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Enter Symbol
or Name
USA
CA



Rock Energy Inc
Symbol RE
Shares Issued 40,444,997
Close 2015-01-26 C$ 2.51
Market Cap C$ 101,516,942
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Rock Energy chops 2015 budget to $25M from $90M

2015-01-26 20:05 ET - News Release

Mr. Allen Bey reports

ROCK ENERGY INC. PROVIDES 2014 OPERATIONS UPDATE AND REVISED 2015 GUIDANCE

Rock Energy Inc. has provided a 2014 operations update and revised its 2015 guidance.

Operations update

During the fourth quarter of 2014. the company drilled a total of 27 (27 net) wells: 16 (16 net) Onward Viking Horizontal wells, eight (eight net) Mantario wells, one (one net) exploration well, and two (two net) dry and abandoned wells, for an average success rate of 93 per cent.

For the full year of 2014, the company drilled a total of 75 (75 net) wells: 39 (39 net) Onward Viking horizontal wells, 21 (21 net) Mantario wells, seven (seven net) Mannville wells, two (two net) exploration wells, and six (six net) dry and abandoned wells, for an average success rate of 92 per cent.

Production during the fourth quarter averaged approximately 5,350 barrels of oil equivalent per day (97 per cent oil), and for the full year, production is expected to average approximately 5,000 barrels of oil equivalent per day. Mantario production in the fourth quarter averaged over 3,500 barrels of oil equivalent per day. Onward Viking production during the fourth quarter was over 900 barrels of oil equivalent per day from 47 of the 53 wells drilled into the play. Currently, the company is producing over 5,350 barrels of oil equivalent per day, including over 1,200 barrels per day of light oil from the Viking at Onward.

During the fourth quarter, the company also made significant progress in the completion of the battery and injection facilities at the Mantario EOR (enhanced oil recovery) project, and shot a 33-section 3-D seismic program over its lands in the Onward area.

Updated guidance

On Nov. 5, 2014, Rock provided initial guidance for 2015, which included a capital spending program of $90-million generating average production of 5,400 barrels of oil equivalent per day, assuming WTI (West Texas Intermediate) would average $81.25 (U.S.) per barrel for the year. Given the current level of crude oil prices, Rock has reduced its capital spending in 2015 to $25-million.

Strategically, Rock's 2015 business plan is directed at activities that confirm proof of concept, capture new opportunities and preserve existing inventory. This disciplined approach is targeted to maintain a financially strong organization with a long-term view to value creation. No further capital is planned to be spent on development drilling until commodity prices improve.

Rock is focused on spending the minimum amount of capital to complete the essential projects related to the Mantario EOR scheme so that reservoir pressure can be maintained and polymer injection can begin. This will ensure the maximum recovery factor, the lowest decline rate and the receipt of the EOR royalty incentive. It is expected that the polymer injection will begin in March, 2015. Drilling of Viking wells at Onward and exploration wells have been deferred. At the present time, Rock has no drilling rigs operating.

With this change in strategy, the company is now planning to spend $17-million to $18-million in the first half of the year, and up to $25-million for the whole year. This reduced capital spending plan will generate average production for the year of 4,600 to 5,000 barrels of oil equivalent per day. Assuming that WTI averages $55 (U.S.) per barrel for the year ($50.00 (U.S.) WTI per barrel for the first quarter and the second quarter, and $60 (U.S.) WTI per barrel for the third quarter and the fourth quarter), that the WTI-WCS (Western Canadian Select) differential averages $15 (U.S.) per barrel, and that the exchange rate averages $1.25 to $1 (U.S.), the company would generate cash flow of approximately $35-million (86 cents per share). At current forward strip pricing (WTI of approximately $50 (U.S.) per barrel), the company would generate cash flow of approximately $18-million (45 cents per share).

The year 2015 is proving to be a challenging year for the industry as it manages a significant reduction in commodity prices. Rock will be conservative and prudent with its capital spending, and will remain flexible to react to changing oil prices. For the present time, the leadership team at Rock is focused on maximizing its operating netback, managing the balance sheet and building its inventory of opportunity.

We seek Safe Harbor.

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