Razor Energy Corp. Announces Fourth Quarter and 2017 Year End Results

April 13, 2018 6:57 AM

CALGARY, Alberta, April 13, 2018 (GLOBE NEWSWIRE) — Razor Energy Corp. (“Razor” or the “Company”) (TSXV:RZE) (www.razor-energy.com) is pleased to announce its fourth quarter 2017 financial and operating results. Selected financial and operational information is outlined below and should be read in conjunction with Razor’s audited consolidated financial statements and management’s discussion and analysis for the year ended December 31, 2017, which are available on SEDAR at www.sedar.com and the Company’s website.

With continued efforts toward increasing production through reactivations and other optimization activities, Razor has achieved record production levels in the fourth quarter of 2017 with production averaging 4,534 barrels of oil equivalent per day (“boe/d”), of which approximately 88% was light oil and NGLs.

FOURTH QUARTER 2017 HIGHLIGHTS

Achieved record production of 4,534 boe/d (88% liquids), up 8% from Q3 2017;
Generated adjusted funds flow of $6.3 million ($0.40/share basic and diluted), up 297% from Q3 2017 on higher realized prices and increased production volumes;
Recorded positive fourth quarter net income of $2.3 million, up from a loss of $2.5 million in Q3 2017;
Capital expenditures totaled $3.7 million, focused on well reactivations, re-entries and pipeline and facilities upgrades; and
Acquired additional non-operated working interest positions to consolidate Razor’s existing assets in the Kaybob Triassic Units 1 and 2 for aggregate cash consideration of $4.6 million.

2017 ANNUAL HIGHLIGHTS

Full year production averaged 3,813 boe/d (89% liquids);
Generated adjusted funds flow of $10.0 million ($0.73/share basic and diluted);
Capital expenditures totaled $9.9 million, focused on well reactivations, re-entries and pipeline and facilities upgrades;
Maintained a strong financial position, with year-end net debt of $27.2 million and $7.5 million in cash; and
Completed 3 major asset acquisitions in the Swan Hills and Kaybob areas for a total cash consideration of $32.8 million.

Razor’s strategy of growing production through well reactivations continued its momentum in the fourth quarter of 2017 with production growth of 8% from the third quarter of 2017. Razor has also focused on reducing operating costs, resulting in a 11% decrease in per boe operating expenses in Q4 2017 as compared to Q1 2017. Such reductions were primarily attributable to increased volumes, decreased workover activity and improved operational efficiencies.

NEAR AND MEDIUM TERM OBJECTIVES

The Company’s near to medium term objectives include:

Reducing operating costs;
Reactivating suspended wells;
Improving production efficiency through recompletions, workovers, stimulations, and waterflood optimizations; and
Acquiring and consolidating complementary assets.

FINANCIAL AND OPERATING HIGHLIGHTS

The following tables summarizes key financial and operating highlights associated with the Company’s financial performance.

	Three Months Ended December 31,		Year Ended December 31,
($000’s unless otherwise stated)	2017	2016	2017		2016
Production ¹
Oil (bbl/d)	2,917	—	2,487		—
Gas (mcf/d)	3,299	—	2,448		—
NGL (bbl/d)	1,067	—	918		—
Total (boe/d)	4,534	—	3,813		—
Oil and natural gas revenue
Oil and NGL sales	21,750	—	59,459		—
Natural gas sales	559	—	1,635		—
Other revenue	2,207	—	5,173		—
Total revenue	24,516	—	66,267		—
Weighted average number of shares outstanding (basic and diluted)	15,690,133	3,956,269	13,709,753		1,800,158
Adjusted funds flow ²	6,281	—	9,965		(432	)
Adjusted funds flow per share (basic and diluted)	0.40	—	0.73		(0.24	)
Funds flow ²	4,643	—	6,657		(432	)
Funds flow per share (basic and diluted)	0.3	—	0.49		(0.24	)
Net income (loss)	2,256	—	(3,650	)	(434	)
Net income (loss) per share (basic and diluted)	0.14	—	(0.27	)	(0.24	)
Netback ($/boe)
Oil and gas sales	53.48	—	47.97		—
Other revenues	5.29	—	4.06		—
Revenue	58.77	—	52.03		—
Royalty	11.04	—	9.87		—
Operating expenses	27.56	—	29.41		—
Operating netback ²	20.17	—	12.75		—
General and administrative costs	5.14	—	4.25		—
Acquisition and transaction costs	0.02	—	0.9		—
Interest expense	1.82	—	2.18		—
Corporate netback ²	13.19	—	5.42		—
Capital expenditures	8,873	—	9,852		20
Net assets acquired	15,661	—	32,750		—

1) Production for the year ended December 31, 2017 represents the daily average production from February 1 to December 31, 2017.
2) Refer to “Non-IFRS measures”.

	December 31,	December 31,
($000’s)	2017	2016
Total assets	133,904	83
Cash	7,487	8
Long-term debt (principal)	30,000	—
Net debt ¹	27,215	442

1) Refer to “Non-IFRS measures”.

RESERVES SUMMARY

Summary of Gross Oil and Gas Reserves as of December 31, 2017 ^{(1), (2), (3), (4)}

	Light and Medium Oil	Conventional Natural Gas	Natural Gas Liquids	Barrels of Oil Equivalent
	Gross	Gross	Gross	Gross
	(Mbbl)	(Mmcf)	(Mbbl)	(Mboe)
Proved
Developed producing	8,141	7,412	2,533	11,910
Developed non‑producing	1,628	1,555	728	2,615
Undeveloped	419	376	66	547
Total Proved	10,188	9,343	3,327	15,072
Total Probable	3,836	2,657	976	5,255
Total Proved plus Probable	14,024	12,000	4,303	20,327

Net Present Value of Future Net Revenues Before Income Taxes Discounted at (% per Year):

(‘000)	0%	5%	10%	15%	20%
Proved
Producing	291,401	221,759	178,344	149,263	128,645
Developed non-producing	48,821	37,338	29,412	23,813	19,732
Undeveloped	12,147	10,545	9,160	7,986	6,997
Total Proved	352,369	269,642	216,916	181,062	155,374
Total Probable	131,287	76,082	48,133	32,160	22,177
Total Proved plus Probable	483,656	345,724	265,049	213,222	177,551

Notes:

The tables summarize the data contained in the independent report prepared by Sproule Associates Limited (“Sproule”) as at December 31, 2017 and as a result may contain slightly different numbers due to rounding.
Gross reserves means the total working interest (operating or non-operating) share of remaining recoverable reserves owned by Razor before deductions of royalties payable to others and without including any royalty interests owned by Razor.
Based on Sproule’s December 31, 2017 escalated price forecast.
The net present value of future net revenue attributable to the Company’s reserves is stated without provision for interest costs and general and administrative costs, but after providing for estimated royalties, production costs, development costs, other income, future capital expenditures, and well abandonment and reclamation costs for only those wells assigned reserves by Sproule. It should not be assumed that the undiscounted or discounted net present value of future net revenue attributable to the Company’s reserves estimated by Sproule represent the fair market value of those reserves. The recovery and reserve estimates of the Company’s oil, NGL and natural gas reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual reserves may be greater than or less than the estimates provided herein.

See Razor’s February 15, 2018 press release and 2017 Annual Information Form for further details.

OPERATIONAL UPDATE

Razor’s production during the year averaged 3,813 boe/d, of which approximately 89% was light oil and NGLs.

In Q4 2017, Razor achieved record production of 4,534 boe/d as a result of continued efforts toward increasing production from the Swan Hills and Kaybob assets through reactivations, optimization activities, and waterflood initiatives. The working interest acquisition of the Kaybob assets in December 2017 provided additional average daily production of 217 boe/d (35 boe/d impact on Q4 2017 production). Average production for the month of March 2018 was approximately 4,200 boe/d, with curtailments primarily from non-operated infrastructure maintenance activities, both expected and unexpected. Plant turnarounds and related activities will continue in April, and is then expected to normalize in May. Guidance of 5,000 boe/d average in 2018 remains unaffected.

Razor’s Q1 2018 four well development program in its Kaybob South Triassic A Pool has been completed.

The first well, 13-24-62-20W5, was rig released on January 31, 2018 and encountered 11m of net pay. The well was subsequently completed and placed on production March 23, 2018. In its first 18 producing days onstream, 13-24 averaged 737 barrels of fluid per day at an average 98.5% watercut resulting in 12 bbl/d oil plus 18 mcf/d or 15 boe/d.

The second well, 15-12-62-20W5, was rig released on February 11, 2018 and encountered 10m of net pay. The well was subsequently completed and placed on production March 21, 2018. In its first 21 producing days onstream, 15-12 averaged 288 barrels of fluid per day at an average 87.6% watercut resulting in 36 bbl/d oil plus 22 mcf/d or 40 boe/d.

The third well, 16-03-62-20W5, was rig released on February 22, 2018 and encountered 10m of net pay. The well was subsequently completed and placed on production March 12, 2018. In its first 22 producing days onstream, 16-03 averaged 1,401 barrels of fluid per day at an average 99% watercut resulting in 8 bbl/d oil plus 86 mcf/d or 22 boe/d.

The fourth well, 08-07-62-20W5, was rig released on March 3, 2018 and encountered 4m of net pay. The well was subsequently completed and placed on production March 21, 2018. In its first 20 producing days onstream, 08-07 averaged 279 barrels of fluid per day at an average 98% watercut resulting in 5 bbl/d oil plus 22 mcf/d or 9 boe/d.

Aggregate production from the four well program for the timeframe described above is 2,705 barrels of fluid per day at 97.8% watercut resulting in 61 bbl/d oil plus 148 mcf/d or 86 boe/d.

Management will continue to evaluate production from these wells and potentially adjust the locations and timing of the remaining four wells budgeted for 2018 pending further information.

During the fourth quarter of 2017, the Company realized an average operating netback of $20.17/boe, up 236% from the third quarter of 2017 primarily attributable to the increase in oil and gas sales which were up 25% quarter over quarter and other revenues were up 148% quarter over quarter. Royalty rates averaged 21% in the fourth quarter of 2017, up from 19% in the third quarter of 2017, primarily due to a 24% increase in realized oil sales prices in Q4 2017 over Q3 2017.

Processing and gathering income increased 82% in Q4 2017 to $1.8 million from $1.0 million in Q3 2017, primarily due to increased volumes and prices realized from the Company’s blending facility.

In the fourth quarter of 2017, operating expenses decreased by 11% to $27.56/boe, compared to $30.86 in the third quarter of 2017. The decrease in operating cost was mostly due to decreased workover activity in the fourth quarter and an improvement in operational efficiencies.

The top five cost drivers, fuel and electricity, labour, property taxes, and repairs and workovers, accounted for 66% of total operating expenses in 2017 (63% – Q4 2017, 64% – Q3 2017), with repairs and workovers accounting for 24% of operating expenses and fuel and electricity following closely at 25% of operating expenses.

Management is focused on continuous improvement of operational efficiencies to drive down key cost drivers. Specifically, the Company is working to reduce reliance on grid-based electricity through natural gas power generation along with electrical contract buydowns to align with current demand. Management is also executing various well reactivation projects to increase production which reduces the per boe impact of fixed operating costs.

CAPITAL PROGRAM

In 2017, Razor’s capital program of $9.9 million was invested on a combination of reactivations, re-entries, optimization activities, stimulations, pipelines and facilities, and waterflood management. The Company reactivated 25 gross (18.9 net) wells during 2017, resulting in 880 boe/d of additional production and exited the year with 15,072 Mboe of proved reserves and 20,326 Mboe of proved plus probable reserves. In 2017, corporate capital expenditures of $0.5 million related to initial corporate start-up costs and consisted primarily of computer systems and equipment, vehicles, and furniture and fixtures.

In the fourth quarter of 2017 the Company reactivated 5 gross (3.7 net) wells, resulting in 225 boe/d of net additional production.

For fiscal 2018, the Board of Directors of the Company has approved a capital budget of $38.4 million, which includes end of life expenditures. The diversity of the budget provides for capital allocation towards highly economic production growth in addition to long term operational and technological investments in power generation and oilfield information technology.

ABANDONMENT, RECLAMATION, AND REMEDIATION EXPENDITURES

Razor inherited decommissioning liabilities included in its Swan Hills and Kaybob acquisitions. The Company spent $1.6 million in Q4 2017 and a total of $3.3 million year-to-date. The Company has met the Alberta Energy Regulator’s requirements under its 2017 Inactive Well Compliance Program and continues to invest in end-of-life well and facility operations.

NORMAL COURSE ISSUER BID

On September 11, 2017, Razor announced its intention to commence a Normal Course Issuer Bid (“NCIB”) to repurchase shares in open market transactions on the TSXV. Under the NCIB, the Company may purchase for cancellation up to 796,861 of its common shares, which represents 5% of the outstanding common shares at September 11, 2017. The NCIB will expire no later than September 13, 2018. In 2017, the Company repurchased and canceled 425,300 common shares for $0.7 million.

As at December 31, 2017, the Company had a total of 15,511,934 common shares outstanding, and as at April 12, 2018, a total of 15,767,534 common shares outstanding.

ABOUT RAZOR

Razor is a publicly-traded junior oil and gas development and production company headquartered in Calgary, Alberta, concentrated on acquiring, and subsequently enhancing, producing oil and gas properties primarily in Alberta. The Company is led by experienced management and a strong, committed Board of Directors, with a long term vision of growth focused on efficiency and cost control in all areas of the business.

Razor started operations in the first quarter of 2017, through an acquisition of producing assets in the Swan Hills area. In the second quarter of 2017, Razor added to its asset base with the acquisition of complementary assets in the Kaybob area. These predominantly light oil assets provide a foundation for strong shareholder return through abundant low risk operations. Razor plans to concurrently grow Swan Hills and Kaybob, and execute on similar acquisitions, using its experience to extract upside value.

Razor is a pivotal leading-edge enterprise, balancing creativity and discipline, focused on growing an enduring energy company. Razor currently trades on TSX Venture Exchange under the ticker “RZE”.

[expand title=”Advisories & Contact”]

For additional information please contact:

Doug Bailey President and Chief Executive Officer	OR	Kevin Braun Chief Financial Officer
Razor Energy Corp. 800, 500-5^th Ave SW Calgary, Alberta T2P 3L5 Telephone: (403) 262-0242 *www.razor-energy.com*

Renmark Financial Communications Inc.
sfeng@renmarkfinancial.com
Tel.: (416) 644-2020 or (514) 939-3989
www.renmarkfinancial.com

READER ADVISORIES

FORWARD-LOOKING STATEMENTS: This press release may contain certain statements that may be deemed to be forward-looking statements. Such statements relate to possible future events, including, but not limited to, the Company’s objectives, reductions in operating costs, the Company’s capital program and proposed drilling, reactivation, workover, stimulation, water and other activities, future rates of production, capital investments relating to the installation of natural gas power generation units, potential future land and other acquisitions, anticipated abandonment, reclamation and remediation costs for 2018. 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 “anticipate”, “believe”, “expect”, “plan”, “estimate”, “potential”, “will”, “should”, “continue”, “may”, “objective” and similar expressions. The forward-looking statements are based on certain key expectations and assumptions made by the Company, including but not limited to expectations and assumptions concerning the availability of capital, current legislation, receipt of required regulatory approval, the success of future drilling and development activities, the performance of existing wells, the performance of new wells, the Company’s growth strategy, general economic conditions, availability of required equipment and services and prevailing commodity prices. Although the Company believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because the Company can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; as the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), commodity price and exchange rate fluctuations, changes in legislation affecting the oil and gas industry and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures. Please refer to the risk factors identified in the annual information form and management discussion and analysis of the Company which is available on SEDAR at www.sedar.com. 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 press release contains the terms “funds flow”, “adjusted funds flow”, “net debt”, “operating netback” and “corporate netback”, which do not have standardized meanings prescribed by International Financial Reporting Standards (“IFRS”) and therefore may not be comparable with the calculation of similar measures by other companies. Funds flow represents cash flow from operating activities before changes in non-cash working capital. Adjusted funds flow represents cash flow from operating activities before changes in non-cash working capital and decommissioning obligation expenditures incurred. Management uses adjusted funds flow to analyze operating performance and leverage, and considers adjusted funds flow from operating activities to be a key measure as it demonstrates the Company’s ability to generate cash necessary to fund future capital investments and repay debt. Net debt is calculated as as the principal amount of long-term debt less working capital (or plus working capital deficiency), with working capital excluding mark-to-market risk management contracts. Management believes net debt is a useful supplemental measure of the total amount of current and long-term debt of the Company. Operating netback equals total petroleum and natural gas sales less royalties and operating costs calculated on a boe basis. Razor considers operating netback as an important measure to evaluate its operational performance as it demonstrates its field level profitability relative to current commodity prices. Corporate netback is calculated by deducting general & administration, acquisition and transaction costs, and interest from operating netback. Razor considers corporate netback as an important measure to evaluate its overall corporate performance.

ADVISORY PRODUCTION INFORMATION: Unless otherwise indicated herein, all production information presented herein is presented on a gross basis, which is the Company’s working interest prior to deduction of royalties and without including any royalty interests.

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.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.

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Razor Energy Corp. Announces Fourth Quarter and 2017 Year End Results

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