Press release from Marketwire
Renegade Petroleum Ltd. Announces Record Second Quarter 2012 Production, Financial Results and Operational Update
Monday, August 13, 2012
Renegade Petroleum Ltd. Announces Record Second Quarter 2012 Production, Financial Results and Operational Update07:00 EDT Monday, August 13, 2012CALGARY, ALBERTA--(Marketwire - Aug. 13, 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 and six month periods ended June 30, 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.FINANCIAL & OPERATING HIGHLIGHTSThree months ended June 30,Six months ended June 30,20122011% change20122011% changeFinancial (000's except per share amounts)Petroleum and natural gas sales25,85214,5587853,53927,22497Funds flow from operations(1)14,1877,2769528,55312,745124Per share - basic0.160.10600.340.1979Per share - diluted0.160.09780.330.1974Net income (loss)8,042(1,040)8738,278(1,925)530Per share - basic and diluted(2)0.09(0.01)1,0000.10(0.03)433Capital expenditures19,51924,950(22)79,27441,08393Net debt(3)80,03630,81816080,03630,818160Weighted average shares outstanding(2)Basic89,63575,6661883,64466,72425Diluted91,52075,6662186,10866,72429Shares outstanding, end of periodBasic89,63577,30816Diluted98,80984,52917OperatingAverage daily productionCrude oil (bbls/d)3,5451,6011213,5201,641115Natural gas (Mcf/d)7384386869847248Natural gas liquids (bbls/d)44151934210320Total (boe/d) (4)3,7121,6891203,6781,730113Average realized priceCrude oil and natural gas liquids ($/bbl)78.8797.75(19)82.2990.22(9)Natural gas ($/mcf)1.381.08281.551.3217Total ($/boe) (4)76.5394.71(19)79.9986.51(8)Netback ($/boe)Oil and gas sales76.5394.71(19)79.9986.51(8)Royalties(11.92)(17.69)(33)(12.14)(15.84)(23)Operating expenses(13.22)(17.87)(26)(13.50)(17.00)(21)Transportation(2.92)(2.93)-(2.93)(2.61)12Operating netback prior to realized derivative contracts48.4756.22(14)51.4251.061Realized gain on derivative contracts2.56-n/a0.80-n/aOperating netback(4)51.0356.22(9)52.2251.062(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 International Financial Reporting Standards 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 and six months ended June 30, 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) Current assets less current liabilities, excluding derivative financial instruments.(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.ACCOMPLISHMENTSAchieved record average production of 3,712 boe per day for the three months ended June 30, 2012, up 120 percent from the comparable quarter of 2011. Production for the three months ended June 30, 2012 consisted of 96 percent light oil and 4 percent natural gas and natural gas liquids; Increased funds flow from operations by 95 percent to $14.2 million in the second quarter of 2012 from $7.3 million in the second quarter of 2011. Increased funds flow from operations per diluted share by 78 percent to $0.16 per diluted share in the second quarter of 2012 from $0.09 per diluted share in the second quarter of 2011; Increased cash flow from operating activities 241 percent to $16.7 million or $0.18 per diluted share in the second quarter of 2012 from cash flow of $4.9 million or $0.06 per diluted share in the second quarter of 2011; Reduced operating expenses 26 percent to $13.22 per boe in the second quarter of 2012 from $17.87 per boe in the second quarter of 2011; Achieved a 100 percent success rate drilling 12 gross (11.3 net) wells in the second quarter of 2012 including 10 gross (10.0 net) wells in the Viking in west central Saskatchewan and 2 gross (1.3 net) wells in southeast Saskatchewan; Increased land position by over 14,000 net acres of land in each of its core areas since the beginning of the second quarter, increasing the Company's total undeveloped land to approximately 186,000 net acres at June 30, 2012; and In May of 2012, the Company's credit facility was syndicated and increased from $100 million to $125 million.OPERATIONAL UPDATE During the second quarter of 2012, Renegade successfully executed its capital expenditure program with a 100 percent success rate. A total of 12 gross (11.3 net) wells were drilled of which 5 gross (5.0 net) were completed and brought on production in the quarter. The remaining 7 gross (6.3 net) wells have been brought on production in the third quarter. Renegade's drilling and completions activity for the three and six months ended June 30, 2012 is summarized by region below:Three months ended June 30, 2012Six months ended June 30, 2012RegionGrossNetGrossNetSoutheast Saskatchewan21.3129.1West Central Saskatchewan1010.02928.5Total1211.34137.6Renegade's capital expenditure program for the three and six months ended June 30, 2012 is summarized below:($000)Capital ExpendituresThree months ended June 30, 2012Six months ended June 30, 2012Drilling, Completion and Production Equipment11,79644,378Facilities and Equipment2,9918,133Land and Seismic3,8549,256Property Acquisitions/Dispositions44216,659Capitalized General and Administrative Expenses375729Other61119Total19,51979,274In addition, Renegade has been actively increasing its land holdings in each of its core areas. To date, Renegade holds a total of approximately 186,000 net undeveloped acres. Southeast Saskatchewan Renegade drilled 2 gross (1.3 net) wells in southeast Saskatchewan in the second quarter of 2012. Subsequent to June 30, 2012, Renegade has drilled and completed 8 gross (5.2 net) southeast Saskatchewan wells. In southeast Saskatchewan, Renegade is focused on the Souris Valley trends in Crystal Hills and Redvers and the Frobisher trends in Wordsworth and Queensdale. The Crystal Hills well drilled in the second quarter, located along the Souris Valley trend, had a 30 day initial production rate of 120 boe/d. This well was drilled as a single leg horizontal in order to establish reservoir data from one of three productive cycles. Renegade completed its first horizontal well in the Redvers area in late July of 2012. Initial production from this well was 80 boe/d unoptimized due to facility constraints. The well was drilled as a single leg horizontal as it was Renegade's first horizontal well drilled into the pool. Due to the success of this horizontal well, as well as the acquisition of 18 square kilometers of 3D seismic during the quarter, Renegade now anticipates moving closer to a full scale development plan in the area. Renegade is currently in the process of drilling its second and third wells in the pool in order to exploit the multiple cycles that have been previously defined by vertical production. Renegade now has two drilling rigs active in southeast Saskatchewan with plans to keep them active for the remainder of 2012. The focus of the drilling activity for the balance of the year will be in Crystal Hills, Redvers, Wordsworth and Queensdale. Throughout the quarter, the Company has continued to focus on processing capacities with phase two upgrades being completed in Wordsworth and Crystal Hills. The recently initiated construction of a new production facility in the Redvers area, which is scheduled to be completed in the fourth quarter of 2012, will support Renegade's development program for the second half of 2012. Slave Point In July, following spring break-up, the Company completed a workover on its first horizontal Slave Point well which was inherited from its acquisition in March 2012. The well was placed back on production in mid-July, and is currently cleaning up frac/work-over fluids. As the well continues to clean up and be optimized, management expects the oil cut to increase and reflect production profiles of pre-existing horizontal wells in the Slave Point pools along the main reef complex which typically take up to 60 days to reach peak production rates. Renegade is currently in various stages of licensing 17 locations at Senex and continues to move forward with plans to commence drilling activities late in the third quarter to early in the fourth quarter of 2012 with an anticipated program of up to three horizontal wells. Total drilling and completion cost estimates for the program are expected to be $10.0 million. West Central Saskatchewan Renegade drilled 10 gross (10.0 net) wells in the second quarter of 2012, bringing the 2012 total to 29 gross (28.5 net) wells. Of the 10 wells drilled, five were completed within the quarter due to limited access to locations caused by an extended breakup in west central Saskatchewan. Renegade has now drilled and brought onto production 12 gross (12.0 net) wells based on 40 acre spacing. The production results continue to show a strong correlation to the offset 80 acre spacing well type curves. The Company is planning on initiating waterflood pilots in the southeast Dodsland and Lucky Hills areas by the end of 2012 to further compliment the growth of the areas being drilled on 40 acre spacing. In addition, Renegade has received approval for a pilot waterflood in the Dodsland pool and management expects to commence water injection into the field by late 2012. OUTLOOK Renegade continues to be excited and optimistic about generating growth prospects in 2012 and beyond and is committed to delivering strong per share growth and capital efficiencies. Renegade's 96 percent light oil weighting and prudent hedging policy has allowed the company to maintain industry leading operating netbacks of $51.03 per boe in the second quarter, despite the large pricing differentials realized during the quarter. In addition, Renegade has maintained significant financial flexibility with only $69 million drawn on its existing $125 million operating line as at June 30, 2012. In addition, Renegade has an extensive land base of approximately 186,000 undeveloped acres which provides the Company with an extensive drilling inventory of over 809 potential gross (729 net) drilling locations. This depth of drilling inventory positions the Company well for long-term organic growth in production, cash flow, reserves and net asset value. During the second quarter, Renegade experienced a longer than anticipated break-up in west central Saskatchewan in the Viking and in the Souris Valley and Frobisher trends in southeast Saskatchewan. Conditions in west central Saskatchewan and southeast Saskatchewan have improved dramatically since the end of July and Renegade is currently in its full scale drilling program. Renegade's current production is approximately 4,200 boe/d, based on field estimates, and management anticipates being in a position to successfully execute on its previously announced capital program for the year.CORPORATE INFORMATIONRenegade'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 Statements This 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. Conversion The 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) 410-3376Neither 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.