Press release from Marketwire
Raging River Exploration Inc. Announces $105 Million Dodsland Viking Acquisition, Freehold Leasing Arrangment, $70 Million Bought Deal Financing, Operations Update and Increased 2013 Guidance
Wednesday, October 23, 2013
Raging River Exploration Inc. Announces $105 Million Dodsland Viking Acquisition, Freehold Leasing Arrangment, $70 Million Bought Deal Financing, Operations Update and Increased 2013 Guidance08:30 EDT Wednesday, October 23, 2013
CALGARY, ALBERTA--(Marketwired - Oct. 23, 2013) -
NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE U.S.
Raging River Exploration Inc. ("Raging River" or the "Company") (TSX:RRX) is pleased to announce that the Company has entered into an agreement to acquire certain properties located in the Dodsland area of southwest Saskatchewan (the "Acquisition") for $105 million, the Company has also entered a freehold leasing arrangement ("Freehold Arrangement") also in the greater Dodsland area with a senior energy producer and increased its 2013 development capital budget to $165 million from $145 million.
INCREASED 2013 GUIDANCE
Including the acquisition of 900 boe/d (83% light oil) and the $20 million capital budget expansion, Raging River now expects to exit 2013 at approximately 8,000 boe/d (96% oil). This represents an increase of 27% from the August 14, 2013 exit guidance of 6,300 boe/d.
Based on field receipts, third quarter production was approximately 5,650 boe/d including 5,450 bbls/d of oil and 1,200 mcf/d of natural gas, an increase of over 1,000 bbls/d of light oil from the second quarter levels. Although the Acquisition will have a nominal impact on our 2013 average guidance, the continued success of our drilling program has resulted in increasing our average 2013 guidance by a further 5% to 5,400 boe/d.
This guidance increase represents the fourth increase to the Company's 2013 guidance which has seen our average production guidance increase by 17% to 5,400 boe/d from 4,600 boe/d and our exit production guidance increase by 48% to 8,000 boe/d from the initial 5,400 boe/d.
SUMMARY OF THE ACQUISITION AND FREEHOLD ARRANGEMENT
Through the Acquisition and Freehold Arrangement, Raging River is acquiring an elite Viking light oil waterflood asset consisting of 900 boe/d (85% light oil) of production and 40.3 net sections of highly prospective land targeting Viking oil. The total drilling inventory associated with deals includes over 280 net drilling locations of which 95% are currently unbooked.
The total consideration for the Acquisition is approximately $105 million (subject to customary closing adjustments and regulatory approvals). In connection with the Acquisition, Raging River will be issuing 12,500,000 common shares on a bought deal basis to raise approximately $70 million. The Acquisition is expected to close on or before November 21, 2013.
|Production(1):||900 boe/d (83% light oil)|
|Average decline rate:||10%/year|
|Proved reserves(2):||3,420 Mboe (97% Viking light oil)|
|Proved plus Probable reserves(2)||4,625 Mboe (97% Viking light oil)|
|Land prospective for Viking oil:||10,000 net acres|
|Total risked drilling locations:||120 net horizontal wells (87% unbooked)|
|Current operating netback(3)(4):||$49.00/boe|
- Based on forecasted average volumes for the month of December 2013.
- Gross Reserves. Reserves have been estimated by Sproule Associates Limited effective December 31, 2013 in accordance with National Instrument 51 ‐ 101 and the COGEH Handbook and based on forecast prices and costs. Gross Reserves means the working interest reserves of the assets acquired pursuant to the Acquisition before the calculation of royalties, and before the consideration of any royalty interests associated with such assets. Sproule's evaluation of the reserves includes the Gleneath and Eagle Lake interests only. Additional minor interests associated with the Acquisition were not evaluated.
- Calculated for the quarter ended [ September 30, 2013 ] and based on Edmonton Light pricing of Cdn $95/bbl and AECO pricing of $3/mcf and calculated by subtracting royalties, transportation costs and operating costs from revenues.
- See Non-IFRS Measures.
|Production(1):||$116,500 per producing boe|
|Proved plus Probable Reserves(2):||$22.70 per boe|
|Proved plus Probable Recycle Ratio(3):||2.2 times|
- Based on forecasted average volumes for the assets to be acquired pursuant to the Acquisition, for the month of December 2013.
- Reserves as disclosed above.
- Utilizing netback shown above.
The Acquisition is anchored by 3.8 mmboe of producing reserves and a low decline rate of 10% per year. Horizontal infill drilling in conjunction with waterflood optimization by the previous operator of these lands has shown potential to achieve material increases in recovery factors. Utilizing the experience gained from drilling in excess of 270 Viking horizontal oil wells Raging River intends to optimize the infill drilling and waterflood strategy to add material reserves and production from the Acquisition over the next 12-18 months.
Freehold Arrangement Summary:
The Freehold Arrangement includes approximately 24.5 net sections of highly prospective land targeting Viking light oil in the Forgan area with a multi-well drilling commitment over the next two years.
|Land:||15,800 net acres|
|Total risked drilling locations:||160 net horizontal wells (100% unbooked)|
The Freehold Arrangement provides a corner stone for Viking light oil development in the Forgan prospect area which is approximately 25 miles southeast of our existing Plato production. The lands have been strategically selected to offset existing horizontal Viking oil wells. Similar to our past experiences, Raging River intends to utilize its proven strategy to improve rates, reserves and economics from this developing area.
With favorable drilling conditions throughout the third quarter Raging River was able to execute an exceptionally active quarter. A total of 94 (71.1 net) horizontal Viking oil wells were drilled at a 100% success rate of which 50 wells have been on-stream for at least 60 days. The average 60 day oil rate has been approximately 50 bbls/d, which is consistent with the historical 60 day average rate of the 110 wells drilled by the Company from January 1, 2012 to June 30, 2013. On-stream costs for the program have stayed consistent at an average of $875,000 per well.
We anticipate continuing operating two drilling rigs through the fourth quarter which should see an additional 50 net horizontal Viking oil wells drilled by year-end.
Recent Drilling Highlights:
- Beadle: 22 wells drilled since June at 100% success. 16 of the wells have successfully tested previously undrilled sections. 13 of the wells have been on production for at least 60 days with average production rates of 45 bbls/d of oil per well.
- Kerrobert: 7 new wells were drilled during the third quarter, all of which have been on production for 60 days averaging 40 bbls/d of oil per well. The Company continues to have success pushing the boundaries of the known oil accumulation with 4 wells having successfully tested the eastern edge of the play.
- Dodsland East: 22 wells (11.0 net) were drilled during the third quarter testing 13 previously undrilled sections. In all cases, geological descriptions were encouraging and production rates are beginning to confirm this with 16 of the new wells currently on production with rates between 45-55 bbls/d of oil.
Raging River has entered into an agreement, on a bought deal basis, with a syndicate of underwriters, led by FirstEnergy Capital Corp. and including Peters & Co. Limited, Dundee Securities Ltd., Desjardins Securities Inc., National Bank Financial Inc., Paradigm Capital Inc. and Cormark Securities Inc. (collectively, the "Underwriters"), pursuant to which the Underwriters have agreed to purchase for resale, 12,500,000 Common Shares of Raging River at a price of $5.60 per Common Share for gross proceeds of $70 million (the "Financing").
Pursuant to a short form prospectus, the Common Shares will be eligible for sale in the provinces of Alberta, British Columbia, Saskatchewan, Manitoba and Ontario. The Common Shares may also be privately placed in the United States pursuant to certain exemptions from the registration requirements of the United States Securities Act of 1933, as amended.
The net proceeds from the Financing will be initially used to reduce outstanding indebtedness under the Company's current credit facility, a portion of which will then be used to fund the Acquisition.
Closing of the Financing is expected on or about November 13, 2013 and is subject to certain conditions, including, but not limited to, the receipt of all necessary regulatory approvals including the approval of the TSX.
The Acquisition and Freehold Arrangement allows Raging River to continue its consolidation of the Viking light oil resource play in the Dodsland area with the addition of 900 boe/d (83% light oil) of production and 25,800 net acres of land that have in excess of 280 net risked horizontal development drilling locations. After giving effect to the Acquisition and Freehold Arrangement, Raging River has in excess of 200 net sections of land prospective for Viking light oil. Raging River is continuing its focus on adding a quality drilling inventory through selective delineation and de-risking of our landholdings. Approximately half of our 200 net sections have had at least one successful horizontal Viking oil well drilled.
With the continued success of our de-risking efforts, Raging River's drilling inventory continues to grow. Based on current estimates we have an extensive light oil drilling inventory in excess of 1,800 net horizontal wells, 100% of which fall within our Dodsland core area. This inventory represents approximately 10 years of defined, low risk development drilling that could be financed within cash flow and prudent use of the Company's credit facilities.
As a result of the Company's continued operational success and in conjunction with the closing of the Acquisition, Raging River's credit facility is expected to be increased to $225 million from $125 million. The borrowing base is currently being reviewed by syndicate members and will be re-affirmed with the closing of the Acquisition.
As of January 1, 2014, proforma the Acquisition, Financing and remaining development capital program, net debt is anticipated to be approximately $105 million representing approximately 0.75 times the estimated annualized fourth quarter 2013 cashflow.
Additional corporate information can be found at www.sedar.com.
The securities offered have not been and will not be registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or applicable exemption from the registration requirements. This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.
FORWARD LOOKING STATEMENTS: This press release contains forward-looking statements. More particularly, this press release contains statements concerning the anticipated terms and timing for closing the Acquisition, the anticipated means of financing the purchase price for the Acquisition, the performance characteristics of the assets to be acquired pursuant to the Acquisition (the " Assets "), the quantity of reserves associated with the Assets, the oil weighting of the Assets, the forecasted average daily production volumes for December 2013 associated with the Assets, the number of drilling locations associated with the Assets, the success of implementing waterflood techniques with the Assets, the anticipated terms and timing for closing the Financing, the receipt of regulatory approvals, including the TSX approval, for the Financing, the use of proceeds of the Financing, increased exit production guidance for 2013, anticipated drilling inventory, timing for development and means of financing drilling inventory, anticipated increase in borrowing base under credit facility, anticipated net debt as January 1, 2014, expected 2013 capital expenditures, expected cash flow for the fourth quarter of 2013 and Raging River's growth strategy and anticipated growth plans for 2014 and beyond. In addition, the use of any of the words "guidance", "initial, "scheduled", "can", "will", "prior to", "estimate", "anticipate", "believe", "potential", "should", "unaudited", "forecast", "future", "continue", "may", "expect", "project", and similar expressions are intended to identify forward-looking statements.
The forward-looking statements contained herein are based on certain key expectations and assumptions made by the Company, including but not limited to expectations and assumptions that the Acquisitions and Financing will close on the terms and at the time expected, all regulatory approvals and other conditions will be received or satisfied for closing the Acquisitions and Financing, all conditions for the increase of the borrowing base of the Company's credit facility will be satisfied, concerning the success of optimization and efficiency improvement projects, 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, Raging River'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, that the conditions for the Acquisitions and Financing will not be satisfied or close on the terms and expected, Raging River will not achieve the anticipated benefits of the Acquisitions, the borrowing base will not be increased as expected, 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. In addition, the intended use of the net proceeds of the Financing by Raging River might change if the board of directors of Raging River determines that it would be in the best interests of the Company to deploy the proceeds for some other purpose. Refer to the AIF on SEDAR at www.sedar.com and risks contained therein.
Management of Raging River believe that the expectations reflected in the forward-looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included herein should not be unduly relied upon. 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.
MEANING OF BOE: When used in this press release, boe means a barrel of oil equivalent on the basis of 1 boe to 6 thousand cubic feet of natural gas. Boe per day means a barrel of oil equivalent per day. Boe's may be misleading, particularly if used in isolation. A boe conversion ratio of 1 boe for 6 thousand cubic feet of natural gas is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. As the value ratio between natural gas and crude oil based on the current prices of natural gas and crude oil 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.
ADVISORY ON INITIAL PRODUCTION RESULTS Any references in this press release to initial, early and/or test or production/performance 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. Additionally, such rates may also include recovered "load oil" fluids used in well completion stimulation. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production for the Company. The initial production rate may be estimated based on other third party estimates or limited data available at this time. The initial production is generally estimated using boes, unless otherwise indicated. In all cases in this news release initial production or test are not necessarily indicative of long-term performance of the relevant well or fields or of ultimate recovery of hydrocarbons.
NON-IFRS MEASURES: This press release contains the terms "net debt" and "operating netback" which do not have a standardized meaning prescribed by International Financial Reporting Standards (" IFRS ") and therefore may not be comparable with the calculation of similar measures by other companies. Management believes "net debt" is a useful supplemental measure of the total amount of current and long-term debt of the Company. Mark-to-market risk management contracts are excluded from the net debt calculation. Management believes "operating netback" is a useful supplemental measures of firstly, the amount of revenues received after royalties and operating and transportation costs and secondly, the amount of revenues received after the royalties, operating, transportation costs, general and administrative costs, financial charges and asset retirement obligations.
FOR FURTHER INFORMATION PLEASE CONTACT:
Raging River Exploration Inc.
Mr. Neil Roszell
President and Chief Executive Officer
Raging River Exploration Inc.
Mr. Jerry Sapieha, CA
Vice President, Finance and Chief Financial Officer