Renegade Petroleum Ltd.
TSX VENTURE : RPL

Renegade Petroleum Ltd.

April 27, 2011 08:06 ET

Renegade Petroleum Ltd. Announces Year-End 2010 Results and Provides Operational Update and 2011 Outlook

CALGARY, ALBERTA--(Marketwire - April 27, 2011) -

THIS NEWS RELEASE IS NOT FOR DISSEMINATION IN THE UNITED STATES OR TO ANY UNITED STATES NEWS SERVICES.

Renegade Petroleum Ltd. ("Renegade" or the "Company") (TSX VENTURE:RPL) is pleased to announce it has filed on SEDAR its audited consolidated financial statements ("Financial Statements") and management's discussion and analysis ("MD&A") for the three months and year ended December 31, 2010. Selected financial and operational information is outlined below and should be read in conjunction with Renegade's Financial Statements, the related MD&A and the annual information form ("AIF") which will be available shortly for review at www.renegadepetroleum.com or www.sedar.com.

FINANCIAL & OPERATING HIGHLIGHTS

Three months Ended December 31Year Ended December 31
20102009%
change
20102009%
change
Financial (000's except per share amounts)
Petroleum and natural gas sales10,5367001,40529,2012,747963
Funds flow from (used in) operations (1)3,688(680)6429,4164102,197
Per share - basic(2)0.07(0.09)1780.210.07200
Per share - diluted(2)0.06(0.09)1670.200.07186
Net loss(2,678)(808)(231)(8,449)(827)(922)
Per share – basic and diluted(3)(0.05)(0.10)50(0.19)(0.14)(36)
Capital expenditures31,5823269,588157,9061,15813,536
Net debt (surplus)45,782(5,372)95245,782(5,372)952
Weighted average shares outstanding(2)
Basic54,9737,74960944,1865,741670
Diluted57,3697,84263246,1995,835692
Shares outstanding, end of period(2)
Basic55,42310,923407
Diluted62,57614,495332
Operating
Average Daily Production
Crude Oil (bbls/d)1,450881,5481,043103913
Natural Gas (Mcf/d) (4)3902475827123714
Natural gas liquids (bbls/d)22-22-
Total (boe/d)1,5171321,0491,090145652
Average realized price
Crude oil and Natural Gas Liquids ($/bbl)76.3274.55274.0564.9114
Natural Gas ($/mcf) (4)2.203.27(33)2.802.91(4)
Total ($/boe)75.4957.563173.4051.9741
Netback ($/boe)(4)
Oil and Gas Sales75.4957.563173.4051.9741
Royalties16.098.728513.247.7970
Operating Expenses16.836.9314318.135.81212
Transportation2.192.0662.601.4481
Operating Netback40.3839.85139.4336.937
(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 Canadian Generally Accepted Accounting Principles 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 and incurred asset retirement expenditures. 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)All references to per share basic, per share diluted, outstanding common share and weighted average common share amounts reflect the consolidation on January 18, 2010 of all of Renegade's common shares on a ten (10) to one (1) basis.
(3)Due to the anti-dilutive effect of Renegade's net loss for the three months ended December 31, 2010 and 2009, and the year ended December 31, 2010 and 2009, 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.
(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.
2010 Accomplishments
  • Increased average daily production by 652% to 1,090 boe/d in 2010 from 145 boe/d in 2009. For the fourth quarter of 2010 Renegade achieved record average production of 1,517 boe/d up 1,049% from 132 boe/d in the fourth quarter of 2009. Production for the three months ended December 31, 2010 production consisted of 96% light oil and 4% natural gas and natural gas liquids;

  • Reduced operating costs in the fourth quarter of 2010 by 41% to $16.83 per boe from $28.35 per boe in the third quarter of 2010; operating costs for the year ended 2010 were $18.13 per boe;

  • Increased proved plus probable reserves by 1,173% to 8.1 million boe (98% liquids) from 0.6 million boe in 2009 on a pro forma basis post-acquisition of Petro Uno Resources Ltd. ("Petro Uno");

  • Increased funds flow from operations to $9.4 million or $0.20 per diluted share in 2010 from $0.4 million or $0.07 per share in 2009; on a per diluted share basis funds flow from operations grew 186% in 2010;

  • Drilled 58.0 gross (37.2 net) wells in 2010 with a 95% success rate;

  • Increased land position to 109,988 gross (74,296 net) undeveloped acres in 2010 up from 14,595 gross (8,877 net) undeveloped acres in 2009 for a 737% increase in net undeveloped land;

  • Completed 4 equity financings for a total of $100 million;

  • Completed 7 acquisitions for a total of $115 million; and

  • Entered into a new banking facility for $40 million that was subsequently increased to $45 million.

2011 Operations Update
  • Drilled 8.0 gross (7.1 net) wells since the beginning of 2011 with a 100% success rate including 4.0 gross (3.1 net) in Southeast Saskatchewan and Manitoba and 4.0 gross (4.0 net) wells in the Viking in west central Saskatchewan (on a pro forma basis post-acquisition of Petro Uno);

  • Acquired Petro Uno in an all share deal in April 2011 through the issuance of 11.8 million shares of Renegade;

  • Raised $44.6 million of equity through the issuance of 9.9 million shares at a price of $4.50 per share;

  • Acquired 10,191 net acres of land in various core areas in Southeast Saskatchewan including 640 net acres in the heart of the Bakken light oil resource play; and

  • Is in discussions with National Bank to increase its operating facility to $65 million; closing of the operating facility is expected to occur at the end of May.

RESERVES

In 2010, Renegade replaced 1,731% of production on a proved plus probable basis, including reserves added through acquisitions, and increased its year-end proved plus probable reserves by 1,173% to 8.1 million boe on a pro forma basis post-acquisition of Petro Uno. Comparable pro forma year-end 2009 reserves were 0.6 million boe proved plus probable.

Due to the fact that Renegade and Petro Uno each had a 50% working interest in every well that Petro Uno drilled in the Viking formation in 2010, the reserve information has been disclosed on a pro forma basis post-acquisition of Petro Uno as at December 31, 2010 in order to provide a more meaningful analysis of the Company.

Renegade's reserves ("Renegade Report") and Petro Uno's reserves ("Petro Uno Report") were evaluated as at December 31, 2010 by the independent engineering firm of Sproule Associates Limited ("Sproule") in accordance with the rules provided by National Instrument 51-101 ("NI 51-101"). The following tables provide summary information presented in the Renegade Report and Petro Uno Report effective December 31, 2010 and based on their December 31, 2010 price forecast. The tables provide a summary of the Renegade reserves as if the acquisition of Petro Uno had occurred on January 1, 2010 on a pro forma basis. The summary tables below should be read in conjunction with Renegade Report and Petro Uno Report which will form part of the AIF which will be filed on Sedar.

The year end working interest reserves for 2010 include Renegade's and Petro Uno's working interests excluding royalty interests received and before royalties payable.

Summary of Company Working Interest Oil and Gas Reserves – Forecast Prices and Costs

A summary of the Company working interest oil and gas reserves using forecast pricing and costs on a pro forma basis including the acquisition Petro Uno are as follows:

December 31, 2010Oil
(mbbl)
Gas
(mmcf)
NGL
(mbbl)
Total
(mboe)
Future Development Costs ($000's)
Proved Producing2,80749672,897-
Proved Non-Producing1307-131317
Proved Undeveloped2,27026-2,27470,606
Total Proved5,20752975,30270,923
Probable2,80019122,83411,015
Total Proved plus Probable8,00772098,13681,938

Summary of Before and After Tax Net Present Values

A summary of the Company's pro forma Petro Uno acquisition basis before and after tax net present value of reserves, as at December 31, 2010 are as follows:

The estimated future net revenue contained in the following table does not necessarily represent the fair market value of the reserves. There is no assurance that the forecast price and cost assumptions contained in the Renegade Report or the Petro Uno Report will be attained and variations could be material. The recovery and reserve estimates described herein are estimates only. Actual reserves may be greater or less than those calculated.

Before Tax Net Present Value ($000's)
Discount Rate
DescriptionUndiscounted5%10%15%20%
Proved Producing128,326103,28388,49078,32770,785
Proved Non-Producing7,2266,3725,7215,2104,800
Proved Undeveloped65,12347,58035,18226,02619,035
Total Proved200,675157,235129,393109,56394,620
Probable145,53598,68372,87656,91646,232
Total Proved Plus Probable346,210255,918202,269166,482140,852
After Tax Net Present Value
Discount Rate
DescriptionUndiscounted5%10%15%20%
Proved Producing125,202100,56786,02276,04968,660
Proved Non-Producing5,5624,8874,3733,9723,652
Proved Undeveloped47,59232,89722,53314,9089,114
Total Proved178,356138,351112,92894,92981,426
Probable106,01271,70552,67640,87232,951
Total Proved Plus Probable284,368210,056165,604135,801114,377

Reserves Reconciliation

A summary of the reserves reconciliation for the year ended December 31, 2010 on a pro forma Petro Uno acquisition basis is as follows:

(mboe)ProvedProbableProved plus Probable
Opening Balance, December 31, 2009373264637
Infill Drilling2,2031,1783,381
Extensions623366989
Discoveries21526
Acquisitions2,6741,1313,805
Economic Factors(1)(4)(5)
Dispositions(115)(59)(174)
Production(442)-(442)
Technical Revisions(33)(48)(81)
Closing Balance December 31, 20105,3032,8338,136

Capital Program Efficiency

The efficiency of the Company's capital program on a pro forma Petro Uno acquisition basis for the year ended December 31, 2010 is summarized below:

December 31, 2010December 31, 2009
ProvedProved
Plus
Probable
ProvedProved
Plus
Probable
Capital Expenditures ($000's)
Exploration and Development67,44967,4492,7332,733
Acquisitions115,605115,094--
Facilities10,91710,917--
Change in future development costs ("FDC")67,77861,7529401,390
Total Costs261,749255,2123,6734,123
Reserve Additions (mboe)
Exploration and Development2,4033,948133201
Acquisitions – Corporate and property, net2,6413,724--
2010 Finding & Development Costs ($/boe)
Excluding FDC32.6119.8520.5513.60
Including FDC60.8235.4927.6220.51
Including FDC, excluding Facilities56.2732.7327.6220.51
2010 Finding, Development and Acquisition Costs ($/boe)
Excluding FDC39.2525.22--
Including FDC52.6933.27--
Including FDC, excluding Facilities50.5231.84--
Recycle Ratio
Operating Netback ($/boe)40.6340.6335.9535.95
Finding and Development Costs, excluding Facilities50.5231.8427.6227.62
Recycle Ratio0.81.31.31.8
Reserves
Reserves additions including revisions (mboe)5,0447,672133201
Production (mboe)4434436565
Reserves Replacement11.417.32.03.1
Reserve Life Index
Total Company Interest Reserves (mboe)5,3038,137374639
Annual 2010 Production (mboe)4434436565
Reserve Life Index based on annual 2010 production12.018.45.89.8

OUTLOOK

During 2010, Renegade transitioned from a start-up at the beginning of the year to a Company with multiple core areas by the end of the year. Renegade executed drilling, work over and optimization programs in each of its core areas in southeast Saskatchewan, in west central Saskatchewan in the Viking formation, in North Dakota and in Manitoba in the Spearfish play. The Company continually evaluates and assesses its asset base and is focusing on capital programs which will provide the highest rates of return available to the Company in 2011. Renegade has made the necessary investments in its core areas to ensure an efficient and highly profitable production profile during 2011.

Renegade now has more than 296 gross (237 net) drilling locations in its inventory. This depth of drilling inventory positions the Company well for long-term sustainable growth in production, reserves and net asset value going forward.

Renegade's 2011 capital expenditures budget has been set at $65 million of which $57 million will be spent on drilling and completions. Due to the extended break-up anticipated by management as a result of record snow pack in the first quarter of 2011 in Southeast and West Central Saskatchewan, management is budgeting to re-start the Company's drilling program in early July.

Execution of the 2011 the budget is expected to increase the Company's daily production to an average between 2,400 and 2,600 boe/d for the year ending 2011.

Renegade's recent drilling results in the Lucky Hills area in the Viking light oil resource play have exceeded management's expectations. Accordingly, Renegade has accelerated the capex program in the Viking. Renegade expects to spend approximately 60% of its 2011 drilling and completions budget in the Viking, 38% in Southeast Saskatchewan and Manitoba, and 2% in North Dakota. In total, Renegade expects to drill approximately 46.8 net wells in 2011.

Renegade's management believes that with the Company's high-quality reserve base and development drilling inventory and excellent balance sheet, the Company is well-positioned to continue generating strong operating and financial results through 2011 and beyond.

SUBSEQUENT EVENTS

On February 16, 2011, the Company announced the proposed acquisition of all of the issued and outstanding common shares of Petro Uno, a public junior oil and gas exploration company which has interests in petroleum and natural gas properties and undeveloped land in West Central Saskatchewan. Consideration consisted of 11,811,248 common shares of the Company at a price of $4.06 per share. On April 14, 2011, the Company announced the closing of the Petro Uno acquisition.

On March 9, 2011, the Company closed a bought deal equity financing pursuant to which the Company issued 9,300,000 Renegade common shares at a price of $4.50 per share for gross proceeds of approximately $41.9 million. On April 8, 2011 the Company closed the over-allotment option associated with the financing pursuant to which the Company issued 604,700 common shares at a price of $4.50 per share for additional gross proceeds of approximately $2.7 million.

CORPORATE INFORMATION

Renegade's common shares trade on the TSX Venture Exchange under the symbol RPL. Renegade currently has approximately 77.3 million shares outstanding and 84.2 million fully-diluted shares.

FORWARD-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).
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.

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).

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.

Neither 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.

Contact Information

  • Renegade Petroleum Ltd.
    Michael Erickson
    President & CEO
    (403) 355-8922

    Renegade Petroleum Ltd.
    Alex Wylie
    Vice-President, Finance & CFO
    (403) 410-3376