18% over 2015 levels. The details of our second half 2016 guidance and 2016 full year guidance are provided below.
Second Half | 2016 | |||||||
2016 | Revised | Previous | ||||||
Average daily production | ||||||||
Crude oil and NGL’s (bbls/d) | 18,500 | 16,750 | 15,500 | |||||
Natural gas (mcf/d) | 7,500 | 7,500 | 7,750 | |||||
Barrels of oil equivalent (boe/d) | 19,750 | 18,000 | 16,750 | |||||
Pricing | ||||||||
Crude oil – WTI ($US/bbl) | 46.84 | 43.18 | 42.40 | |||||
Exchange rate ($Cdn/$US) | 1.30 | 1.30 | 1.29 | |||||
Natural gas – AECO ($/mcf) | 2.55 | 2.08 | 1.76 | |||||
Cdn Light Sweet ($Cdn/bbl) | 56.30 | 52.00 | 49.80 | |||||
Financial | ||||||||
Operating cashflow ($000) | 114,100 | 189,500 | 169,500 | |||||
G&A ($000) | 4,700 | 8,500 | 8,400 | |||||
Financial charges ($000) | 2,200 | 3,900 | 2,900 | |||||
Cash tax recovery ($000) | – | (2,900 | ) | (2,900 | ) | |||
Funds flow from operations ($000) | 107,200 | 180,000 | 161,100 | |||||
Annualized FFO per share – basic | 0.93 | 0.78 | 0.72 | |||||
2016 exit net debt ($000) | 147,500 | 147,500 | 50,000 | |||||
2016 exit net debt to funds flow from operations | 0.7:1 | 0.8:1 | 0.3:1 | |||||
Netbacks ($/boe) | ||||||||
Oil and gas sales | 47.75 | 44.28 | 42.50 | |||||
Royalties | 4.50 | 4.29 | 4.20 | |||||
Operating expense | 10.45 | 9.85 | 9.30 | |||||
Transportation expense | 1.35 | 1.37 | 1.35 | |||||
Hedging gain | – | (0.03 | ) | (0.05 | ) | |||
Operating netback | 31.45 | 28.80 | 27.70 | |||||
G&A | 1.30 | 1.29 | 1.30 | |||||
Financial charges | 0.60 | 0.60 | 0.45 | |||||
Cash tax recovery | – | (0.43 | ) | (0.45 | ) | |||
Funds flow netback | 29.55 | 27.34 | 26.40 | |||||
Capital expenditures | ||||||||
Drilling, completion & equipping ($000) | 108,000 | 174,000 | 162,000 | |||||
Land, seismic and maintenance ($000) | 3,000 | 6,000 | 6,000 | |||||
Waterflood ($000) | 10,000 | 15,000 | 7,000 | |||||
Acquisitions ($000)(1) | 111,000 | 136,000 | 0 | |||||
Total ($000) | 231,500 | 331,000 | 175,000 |
(1) | Includes the corporate acquisition of Rock Energy and assumes the assumption of Rock’s net debt of $70 million and the issuance of 3,896,578 Raging River shares at $10.48 per share |
Additional corporate information relating to Raging River can be found on Raging River’s website at www.rrexploration.com or on www.sedar.com.