CALGARY, ALBERTA
-- (MARKET WIRE)
-- 11/15/12
Renegade Petroleum Ltd. ("Renegade" or the "Company") (TSX VENTURE:RPL) is pleased to announce it has filed on SEDAR its interim consolidated financial statements ("Financial Statements") and related management's discussion and analysis ("MD&A") for the three and nine month periods ended September 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
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Three months ended Nine months ended
September 30, September 30,
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2012 2011 % change 2012 2011 % change
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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
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Weighted average
shares outstanding(2)
Basic 89,635 77,308 16 85,656 70,291 22
Diluted 89,635 77,308 16 87,657 70,291 25
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Shares outstanding,
end of period
Basic 89,635 77,308 16
Diluted 101,104 87,164 16
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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
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Total (boe/d) (4) 3,923 2,852 38 3,760 2,108 78
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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)
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Total ($/boe)(4) 78.40 85.68 (8) 79.43 86.37 (8)
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Netback ($/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
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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
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Operating netback(4) 52.03 51.96 - 52.14 51.62 1
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(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, 2012
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Region Gross Net Gross Net
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Southeast
Saskatchewan 14 10.2 26 19.3
West Central
Saskatchewan 10 10.0 39 38.5
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Total 24 20.2 65 57.8
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Renegade's capital expenditure program for the three and nine months ended September 30, 2012 is summarized below:
($000)
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Three months ended Nine months ended
Capital Expenditures September 30, 2012 September 30, 2012
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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
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Total 30,694 109,968
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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.
CORPORATE INFORMATION
Renegade's common shares trade on the TSX Venture Exchange under the symbol RPL. Renegade currently has approximately 89.6 million shares outstanding and 101.1 million fully-diluted shares. Upon closing of the Asset Acquisition and the Financings, Renegade anticipates having approximately 202.5 million shares outstanding and 214.0 million fully-diluted shares
READER ADVISORIES
Dividends
The payment and the amount of dividends declared in any month will be subject to the discretion of the board of directors and will depend on the board of director's assessment of Renegade's outlook for growth, capital expenditure requirements, funds from operations, potential acquisition opportunities, debt position and other conditions that the board of directors may consider relevant at such future time. The amount of future cash dividends, if any, may also vary depending on a variety of factors, including fluctuations in commodity prices and differentials, production levels, capital expenditure requirements, debt service requirements, operating costs, royalty burdens and foreign exchange rates.
Forward-Looking Statements
This press release contains forward-looking statements. More particularly, this press release contains statements concerning Renegade's capital expenditure program, Renegade's drilling plans, the expected ability of Renegade to execute on its exploration and development program and Renegade's anticipated production (both in terms of quantity and raw attributes) funds flow from operations, operating netbacks, exit net debt and other similar matters.
The forward-looking statements contained in this document are based on certain key expectations and assumptions made by Renegade, including: (i) with respect to capital expenditures, generally, and at particular locations, the availability of adequate and secure sources of funding for Renegade's proposed capital expenditure program and the availability of appropriate opportunities to deploy capital; (ii) with respect to drilling plans, the availability of drilling rigs, expectations and assumptions concerning the success of future drilling and development activities and prevailing commodity prices; (iii) with respect to Renegade's ability to execute on its exploration and development program, the performance of Renegade's personnel, the availability of capital and prevailing commodity prices; and (iv) with respect to anticipated production, the ability to drill and operate wells on an economic basis, the performance of new and existing wells and accounting risks typically associated with oil and gas exploration and production; (v) oil prices; (vi) currency exchange rates; (vii) royalty rates; (viii) operating costs; and (ix) transportation costs.
Although Renegade believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because Renegade cannot give any assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, the failure to obtain necessary financing in respect of the purchase price of the Asset Acquisition, the failure to obtain necessary regulatory, shareholder and court approvals for the Transaction and risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses; health, safety and environmental risks; commodity price and exchange rate fluctuations; and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures).
Any references in this news release to initial production (IP) rates or 30 day initial production rates are useful in confirming the presence of hydrocarbons, however, such rates are not determinative of the rates at which such wells will continue production and decline thereafter are not necessarily indicative of long term performance or ultimately recovery. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production for Renegade.
The forward-looking statements contained in this document are made as of the date hereof and Renegade undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws. Please refer to Renegade's Annual Information Form dated April 27, 2012 (the "AIF") for additional risk factors relating to Renegade. The AIF is available for viewing on www.sedar.com.
Conversion
The term barrels of oil equivalent ("boe") may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet ("mcf") of natural gas to one boe (6 mcf/bbl) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. All boe conversions in this report are derived from converting gas to oil in the ratio of six thousand cubic feet of gas to one barrel of oil. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Contacts:
Renegade Petroleum Ltd.
Michael Erickson
President & CEO
(403) 355-8922
Renegade Petroleum Ltd.
Alex Wylie
Vice-President, Finance & CFO
(403) 410-3376
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