Press release from Marketwire
Renegade Petroleum Ltd. Announces First Quarter 2012 Results, Operational Update, Increased 2012 Guidance and Executive Appointment
Monday, May 14, 2012
Renegade Petroleum Ltd. Announces First Quarter 2012 Results, Operational Update, Increased 2012 Guidance and Executive Appointment09:17 EDT Monday, May 14, 2012CALGARY, ALBERTA--(Marketwire - May 14, 2012) - Renegade Petroleum Ltd. ("Renegade" or the "Company") (TSX VENTURE:RPL) is pleased to announce it has filed on SEDAR its interim consolidated financial statements ("Financial Statements") and related management's discussion and analysis ("MD&A") for the three month period ended March 31, 2012. Selected financial and operational information is outlined below and should be read in conjunction with the Financial Statements and related MD&A which are available for review at www.renegadepetroleum.com or www.sedar.com.ACCOMPLISHMENTSIncreased 2012 guidance to 4,350 to 4,450 boe/d with exit guidance set at 5,200 to 5,400 boe/d. Fourth quarter funds flow is forecast to be in excess of $25 million; Achieved record average production of 3,644 boe per day for the three months ended March 31, 2012, up 106 percent from the comparable quarter of 2011. Production for the three months ended March 31, 2012 consisted of 96 percent light oil and 4 percent natural gas and natural gas liquids; Increased the credit facility from $100 million to $125 million subsequent to March 31, 2012. Final approval is expected to occur in May 2012; Increased funds flow from operations by 163 percent to $14.4 million in the first quarter of 2012 from $5.5 million in the first quarter of 2011. Increased funds flow from operations per share by 111 percent to $0.19 per share in the first quarter of 2012 from $0.09 per share in the first quarter of 2011; Increased cash flow from operating activities 343 percent to $15.1 million or $0.19 per share in the first quarter of 2012 from cash flow of $3.4 million or $0.06 per share in the first quarter of 2011; Reduced operating expenses 15 percent to $13.80 per boe in the first quarter of 2012 from $16.32 per boe in the first quarter of 2011; Increased land position by 35,000 net acres (Approximately 17,000 net acres in the Slave Point Play and 18,000 net acres in southeast Saskatchewan) in its core areas since the beginning of the first quarter, increasing the Company's total undeveloped land to approximately 172,000 net acres at March 31, 2012. As at May 14, 2012, Renegade's undeveloped land position is approximately 178,000 net acres; Achieved a 95 percent success rate on its drilling program in the first quarter of 2012 and completed and brought onto production 29 gross (26.3 net) wells; Announced that the Company entered into a new core area in the Alberta Slave Point and additionally closed an asset acquisition in the Senex area of the Slave Point on March 30, 2012, which provided the Company with a total of 50 sections of land, processing facilities, water disposal and storage capacity, all season roads, and 113 square kilometers of 3D seismic; and On March 30, 2012, the Company closed a bought-deal equity financing of 10,000,000 common shares at a price of $4.00 per share for gross proceeds of $40.0 million. The Company also issued 2,084,000 common shares on a "flow-through" basis with respect to Canadian exploration expenses at a price of $4.80 per share for total gross proceeds of $10.0 million. FINANCIAL & OPERATING HIGHLIGHTSThree months ended March 31,20122011% changeFinancial (000's except per share amounts)Petroleum and natural gas sales27,68712,666119Funds flow from operations (1)14,3665,469163Per share - basic0.190.09111Per share - diluted0.180.09100Net income (loss)236(885)127Per share - basic0.00(0.02)100Per share - diluted(2)0.00(0.02)100Capital expenditures59,75516,133270Net debt(3)74,55917,331330Weighted average shares outstanding(2)Basic77,65357,80334Diluted80,61057,80339Shares outstanding, end of periodBasic89,63564,73238Diluted98,80971,73138OperatingAverage daily productionCrude oil (bbls/d)3,4951,680108Natural gas (Mcf/d)65750530Natural gas liquids (bbls/d)396550Total (boe/d) (4)3,6441,770106Average realized priceCrude oil and natural gas liquids ($/bbl)85.8083.033Natural gas ($/mcf)1.561.77(12)Total ($/boe)83.5179.475Netback ($/boe)(4)Oil and gas sales83.5179.475Royalties(12.37)(14.20)(13)Operating expenses(13.80)(16.32)(15)Transportation(2.95)(2.32)27Operating netback prior to realized derivative contracts54.3946.6317Realized loss on derivative contracts(1.00)-n/aOperating netback(4)53.3946.6315(1) "Funds flow from operations" should not be considered an alternative to, or more meaningful than, cash flow from operating activities as determined in accordance with IFRS as an indicator of Renegade's performance. "Funds flow from operations" represents cash flow from operating activities prior to changes in non-cash working capital, transaction costs and decommissioning provision expenditures incurred. Renegade also presents funds flow from operations per share whereby per share amounts are calculated using weighted average shares outstanding consistent with the calculation of earnings per share.(2) Due to the anti-dilutive effect of Renegade's net loss for the three months ended March 31, 2011, the diluted number of shares is equal to the basic number of shares. Therefore, diluted per share amounts of the net loss are equivalent to basic per share amounts.(3) Amount drawn on Renegade's credit facility as at March 31, 2012 was $49.8 million.(4) A conversion ratio of 1 barrel of oil equivalent ("boe"): 6 Mcf has been used, which is based on an energy equivalency conversion method primarily applicable at the burner tip and does not necessarily represent a value equivalency at the wellhead. Boes may be misleading, particularly if used in isolation.OPERATIONAL UPDATE During the first quarter of 2012, Renegade has managed to accelerate its program in both west central and southeast Saskatchewan, and as a result, is ahead of schedule on its 2012 drilling program. A total of 29 gross (26.3 net) wells were completed and brought on production. Renegade's drilling and completion activity for the first quarter of 2012 is summarized below:Drilled and CompletedRegionGrossNetSoutheast Saskatchewan107.8West Central Saskatchewan1918.5Total2926.3Renegade's first quarter 2012 capital expenditure program is summarized below:($000)For The Three Months Ended March 31, 2012Capital ExpendituresDrilling, Completion and Production Equipment32,582Facilities and Equipment5,142Land and Seismic5,402Property Acquisitions16,217Capitalized General and Administrative Expenses354Other58Total59,755In addition, Renegade has been actively increasing its land holdings in each of its core areas. As at May 14, 2012, Renegade holds a total of approximately 178,000 net undeveloped acres. Southeast Saskatchewan During the first quarter of 2012, Renegade drilled and completed 10 gross (7.8 net) wells in southeast Saskatchewan. Throughout the quarter the Company has continued to increase processing capacity at its facilities in Wordsworth and Crystal Hills which has enabled recent optimizations of the new wells drilled. There were 4 dual leg horizontal wells drilled in first quarter along the Frobisher and Souris Valley trends of which 3 are on production and 1 is currently being completed. The unoptimized average 30 day initial production rate for these wells is approximately 130 boe/d per well, and with the recent facility upgrades, well production will increase as fluid levels are managed. Of the 4 dual leg horizontals, 1 is fully optimized and had a 60 day initial production rate in excess of 160 boe/d. Renegade's budgeted 30 day type curves for the Wordsworth and Crystal Hill areas are approximately 85 boe/d. As a result of the financing completed in March 2012, Renegade has accelerated the infrastructure development in the Redvers area along the Souris Valley trend. Completion of the facility is anticipated at the end of the third quarter which will allow Renegade to accelerate its drilling program in the fourth quarter of 2012. Renegade anticipates commencing its drilling program in southeast Saskatchewan towards the end of May 2012.Slave Point During the first quarter of 2012 Renegade increased its total acreage in the Slave Point to over 50 sections (33,000 net acres). As at May 14, 2012, Renegade controls over 58 sections of land in the Senex (41 sections) and Joan (17 sections) areas of northern Alberta. Renegade's inventory of potential locations targeting the Slave Point formation is now approximately 200 gross (200 net). The company expects drilling activities to commence late in the third quarter of 2012 with an anticipated program of 3 horizontal wells. Total drilling and completion cost estimates for the program are expected to be $10.0 million. The associated infrastructure from the March 30, 2012 strategic acquisition provides the Company with the ability to facilitate year round production and activity in the Senex area. Renegade anticipates the on-production dates for the wells to occur in the latter half of the fourth quarter from the Slave Point program. Although the production from the Slave Point will not materially affect the 2012 average corporate production due to the timing of the on-production dates, the program positions Renegade for significant growth in 2013. West Central Saskatchewan During the first quarter the Company drilled and completed 19 gross (18.5 net) horizontal Viking light oil wells. Renegade anticipates drilling an additional 19 gross (19.0 net) wells throughout the remainder of 2012. Renegade has now drilled and brought onto production 5 gross (5.0 net) wells based on 40 acre spacing. The production results continue to show a strong correlation to the offset 80 acre well type curves and as such there has been no adverse impact on the original 80 acre spaced wells. Renegade's inventory of potential Viking locations, based on 40 acre spacing, is now 349 gross (319 net) locations. Renegade continues to await approval for a pilot waterflood in the Dodsland pool. Management anticipates receiving approval by mid-2012 and, if successful, expects to commence water injection into the field by late 2012. Production levels from the horizontal Viking wells drilled continue to meet management's expectations. Renegade plans to have one active drilling rig in west central Saskatchewan beginning the third week of May.OUTLOOK Renegade is pleased to announce an increase to its previously disclosed 2012 average production guidance from 4,000 to 4,200 boe/d to 4,350 to 4,450 boe/d with exit guidance set at 5,200 to 5,400 boe/d. Funds flow in the fourth quarter is forecast to be in excess of $25 million. Renegade is also pleased to report that the Board of Directors has approved a revised 2012 capital expenditures program of $130 million for exploration and development activities, with approximately 68% of the total capital program allocated toward drilling, completions and well equipping activities. This represents an increase from the previously announced $76 million capital expenditures program and the Company anticipates drilling an additional 49 gross (43.7 net) wells for the remainder of 2012. Renegade's budgeted drilling activity for the remainder of 2012 is summarized by region below:RegionGrossNetSoutheast Saskatchewan2721.7West Central Saskatchewan1919.0Slave Point Alberta33.0Total4943.7Management is pleased to provide the following increased 2012 guidance:REVISED 2012 GUIDANCEREVISEDPRIORProduction (boe/d) - 96% Light Oil4,350 - 4,4504,000 - 4,200Exit Guidance5,200 - 5,400n/aYear over Year Production Increase74% - 78%60% - 68%Funds Flow (1)(2)2012 Funds Flow From Operations ($000)$78,000 - $81,000$78,000 - $83,000Funds Flow From Operations Per Diluted Share (3)$0.81 - $0.83$0.81 - $0.86Funds Flow From Operations - Q2 to Q4 2012 ($000)$64,000 - $67,000$60,000 - $64,000Funds Flow From Operations Per Diluted Share - Q2 to Q4 2012(3)$0.64 - $0.67$0.60 - $0.65Operating Netback (per boe)(4)~$57~$62Capital Expenditures ($000)$130,000$76,000Exit Net Debt$78,000 - $81,000n/aPlanned Wells Drilled78 gross (70.0 net)67 gross (61.3 net) (1) 2012 funds flow from operations assumes oil pricing of US$95.00/bbl WTI, a 0.97 US$/C$ exchange rate and current 2012 existing oil swaps of 1,500 bbls/d at an average price of C$100.23. (2) Annual amounts include first quarter 2012 actual results. Amounts also shown on a remaining 9 month 2012. (3) Adjusted to take into effect the dilutive component of the common shares issued on March 30, 2012 financing. (4) The 2012 guidance uses an average royalty rate of 16% of revenue, operating costs of $13.50 per boe and transportation costs of $2.90 per boe. Netbacks for the remainder of 2012 are anticipated to be $60 per boe.Initial BudgetRevised BudgetIncreaseDrilling & Completions$63 Million$88 Million$25 MillionFacilities$9.5 Million$14 Million$4.5 MillionLand & Seismic$3.5 Million$11 Million$7.5 MillionAcquisitions$Nil$17 Million$17 MillionTotal$76 Million$130 Million$54 MillionDuring the first quarter of 2012, the Company experienced a reduction in its realized price for light crude oil due to widening crude oil differentials caused by capacity constraints in the refining market. The Company foresees crude oil differentials shrinking throughout the remainder of 2012, however, the Company has incorporated a revised expectation for its realized oil prices in its updated 2012 forecast. Renegade continues to be enthusiastic and optimistic about generating growth prospects in 2012 and continues to be committed to delivering per share growth and capital efficiency. Renegade currently has approximately 781 gross (701 net) potential drilling locations in its inventory. This depth of drilling inventory positions the Company well for long-term organic growth in production, cash flow, reserves and net asset value in 2012 and beyond. EXECUTIVE APPOINTMENTRenegade is pleased to announce the appointment of Mr. Andrew Greenslade as Vice President, Operations. Mr. Greenslade been an integral part of the Renegade team since December 2010 and brings extensive operational and engineering experience to the Company. Mr. Greenslade is a professional Engineer who has held positions with the Energy Resources Conservation Board, Nexen, Talisman, and most recently, has held the role of Manager of Operations and Engineering at Renegade. ANNUAL GENERAL MEETINGRenegade's Annual General Meeting is scheduled for 3:00pm on Wednesday June 27, 2012 at the Petroleum Club, McMurray Room, located at 319 - 5th Avenue SW, Calgary, Alberta.CORPORATE INFORMATION Renegade's common shares trade on the TSX Venture Exchange under the symbol RPL. Renegade currently has approximately 89.6 million shares outstanding and 98.8 million fully-diluted shares. READER ADVISORIESForward-Looking StatementsThis press release contains forward-looking statements. More particularly, this press release contains statements concerning Renegade's capital expenditure program, Renegade's drilling plans, the expected ability of Renegade to execute on its exploration and development program and Renegade's anticipated production (both in terms of quantity and raw attributes) funds flow from operations, operating netbacks, exit net debt and other similar matters. The forward-looking statements contained in this document are based on certain key expectations and assumptions made by Renegade, including: (i) with respect to capital expenditures, generally, and at particular locations, the availability of adequate and secure sources of funding for Renegade's proposed capital expenditure program and the availability of appropriate opportunities to deploy capital; (ii) with respect to drilling plans, the availability of drilling rigs, expectations and assumptions concerning the success of future drilling and development activities and prevailing commodity prices; (iii) with respect to Renegade's ability to execute on its exploration and development program, the performance of Renegade's personnel, the availability of capital and prevailing commodity prices; and (iv) with respect to anticipated production, the ability to drill and operate wells on an economic basis, the performance of new and existing wells and accounting risks typically associated with oil and gas exploration and production; (v) oil prices; (vi) currency exchange rates; (vii) royalty rates; (viii) operating costs; and (ix) transportation costs. Although Renegade 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 Renegade 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, the failure to obtain necessary regulatory approvals, 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; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses; health, safety and environmental risks; commodity price and exchange rate fluctuations; and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures). Any references in this news release to initial production (IP) rates are useful in confirming the presence of hydrocarbons, however, such rates are not determinative of the rates at which such wells will continue production and decline thereafter are not necessarily indicative of long term performance or ultimately recovery. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production for the Company. The forward-looking statements contained in this document are made as of the date hereof and Renegade 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. Please refer to Renegade's Annual Information Form dated April 27, 2012 (the "AIF") for additional risk factors relating to Renegade. The AIF is available for viewing on www.sedar.com. ConversionThe term barrels of oil equivalent ("boe") may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one boe (6 mcf/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. All boe conversions in this report are derived from converting gas to oil in the ratio of six thousand cubic feet of gas to one barrel of oil. 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 on a 6:1 basis may be misleading as an indication of value.FOR FURTHER INFORMATION PLEASE CONTACT: Michael EricksonRenegade Petroleum Ltd.President & CEO(403) 355-8922ORAlex WylieRenegade Petroleum Ltd.Vice-President, Finance & CFO(403) 410-3376www.renegadepetroleum.comNeither 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 release.