CALGARY, ALBERTA--(Marketwired - Dec. 11, 2014) - RMP Energy Inc. ("RMP" or the "Company") (TSX:RMP) is pleased to announce its 2015 Capital Budget and provide fiscal 2015 financial and operating market guidance.
2015 Capital Budget
The Company's Board of Directors has approved a "cash flow-based" exploration and development expenditures program of $150 million for 2015 (the "2015 Capital Budget"). The 2015 Capital Budget is to be funded by internally-generated funds from operations, which is forecasted to approximate $150 million (or $1.23 per basic share). As a result, the Company's year-end 2015 debt position is anticipated to remain unchanged from estimated year-end 2014 net debt. RMP is presently drawn approximately $95 million on its available bank facility, which has a borrowing limit of $175 million.
RMP will remain disciplined and flexible with its 2015 Capital Budget as it monitors business conditions and commodity prices over the coming months and, may make adjustments to its planned capital expenditures in 2015. The Company has flexibility to adjust the level of its capital investments as circumstances warrant.
Despite the crude oil price weakness and uncertainty, the 2015 Capital Budget is anticipated to provide RMP with another significant increase in production. The Company's 2015 Capital Budget is forecasted to generate 30% year-over-year production growth from fiscal 2014 (30% increase per basic share). Fiscal 2015 production is projected to average 15,500 boe/d, weighted approximately 44% light crude oil and NGLs, with production growth driven by the Company's Montney plays at Ante Creek, Waskahigan and Grizzly.
At Ante Creek, four wells (4.0 net) are presently shut-in due to solution gas capacity constraints on existing field infrastructure and a fifth well recently drilled and completed is currently being equipped for tie-in. The gas processing constraint at Ante Creek is anticipated to be resolved upon the start-up of a second solution gas handling facility, which is expected to occur at the end of March 2015. Although Ante Creek's current production oil weighting is approximately 54%, the observed trends of the gas-to-oil ratios on early-stage primary production performance of the producing wells to-date has resulted in the Company forecasting Ante Creek's production for fiscal 2015 to be weighted 45% light oil and 55% associated solution gas.
The Company's 2015 drilling focus will be on the continued delineation and development of its Montney light oil resource positions at Ante Creek, Waskahigan and Grizzly in West Central Alberta, which includes a total of 106 net sections of land, providing a multi-year inventory of drilling locations with high field netbacks, strong re-cycle ratios and accelerated capital payouts. At Ante Creek, the Company plans to drill 14 wells (14.0 net) with an additional six wells (6.0 net) planned at Waskahigan and two (2.0 net) wells at Grizzly.
The drilling and completion expenditure component of the Company's 2015 Capital Budget is projected to approximate $93 million, with additional funds of approximately $57 million budgeted for well-site tie-in and gathering lines, facilities infrastructure, undeveloped land accumulation, and seismic. Included in this budgeted amount is approximately $16 million related to the construction and installation of RMP's second solution gas handling facility and oil battery at Ante Creek.
Fiscal 2015 Financial and Operating Guidance
The Company's 2015 financial and operating guidance is as follows:
| Forecast: | Fiscal 2015 | ||
| Average daily production: | |||
| Light oil (Bbls/d) | 6,700 | ||
| NGLs (Bbls/d) | 200 | ||
| Natural gas (MMcf/d) | 52 | ||
| Oil equivalent (boe/d) | 15,500 | ||
| Capital expenditures ($) | $ 150 million | ||
| Funds from operations (1) ($) | $ 150 million | ||
| Funds from operations (1) - per share basic ($) | $ 1.23 | ||
| Year-end 2015 net debt (1) ($) | $ 117 million | ||
| Net debt-to-funds from operations ratio | 0.8x | ||
| Bank credit facility borrowing limit | $ 175 million | ||
| Key Assumptions: | |||
| Royalty rate (%) | 19% | ||
| Operating costs ($/boe) | $ 5.50 | ||
| Transportation costs ($/boe) | $ 2.10 | ||
| Operating netback (1) ($/boe) | $ 28.50 | ||
| General and administrative expense ($/boe) | $ 1.40 | ||
| WTI oil (US$/Bbl) | $ 70.00 | ||
| RMP oil differential to WTI (C$/Bbl) | ($10.00) | ||
| AECO gas (C$/GJ) | $ 3.50 | ||
| Exchange Rate (US$/C$) | 0.873 | ||
| Funds from Operations Sensitivities: | |||
| Change of $1.00/Bbl in oil wellhead price | +/- $ 2.1 million | ||
| Change of $0.10/Mcf in gas wellhead price | +/- $ 1.4 million | ||
| Change of $0.01/C$ in US$/C$ exchange rate | +/- $ 1.8 million | ||
| Table Notes: | |
| 1. | Funds from operations, Operating netback and Net debt do not have any standardized meaning prescribed by International Financial Reporting Standards ("IFRS").Refer to the Reader Advisories at the end of the news release. |
Hedging Update
In order to ensure the Company's petroleum and natural gas revenue is partially protected from lower-than-budgeted natural gas prices, for calendar 2015, a total of 10,000 GJs/d is hedged at a fixed AECO price of $3.70/GJ ($3.90/Mcf). Additionally, with respect to its oil production revenue, for calendar 2015 a total of 500 Bbls/d of crude oil is hedged with a fixed Canadian-denominated WTI price of C$100.25/Bbl.
Abbreviations
| Bbl or Bbls | barrel or barrels | Mcf/d | thousand cubic feet per day | |
| Mbbl | thousand barrels | MMcf/d | million cubic feet per day | |
| Bbls/d | barrels per day | Mcf | thousand cubic feet | |
| boe | barrels of oil equivalent | MMcf | million cubic feet | |
| Mboe | thousand barrels of oil equivalent | Bcf | billion cubic feet | |
| boe/d | barrels of oil equivalent per day | psi | pounds per square inch | |
| NGLs | natural gas liquids | kPa | kilopascals | |
| WTI | West Texas Intermediate | GJ/d | Gigajoules per day |
Reader Advisories
The Company anticipates remaining disciplined but flexible with its 2015 exploration and development capital expenditures as it monitors business conditions and commodity prices throughout fiscal 2015. Where deemed prudent, it may make adjustments to its 2015 Capital Budget. Actual spending may vary due to a variety of factors, including drilling results, crude oil and natural gas prices, economic conditions, prevailing debt and/or equity markets, field services and equipment availability, permitting and any future acquisitions. The timing of most capital expenditures is discretionary. Consequently, the Company has a significant degree of flexibility to adjust the level of its capital investments as circumstances warrant. Additionally, to enhance flexibility of RMP's capital program, the Company typically does not enter into material long-term obligations with any of its drilling contractors or service providers with respect to its operated crude oil and natural gas properties.
The information in this news release contains certain forward-looking statements. These statements relate to future events or our future performance. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "seek", "anticipate", "budget", "plan", "continue", "estimate", "approximate", "expect", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe", "would" and similar expressions. More particularly and without limitation, this new release contains forward looking information relating to: the Company's 2015 Capital Budget and the budgeted funds allocated to each of drilling and completions in addition to field facilities, undeveloped land purchases and seismic, including the capital to be incurred in 2015 related to the Ante Creek 2nd facility and expected commission date of such; forecasted average daily production rate and liquids weighting for 2015 and expected increase over forecasted fiscal 2014 average daily production; funds from operations for 2015; key assumptions within the forecasted 2015 financial and operating guidance including; operating costs and transportation costs for 2015; 2015 corporate royalty rate, general and administrative expense, market WTI oil and AECO gas pricing and wellhead oil price differential and foreign exchange; 2015 drilling plans; sources of funding for the 2015 Capital Budget; year-end 2014 and year-end 2015 estimated net debt; and, funds from operations sensitivities in wellhead oil and wellhead gas price changes and foreign exchange rate changes. These statements involve substantial known and unknown risks and uncertainties, certain of which are beyond the Company's control, including: the impact of general economic conditions; industry conditions; changes in laws and regulations including the adoption of new environmental laws and regulations and changes in how they are interpreted and enforced; fluctuations in commodity prices and foreign exchange and interest rates; stock market volatility and market valuations; volatility in market prices for oil and natural gas; liabilities inherent in oil and natural gas operations; changes in income tax laws or changes in tax laws and incentive programs relating to the oil and gas industry; geological, technical, drilling and processing problems and other difficulties in producing petroleum reserves; and obtaining required approvals of regulatory authorities. The Company's actual results, performance or achievement could differ materially from those expressed in, or implied by, such forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur or, if any of them do, what benefits that the Company will derive from them. The Company's forward-looking statements are expressly qualified in their entirety by this cautionary statement. Except as required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statements.
In this news release RMP has adopted a standard for converting thousands of cubic feet ("mcf") of natural gas to barrels of oil equivalent ("boe") of 6 mcf:1 boe. Use of boes may be misleading, particularly if used in isolation. The boe rate is based on an energy equivalent conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different than the energy equivalency of the 6:1 conversion ratio, utilizing the 6:1 conversion ratio may be misleading as an indication of value.
As an indicator of the Company's performance, the term funds from operations contained within this news release should not be considered as an alternative to, or more meaningful than, cash flow from operating, financing or investing activities, as determined in accordance with International Financial Reporting Standards ("IFRS"). This term is not a recognized measure, does not have a standardized meaning nor is it a financial measure under IFRS. Funds from operations is widely accepted as a financial indicator of an exploration and production company's ability to generate cash which is used to internally fund exploration and development activities and to service debt. This measure is widely used by shareholders and investors in the valuation, comparison and investment recommendations of companies within the natural gas and crude oil exploration and production industry. Funds from operations, as disclosed within this news release, represents cash flow from operating activities before: expensed corporate acquisition-related costs, decommissioning obligation cash expenditures and changes in non-cash working capital from operating activities and non-cash changes in deferred charge. The Company presents funds from operations per share whereby per share amounts are calculated consistent with the calculation of earnings per share.
Net debt refers to outstanding bank debt less deferred charge plus working capital deficiency (or minus working capital surplus), excluding unrealized amounts pertaining to risk management contracts. Net debt is not a recognized measure under IFRS and does not have a standardized meaning.
Field operating netback or operating netback refers to realized wellhead revenue less royalties, operating expenses and transportation costs per barrel of oil equivalent. Field operating netback or operating netback is not a recognized measure under IFRS and does not have a standardized meaning.
Contact Information:
John Ferguson
President and Chief Executive Officer
(403) 930-6303
john.ferguson@rmpenergyinc.com
RMP Energy Inc.
Dean Bernhard
Vice President, Finance and Chief Financial Officer
(403) 930-6304
dean.bernhard@rmpenergyinc.com