Rock Energy Inc.

Rock Energy Inc.

May 12, 2009 19:32 ET

Rock Energy Inc.: Press Release

CALGARY, ALBERTA--(Marketwire - May 12, 2009) - Rock Energy Inc. ("Rock") (TSX:RE) announces its financial and operational results for the three months ended March 31, 2009. Rock has filed its unaudited interim Consolidated Financial Statements for the period ended March 31, 2009 and related Management's Discussion and Analysis ("MD&A"). Copies of Rock's materials may be obtained on and on its website at

Certain selected financial and operations information for the three months ended March 31, 2009 and the 2008 comparatives are set out below and should be read in conjunction with Rock's unaudited interim Consolidated Financial Statements and MD&A.

FINANCIAL Three months Three months
ended ended
March 31, 2009 March 31, 2008
Oil and gas revenue ('000) $11,675 $15,294

Funds from operations ('000) (1) $ 3,896 $ 7,540
Per share - basic $ 0.15 $ 0.29
- diluted $ 0.15 $ 0.29

Net income (loss) ('000) $(2,261) $ 1,220
Per share - basic $ (0.09) $ 0.05
- diluted $ (0.09) $ 0.05

Capital expenditures ('000) $ 3,374 $16,398

As at As at
March 31, 2009 March 31, 2008
Working capital deficit including
bank debt ('000) $(38,100) $(37,933)

Common shares outstanding 25,899,843 25,887,642
Options outstanding 1,535,450 2,344,227

OPERATIONS Three months Three months
ended ended
March 31, 2009 March 31, 2008
Average daily production
Crude oil and natural gas
liquids (bbls/d) 1,904 1,529
Natural gas (mcf/d) 11,486 7,613
Barrels of oil equivalent (boe/d) 3,818 2,798

Average product prices
Crude oil ($/bbl) $35.53 $68.97
Natural gas liquids ($/bbl) $34.78 $66.48
Natural gas ($/mcf) $ 5.42 $ 8.25
BOEs ($/boe) $33.97 $60.06

Field netback ($/boe) $14.03 $34.47

Note (1) Funds from operations and funds from operations per share are non
GAAP terms that represent cash generated from operating activities
before changes in non-cash working capital. We consider it a key
measure as it demonstrates our ability to generate the cash
necessary to fund future growth through capital investment.
Funds from operations may not be comparable with the calculation
of similar measures for other companies. Funds from operations
per share is calculated using the same share basis which is used
in the determination of net income (loss) per share.

During the first quarter of 2009 Rock was focused on maintaining strict control on capital spending relative to cash flow, reducing costs, and building our inventory of crude oil and gas drilling locations.

Production during the first quarter averaged 3,818 boe per day (40% heavy oil, 10% light oil and natural gas liquids and 50% gas), and Rock's current production is estimated to be 3,500-3,600 boe per day as our wells experience their natural declines. The Company currently has 100-150 boe per day of heavy oil in the Plains region shut in due to normal spring break-up conditions. Rock will begin the 8 well heavy oil drilling program as soon as weather conditions permit, and our production rate is expected to begin building again in the second half of the year.

Financially, Rock generated funds from operations of $3.9 million ($0.15 per basic and diluted share) in the first quarter of the year. The loss for the period was $2.3 million ($0.09 per basic and diluted share). During the quarter the Company was able to significantly reduce its operating costs to $12.33/boe compared to $14.99/boe in the fourth quarter of 2008. Rock's realized price in the first quarter of 2009 was $33.97/boe. Of particular note is the price Rock is receiving for its heavy oil. During the first quarter Rock received an average heavy oil price of $35.22/bbl as heavy oil differentials continue to narrow. Currently we are receiving in excess of $45.00/bbl for heavy oil at the wellhead which when combined with our historical F&D costs for heavy oil generates recycle ratios well in excess of 2.0. In addition, the new Alberta royalty incentive program makes these results even more robust as each heavy oil well would receive a royalty credit of approximately $150,000.

Capital expenditures for the quarter were $3.4 million and total net debt at the end of the period was $38.1 million (against bank newly approved lines of $51 million). During the period Rock drilled 2 (1.3 net) natural gas wells at Saxon and Elmworth, both of which were cased as natural gas wells. The Saxon well is not expected to be placed on production until next winter as the well tested at rates of 250-300 mcf per day. We will proceed with this tie-in next winter in conjunction with our other activities in this area to minimize our costs. The Elmworth well is expected to be completed and tested after spring breakup and should be on production in the third quarter of 2009.

Rock's Board of Directors in March approved an initial capital budget of $15 million for 2009 based on a price forecast for WTI oil of US$47.00 per barrel and for AECO natural gas of Cdn$5.00 per mcf. This basic budget includes drilling 12 wells (8 heavy oil, and 4 natural gas) during the year to preserve the reserve base, and take advantage of the recently announced Alberta royalty initiatives. The remaining funds will be used to acquire seismic and land in order to expand the drilling inventory, and to reduce our debt levels.

Based on this initial capital budget, Rock's production for 2009 is forecast to average 3,200- 3,400 boe per day, generating funds from operations of $17.5 million or $0.68 per basic share. Debt at year-end would be reduced to approximately $36 million. The first quarter production results have exceeded budget expectations and oil prices seem to be firming. However, in order to maintain a prudent financial plan Management has recommended and the Board has approved maintaining a $15 million capital program. Rock will be reviewing the capital program at the end of the second quarter of 2009, but at this point in time we wish to maintain the strength of our balance sheet as we pursue acquisition opportunities.

On March 30, 2009 Rock announced the resignation of Mr. Peter Scott. We thank Peter for his significant contribution over the last 6 years, and wish him all the best in his future ventures. On April 13, 2009 Mr. John Van de Pol joined the company as the Vice President of Finance and CFO. John brings significant experience in managing the growth of junior oil and gas companies through both acquisition and exploration strategies.

Rock has entered 2009 cautiously with a strict capital program in light of uncertain commodity markets. We have made some early progress in reducing our operating costs and look to further reduce both our capital and operating costs in the quarters ahead. Rock is in a strong position with a solid base of balanced oil and gas production, cash flow and financial capability to thrive in this time of uncertain economic conditions. We have developed a significant inventory of over 110 drilling locations (60 oil and 50 gas) and continue to build on it. The changing landscape of our industry continues to provide more opportunity, and we are well positioned to take advantage of that as we actively build our exploration and development inventory and pursue mergers and complimentary acquisitions.


This press release contains forward-looking statements that involve known and unknown risks, uncertainties, assumptions and other factors, some of which are beyond Rock's control that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Rock believes that the expectations reflected in those forward-looking statements are reasonable at the time made but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in, or incorporated by reference into, this press release should not be unduly relied upon. These statements speak only as of the date of such information, as the case may be, and may be superseded by subsequent events. Rock does not intend, and does not assume any obligation, to update these forward-looking statements, except as required by applicable law.

This press release contains references to barrels of oil equivalent (boe), boes maybe misleading, particularly if used in isolation. A boe conversion of 6 mcf to 1 barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

For further information please visit our website at

Contact Information

  • Rock Energy Inc.
    Allen J. Bey
    President & CEO
    (403) 218-4380
    Rock Energy Inc.
    John H. Van de Pol
    Vice President, Finance & CFO
    (403) 218-4380