RMP Energy Inc.
TSX : RMP

RMP Energy Inc.

May 14, 2015 17:17 ET

RMP Energy Reports First Quarter 2015 Financial Results

CALGARY, ALBERTA--(Marketwired - May 14, 2015) - RMP Energy Inc. ("RMP" or the "Company") (TSX:RMP) is pleased to report for the three months ended March 31, 2015 funds from operations of $25.6 million ($0.21 per basic share) on realized revenue of $42.3 million and average daily production of 12,245 barrels of oil equivalent, weighted 47% light oil and NGLs. Detailed first quarter results are as follows:

Financial Stats Quarterly Summary
(thousands except share and per boe data)
(6:1 oil equivalent conversion)

March 31, 2015


March 31, 2014


% change

P&NG revenue (1) 42,335 56,505 (25 )
Funds from operations (2) 25,611 35,534 (28 )
Per share - basic 0.21 0.30 (30 )
Per share - diluted 0.20 0.28 (29 )
Net income / (loss) (5,353 ) 9,896 (154 )
Per share - basic (0.04 ) 0.08 (150 )
Per share - diluted (0.04 ) 0.08 (150 )
Total capital expenditures 46,938 56,264 (17 )
Net debt (2) - period end 144,560 134,542 7
Weighted average basic shares 122,188,885 118,876,223 3
Weighted average diluted shares 125,756,197 126,590,500 (1 )
Issued and outstanding shares (3) 122,229,473 119,254,756 2
Operating Stats
Average daily production:
Natural gas (Mcf/d) 38,728 22,086 75
Crude Oil (bbls/d) 5,488 5,310 3
NGLs (bbls/d) 303 238 27
Oil equivalent (boe/d) 12,245 9,229 33
Average sales price (1):
Natural gas ($/Mcf) 3.16 5.68 (44 )
Crude Oil ($/bbl) (1) 48.33 91.56 (47 )
NGLs ($/bbl) 31.25 67.66 (54 )
Oil equivalent ($/boe) 38.42 68.02 (44 )
Operating expenses ($/boe) 5.67 6.74 (16 )
Operating netback (4) ($/boe) 25.70 46.42 (45 )
Wells drilled: gross (net) 5 (5.0 ) 6 (6.0 ) (17 )
Notes:
(1) Petroleum and natural gas ("P&NG") revenue and pricing includes realized gains or losses from risk management contract settlements. First quarter 2015 reported average sales price for crude oil excludes realized oil hedge termination proceeds of $6.6 million.
(2) Funds from operations and net debt does not have any standardized meaning prescribed by International Financial Reporting Standards ("IFRS"). Please refer to the Reader Advisories at the end of the news release.
(3) As of May 13, 2015, 122.2 million common shares were outstanding.
(4) Operating netback is not a recognized measure under IFRS. Please refer to the Reader Advisories at the end of the news release.

Highlights

  • First quarter 2015 production averaged 12,245 boe/d, weighted 47% light oil and NGLs, reflecting a 33% increase over the comparative first quarter 2014 production of 9,229 boe/d. As previously- disclosed, during the first quarter, a mechanical disruption resulted in the shut-in of the Company's Kaybob gas production. The Kaybob field was shut-in March 19, 2015 with partial production re- starting in early-May 2015 on an intermittent basis due to steep gas price discounts on a regional gas transmission pipeline system. Subsequent to the first quarter, on April 2, 2015, the Company started- up its second Ante Creek gas handling and battery infrastructure as originally-scheduled.

  • Petroleum and natural gas revenue for the first quarter amounted to $42.3 million, of which 74% was derived from crude oil and NGLs (including a realized commodity hedging gain of $7.6 million, which included $6.6 million from the monetization of its oil hedge contracts in early-January 2015). The Company's crude oil discount to the Canadian-dollar converted WTI price averaged $10.71/bbl during the first quarter, as compared to the $9.59/bbl in the preceding fourth quarter of 2014.

  • First quarter petroleum and natural gas royalties amounted to $5.6 million (16% of petroleum and natural gas sales excluding a realized gain on risk management commodity contracts), as compared to $10.4 million (18% of petroleum and natural gas sales) in the comparative first quarter of 2014.

  • Industry-leading, low cost structure. Corporate operating costs for the first quarter decreased 16% to $5.67/boe, when compared to the $6.74/boe operating costs for the comparative first quarter of 2014, and were 4% lower than the $5.91/boe realized in the fourth quarter of 2014. General and administrative expenses for the first quarter decreased 38% to $1.51/boe, when compared to the $2.43/boe realized for the comparative first quarter of 2014, and were 37% lower than the $2.39/boe realized in the fourth quarter of 2014.

  • Generated funds from operations of $25.6 million ($0.21 per basic share) for the three months ended March 31, 2015, with a realized first quarter 2015 field operating netback of $25.70/boe.

  • Incurred approximately $47 million on property, plant and equipment and exploration and evaluation activities in the first quarter of 2015, including approximately $16 million related to the Company's construction of its second Ante Creek gas handling and battery facility. In the first quarter, the Company successfully drilled four (4.0 net) Ante Creek horizontal oil wells and one (1.0 net) Waskahigan horizontal oil well, with completion operations conducted on these wells in addition to a fourth quarter-drilled well. RMP also conducted numerous equip and tie-in activities on successfully- drilled delineation wells, which were drilled on new surface pad locations not proximal to existing gathering line infrastructure. RMP is planning to re-commence drilling operations next month. Please refer to the Strategic Update section hereafter.

  • RMP continues to be well-capitalized with net debt of approximately $144.6 million at March 31, 2015, representing 1.4 times annualized first quarter 2015 funds from operations. The Company is estimating lower net debt at the end of the second quarter, decreasing to approximately $125 million.
    The current borrowing limit on the Company's bank credit facility is $175 million.

Strategic Update

Consistent with RMP's strategy of cost-effective growth and long-term value-creation, in order to take advantage of current industry conditions, the Company is undertaking the following initiatives:

Hybrid Slick-Water Completion and Drilling Inventory Expansion

Encouraged by industry success with hybrid slick-water fracturing completion technology, RMP has conducted hybrid slick-water stimulations on five horizontal wells at Waskahigan and Grizzly, with the objective of creating a more complex fracture network thereby stimulating more reservoir rock within the Montney formation. Four of the five hybrid slick-water well completions, with initial production information, continue to yield very positive early results. Two of these wells are notable as they have expanded the drilling inventory on the northern and western flanks of the Company's Waskahigan land base. These two wells continue to produce at rates substantially above RMP's expected oil rates for its wells in the area. The Company's acreage position at Waskahigan and Grizzly encompasses approximately 71 sections at 100% working interest providing for a future drilling inventory of approximately 200 locations (of which only 18 proved undeveloped locations and 44 probable undeveloped locations were booked in the year-end 2014 reserves report).

Land Accumulation for Emerging New Core Area

Over the last twelve months, the Company has been accumulating strategic undeveloped land outside of its existing Ante Creek/Waskahigan light oil fairway. A total of 32 sections, with a 100% working interest, have been accumulated providing the Company with an emerging core area which to apply its extensive geologic and engineering technical acumen and knowledge. RMP intends to add additional acreage in the area with plans to commence drilling operations this winter.

Ante Creek Exploration Delineation Drilling

To delineate the areal extent of the Montney reservoir rock on the Company's Ante Creek acreage, RMP will drill an exploration 'step-out' well to the south of its core production area. Drilling operations will take place in the fourth quarter of this year because of surface lease limitations, which requires drilling on frozen ground conditions. At Ante Creek, the Company holds approximately 36 sections of 100% working interest land providing for a future drilling inventory of at least 50 locations (of which only 15 proved undeveloped locations and two probable undeveloped locations were booked in the year-end 2014 reserves report).

Ante Creek Secondary Recovery

The Company has commenced detailed engineering on the implementation of a pilot secondary recovery project at Ante Creek, which RMP believes will significantly increase the ultimate recovery of its large oil-in-place reservoir at Ante Creek from the primary recovery factor of 8.2% utilized in the light oil reserves booking at year-end 2014. A pilot could be implemented as soon as the first quarter of 2016.

RMP's interim condensed consolidated financial statements and associated Management's Discussion and Analysis for the three months ended March 31, 2015 are available on RMP's website at www.rmpenergyinc.com within "Investors" under "Financials". Additionally, these documents were filed today 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.

Annual General Meeting of Shareholders

RMP's annual general meeting of shareholders is scheduled for 3:00 p.m. on Tuesday, June 9, 2015 in the McMurray Room of the Calgary Petroleum Club, located at 319 - 5th Avenue S.W., Calgary, Alberta.

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 MMcf Million cubic feet
boe barrels of oil equivalent Bcf billion cubic feet
Mboe thousand barrels of oil equivalent psi pounds per square inch
boe/d barrels of oil equivalent per day kPa kilopascals
NGLs natural gas liquids GJ/d Gigajoules per day
WTI West Texas Intermediate

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 news release contains forward looking information relating to: RMP's plans and preparations for a secondary recovery project at Ante Creek and its expected implementation timing and anticipated reserves recovery improvements; the Company's anticipated recommencement timing of its 2015 drilling activities; the expected expansion of prospective areas in RMP's Waskahigan and Ante Creek land base as a result of recently drilled delineation wells; the estimated net debt at the end of the second quarter (June 30, 2015); the number of future drilling locations both at Waskahigan and Ante Creek; and, the timing of future exploration and delineation drilling both at Ante Creek and on the new undeveloped lands accumulated outside the existing Ante Creek/Waskahigan light oil fairway. 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.

Statements relating to "reserves" are forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described can be profitably produced in the future.

This news release may disclose drilling locations in four categories: (i) proved undeveloped locations; (ii) probable undeveloped locations; iii) unbooked locations; and, iv) an aggregate total of (i), (ii) and (iii). Proved undeveloped locations and probable undeveloped locations are booked and derived from the Corporation's most recent independent reserves evaluation as prepared InSite as of December 31, 2014 and account for drilling locations that have associated proved and/or probable reserves, as applicable. Unbooked locations are internal estimates based on the Corporation's prospective acre age and an assumption as to the number of wells that can be drilled per section based on industry practice and internal review. Unbooked locations do not have attributed reserves or resources. Unbooked locations have been identified by management as an estimation of the Company's multi-year drilling activities based on evaluation of applicable geologic, seismic, engineering, production and reserves information. There is no certainty that the Company will drill all unbooked drilling locations and if drilled there is no certainty that such locations will result in additional oil and gas reserves, resources or production. The drilling locations on which the Company will actually drill wells is ultimately dependent upon the availability of capital, regulatory approvals, seasonal restrictions, oil and natural gas prices, costs, actual drilling results, additional reservoir information that is obtained and other factors. While certain of the unbooked drilling locations have been derisked by drilling existing wells in relative close proximity to such unbooked drilling locations, the majority of other unbooked drilling locations are farther away from existing wells where management has less information about the characteristics of the reservoir and therefore there is more uncertainty whether wells will be drilled in such locations and if drilled there is more uncertainty that such wells will result in additional oil and gas reserves, resources or production.

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, 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.

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