RMP Energy Inc.

RMP Energy Inc.

March 16, 2016 17:00 ET

RMP Energy Reports Fourth Quarter 2015 and Fiscal 2015 Financial Results

CALGARY, ALBERTA--(Marketwired - March 16, 2016) - RMP Energy Inc. ("RMP" or the "Company") (TSX:RMP) is pleased to report for the year ended December 31, 2015 funds from operations of $92.5 million ($0.75 per basic share) on revenue of $161.6 million and average daily production of 12,026 barrels of oil equivalent. Detailed financial and operating results are as follows:

Financial Results Three Months Ended Twelve Months Ended
(thousands except share and per boe data) (6:1 oil equivalent conversion) Dec. 31,
Dec. 31,
Year 2015 Year 2014 %
P&NG revenue (1) 34,178 56,239 (39 ) 161,633 265,892 (39 )
Funds from operations (2) 18,725 32,152 (42 ) 92,452 164,092 (44 )
Per share - basic 0.15 0.26 (42 ) 0.75 1.36 (45 )
Per share - diluted 0.15 0.25 (40 ) 0.75 1.30 (42 )
Net income (loss) (32,380 ) 1,411 - (84,795 ) 47,846 -
Per share - basic (0.26 ) 0.01 - (0.69 ) 0.40 -
Per share - diluted (0.26 ) 0.01 - (0.69 ) 0.38 -
Total capital expenditures 12,008 61,933 (81 ) 97,003 179,746 (46 )
Net debt (3) - period end 117,956 123,450 (4 ) 117,956 123,450 (4 )
Weighted average basic shares 124,790,535 122,126,405 2 123,220,485 120,994,545 2
Weighted average diluted shares 124,790,535 126,709,422 (2 ) 123,220,485 126,461,424 (3 )
Issued and outstanding shares (4) 126,475,068 122,126,840 4 126,475,068 122,126,840 4
Operating Results
Average daily production:
Natural gas (Mcf/d) 36,352 36,563 (1 ) 38,606 31,341 23
Crude oil (bbls/d) 4,952 5,896 (16 ) 5,318 6,308 (16 )
NGLs (bbls/d) 246 352 (30 ) 274 251 9
Oil equivalent (boe/d) 11,257 12,342 (9 ) 12,026 11,782 2
Average sales price (1):
Natural gas ($/Mcf) 3.26 3.90 (16 ) 3.32 4.71 (30 )
Crude oil ($/bbl) 50.13 76.32 (34 ) 57.86 89.59 (35 )
NGLs ($/bbl) 19.83 52.99 (63 ) 25.06 62.04 (60 )
Oil equivalent ($/boe) 33.00 49.53 (33 ) 36.82 61.83 (40 )
Operating expenses ($/boe) 4.61 5.91 (22 ) 4.90 5.81 (16 )
Operating netback (5) ($/boe) 20.95 31.47 (33 ) 23.65 40.89 (42 )
Wells drilled: gross (net) 2 (2.0 ) 7 (7.0 ) (71 ) 15 (15.0 ) 26 (26.0 ) (42 )

Table Notes:

  1. Petroleum and natural gas ("P&NG") revenue and pricing includes realized gains or losses from risk management 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 at the end of the news release.
  3. Net debt is not a recognized measure under IFRS. Please refer to the Reader Advisories at the end of the news release.
  4. As of March 16, 2016, 126.48 million common shares were outstanding.
  5. Operating netback is not a recognized measure under IFRS. Please refer to the Reader Advisories at the end of the news release.

Fourth Quarter 2015 and Fiscal 2015 Highlights

  • Achieved an annual record level of production of 12,026 boe/d in fiscal 2015 (weighted 46% light oil and NGLs), surpassing the Company's previous record output of 11,782 boe/d in the prior year, in spite of a pared-back capital expenditures budget reduced in response to lower commodity prices. RMP's drilling operations were 38% lower in fiscal 2015; only 15 horizontal oil wells (15.0 net) were drilled versus 24 (24.0 net) horizontal wells in fiscal 2014. RMP's fourth quarter 2015 average daily production was 11,257 boe/d, comprised of crude oil and NGLs production of 5,198 bbls/d and natural gas output of 36.4 MMcf/d.
  • Fourth quarter petroleum and natural gas revenue, including a realized commodity hedging gain of $1.3 million, amounted to $34.2 million, of which 68% was derived from crude oil and NGLs. RMP's crude oil discount to the Canadian-dollar converted WTI price averaged $6.12/bbl during the fourth quarter, as compared to the $7.83/bbl in the preceding third quarter of 2015. Petroleum and natural gas revenue for fiscal 2015 amounted to approximately $161.6 million (including a realized commodity hedging gain of $11.1 million), reflecting a decrease in P&NG revenue of 39% over the $265.9 million realized in fiscal 2014.
  • Fourth quarter petroleum and natural gas royalties amounted to $3.7 million (11% of petroleum and natural gas sales excluding the realized gain on risk management commodity contracts), as compared to $5.7 million (16% of petroleum and natural gas sales) in the third quarter of 2015 and $11.6 million (22% of petroleum and natural gas sales) in the comparative fourth quarter of 2014. On January 29, 2016, the Government of Alberta introduced a new royalty framework for the province's oil and gas industry, the Modernized Royalty Framework ("MRF"), which will take effect on January 1, 2017. Details of the MRF, including the applicable royalty rates and formulas, are scheduled to be released by March 31, 2016.
  • Fourth quarter field operating costs of $4.61/boe decreased 22% on a per boe basis, when compared to the $5.91/boe operating costs for the fourth quarter of 2014. The Company's fiscal 2015 operating costs of $4.90/boe decreased 16% on a per boe basis, when compared to operating costs for the previous year of $5.81/boe. With current challenging industry conditions, RMP continues to be highly-focused on delivering meaningful cost reductions and efficiency gains across its field operations. The Company's low operating cost structure augments its field operating netbacks and provides effective management against protracted commodity price weakness.
  • Fourth quarter transportation costs of $3.90/boe decreased 20% on a per boe basis, when compared to the preceding third quarter 2015 cost of $4.85/boe. Fiscal 2015 transportation costs, which primarily include oil sales pipeline tariffs, pipeline fuel surcharges and transportation costs associated with the capacity usage of mid-stream natural gas sales pipelines, amounted to $15.4 million ($3.51/boe) as compared to fiscal 2014 of $8.8 million ($2.06/boe). The increase in the Company's per unit transportation cost for both the three and twelve months ended December 31, 2015 versus the comparable 2014 periods is primarily the result of temporarily higher gas transportation charges. In fiscal 2015, third-party gas pipeline maintenance activities caused capacity restrictions which widened the gas price differential commencing in the second quarter of 2015, resulting in higher gas transportation costs on a portion of RMP's Waskahigan and Ante Creek sales gas. These gas pipeline restrictions have been mitigated with the Company's three-year Alliance pipeline firm transportation receipt service taking effect on December 1, 2015.
  • Fourth quarter general and administrative expenses ("G&A") of $1.93/boe decreased 19% on a per boe basis, when compared to the $2.39/boe for the fourth quarter of 2014. For fiscal 2015, G&A expenses were $7.1 million ($1.62/boe), as compared to $7.9 million ($1.83/boe) in fiscal 2014. RMP expects to continue to improve its G&A cost structure in fiscal 2016 to meet the needs of the business in the current commodity price environment.
  • Generated fourth quarter 2015 funds from operations of $18.7 million ($0.15 per basic share). Funds from operations for fiscal 2015 were $92.5 million ($0.75 per basic share) as compared to $164.1 million ($1.36 per basic share) in fiscal 2014. Significantly lower commodity prices year-over-year caused reductions in realized funds from operations and operating netbacks. For fiscal 2015, RMP's realized operating netback was $23.65/boe, as compared the $40.89/boe operating netback in fiscal 2014. The Company's fourth quarter 2015 operating netback was $20.95/boe.
  • Reported a net loss for the year ended December 31, 2015 of $84.8 million, as compared to net earnings in fiscal 2014 of $47.8 million. The Company's earnings in fiscal 2015 were impacted by the non-cash impairment charge on the carrying value of its property, plant and equipment in the aggregate amount of $88.8 million, resulting primarily from the deterioration in forward commodity prices.
  • In 2015, RMP invested $97.0 million in property, plant and equipment and exploration and evaluation activities, of which $12.0 million was incurred in the fourth quarter of 2015. A total of 15 horizontal oil wells (15.0 net) were drilled during the year, including ten wells at Ante Creek and five wells at Waskahigan. In the first quarter of this year, RMP successfully drilled and completed two (2.0 net) Ante Creek Montney horizontal oil wells and one (1.0 net) Waskahigan Montney horizontal oil well. RMP's drilling and completion costs for its two most recently-drilled Waskahigan hybrid slick water and Ante Creek wells, drilled in January 2016, were $3.4 million and $2.6 million, respectively (based on field estimates). The Company also drilled an exploration well at Gold Creek in West Central Alberta. The cost to drill and complete this well was approximately $4.4 million (based on field estimates). RMP is very encouraged with the results from this well, with further details expected to be provided in the second quarter of this year, subsequent to forthcoming Alberta Crown land auctions. The Company currently holds a total of 48 sections (47.5 net) of Montney rights at Gold Creek.
  • As an update to RMP's Ante Creek waterflood project, the Company recently received regulatory approval for its injection pilot. RMP expects to convert a producing horizontal oil well into a pilot waterflood injector in early-July 2016 with water injection commencing soon thereafter. Implementation of secondary recovery is expected to significantly increase the ultimate recovery of the Company's large oil-in-place reservoir at Ante Creek.
  • Reduced net debt to $117.9 million at December 31, 2015 from $123.5 million at year-end 2014. The Company is presently drawn approximately $125 million on its bank credit facility with a current debt servicing rate of 3.1% (per annum). The annual borrowing base re-determination by the lenders is scheduled to occur before May 31, 2016. The current borrowing limit on the bank credit facility is $150 million. Bolstering RMP's liquidity position is the recently-announced equity financing. On March 2, 2016, the Company announced a "bought deal" equity financing for total gross proceeds of approximately $30.0 million (the "Equity Financing"), which includes an over-allotment option for the underwriters to purchase an additional 15% of the common shares issued under the Equity Financing. The maximum gross proceeds that could be raised under the Equity Financing should the underwriter's over-allotment option be exercised in full is approximately $34.5 million. The Equity Financing is expected to close on or about March 24, 2016.

RMP's audited consolidated financial statements and Management's Discussion and Analysis for the year ended December 31, 2015 are available on RMP's website at www.rmpenergyinc.com within "Investors" under "Financials". Additionally, these documents will be filed later today on the System for Electronic Document Analysis and Retrieval ("SEDAR"). After such filing, 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 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: expected improvement to RMP's G&A cost structure; timing for the expected release of well results from RMP's exploration well at Gold Creek in West Central Alberta; timing of certain operations related to RMP's Ante Creek water flood project and expectations of increased recovery resulting from the project; expectations that the recently-announced equity financing will be completed and the timing of closing of the equity financing 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.

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 by InSite as of December 31, 2015 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 acreage 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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