Raging River Exploration Inc.

Raging River Exploration Inc.

December 16, 2014 01:05 ET

Raging River Exploration Inc. Achieves 2014 Exit Production, Announces 2015 Budget of $175 Million Capital Program Resulting in 24% Increase in Average Daily Production

CALGARY, ALBERTA--(Marketwired - Dec. 16, 2014) -


Raging River Exploration Inc. ("Raging River" or the "Company") (TSX:RRX) is pleased to announce that it achieved its exit guidance of 12,750 boe/d during the first two weeks of December. As a result of our continued success, we now expect fourth quarter 2014 production to be approximately 12,000 boe/d resulting in an increase to our average 2014 production guidance to 10,600 boe/d from 10,500 boe/d.

2014 has been a record year for Raging River, increasing production by approximately 5,000 boe/d and generating 66% production per share growth. This was accomplished without raising equity while spending our cash flow and slightly increasing the debt to trailing cash flow ratio to 0.8 times from 0.7 times.

The Company also materially expanded our drilling inventory through continued land acquisitions and methodical step-out drilling across our asset base. During 2014, we successfully tested 62 previously undrilled net sections significantly de-risking the future drilling associated with the Company's lands. Raging River has greater than 260 net sections of prospective Viking acreage of which 170 net sections have been tested with at least one horizontal Viking oil well.

2015 Budget

With the recent 50% reduction in WTI that has occurred, the Company is entering 2015 with a cautious outlook. During the first half of 2015, capital expenditures are anticipated to be approximately $70 million equating to a cashflow budget at US$55/bbl WTI.

For the full year our budget anticipates averaging US$60/bbl WTI. Based upon this commodity pricing, the Company has set a capital program of $175 million. With this program, Raging River is forecast to increase 2015 average daily production by 24% while maintaining financial strength with a net debt to funds flow ratio of approximately 1:1.

The board intends to review the capital budget after the first quarter to determine if the expenditure levels approved for the second half of the year are consistent with the prevailing commodity prices. The Company has tested our budget under various commodity price scenarios and a US$5/bbl increase or decrease in WTI prices could change cash flow by approximately 12% or $20 million. Raging River will be in a position to react to any significant commodity price changes by rapidly increasing or decreasing drilling activity levels.

In spite of significantly lower anticipated oil prices, the Company is excited that we are still able to maintain production per share growth without impairing our strong balance sheet. The approved $175 million capital development program consisting of 165 -170 net wells is forecast to increase 2015 average daily production by 24% to 13,100 boe/d (96% oil) and the fourth quarter production rate by 13% to 13,600 boe/d (96% oil).

Play expansion will continue to be an important value driver for the Company with approximately 10% of our drilling locations scheduled to test undrilled sections.

The 2015 budget includes the drilling of 165 -170 net horizontal Viking oil wells from an inventory of over 2,400 locations. Total on-stream costs (drilling, completion and equipping) represent $165 million or 94% of the approved budget. $5 million has been allocated to waterflood and facility expansion with the remaining $5 million allocated to land, seismic and maintenance capital. Service cost reductions have not been factored into our forecast however, prevailing low commodity prices are expected to create some cost savings in 2015.

2015 funds from operations are expected to be $160 million which, when combined with our existing credit facilities, will provide significant funds to execute the budget while maintaining a strong balance sheet.

Based on a 2015 average WTI price of US$60/bbl, the Company expects to exit 2015 with forecasted net debt of $174 million or approximately 1.05 times debt to trailing estimated fourth quarter 2015 funds flow from operations. Raging River has an existing credit facility of $300 million.

2015 Guidance

Average daily production
Crude oil and NGL's (bbls/d) 12,600
Natural gas (mcf/d) 3,000
Barrels of oil equivalent (boe/d) 13,100
Exit barrels of oil equivalent (boe/d) 14,000
Crude oil - WTI ($US/bbl) 60.00
Exchange rate ($US/$Cdn) 0.86
Natural gas - AECO ($/GJ) 3.50
Differential - WTI to Canadian Light ($Cdn/bbl) 7.50
Operating cashflow ($000) 170,600
Hedging gains ($000) 2,200
G&A ($000) 6,300
Financial charges ($000) 6,500
Cash taxes ($000) -
Funds flow from operations ($000) 160,000
Per share - basic 0.89
Annualized fourth quarter funds from operations ($000) 165,000
2015 exit net debt ($000) 174,000
Net debt to funds from operations 1.05:1
Netbacks ($/boe)
Oil and gas sales 55.30
Royalties 5.85
Operating expense 12.00
Transportation expense 2.00
Operating netback 35.45
Hedging gains 0.45
G&A 1.30
Financial charges 1.40
Cash taxes -
Funds from operations 33.20
Capital expenditures
Drilling, completion & equipping ($000) 165,000
Land, seismic and maintenance ($000) 5,000
Facilities & waterflood ($000) 5,000
Total ($000) 175,000


Raging River has continued to push the boundaries of the Viking play westward over the last 12 months with the drilling of three successful exploration wells. Two wells are in the greater Hoosier area of west Dodsland and one well is in the Provost area of Alberta.

Provost area
Raging River has acquired through crown land sales approximately 20 net sections of land prospective for Viking light oil and successfully drilled one exploration well. The exploration well had a 14 day flow test rate of 60 bbls/d of oil confirming the prospectivity of our acreage. This well is expected to be placed on production early in 2015 setting up further drilling of the play in the second half of 2015.
West Dodsland area
Raging River has entered into a Farmout and Option Agreement (the "Agreement") with an industry partner to access 70 sections of Viking lands in the greater Hoosier (west Dodsland) area of southwest Saskatchewan. Under the Agreement, Raging River pays 100% of the costs to earn on average, 70% of the industry partners working interest in one half section of land per well drilled, completed and placed on-stream. The first 10 wells on the Agreement acreage will be drilled in the first quarter of 2015.

The business approach taken by the Company since our inception 3 years ago has been to prudently manage our balance sheet while maintaining meaningful per share growth in addition to developing an enviable drilling inventory. Our established drilling inventory of approximately 2,400 remaining locations has set the Company up to survive in these times of depressed commodity prices. Approximately 50% of these remaining locations provide acceptable rates of return at today's commodity prices demonstrating that production per share can continue to grow for the foreseeable future. Raging River has the operational flexibility and strong balance sheet to rapidly adjust activity levels in this volatile pricing environment.

Raging River remains enthusiastic about the future of the Company. The business will continue to pursue value added property, land and corporate acquisitions in addition to building on our base business through the drill bit.

Additional corporate information can be found in our website at www.rrexploration.com or on www.sedar.com.

FORWARD LOOKING STATEMENTS: This press release contains forward-looking statements. More particularly, this press release contains statements concerning expected fourth quarter 2014 average production, average production guidance for 2014, anticipated exit production for 2014, details of Raging River's 2015 planned capital program including Raging River's drilling and completion plans and the expected timing and locations thereof, average production guidance for 2015, anticipated exit production for 2015, expectations of maintaining financial strength in 2015, expected net debt to cash flow ratio, expectation of maintaining a production per share growth without impairing our strong balance sheet, expectation of number of 2015 drilling locations to test undrilled locations, intention of the board to review the capital budget throughout 2015 to determine if the expenditures levels approved for the second half of the year are consistent with the prevailing commodity prices, expected cash flow sensitivities to changes in oil prices, expectations of changes in commodity prices; guidance relating to 2015 including expectations as to production, cashflow, general and administrative expenses, hedging gains, financial charges, cash taxes, operating expenses, transportation expenses, funds from operations, netbacks, net debt and debt to funds from operations, expected timing for placing well on production and further drilling in Provost area, expected timing for drilling first 10 wells under the Agreement, details of our drilling inventory, expectations of rates of return of drilling locations at current commodity prices, expectations of being able to continue to grow production per share, and intention to continue to pursue value added property, land and corporate acquisitions in addition to building on our base business through the drill bit. In addition, the use of any of the words "guidance", "initial, "scheduled", "can", "will", "prior to", "estimate", "anticipate", "believe", "should", "unaudited", "forecast", "future", "continue", "may", "expect", 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 concerning the success of optimization and efficiency improvement projects, the availability of capital, the ability to complete corporate transactions as contemplated by management, current legislation, pipeline capacity, 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, 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, capital expenditures, acquisitions or other corporate transactions; 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, Raging River's expectations and plans for its 2015 capital program and its 2015 guidance may change as circumstances change and as different opportunities arise, such as acquisition opportunities, and as the Company continues to evaluate its drilling results and opportunities. To the extent any guidance or forward looking statements herein constitute a financial outlook, they are included herein to provide readers with an understanding of management's plans and assumptions for budgeting purposes and readers are cautioned that the information may not be appropriate for other purposes. Additional information on these and other factors that could affect Raging River's operations and financial results are included in the Company's Annual Information Form and other reports on file with Canadian securities regulatory authorities, which may be accessed through the SEDAR website (www.sedar.com).

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.

NON-IFRS MEASURES: This document contains the terms "funds from operations", "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 uses funds generated by operations to analyze operating performance and leverage. 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 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. Additional information relating to these non-IFRS measures, including the reconciliation between funds from operations and cash flow from operating activities, can be found in the Company's most recent management's discussion and analysis MD&A, which may be accessed through the SEDAR website (www.sedar.com).

BARRELS OF OIL EQUIVALENT: The term "boe" or barrels of oil equivalent may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one barrel of oil equivalent (6 Mcf: 1 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. Additionally, 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 ratio of 6:1 may be misleading as an indication of value.

Contact Information

    Mr. Neil Roszell, P. Eng.
    President and Chief Executive Officer
    403-387-2951 (FAX)

    Mr. Jerry Sapieha, CA
    Vice President, Finance and Chief Financial Officer
    403-387-2951 (FAX)