RMP Energy Inc. ("RMP" or the "Company") (TSX:RMP) today provided its financial
and operating results for the three months ended June 30, 2012. For the second
quarter, RMP reported cash flow from operations of $9.6 million ($0.10 per
fully-diluted share) on revenue of $17.0 million and average daily production of
4,763 barrels of oil equivalent with a light oil and natural gas liquids
weighting of 40%. Detailed financial and operating highlights are as follows:
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Financial
Highlights Three Months Ended June 30, Six Months Ended June 30,
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(thousands except
share and per boe
data) (6:1 oil
equivalent % %
conversion) 2012 2011 Change 2012 2011 Change
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Petroleum and
natural gas
revenue (1) 16,971 10,692 59 36,145 18,804 92
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Cash flow from
operations (2) 9,644 4,512 114 19,960 8,001 149
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Per share -
basic and
diluted 0.10 0.06 67 0.21 0.11 91
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Net income (loss) 2,678 (8,236) (133) 5,240 117 -
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Per share -
basic and
diluted 0.03 (0.11) (127) 0.05 - -
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E&D capital
expenditures 18,308 7,843 133 37,224 21,801 71
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Total capital
expenditures 17,686 41,924 (58) 36,668 55,997 (35)
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Net debt (3) -
period end 63,295 12,599 402 63,295 12,599 402
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Weighted average
basic shares 96,834,196 76,147,439 27 96,741,441 70,995,975 36
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Weighted average
diluted shares 96,834,196 76,147,439 27 96,741,441 70,995,975 36
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Issued and
outstanding
shares (4) 98,190,855 84,258,652 17 98,190,855 84,258,652 17
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Operating
Highlights
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Average daily
production:
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Natural gas
(Mcf/d) 17,178 15,153 13 17,519 13,820 27
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Liquids (Oil and
NGLs) (bbls/d) 1,900 618 207 1,975 571 246
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Oil equivalent
(boe/d) 4,763 3,143 52 4,895 2,874 70
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Average sales
price(1) :
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Natural gas
($/Mcf) 2.09 4.10 (49) 2.22 4.06 (45)
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Liquids (Oil and
NGLs) ($/bbl) 79.24 89.60 (12) 80.91 83.68 (3)
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Oil equivalent
($/boe) 39.16 37.38 5 40.57 36.15 12
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Operating expenses
($/boe) 7.12 10.53 (32) 7.91 10.14 (22)
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Operating netback
(5) ($/boe) 26.69 20.19 32 26.55 19.82 34
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Wells drilled:
gross (net) 2 (1.4) 1 (1.0) 100 7 (6.4) 6 (4.8) 17
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Notes:
(1) Petroleum and natural gas revenue and pricing includes realized hedging
gains or losses from commodity contract settlements.
(2) Cash flow from operations or operating cash flow does not have any
standardized meaning prescribed by International Financial Reporting
Standards ("IFRS"). Please refer to the Reader Advisories within.
(3) Net debt is not a recognized measure under IFRS. Please refer to the
Reader Advisories within.
(4) As of August 9, 2012, common shares outstanding were 98.2 million.
(5) Operating netback is not a recognized measure under IFRS. Please refer
to the Reader Advisories within.
Second Quarter 2012 Financial Commentary
-- Second quarter production averaged 4,763 boe/d, with a light oil and
NGLs composition of 40%, as compared to an average output level of 3,143
boe/d with a 20% liquids weighting in the second quarter of 2011.
Production from the Company's Kaybob field was disrupted during the
months of May and June 2012 due to a longer-than-planned maintenance
turnaround at a mid-stream-operated gas plant. Additionally, early and
prolonged wet spring break-up surface conditions delayed well completion
and pump workover operations at Waskahigan.
-- In the second quarter, the Company incurred net exploration and
development capital expenditures of $18.3 million, including the $8.5
million acquisition of a 70% working interest in 12.25 sections (8.6
net) of contiguous undeveloped land, strategically located to the south
east of RMP's existing Waskahigan light oil asset base in West Central
Alberta. On June 11, 2012, the Company closed the minor disposition of
its non-core, low margin Gordondale property for $870 thousand. Disposed
production approximated 50 boe/d (60% natural gas weighted) with field
operating costs of approximately $45/boe and associated decommissioning
and abandonment obligations of approximately $1.0 million.
-- Petroleum and natural gas revenue for the second quarter amounted to
$17.0 million (including a realized oil hedging gain of $311 thousand),
of which 81% was derived from crude oil and NGL sales. The Company's
basis discount differential to the C$-converted WTI price was high when
compared to historical differentials averaging $15.58/bbl for the
quarter, as compared to $15.35/bbl in the first quarter of 2012 and
$0.33/bbl in the fourth quarter of 2011. Current month discount
differentials are approximately $10/bbl for its crude oil.
-- Operating expenses on a boe basis decreased 32% to $7.12/boe in the
quarter, as compared to the per-unit field expenses of $10.53/boe in the
second quarter of 2011.
-- RMP reported cash flow from operations of $9.6 million ($0.10 per share)
for the three months ended June 30, 2012, an increase of 114% (67% per
share) from the cash flow from operations for the second quarter of
2011. As a result of the Company's ongoing successful transition to an
oil-weighted producer, internal cash flow generating capabilities have
increased significantly. Field operating netbacks for the second quarter
of 2012 were $26.69/boe, as compared to the $20.19/boe in the second
quarter of 2011.
-- Net debt as of June 30, 2012 was $63.3 million, representing a leverage
ratio of 1.6 times annualized second quarter operating cash flow.
Effective May 11, 2012, the Company's borrowing limit under its bank
credit facility was increased to $90.0 million, facilitating additional
financial flexibility and liquidity. RMP is committed to maintaining its
strong financial position through continued vigilance on commodity
prices and internal cash flow generation in relation to capital
investment plans for the balance of this year. Currently drawn bank debt
is approximately $62.3 million. Pro forma bank debt, adjusted for the
net proceeds from the July 30th announced $10 million flow-through
financing, is approximately $53.1 million, (1.4 times annualized second
quarter operating cash flow). On June 20, 2012, the Company closed a
$2.5 million flow-through common share private placement in respect of
Canadian development expenses ("CDE"), pursuant to which 1.54 million
shares were issued at $1.62 per share.
-- Subsequent to the quarter-end, on July 30th, the Company announced that
it entered into a bought-deal equity financing involving the issuance of
4,445,000 flow-through common shares in respect of Canadian exploration
expenditures ("CEE") at a price of $2.25 per share for gross proceeds of
approximately $10 million. Closing is expected to occur on or about
August 21, 2012. This financing is strategic in nature as it provides
RMP with funding to advance its oil-directed exploration drilling
activities in the Montney formation on some of its recently-acquired
lands.
Second Quarter 2012 Operations Update
Waskahigan, West Central Alberta
With typical spring break-up conditions, field drilling and completion
activities were muted in the second quarter. The Company drilled a 100% working
interest horizontal oil well (5-3-64-23W5) and successfully completed a
first-quarter drilled horizontal well (1.0 net) during the second quarter
(12-3-64-23W5). In the first half of this year, RMP has drilled a total of six
(6.0 net) horizontal wells at Waskahigan and recently drilled its seventh well
of the year in July 2012. Pad drilling is providing cost efficiencies for
drilling and fracture stimulation. Additionally, lower industry demand for
services has resulted in lower costs for drilling rigs and pressure pumping
equipment.
The Company has established a core Montney light oil project at Waskahigan,
which has the size and scale to drive significant future production and cash
flow growth. In this area, RMP has amassed a light oil drilling inventory of
approximately 190 locations, with an average working interest of 94%.
RMP's execution of its development drilling program, infrastructure construction
and operating cost optimization initiatives have been very successful at
Waskahigan. Since the corporate re-structuring in May 2011, the Company has
drilled sixteen (16.0 net) Waskahigan horizontal wells with 100% success.
Operating costs for the second quarter were $5.40/boe at Waskahigan, a
substantial decrease from the operating costs of approximately $12/boe in 2011.
With start-up in mid-April 2012 of the Company's water disposal well, field
operating costs at Waskahigan are expected to continue to decline.
Production results to-date from the Waskahigan field are encouraging. Since
bringing on-stream the 4-36-63-23W5 discovery well in June 2010, RMP has
produced and recovered a total of 573 thousand barrels of light oil from the
Montney reservoir from a total of twenty (20.0 net) horizontal oil wells
(through to June 30, 2012). Field output is tracking the Company's internal type
curve expectations, which model an expected ultimate recovery ("EUR") for each
well of approximately 160,000 barrels of light oil (220,000 boe).
In the second quarter, the Company kicked-off expansion plans for its Waskahigan
oil battery, which will on completion increase oil handling capacity to
approximately 6,000 bbls/d from the current capacity of 2,500 bbls/d. RMP's
decision to expand its infrastructure at Waskahigan will allow for the: i)
future handling of the Company's expanded production base, ii) processing of
RMP's trucked-in Ante Creek oil production, and iii) the accommodation of
third-party volumes from area operators of which the Company has been receiving
numerous capacity enquiries. Battery expansion is anticipated to be
fully-completed in the fourth quarter of this year.
Ante Creek, West Central Alberta
On August 3, 2012, the Company brought on-stream its wholly-owned 4-35-66-24W5
Montney oil well at Ante Creek. The well recently produced "flush" production at
a restricted rate of approximately 1,300 bbls/d of light oil, or 1,400 boe/d
including associated solution gas which is been conserved and processed at an
area operator's gas plant. RMP is excited with the resource potential of its six
section land block at Ante Creek and its five sections in South Ante Creek. The
Company anticipates drilling a second 100% working interest horizontal well by
the end of the year off the existing surface lease pad for the 4-35 well and
potentially an exploration well on the South Ante Creek acreage. At Ante Creek,
the Company has identified an additional 23 drilling locations at 100% working
interest, and with success with its exploration location, significantly more
locations could be added to the Company's drilling inventory in this area.
The Company's interim condensed consolidated financial statements and associated
Management's Discussion and Analysis ("MD&A") for the three and six months ended
June 30, 2012 is available on RMP's website at www.rmpenergyinc.com within
"Investors" under "Financials". Additionally, these documents will be filed by
the close of business today, on the Company's profile on the System for
Electronic Document Analysis and Retrieval ("SEDAR"). These documents can be
retrieved electronically from the SEDAR system by accessing RMP's public filings
under "Search for Public Company Documents" within the "Search Database" module
at www.sedar.com.
Abbreviations
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bbl barrel Mcf/d thousand cubic feet per day
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Mbbl thousand barrels MMcf/d million cubic feet per day
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bbls/d barrels per day Bcf billion cubic feet
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boe barrels of oil equivalent psi pounds per square inch
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Mboe thousand barrels of oil kPa kilopascals
equivalent
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boe/d barrels of oil equivalent per WTI West Texas Intermediate
day
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NGLs natural gas liquids C$ Canadian dollars
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Reader Advisories
Any references in this news release to initial and/or final raw test or
production rates and/or "flush" production rates are useful in confirming the
presence of hydrocarbons, however, such rates are not determinative of the rates
at which such wells will commence production and decline thereafter. While
encouraging, readers are cautioned not to place reliance on such rates in
calculating the aggregate production for the Company.
The information in this news release contains certain forward-looking
statements. These statements relate to future events or our future performance.
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 "seek", "anticipate", "budget", "plan", "continue",
"estimate", "approximate", "expect", "may", "will", "project", "predict",
"potential", "targeting", "intend", "could", "might", "should", "believe",
"would" and similar expressions. More particularly and without limitation, this
new release contains forward looking information relating to: Waskahigan and
Ante Creek area drilling inventory, the ongoing transition of RMP to an
oil-weighted production company, operating expense reductions, forward market
pricing discount for the Company's Waskahigan crude oil grade, Waskahigan well
type curve EUR, expected closing of its CEE flow-through financing, pro forma
bank indebtedness, the timing of the Company's Waskahigan oil battery expansion,
and drilling plans for the Company's Ante Creek area. These statements involve
substantial known and unknown risks and uncertainties, certain of which are
beyond the Company's control, including: the impact of general economic
conditions; industry conditions; changes in laws and regulations including the
adoption of new environmental laws and regulations and changes in how they are
interpreted and enforced; fluctuations in commodity prices and foreign exchange
and interest rates; stock market volatility and market valuations; volatility in
market prices for oil and natural gas; liabilities inherent in oil and natural
gas operations; changes in income tax laws or changes in tax laws and incentive
programs relating to the oil and gas industry ; geological, technical, drilling
and processing problems and other difficulties in producing petroleum reserves;
and obtaining required approvals of regulatory authorities. The Company's actual
results, performance or achievement could differ materially from those expressed
in, or implied by, such forward-looking statements and, accordingly, no
assurances can be given that any of the events anticipated by the
forward-looking statements will transpire or occur or, if any of them do, what
benefits that the Company will derive from them. The Company's forward-looking
statements are expressly qualified in their entirety by this cautionary
statement. Except as required by law, the Company undertakes no obligation to
publicly update or revise any forward-looking statements.
In this news release RMP has adopted a standard for converting thousands of
cubic feet ("mcf") of natural gas to barrels of oil equivalent ("boe") of 6
mcf:1 boe. Use of boes may be misleading, particularly if used in isolation. The
boe rate is based on an energy equivalent conversion method primarily applicable
at the burner tip and does not represent a value equivalency at the wellhead.
Given that the value ratio based on the current price of crude oil as compared
to natural gas is significantly different than the energy equivalency of the 6:1
conversion ratio, utilizing the 6:1 conversion ratio may be misleading as an
indication of value.
As an indicator of the Company's performance, the term cash flow from operations
or operating cash flow contained within this news release should not be
considered as an alternative to, or more meaningful than, cash flow from
operating, financing or investing activities, as determined in accordance with
International Financial Reporting Standards ("IFRS"). This term is not a
recognized measure, does not have a standardized meaning nor is it a financial
measure under IFRS. Cash flow from operations is widely accepted as a financial
indicator of an exploration and production company's ability to generate cash
which is used to internally fund exploration and development activities and to
service debt. This measure is widely used by shareholders and investors in the
valuation, comparison and investment recommendations of companies within the
natural gas and crude oil exploration and production industry. Cash flow from
operations, as disclosed within this news release, represents cash flow from
operating activities before: expensed corporate acquisition-related costs,
decommissioning obligation cash expenditures and changes in non-cash working
capital from operating activities. The Company presents cash flow from
operations per share whereby per share amounts are calculated consistent with
the calculation of earnings per share.
Net debt refers to outstanding bank debt plus working capital deficit or less
any working capital surplus (excludes current unrealized amounts pertaining to
risk management commodity contracts). Net debt is not a recognized measure under
IFRS and does not have a standardized meaning.
Operating netbacks refers to realized wellhead revenue less royalties, operating
expenses and transportation costs per barrel of oil equivalent ("boe").
Operating netback is not a recognized measure under IFRS and does not have a
standardized meaning.
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