Raging River Exploration Initiates Process to Review Strategic Repositioning
OREANDA-NEWS. March 13, 2018. Raging River Exploration Inc. (the “Company” or “Raging River”) (TSX:RRX) announces that Raging River’s Board of Directors (the "Board") has commenced a formal process to initiate a strategic repositioning of the Company (the “Repositioning Process”) in an effort to enhance shareholder value. Raging River believes that the current trading price of its common shares does not adequately reflect the underlying value of the Company. The purpose of the Repositioning Process is to evaluate a number of alternatives available to the Company concurrently.
In connection with the Repositioning Process, the Board intends to undertake a comprehensive review to identify and consider a broad range of alternatives to enhance shareholder value, including, but not limited to, a merger, corporate sale, corporate restructuring, the sale of select assets, the purchase of assets, or any combination of the potential alternatives. The Board has appointed an independent committee (the "Special Committee"), chaired by Raging River’s lead independent director, Kevin Olson, to facilitate and lead the review. GMP FirstEnergy has been engaged as the exclusive financial advisor to the Company and National Bank Financial Inc. as the advisor to the Special Committee in connection with this review.
Raging River continues to execute on its business plan and is in a strong financial position. Raging River does not intend to disclose developments with respect to the Repositioning Process unless the Board has approved a specific transaction, or otherwise determines that disclosure is necessary or appropriate.
2017 Financial and Operating Highlights
Selected financial and operational information is outlined below and should be read in conjunction with the audited financial statements, the related Management’s Discussion and Analysis (“MD&A”) and the Annual Information Form. These filings will be available at www.sedar.com and the Company’s website at www.rrexploration.com.
|Three months ended
|Financial (thousands of dollars except share data)|
|Petroleum and natural gas revenue||130,167||98,479||32||451,153||297,020||52|
|Funds flow from operations (1)||83,867||64,561||30||281,991||188,188||50|
|Per share - basic||0.36||0.28||29||1.22||0.83||47|
|Per share - basic||0.09||0.08||13||0.26||0.10||160|
|Development capital expenditures||74,554||76,658||(3)||372,073||211,556||76|
|Property and corporate acquisitions||-||58,259||(100)||-||144,647||(100)|
|Total capital expenditures||74,554||134,917||(45)||372,073||356,203||4|
|Weighted average shares (thousands)|
|Shares outstanding, end of period (thousands)|
|Operating (6:1 boe conversion)|
|Average daily production|
|Light crude oil and NGLs (bbls/d)||20,891||17,058||22||19,863||15,589||27|
|Heavy crude oil (bbls/d)||1,115||1,780||(37)||1,213||965||26|
|Natural gas (mcf/d)||10,020||9,652||4||10,742||8,079||33|
|Barrels of oil equivalent (2)(boe/d)||23,676||20,447||16||22,867||17,900||28|
|Oil and gas sales(3)||59.76||52.35||14||54.05||45.34||19|
|Field netback (1)||41.83||35.20||19||36.59||29.76||23|
|Realized loss on risk management contracts(5)||(0.70||)||(0.15||)||367||(0.23||)||-||100|
|Operating netback (1)||41.13||35.05||17||36.36||29.76||22|
|General and administrative expense||(1.09||)||(1.00||)||9||(1.06||)||(1.14||)||(7)|
|Realized loss on risk management contracts(6)||(0.06||)||-||100||(0.01||)||-||100|
|Asset retirement expenditures||(0.10||)||(0.12||)||(17)||(0.10||)||(0.07||)||43|
|Current taxes recovery (expense)||-||1.22||(100)||(0.23||)||0.87||(126)|
|Funds flow netback(1)||38.50||34.33||12||33.79||28.73||18|
(1) See “Non-IFRS Measures.”
(2) See ‘“Barrels of Oil Equivalent.”
(3) Excludes unrealized risk management contracts.
(4) Excludes service wells.
(5) Includes realized losses on commodity contracts. Excludes realized losses on interest rate swap.
(6) Includes realizes losses on interest rate swap.
FOURTH QUARTER 2017 HIGHLIGHTS
- Achieved a quarterly production record with average production of 23,676 boe/d (93% oil) representing an increase of 16% over the comparable period in 2016. This represents a 16% production per share increase from the fourth quarter of 2016.
- Achieved funds flow from operations of $83.9 million ($0.36/share basic), a 39% increase quarter over quarter and a 30% increase from the fourth quarter of 2016.
- The Company generated operating netbacks of $41.83/boe on an unhedged basis and funds flow netbacks of $38.50/boe.
- Generated fourth quarter net earnings of $20 million or $9.17/boe.
- Corporate royalties continued to be stable at 9.2% during the quarter.
- The Company’s exploration and development expenditures for the quarter were $74.6 million. A total of 48.9 net Viking crude oil wells were drilled at a 96% success rate.
- As previously reported, our initial Duvernay light oil discovery well was successfully drilled and completed in the fourth quarter.
- Maintained a strong balance sheet with year-end net debt of $299.6 million representing 0.9 times net debt to fourth quarter annualized funds flow from operations.
YEAR ENDED DECEMBER 31, 2017
- Production averaged 22,867 boe/d (92% oil), a 28% increase (25% production per share) from 2016 annual production of 17,900 boe/d.
- Generated funds flow from operations of $282 million ($1.22/share basic) an increase of 50% from 2016.
- Attained top decile general and administrative costs of $1.06/boe, a 7% decrease from 2016.
- Executed a $372.1 million exploration and development program to drill a total of 328.8 net Viking crude oil wells and 1.0 net Duvernay well for a success rate of 98%. The capital expenditures consisted of $297.4 million of Viking development capital, $31.9 million of capital deployed into long term Viking waterflood initiatives as well as $42.8 million into early stage land capture and initial evaluation of an emerging Duvernay light oil play.
- Proved plus probable reserves increased 14% to 106.7 mmboe (94% oil) and proved reserves increased 15% to 82 mmboe (94% oil).
- Finding and development costs including the change in future development capital were:
- $36.95 per boe on a proved developed producing basis resulting in a recycle ratio of 1.0 times.
- $28.77/boe on a total proved basis resulting in a recycle ratio of 1.3 times.
- $25.11/boe on a total proved plus probable basis resulting in a recycle ratio of 1.5 times.
- Total net undeveloped land holdings increased 38% to 591,363 acres. The 38% increase in undeveloped land was primarily in the Duvernay shale basin where the Company now holds approximately 250,000 acres.
- Increased our credit facilities to $500 million from $400 million in July 2017.
2018 OPERATIONS UPDATE
Our 113 net well Viking program for the first quarter will be finished with all rigs and fracture stimulation equipment released by mid-March.
Extended reach horizontal wells (“ERH”) continue to be a focus for the company with 71 net Viking ERH wells drilled this quarter (63% of the wells drilled). The Company has completed a thorough review of its historical ERH results. These results have continued to confirm that the ERH wells are providing a significant benefit to economics and recoverable reserves within Raging River's Viking drilling inventory. Based on the analysis of 27 one mile Raging River ERH wells and 89 three quarter mile Raging River ERH wells that have at least three months of production data, the ERH wells are outperforming the closest offset half mile well by a factor of 70%, for approximately 30% incremental capital cost.
As previously discussed in our February 21, 2018 press release, Raging River continues to prudently and methodically advance the evaluation of the emerging Duvernay light oil play in central Alberta. We continue to expand our prospective land base and currently Raging River controls 250,000 net acres (390 sections) within the Duvernay light oil fairway.
We have had continued geotechnical success throughout the first quarter. Our second well in the Ferrybank area (2-20 bottom hole) was successfully drilled to a total measured depth of 5,402m. As part of the drilling operations, we vertically drilled through the Duvernay formation and obtained open hole logs prior to plugging back, kicking-off and continuing to drill a 3,171m lateral section in the upper portion of the Duvernay formation. We plan to complete the 2-20 location after spring break up.
Our third Duvernay well in the Pembina (Pigeon Lake) area (14-36), has been successfully drilled and cased to a total measured depth of 5,058m with a 2,450m lateral section. As part of the drilling operations, we drilled and cored, and logged, the complete Duvernay section. Data from the open hole logs and preliminary core analysis has confirmed our geotechnical expectations of this area with estimated net pay in excess of 20m. Given the strong geotechnical result, the Company has elected to accelerate completion operations for this well into the first quarter. Fracture stimulation operations have recently commenced on this well and we anticipate starting flow back of this well later in March.
On February 28, 2018, we spud the third and final evaluation well of our first quarter 2018 delineation program in the Gilby area (Gilby 1-20). Similar to the Pigeon Lake 14-36 well, our plan is to drill a vertical pilot, core the Duvernay section and obtain a full suite of open hole logs, prior to plugging back and drilling a planned 2,200m lateral section in the Duvernay Formation. Completion operations are anticipated to commence late in the second quarter.
Raging River has been active surveying and acquiring surface leases in multiple areas, to continue to delineate and evaluate our expanding land base. Our current base plan contemplates six 100% working interest Duvernay evaluation wells in 2018. We may look to accelerate Duvernay activity in 2018, should commodity pricing and results continue to be supportive.
Based on strong performance in the Viking, we anticipate first quarter 2018 production to average 23,500 to 24,000 boe/d. With the acceleration of the 14-36 Duvernay completion, we anticipate first quarter 2018 capital spending to be approximately $110 million to $115 million.
Raging River is in a unique position to elicit change through the announced Repositioning Process in an effort to enhance shareholder value. We have a clean balance sheet with an estimated 2018 year-end net debt to trailing funds flow from operations of less than one times with a conservative credit facility of $500 million. Our exceptionally strong Viking drilling inventory with over 2,500 locations continues to allow us to meet and exceed forecast growth expectations with consistent success and an industry leading light oil netback. We continue to be excited by the prospects of our 390 section land position with positive early drilling results and increasing producer activity in the emerging Duvernay light oil play.
Raging River intends to continue to execute on its 2018 capital plan and its 2018 average production guidance of 24,500 boe/d remains intact. Raging River’s management team and Board are committed to acting in the best interests of the Company, and believe a Repositioning Process will ultimately benefit shareholders. The Repositioning Process has not been initiated as a result of receiving any offer or approach, or as a reaction to any operational results or deviations to the Company’s communicated or internal forecasts. The Company does not intend to periodically or otherwise, disclose developments with respect to the Repositioning Process unless the Board has approved a specific transaction or action plan, or otherwise determines that disclosure is necessary or appropriate. The Company cautions that there are no assurances or guarantees that the process will result in a transaction or, if a transaction is undertaken, the terms or timing of such a transaction. The Company has not yet set a definitive schedule to complete its identification, examination and consideration of the strategic Repositioning Process.