RMP Energy Inc.

RMP Energy Inc.

November 12, 2012 16:38 ET

RMP Energy Announces Third Quarter 2012 Results, Increased Bank Line and Provides Operations Update and Updated Guidance

CALGARY, ALBERTA--(Marketwire - Nov. 12, 2012) - RMP Energy Inc. ("RMP" or the "Company") (TSX:RMP) today announced its financial and operating results for the three months ended September 30, 2012, which reflect the Company's successful execution of its profitable oil production growth strategy. For the third quarter, RMP reported funds from operations of $0.12 per fully-diluted share or an aggregate $11.8 million, representing a 143% increase from the same quarter in 2011, on revenue of $19.5 million and average daily production of 4,967 barrels of oil equivalent weighted 40% light oil and natural gas liquids. Financial and operating highlights are as follows:

Financial Highlights Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
(thousands except share and per boe data) (6:1 oil equivalent conversion) 2012 2011 % Change 2012 2011 % Change
Petroleum and natural gas revenue (1) 19,511 12,233 59 55,656 31,037 79
Funds from operations (2) 11,789 4,847 143 31,749 12,848 147
Per share - basic and diluted 0.12 0.06 100 0.32 0.17 88
Net income (loss) (1,164 ) (4,111 ) (72 ) 4,076 (3,994 ) -
Per share - basic and diluted (0.01 ) (0.05 ) (80 ) 0.04 (0.05 ) -
E&D capital expenditures 25,809 36,006 (28 ) 63,033 57,807 9
Total capital expenditures 25,805 36,212 (29 ) 62,473 92,209 (32 )
Net debt (3) - period end 64,069 37,822 69 64,069 37,822 69
Weighted average basic shares 100,225,439 84,287,173 19 97,915,535 75,475,060 30
Weighted average diluted shares 100,225,439 84,287,173 19 97,915,535 75,475,060 30
Issued and outstanding shares (4) 104,281,424 86,882,547 20 104,281,424 86,882,547 20
Operating Highlights
Average daily production:
Natural gas (Mcf/d) 17,874 15,236 17 17,638 14,297 23
Liquids (Oil and NGLs) (bbls/d) 1,988 861 131 1,979 668 196
Oil equivalent (boe/d) 4,967 3,400 46 4,919 3,051 61
Average sales price(1) :
Natural gas ($/Mcf) 2.47 4.04 (39 ) 2.30 4.06 (43 )
Liquids (Oil and NGLs) ($/bbl) 84.52 82.87 2 82.12 83.28 (1 )
Oil equivalent ($/boe) 42.70 39.10 9 41.29 37.26 11
Operating expenses ($/boe) 9.04 10.46 (14 ) 8.29 10.26 (19 )
Operating netback (5) ($/boe) 29.55 19.37 53 27.57 19.65 40
Wells drilled: gross (net) 4 (3.4 ) 5 (4.4 ) (20 ) 11 (9.8 ) 11 (9.2 ) -
(1) Petroleum and natural gas revenue and pricing includes realized gains or losses from commodity contract settlements.
(2) Funds from operations does not have any standardized meaning prescribed by International Financial Reporting Standards ("IFRS"). Please refer to the Reader Advisories within.
(3) Net debt is not a recognized measure under IFRS. Please refer to the Reader Advisories within.
(4) As of November 12, 2012, common shares outstanding were 104.28 million.
(5) Operating netback is not a recognized measure under IFRS. Please refer to the Reader Advisories within.

Third Quarter 2012 Operating and Financial Highlights

  • Third quarter production averaged 4,967 boe/d, with a light oil and NGLs composition of 40%, as compared to third quarter 2011 production of 3,400 boe/d (weighted 25% oil and NGLs). New well tie-ins and down-hole pump workovers were delayed in the third quarter of this year due to unseasonable, prolonged wet surface lease conditions at Waskahigan in West Central Alberta.
  • In the third quarter, the Company incurred exploration and development expenditures of $25.8 million. For the nine months ended September 30, 2012, RMP incurred $62.1 million in exploration and development expenditures, net of transacted dispositions, and currently expects to incur approximately $90 million of exploration and development expenditures for fiscal 2012 (net of transacted dispositions).
  • Petroleum and natural gas revenue for the third quarter amounted to $19.5 million (including a realized oil hedging gain of $483 thousand), of which 79% was derived from crude oil and NGL sales. The Company's discount differential to the Canadian-dollar denominated WTI price during the third quarter averaged $6.41/bbl, as compared to $15.58/bbl in the second quarter of 2012 and $15.35/bbl in the first quarter of 2012.
  • In the third quarter, RMP commenced a pump replacement program, of which three pumps were replaced on the Company's older Waskahigan wells, resulting in approximately $1.00/boe of additional operating costs, RMP's field operating expenses on a boe basis decreased 14% to $9.04/boe in the third quarter, as compared to $10.46/boe in the third quarter of 2011. Corporately, normalized per unit operating costs prior to pump replacement activity, are estimated between $7.50/boe to $8.00/boe.
  • RMP reported funds from operations of $11.8 million ($0.12 per share) for the three months ended September 30, 2012, an increase of 143% (100% per share) from the funds from operations for the third quarter of 2011. Field operating netbacks for the quarter were $29.55/boe, as compared to the $19.37/boe in the third quarter of 2011, reflecting the Company's ongoing successful transition to a low cost, light oil-weighted producer.
  • Net debt as of September 30, 2012 was $64.1 million, representing a leverage ratio of 1.36 times annualized third quarter funds from operations. On September 28, 2012, the Company closed a $3.9 million flow-through common share private placement in respect of Canadian development expenses ("CDE"), pursuant to which 1.65 million shares were issued at $2.37 per share.

Bank Credit Facility Increase

RMP is very pleased to report that based on the semi-annual review of the borrowing base associated with the Company's committed, extendible revolving bank credit facility, the lending syndicate (the "Lenders") has increased RMP's credit facility by 22% to $110 million from $90 million. The credit facility represents the maximum amount that can be borrowed and is primarily based on the Lenders assessment and analysis of the Company's proved oil and gas reserves, results of operations, and the Lenders forecasted commodity prices. The next borrowing base re-determination is scheduled to occur on or about May 31, 2013. As of November 9, 2012, RMP had approximately $61 million of bank debt drawn.

Drilling and Operations Update

Ante Creek, West Central Alberta

The production from RMP's first Ante Creek Montney horizontal oil well (4-35-66-24W5) continues to exceed internal expectations. After 84 days of production, this 100% working interest oil well is presently flowing, without artificial lift, approximately 1,000 bbls/d of light gravity sweet crude oil (37 degree API) and 0.9 mmcf/d of associated natural gas with no measureable formation water, for an oil equivalent rate of approximately 1,150 boe/d. The Company is very encouraged by the production profile of this oil well. As of November 10, 2012, the 4-35 well has produced an estimated 87,000 bbls of oil and approximately 62 mmcf of natural gas, for a combined cumulative production of 97,000 boe.

The Company recently completed and is currently undertaking flow test operations on its third Montney horizontal oil well located at 1-36-66-24W5 (100% working interest), which was drilled to the east side of RMP's acreage in order to delineate the Montney formation. Prior to snubbing out the frac string to put in-place production tubing, the 1-36 well recovered all of its frac fluid during the first 40 hours of flow back and over the next 37 hours of a new oil production flow test through the frac string, the 1-36 well flowed back an average of approximately 2,287 bbls/d of 36 degree API crude oil and 3.8 mmcf/d of associated solution gas for a total of approximately 2,920 boe/d at an average flowing tubing wellhead pressure of 490 psi.

The Company also recently announced the test results of its second Montney horizontal oil well located at 13-26-66-24W5 (100% working interest) in its news release dated November 7, 2012. Please refer to important Reader Advisories at the end of this news release. Both of these wells (13-26 and 1-36) will qualify for the Alberta Government's Horizontal Oil New Well royalty rate cap of 5% on the first 80,000 boe produced.

At Ante Creek, the Company is currently facility limited for processing of associated solution gas. The associated Montney solution gas is conserved and processed at an area operator's gas plant, which currently has allocated approximately 1.5 mmcf/d of capacity to RMP. Oil production from RMP's Ante Creek area is presently being trucked into the Company's Waskahigan oil battery. The Company is presently evaluating numerous gas take-away alternatives in order to alleviate these capacity limitations for 2013.

To the south of the Company's Ante Creek land block, RMP plans to test the horizontal Montney potential on its five-section, South Ante Creek acreage by the end of this year by drilling the wholly-owned 4-14-65-23W5 location.

RMP is very encouraged with the early stage drilling delineation of its Montney oil asset base at Ante Creek, which is expected to complement its extensive Waskahigan Montney oil and Kaybob Montney gas development drilling inventory portfolio. At Ante Creek, the Company has identified an additional 21 drilling locations at 100% working interest, and conditional upon success with its South Ante Creek exploration location, RMP's drilling inventory in the area could potentially double in size.

Waskahigan, West Central Alberta

In the third quarter, RMP drilled three 100% working interest horizontal oil wells and successfully completed these wells in addition to a second-quarter drilled horizontal well (1.0 net). During the nine months ended September 30, 2012, the Company drilled a total of nine (9.0 net) horizontal wells at Waskahigan. Subsequent to the end of the third quarter, RMP drilled two additional Montney horizontal oil wells (2.0 net) and successfully completed one of the two wells with the completion scheduled for the second well by the end of November 2012.

Since the corporate re-structuring in May 2011, RMP has successfully drilled a total of twenty (20.0 net) Montney horizontal oil wells. In total, the Company has twenty-six (26.0 net) horizontal oil wells drilled into the Montney light oil pool at Waskahigan.

During the third quarter, the Company continued with the expansion of its Waskahigan oil battery to approximately 6,000 bbls/d from the current capacity of 2,500 bbls/d. The expanded oil battery will provide for the: i) future handling of the Company's expanded production base, ii) processing of RMP's trucked-in Ante Creek oil production, and iii) the accommodation of third-party volumes from area operators. Full battery expansion is anticipated to be completed in early 2013.

Updated 2012 Market Guidance

For 2012, RMP is currently expecting to incur approximately $90 million in exploration and development expenditures, net of transacted dispositions. The Company's 2012 capital expenditures have increased primarily as a result of the: Waskahigan oil battery expansion, initial Ante Creek battery construction and expansion plus related solution gas gathering line connection into a third-party system, and exploration drilling on RMP's five section acreage position at South Ante Creek.

The Company's production for the month of October 2012 averaged approximately 5,600 boe/d, weighted 48% light oil and NGLs, as based on field estimates. Current production is approximately 6,000 boe/d (based on field estimates), weighted approximately 50% light oil and NGLs. RMP's year-end 2012 net debt is estimated at approximately $75 million, with significant un-utilized credit capacity of approximately $35 million heading into 2013.

The Company anticipates releasing its 2013 Capital Budget and Business Plan on or about December 12, 2012.

RMP has updated its corporate presentation and is available on the Company's website at www.rmpenergyinc.com.

The Company's interim condensed consolidated financial statements and associated Management's Discussion and Analysis ("MD&A") for the three and nine months ended September 30, 2012 is available on RMP's website at www.rmpenergyinc.com within "Investors" under "Financials". Additionally, these documents will be filed by the close of business today, on the Company's profile on the System for Electronic Document Analysis and Retrieval ("SEDAR"). These documents can be retrieved electronically from the SEDAR system by accessing RMP's public filings under "Search for Public Company Documents" within the "Search Database" module at www.sedar.com.


bbl barrel Mcf/d thousand cubic feet per day
Mbbl thousand barrels MMcf/d million cubic feet per day
bbls/d barrels per day Bcf billion cubic feet
boe barrels of oil equivalent psi pounds per square inch
Mboe thousand barrels of oil equivalent kPa kilopascals
boe/d barrels of oil equivalent per day WTI West Texas Intermediate
NGLs natural gas liquids C$ Canadian dollars

Reader Advisories

Any references in this news release to initial and/or final raw test or production rates and/or "flush" production rates are useful in confirming the presence of hydrocarbons, however, such rates are not determinative of the rates at which such wells will commence production and decline thereafter. These test results are not necessarily indicative of long-term performance or ultimate recovery. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production for the Company.

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: Ante Creek area drilling inventory, timing of on-stream date of Ante Creek 13-26 well, current associated solution gas processing limitations at Ante Creek, current and cumulative production from the Ante Creek 4-35 well, current corporate production levels and estimated corporate production for the month of October 2012, estimated 2012 capital expenditures net of transacted dispositions, estimated year-end 2012 net debt, go-forward future corporate per unit operating expenses, forward market pricing discount for the Company's Waskahigan crude oil grade, the timing of the Company's Waskahigan oil battery expansion, and drilling plans for the Company's South Ante Creek area and at Waskahigan. 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. 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 plus working capital deficit or less any working capital surplus (excludes current unrealized amounts pertaining to risk management commodity contracts). Net debt is not a recognized measure under IFRS and does not have a standardized meaning.

Operating netbacks refers to realized wellhead revenue less royalties, operating expenses and transportation costs per barrel of oil equivalent ("boe"). Operating netback is not a recognized measure under IFRS and does not have a standardized meaning.

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