Exploration & Production | General | Quarterly / Earnings Reports | First Quarter (1Q) Update

RMP Expands Canadian Facilities; Initiates Light Oil Delivery

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RMP Energy Inc. reported for the three months ended March 31, 2014 a record level of funds from operations of $35.5 million ($0.30 per basic share) on revenue of $56.5 million and average daily production of 9,229 barrels of oil equivalent (60% light oil and NGLs weighted). 

First Quarter 2014 Highlights

• On March 1, 2014, in spite of abnormally cold winter conditions with significant snow accumulation, the Company commissioned its expanded Ante Creek battery facility and commenced delivering light oil and associated natural gas through its Ante Creek-to-Waskahigan pipelines. This new infrastructure enabled RMP to achieve a record level of production in the first quarter of 2014, with an average daily production level of 9,229 boe/d, weighted 60% light oil and NGLs, representing a 27% increase over fourth quarter 2013 production of 7,266 boe/d. On April 24, 2014, the Company increased its fiscal 2014 average daily production market guidance forecast to approximately 10,500 boe/d, which represents a 53% targeted increase over fiscal 2013. RMP's production during the second half of this year is budgeted to exceed 12,000 boe/d. Due to downstream sales pipeline capacity constraints at Waskahigan, the Company continues to truck and offload crude oil into a RMP-dedicated riser at a Fox Creek pipeline terminal on oil volumes in excess of the Company's pipeline deliveries. 
• Petroleum and natural gas revenue for the first quarter amounted to $56.5 million, of which 80% was derived from crude oil and NGLs (including a realized commodity hedging loss of $2.3 million). The Company's crude oil discount to the Canadian-dollar converted WTI price averaged $13.74/bbl during the first quarter, as compared to the $23.80/bbl in the preceding fourth quarter of 2013 and $13.50/bbl in the comparable first quarter of 2013 (excluding realized commodity hedging loss). 
• Petroleum and natural gas royalties amounted to $10.3 million (18% of petroleum and natural gas sales excluding a realized loss on risk management commodity contracts), as compared to $4.2 million (13% of petroleum and natural gas sales) in the comparative first quarter of 2013. The effective field royalty rate on the Company's Ante Creek production in the first quarter was 24%, as compared to 25% in the fourth quarter of 2013 and 22% in the first quarter of 2013. 
• First quarter corporate operating costs of $6.74/boe decreased by 15% on a per boe basis, when compared to the operating costs for the first quarter of 2013 of $7.93/boe. First quarter 2014 field operating costs at RMP's Ante Creek and Waskahigan light oil fields were $3.06/boe and $8.88/boe, respectively. Increased well maintenance activities at Waskahigan due to harsh winter conditions in the first quarter resulted in higher field operating costs relative to its historical cost profile. 
• Record quarterly funds from operations of $35.5 million ($0.30 per basic share) for the three months ended March 31, 2014, a 77% increase over the $20.1 million generated in the first quarter of 2013. 
• RMP's operating netback in the first quarter of 2014 was $46.42/boe, a 27% increase over the $36.69/boe netback realized in the comparative first quarter of 2013. Field operating netbacks during the quarter at Ante Creek and Waskahigan were $55.52/boe and $57.03/boe, respectively. 
• For the quarter ended March 31, 2014, RMP reported net income of $9.9 million, a significant increase as compared to net earnings in the first quarter of 2013 of $1.7 million. 
• In the first quarter, the Company incurred capital expenditures of $56.3 million, including a horizontal light oil drilling and completions program encompassing four (4.0 net) Ante Creek wells, two (2.0 net) Waskahigan wells (including a long-reach horizontal commitment well, providing for the earning of two sections of land), and the completion and tie-in of one (1.0 net) exploration well at Grizzly that was drilled in December 2013. Of the Ante Creek wells drilled in the quarter, one was a successful step-out well delineating the areal extent of the Montney formation to the south. Details on the well completion results were previously disclosed in RMP's February 27, 2014 and March 19, 2014 news releases. Additionally, $19.3 million of the remaining capital related to the Company's Ante Creek pipeline interconnect and its battery expansion project was recognized in the first quarter, including approximately $5.8 million for the installation of an oil trunk line loop downstream of its Waskahigan battery. To facilitate RMP's future drilling and well tie-in plans at Waskahigan to the south, in the first quarter, gathering lines were also installed underneath the West Waskahigan river for a cost of $2.4 million. The Company also participated in a joint venture, 38 square mile 3-D seismic shoot at Waskahigan for $1.6 million (net to RMP). For fiscal 2014, RMP has set a capital spending budget of $130 million, targeting the Montney formation at Ante Creek, Waskahigan and Grizzly in West Central Alberta. Due to prevailing 'spring break-up' surface conditions, the Company is presently not conducting any drilling and/or well completion operations. RMP expects to re-commence drilling operations by the end of May 2014. 
• Net debt at March 31, 2014 was $134.5 million, as compared to $116.2 million at December 31, 2013. The Company's borrowing limit under its bank credit facility is currently set at $160.0 million. As at May 13, 2014, the Company was drawn approximately $129 million on the bank credit facility.