Renegade Petroleum loses $405,000 in Q3

2012-11-15 07:56 ET - News Release

 

Mr. Michael Erickson reports

RENEGADE PETROLEUM LTD. ANNOUNCES RECORD THIRD QUARTER 2012 RESULTS AND OPERATIONAL UPDATE

Renegade Petroleum Ltd. has filed on SEDAR its interim consolidated financial statements and related management's discussion and analysis (MD&A) for the three- and nine-month periods ended Sept. 30, 2012. Selected financial and operational information is outlined below and should be read in conjunction with the Financial Statements and related MD&A which are available for review at www.renegadepetroleum.com or www.sedar.com.

FINANCIAL & OPERATING HIGHLIGHTS

 

                          Three months ended          Nine months ended                                  September 30,              September 30,                                 2012     2011 % change     2012     2011 % change Financial (000's                                                             except per share                                                            amounts)                                                                   Petroleum and natural                                                        gas sales              28,297   22,480       26   81,836   49,704       65                                                                             Funds flow from                                                              operations(1)          15,826   11,071       43   44,379   23,816       86   Per share - basic       0.18     0.14       29     0.52     0.34       53   Per share - diluted     0.17     0.14       21     0.51     0.33       55                                                                             Net income (loss)         (405)    (617)      34    7,873   (2,542)     410   Per share - basic                                                            and diluted(2)        (0.00)   (0.01)     100     0.09    (0.04)     325                                                                             Capital expenditures    30,694   38,998      (21) 109,968   80,081       37 Net debt(3)             94,903   59,848       59   94,903   59,848       59 Operating                                                                   Average daily                                                                production                                                                   Crude oil (bbls/d)     3,762    2,727       38    3,601    2,007       79   Natural gas (Mcf/d)      714      640       12      703      528       33   Natural gas liquids                                                          (bbls/d)                 42       18      133       42       13      223 ----------------------------------------------------------------------------  Total (boe/d) (4)      3,923    2,852       38    3,760    2,108       78 ----------------------------------------------------------------------------Average realized price                                                        Crude oil and                                                                natural gas liquids                                                         ($/bbl)               80.60    88.64       (9)   81.70    89.12       (8)  Natural gas ($/mcf)     1.39     1.55      (10)    1.50     1.56       (4)----------------------------------------------------------------------------  Total ($/boe)(4)       78.40    85.68       (8)   79.43    86.37       (8)----------------------------------------------------------------------------Netback ($/boe)                                                               Oil and gas sales      78.40    85.68       (8)   79.43    86.37       (8)  Royalties             (13.55)  (16.28)     (17)  (12.64)  (16.08)     (21)  Operating expenses    (13.16)  (14.69)     (10)  (13.38)  (15.99)     (16)  Transportation         (2.90)   (2.75)       5    (2.92)   (2.68)       9 ----------------------------------------------------------------------------  Operating netback                                                            prior to realized                                                           derivative                                                                  contracts             48.79    51.96       (6)   50.49    51.62       (2)  Realized gain on                                                             derivative                                                                  contracts              3.24        -      n/a     1.65        -      n/a ----------------------------------------------------------------------------  Operating netback(4)   52.03    51.96        -    52.14    51.62        1 ----------------------------------------------------------------------------                                                                            (1)   "Funds flow from operations" should not be considered an alternative        to, or more meaningful than, cash flow from operating activities as         determined in accordance with International Financial Reporting             Standards as an indicator of Renegade's performance. "Funds flow from       operations" represents cash flow from operating activities prior to         changes in non-cash working capital, transaction costs and                  decommissioning provision expenditures incurred. Renegade also              presents funds flow from operations per share whereby per share             amounts are calculated using weighted average shares outstanding            consistent with the calculation of earnings per share.                (2)   Due to the anti-dilutive effect of Renegade's net loss for the three        months ended September 30, 2012 and the three andnine months ended          September 30, 2011, the diluted number of shares is equal to the basic      number of shares. Therefore, diluted per share amounts of the net loss      are equivalent to basic per share amounts.                            (3)   Current assets less current liabilities, excluding derivative               financial instruments.                                                (4)   A conversion ratio of 1 barrel of oil equivalent ("boe"): 6 Mcf has         been used, which is based on an energy equivalency conversion method        primarily applicable at the burner tip and does not necessarily             represent a value equivalency at the wellhead. Boes may be misleading,      particularly if used in isolation. Please refer to reader advisories        below.                                                                

 

ACCOMPLISHMENTS

 

  • -- Achieved record average production of 3,923 boe per day for the three months ended September 30, 2012, up 38 percent from the comparable quarter of 2011. Production for the three months ended September 30, 2012 consisted of 97 percent light oil and 3 percent natural gas and natural gas liquids;
    • -- Increased funds flow from operations by 43 percent to $15.8 million in the third quarter of 2012 from $11.1 million in the third quarter of 2011. Increased funds flow from operations per diluted share by 21 percent to $0.17 per diluted share in the third quarter of 2012 from $0.14 per diluted share in the third quarter of 2011;
      • -- Increased cash flow from operating activities 79 percent to $14.9 million or $0.16 per diluted share in the third quarter of 2012 from cash flow of $8.3 million or $0.11 per diluted share in the third quarter of 2011;
        • -- Reduced operating expenses 10 percent to $13.16 per boe in the third quarter of 2012 from $14.69 per boe in the third quarter of 2011;
          • -- Completed construction of the Redvers facility in southeast Saskatchewan allowing for significant unoptimized production to come on stream in the fourth quarter, which was previously constrained due to capacity;
            • -- Achieved a 100% success rate drilling 24 gross (20.2 net) wells in the third quarter of 2012 including 10 gross (10.0 net) wells in the Viking in west central Saskatchewan and 14 gross (10.2 net) wells in southeast Saskatchewan;
              • -- Currently hedged 2,000 bbls/d in fixed price oil swaps for the fourth quarter of 2012 at an average price of $98.31 Canadian per barrel and 2,000 bbls/d in fixed price oil swaps for calendar 2013 at an average price of $96.61 Canadian per barrel;
                • -- Subsequent to the quarter, on October 29, 2012, the Company announced an asset acquisition with a Canadian senior producer to to acquire certain strategic light oil and gas assets within its existing southeast Saskatchewan core area for cash consideration of approximately $405 million (net of approximately $15 million in closing adjustments) (the "Asset Acquisition"). The assets expected to be acquired include 3,600 boe/d of light oil production (94% light oil) with a stable, long life, low decline (18%) production profile;
                  • -- Also on October 29, 2012, the Company also announced a $70.7 million bought-deal financing of subscription receipts of Renegade (the "Bought Deal Offering"), a $114.3 million private placement of subscription receipts of Canadian Phoenix Acquisition Corp. ("CPAC"), a newly created wholly-owned subsidiary of Canadian Phoenix Resources Corp. ("Canadian Phoenix") (the "Private Placement"), strategic acquisition by Renegade of CPAC, which is expected to hold approximately $75 million in cash plus the escrowed proceeds from the Private Placement immediately prior to closing (the "Arrangement") and an expected increase to its credit facility to approximately $325 million (collectively, the "Financings") upon closing the Asset Acquisition; and
                    • -- The above noted Asset Acquisition and Financings create a series of transformational transactions which are expected to transition the Company into the highest domestic light oil weighted income plus growth dividend paying corporation in the Canadian public markets.
                      • -- On November 2, 2012, Renegade closed an asset purchase agreement with a private producer to acquire certain light oil and gas assets within its existing southeast Saskatchewan core area for total consideration of $1.375 million made up of $1.2 million of cash and 69,228 common shares of Renegade with a deemed value of $0.175 million.

                       

                      During the third quarter of 2012, Renegade successfully executed its capital expenditure program with a 100 percent success rate. A total of 24 gross (20.2 net) wells were drilled of which 16 gross (12.2 net) were completed and brought on production in the quarter. The remaining 8 gross (8.0 net) wells have been brought on production in the fourth quarter.

                      Renegade's drilling and completions activity for the three and nine months ended September 30, 2012 is summarized by region below:

                       

                                                    Three months ended           Nine months ended                              September 30, 2012          September 30, 2012Region                       Gross           Net         Gross           NetSoutheast                                                                    Saskatchewan                   14          10.2            26          19.3West Central                                                                 Saskatchewan                   10          10.0            39          38.5Total                           24          20.2            65          57.8

                       

                      Renegade's capital expenditure program for the three and nine months ended September 30, 2012 is summarized below:

                       

                      ($000)                                                                                                         Three months ended      Nine months endedCapital Expenditures               September 30, 2012     September 30, 2012Drilling, Completion and                                                     Production Equipment                          22,056                 66,434Facilities and Equipment                        3,671                 11,804Land and Seismic                                3,549                 12,805Property                                                                     Acquisitions/Dispositions                      1,129                 17,788Capitalized General and                                                      Administrative Expenses                          230                    959Other                                              59                    178Total                                          30,694                109,968

                       

                      OPERATIONAL UPDATE

                      Southeast Saskatchewan

                      Renegade drilled 14 gross (10.2 net) wells in the third quarter of 2012, bringing the year to date total to 26 gross (19.3 net). Renegade continues to maintain its strong focus on both the Frobisher and Souris Valley trends with increased well performance, facility capacity and increased acreage providing long term growth potential. A total of 12 gross (9.5 net) wells were drilled along these key trends.

                      Wordsworth & Queensdale

                      During the third quarter of 2012, Renegade drilled and completed 4 gross (2.5 net) wells in the Wordsworth and Queensdale areas.

                      Three gross (1.5 net) horizontal Frobisher wells were drilled in Wordsworth area, with a dual leg horizontal yielding a 30 day initial production average of over 180 bbls/day and Renegade's first three leg horizontal well having a 30 day initial production average of 290 bbls/day.

                      Renegade drilled 1 gross (1.0 net) vertical in its existing Queensdale area. The vertical well provided key reservoir data within its large contiguous land position. Renegade is currently in the process of licensing 3 horizontal wells offsetting the vertical and anticipates drilling to commence on the first of these wells in the fourth quarter.

                      Crystal Hills

                      Renegade drilled 3 gross (2.2 net) wells in the Crystal Hills area of southeast Saskatchewan in the third quarter of 2012. An additional 1 gross (0.3 net) well drilled in the second quarter was brought on production in the third quarter. Renegade's drilling program in the Crystal Hills area has yielded 30 day initial production rates on average of 92 bbls/day which is above Renegade's budgeted type curve of 54 bbls/day. Renegade's latest well drilled in the Crystal Hills area early in October came on production October 28, 2012 and is currently producing approximately 240 bbls/day (120 bbls/day net).

                      Redvers

                      During the third quarter, Renegade drilled 5 gross (5.0 net) wells and additionally completed 1 gross (1.0 net) well that was drilled in the second quarter in the Redvers area of southeast Saskatchewan.

                      As a result of the financing completed in March 2012, Renegade has accelerated the infrastructure development in the Redvers area to accommodate the development of the Souris Valley trend. The Redvers facility has recently been commissioned and is anticipated to be fully operational within the next several weeks which will allow Renegade to begin optimization of Renegade's initial horizontals in the play.

                      During the quarter, Renegade used the time in which the facility was being constructed to evaluate the horizontals drilled using advanced means drilling and completion techniques and various production methods to increase well performance once capacity was available. Drilling activity in the quarter consisted of 4 gross (4.0 net) horizontals and 1 gross (1.0 net) vertical well.

                      West Central Saskatchewan

                      Renegade continues to experience exceptional well performance in the Viking play of west central Saskatchewan. Renegade's Viking results continue to be industry leading on long term production and cumulative recoveries which exceeds our independent reserve auditor type curves. Based on public data, Renegade has become a leading Viking producer in west central Saskatchewan over the last 18 months. This accomplishment is attributed to Renegade's continued technology improvement and disciplined initial production management. Renegade continues to drive down costs with current drilling and completion costs per well of approximately $850 thousand and total on stream costs of approximately $950 thousand. Drilling improvements have been made with the average time from spud to total depth down to 1.5 days from the previous 2.3 days.

                      Renegade drilled 10 gross (10.0 net) wells in the third quarter of 2012, bringing the 2012 total to 39 gross (38.5 net) wells. Of the 10 wells drilled, 6 gross (6.0 net) were spud late in the third quarter and completed and brought onto production early in the fourth quarter.

                      Renegade has now drilled and brought onto production 12 gross (12.0 net) wells based on 40 acre spacing. The production results continue to show a strong correlation to the offset 80 acre spacing well type curves.

                      Alberta Slave Point

                      Renegade currently has 5 locations licensed and has 12 locations in various stages of licensing at Senex. Due to the transformational shift in Renegade's strategy, Renegade does not anticipate allocating capital to the Slave Point play for the remainder of 2012. However, Renegade remains excited about the upside on the play and will consider either undertaking a modest capital program in 2013 or identifying potential joint venture partners for these high growth properties. Renegade's Board of Directors will make a formal decision on the Slave Point play upon the closing of the Asset Acquisition and Arrangement.

                      OUTLOOK

                      Renegade is on track to meet its exit production for 2012 of 8,000 boe/d pro forma the Asset Acquisition. Current pro forma production is approximately 7,800 boe/d.

                      Renegade's drilling program for the fourth quarter of 2012 includes 1 gross (1.0 net) wells in Wordsworth; 1 gross (0.5 net) in Crystall Hills; 1 gross (1.0 net) wells in Queensdale; 4 gross (3.0 net) wells in Redvers; and 3 gross (3.0 net) wells in the Viking.

                      Renegade's 2013 budget and guidance will be formally approved by its Board of Directors upon closing of the Asset Acquisition and Financings which is scheduled for mid-December.

                      In addition, Renegade is working on a transition to the TSX, which management anticipates completing in the first quarter of 2013.

                      We seek Safe Harbor.