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 herein and should be read in conjunction with the financial statements and related MD&A, which are available for review on the company's website and on SEDAR.
FINANCIAL AND OPERATING HIGHLIGHTS
Three months Nine months
ended ended
Sept. 30, Sept. 30,
2012 2011 2012 2011
Financial (000s,
except per-share
amounts)
Petroleum and natural
gas sales $ 28,297 $ 22,480 $ 81,836 $ 49,704
Funds flow from
operations(1) 15,826 11,071 44,379 23,816
Per share -- basic 0.18 0.14 0.52 0.34
Per share -- diluted 0.17 0.14 0.51 0.33
Net income (loss) (405) (617) 7,873 (2,542)
Per share -- basic
and diluted(2) (0.00) (0.01) 0.09 (0.04)
Capital expenditures 30,694 38,998 109,968 80,081
Net debt(3) 94,903 59,848 94,903 59,848
Operating
Average daily
production
Crude oil (bbl/d) 3,762 2,727 3,601 2,007
Natural gas (Mcf/d) 714 640 703 528
Natural gas liquids
(bbl/d) 42 18 42 13
Total (boe/d)(4) 3,923 2,852 3,760 2,108
Average realized price
Crude oil and
natural gas liquids
($/bbl) 80.60 88.64 81.70 89.12
Natural gas ($/mcf) 1.39 1.55 1.50 1.56
Total ($/boe)(4) 78.40 85.68 79.43 86.37
Netback ($/boe)
Oil and gas sales 78.40 85.68 79.43 86.37
Royalties (13.55) (16.28) (12.64) (16.08)
Operating expenses (13.16) (14.69) (13.38) (15.99)
Transportation (2.90) (2.75) (2.92) (2.68)
Operating netback
prior to realized
derivative
contracts 48.79 51.96 50.49 51.62
Realized gain on
derivative
contracts 3.24 - 1.65 -
Operating netback(4) 52.03 51.96 52.14 51.62
(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 Sept. 30, 2012, and the three
and nine months ended Sept. 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 one barrel of oil equivalent to
6,000 cubic feet 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. Barrels of oil equivalent may
be misleading, particularly if used in isolation.
Accomplishments
- Renegade achieved record average production of 3,923 barrels of oil equivalent per day for the three
months ended Sept. 30, 2012, up 38 per cent from the comparable
quarter of 2011. Production for the three months ended Sept. 30,
2012, consisted of 97 per cent light oil and 3 per cent natural gas and
natural gas liquids.
-
Renegade increased funds flow from operations by 43 per cent to $15.8-million in
the third quarter of 2012 from $11.1-million in the third quarter of
2011. It increased funds flow from operations per diluted share by 21
per cent to 17 cents per diluted share in the third quarter of 2012 from
14 cents per diluted share in the third quarter of 2011.
- The company increased cash flow from operating activities 79 per cent to $14.9-million or 16 cents per diluted share in the third quarter of 2012 from
cash flow of $8.3-million or 11 cents per diluted share in the third
quarter of 2011.
-
Renegade reduced operating expenses 10 per cent to $13.16 per barrel of oil equivalent in the third
quarter of 2012 from $14.69 per barrel of oil equivalent in the third quarter of 2011.
- The company 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.
- The company achieved a 100-per-cent success rate drilling 24 gross (20.2 net) wells in the
third quarter of 2012, including 10 gross (10 net) wells in the Viking
play in west-central Saskatchewan and 14 gross (10.2 net) wells in southeast
Saskatchewan.
- The company is currently hedged 2,000 barrels per day in fixed-price oil swaps for the fourth
quarter of 2012 at an average price of $98.31 per barrel, and
2,000 barrels per day in fixed-price oil swaps for calendar 2013 at an average
price of $96.61 per barrel.
-
Subsequent to the quarter, on Oct. 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 assets expected to be acquired include 3,600
barrels of oil equivalent per day of light oil production (94 per cent light oil) with a stable, long-life,
low-decline (18 per cent) production profile.
-
Also on Oct. 29, 2012, the company also announced a $70.7-million
bought-deal financing of subscription receipts of Renegade, 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., a 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, and an expected increase to its credit
facility to approximately $325-million
upon closing the asset acquisition.
-
The above-noted asset acquisition and financings create a series of
transformational transactions that 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 Nov. 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
$1,375,000 made up of $1.2-million in cash and 69,228 common shares
of Renegade with a deemed value of $175,000.
During the third quarter of 2012, Renegade successfully executed its capital expenditure program, with a 100-per-cent success rate. Twenty-four 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 eight gross (eight net) wells were brought on production in the fourth quarter.
Renegade's drilling and completion activity for the three and nine months ended Sept. 30, 2012, is summarized by region in the accompanying table.
Region Three months ended Nine months ended
Sept. 30, 2012 Sept. 30, 2012
Gross Net Gross Net
Southeast
Saskatchewan 14 10.2 26 19.3
West-central
Saskatchewan 10 10.0 39 38.5
Total 24 20.2 65 57.8
Renegade's capital expenditure program for the three and nine months ended Sept. 30, 2012, is summarized in the accompanying table.
Capital expenditures Three months ended Nine months ended
(in thousands of dollars) Sept. 30, 2012 Sept. 30, 2012
Drilling, completion and
production equipment $ 22,056 $ 66,434
Facilities and equipment 3,671 11,804
Land and seismic 3,549 12,805
property
Acquisitions/dispositions 1,129 17,788
Capitalized general and
administrative expenses 230 959
Other 59 178
Total 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. Twelve gross (9.5 net) wells were drilled along these key trends.
Wordsworth and Queensdale
During the third quarter of 2012, Renegade drilled and completed four 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 barrels per day, with Renegade's first three-leg horizontal well having a 30-day initial production average of 290 barrels per day.
Renegade drilled one gross (one 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 three horizontal wells offsetting the vertical, and anticipates drilling to commence on the first of these wells in the fourth quarter.
Crystal Hills
Renegade drilled three gross (2.2 net) wells in the Crystal Hills area of southeast Saskatchewan in the third quarter of 2012. An additional one 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 barrels per day, which is above Renegade's budgeted type curve of 54 barrels per day. Renegade's latest well drilled in the Crystal Hills area early in October came on production on Oct. 28, 2012, and is currently producing approximately 240 barrels per day (120 barrels per day net).
Redvers
During the third quarter, Renegade drilled five gross (five net) wells and additionally completed one gross (one 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 four gross (four net) horizontals and one gross (one 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, exceeding the company's 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 $850,000 and total on stream costs of approximately $950,000. 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 net) wells in the third quarter of 2012, bringing the 2012 total to 39 gross (38.5 net) wells. Of the 10 wells drilled, six gross (six net) were spudded 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 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 five locations licensed and 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 barrels of oil equivalent per day pro forma following the asset acquisition. Current pro forma production is approximately 7,800 barrels of oil equivalent per day.
Renegade's drilling program for the fourth quarter of 2012 includes one gross (one net) well in Wordsworth, one gross (0.5 net) well in Crystall Hills, one gross (one net) well in Queensdale, four gross (three net) wells in Redvers and three gross (three net) wells in the Viking play.
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 Toronto Stock Exchange, which management anticipates completing in the first quarter of 2013.
We seek Safe Harbor.
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