The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Press release from Marketwire

RMP Energy Announces Increased Bank Line and Provides First Quarter 2012 Financial Results and Hedging Update

Thursday, May 10, 2012

RMP Energy Announces Increased Bank Line and Provides First Quarter 2012 Financial Results and Hedging Update16:21 EDT Thursday, May 10, 2012CALGARY, ALBERTA--(Marketwire - May 10, 2012) - RMP Energy Inc. ("RMP" or the "Company") (TSX:RMP) today provided the following updates and information: First Quarter 2012 Financial Results For the quarter ended March 31, 2012, RMP reported cash flow from operations of $10.3 million ($0.11 per fully-diluted share) on revenue of $19.2 million and average daily production of 5,026 barrels of oil equivalent. Detailed financial and operating highlights are as follows:Financial HighlightsQuarterly Summary(thousands except share and per boe data) (6:1 oil equivalent conversion)March 31, 2012March 31, 2011% changePetroleum and natural gas revenue (1)19,1748,112136Cash flow from operations (2)10,3163,489196Per share - basic0.110.05120Per share - diluted0.110.05120Net income2,5628,353(69)Per share - basic0.030.13(77)Per share - diluted0.030.13(77)E&D capital expenditures (net dispositions)18,91613,95836Total capital expenditures18,98214,07335Net debt (3) - period end57,75319,132202Weighted average basic shares96,647,65565,787,27347Weighted average diluted shares96,647,65565,969,55047Issued and outstanding shares (4)96,647,65565,787,64347Operating HighlightsAverage daily production:Natural gas (Mcf/d)17,85912,47243Liquids (Oil and NGLs)(bbls/d)2,050523292Oil equivalent (boe/d)5,0262,60293Average sales price:Natural gas ($/Mcf)2.334.01(42)Liquids (Oil & NGLs) ($/bbl)82.4576.608Oil equivalent ($/boe)41.9234.6421Operating expenses ($/boe)8.669.65(10)Operating netback (5) ($/boe)26.4119.3736Wells drilled: gross (net)5 (5.0)5 (3.8)- Notes: Petroleum and natural gas revenue and pricing includes any realized hedging gains or losses from commodity contract settlements. 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 per below. Net debt is not a recognized measure under IFRS. Please refer to the Reader Advisories per below. As of May 10, 2012, common shares outstanding were 96.6 million. Operating netback is not a recognized measure under IFRS. Please refer to the Reader Advisories per below. First Quarter 2012 Financial Commentary Record first quarter production of 5,026 boe/d, with a light oil and NGLs composition of 41%, thus reflecting the Company's successful, ongoing transition to an oil-weighted producer. Production for the comparable first quarter of 2011 was 2,602 boe/d, weighted only 20% towards oil and NGLs. In the first quarter, the Company incurred net exploration and development capital expenditures of $18.9 million, net of the disposition of its non-core, undeveloped land rights at Resthaven/Bilbo for $15.0 million. Net debt as of March 31, 2012 was $57.8 million, representing 1.4 times net debt-to-annualized first quarter operating cash flow. RMP reported cash flow from operations of $10.3 million ($0.11 per share) for the three months ended March 31, 2012, up 196% (120% per share) from the cash flow from operations for the first quarter of 2011. Cash flow from operations was reduced by $0.7 million due to a prior period, non-recurring Crown royalty adjustment charge. Petroleum and natural gas revenue for the first quarter amounted to $19.2 million (net of the realized oil hedging loss of $247 thousand), of which 80% was derived from crude oil and NGL sales ($15.4 million). The Company's basis discount differential to C$-priced WTI was $15.35 per bbl for its Waskahigan crude oil, as compared to $0.33 per bbl in the fourth quarter of 2011. The differential between WTI and all grades of western Canadian crude oil widened significantly in the first quarter due to tightening pipeline and refining capacity within the United States mid-west. Differentials have contracted in the forward market for the Company's Waskahigan crude oil base pricing, with pricing at an average discount of approximately $7.00 per bbl for the balance of this year. Corporate operating expenses were down 10% on a boe basis, when compared to the first quarter 2011 period. Going-forward, the Company anticipates additional operating expense reductions as a result of its light oil drilling focus at Waskahigan and the resultant operating efficiencies from RMP's ownership and control of its oil battery and water disposal infrastructure. Operating netbacks at Waskahigan were approximatly $50 per boe in the first quarter of 2012. Subsequent to the end of the first quarter on April 2, 2012, the Company acquired a 70% working interest in 7,840 acres (5,488 net acres) of undeveloped land in the Waskahigan area, including the Montney mineral rights but excluding the deep rights, from an arm's-length party for consideration of $8.5 million. This acquisition augments the Company's expansion of its Waskahigan light oil resource play. As a result of RMP's drilling success, coupled with the aforementioned strategic land purchase, the Company has a light oil drilling inventory, at Waskahigan and Ante Creek, of approximately 215 locations, with an average working interest of 95%. First Quarter 2012 Operations Update Despite early spring break-up conditions resulting in earlier than normal road bans, the Company drilled a total of five (5.0 net) horizontal wells at Waskahigan and a water disposal well at RMP's oil battery, which was operational mid-April providing for additional operating cost savings and field efficiencies. Four of the five horizontal wells were completed and tested in the first quarter, with results disclosed in the Company's news release dated March 21, 2012. The fifth well (13-3-64-23W5) has not yet been completed due to wet spring break-up surface conditions; it will be completed upon surface lease accessibility.As a result of the continued development of RMP's Montney light oil play at Waskahigan, the Company achieved record quarterly production with output of 5,026 boe/d in the first quarter of 2012, weighted 41% towards light oil and NGLs. This represents an increase of 93% over the first quarter 2011 level of 2,602 boe/d (20% oil/NGL weighting) and a 7% increase over the preceding fourth quarter 2011 production of 4,719 boe/d (32% oil/NGL weighting). The operational results for the first quarter of 2012 demonstrate the progress RMP is making in transforming the Company into an oil-weighted production company. Bank Credit Facility Increase RMP is pleased to report that based on the annual review of the borrowing base associated with the Company's committed, extendible revolving bank credit facility, the lending syndicate (the "Lenders") has increased the credit facility from $80 million to $90 million. The credit facility represents the maximum amount that can be borrowed and is primarily based on the Lenders assessment and analysis of the Company's proved oil and gas reserves, RMP's results of operations, and the Lenders forecasted commodity prices. The next borrowing base re-determination is scheduled to occur on or about November 30, 2012. Crude Oil Hedging Update As a means of managing risk of crude oil market price volatility, to ensure that the Company's cash flow is protected to fund the continued development of its light oil assets, the Company may enter into hedging contracts. RMP recently entered into a Canadian-dollar denominated fixed price oil swap for calendar 2013. Next year, 500 bbls/d of crude oil has been hedged with a fixed price of $103.60 Canadian per bbl. For this year, the Company has in-place a total of 700 bbls/d of crude oil hedged with a fixed weighted average price of $99.19 Canadian per bbl. Annual Shareholders Meeting Notice RMP's annual meeting of shareholders is scheduled for 10:00 a.m. on Wednesday, June 6th, 2012 in the Viking Room of the Calgary Petroleum Club, located at 319 - 5th Avenue S.W., Calgary, Alberta.The Company's interim condensed consolidated financial statements and associated Management's Discussion and Analysis ("MD&A") for the three months ended March 31, 2012 is available on RMP's website at 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 Abbreviations Crude Oil and Natural Gas LiquidsNatural GasbblbarrelMcf/dthousand cubic feet per dayMbblthousand barrelsMMcf/dmillion cubic feet per daybbls/dbarrels per dayBcfbillion cubic feetboebarrels of oil equivalentpsipounds per square inchMboethousand barrels of oil equivalentkPakilopascalsboe/dbarrels of oil equivalent per dayNGLsnatural gas liquids 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 drilling inventory, the transition of RMP to an oil-weighted production company, operating expense reductions, forward market pricing discount for the Company's Waskahigan crude oil grade and Waskahigan well completion timing. 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 (excludes current unrealized amounts pertaining to risk management commodity contracts) plus long-term accounts receivables. 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. FOR FURTHER INFORMATION PLEASE CONTACT: John FergusonRMP Energy Inc.President and Chief Executive Officer(403) 930-6303john.ferguson@rmpenergyinc.comORDean BernhardRMP Energy Inc.Vice President, Finance and Chief Financial Officer(403)