News Feed Item

Rock Energy Inc. Achieves Record Production, Increases Capital Spending and Guidance for 2014, and Reports First Quarter Results

CALGARY, ALBERTA -- (Marketwired) -- 05/13/14 -- Rock Energy Inc. (TSX:RE) ("Rock" or the "Company") is pleased to report its financial and operating results for the three months ended March 31, 2014. Rock is a Calgary- based crude oil exploration, development and production company.

Rock has filed its unaudited condensed interim Consolidated Financial Statements for the period ended March 31, 2014 and related Management's Discussion and Analysis ("MD&A"). Copies of Rock's materials may be obtained on www.sedar.com and on our website at www.rockenergy.ca.

CORPORATE SUMMARY                                                           
Three months ended March 31,                            2014           2013 
Crude oil and natural gas revenue ('000)             $32,442        $13,228 
Funds from operations ('000) (1)                     $15,314         $3,048 
Per share - basic                                      $0.39          $0.08 
  - diluted                                            $0.37          $0.08 
Net loss ('000)                                     ($17,301)       ($3,608)
Per share - basic                                     ($0.44)        ($0.09)
  - diluted                                           ($0.44)        ($0.09)
Capital expenditures, net ('000)                     $22,888        $12,589 
As at March 31,                                         2014           2013 
Net debt ('000) (2)                                  $25,607        $12,695 
Common shares outstanding                         39,535,330     39,169,914 
Options outstanding                                3,043,689      3,113,117 
Three months ended March 31,                             2014           2013
Average daily production                                                    
  Crude oil and natural gas liquids (bbls/d)            4,620          2,770
  Natural gas (mcf/d)                                   1,673          2,661
  Barrels of oil equivalent (boe/d)                     4,899          3,214
Average product prices                                                      
  Crude oil and natural gas liquids ($/bbl)            $75.75         $49.72
  Natural gas ($/mcf)                                   $6.28          $3.47
  Total ($/boe)                                        $73.58         $45.73
Field netback ($/boe) (1)                              $39.64         $13.93
(1) Funds from operations, funds from operations per share and field netback
    are not terms prescribed by International Financial Reporting Standards 
    (IFRS), and so are considered non-GAAP measures. Funds from operations  
    represents cash generated from operating activities before changes in   
    non-cash working capital and decommissioning expenditures. Rock         
    considers funds from operations a key measure as it demonstrates the    
    Company's ability to generate the cash necessary to fund future growth  
    through capital investment. Funds from operations per share is          
    calculated using the same share basis which is used in the determination
    of net income (loss) per share. Field netback is calculated as crude oil
    and natural gas revenues after deducting royalties, operating costs and 
    transportation costs, resulting in an approximation of initial cash     
    margin in the field on crude oil and natural gas production. Rock's use 
    of these non-GAAP measurements may not be comparable with the           
    calculation of similar measures for other companies.                    
(2) Net debt excludes commodity price contracts.                            


During the first quarter of 2014 Rock achieved record daily production and was able to make significant progress in delineating the Viking light oil play at Onward and the development of an enhanced oil recovery ("EOR") project at Mantario.

The quarter was highlighted by the following specific accomplishments:

--  Drilled 14 (14.0 net) oil wells with 100% casing success including 4
    (4.0 net) Mantario vertical step out locations in the main pool, 8 (8.0
    net) horizontal Viking oil wells at Onward and 2 (2.0 net) successful
    Mannville oil wells (Onward, Neilburg); 
--  Averaged 4,899 boe per day (94% crude oil and liquids) of production
    representing a 22% increase from Q4 2013, and a 52% increase from a year
--  Divested the majority of our heritage heavy oil assets in the
    Lloydminster area for gross proceeds of $7.3 million, and acquired the
    working interests from the two offsetting owners at the Mantario pool,
    giving the Company 100% ownership and control of the main pool, for a
    combined total of $9.9 million (after adjustments); 
--  Spent a total of $22.9 million on the capital expenditure program; 
--  Generated funds from operations for the quarter of $15.3 million ($0.39/
    basic share); 
--  Effective April 1st, promoted Mr. Scott Kober to Vice President,
    Engineering; and 
--  On April 15th, received formal approval from the Saskatchewan Government
    for the EOR project at Mantario.

Rock's realized price in the first quarter of 2014 was $73.58 per boe compared to $59.87 per boe in the fourth quarter of 2013. The increase in price realization is primarily attributed to a narrowing in the heavy oil price differential as additional refining infrastructure came on stream and pipeline restrictions were eased. The current WTI-WCS differential is trading around $17.00 - $20.00 US/bbl which is consistent with Rock's long term view of a sustainable range.

Operating costs increased during the quarter to $18.04 per boe compared to $16.25 per boe in the fourth quarter of 2013. This increase is attributable to additional heating and fuel costs during an extended cold winter and the inclusion of the heritage heavy oil assets until the asset sale transaction closed in late March. In addition to the effect of the sale of the heritage heavy oil assets, Rock expects to continue to reduce our operating costs going forward through the addition of low cost production from Mantario and Onward (Viking).

Rock generated a field netback of $39.64 per boe in the first quarter of 2014 compared to $28.47 per boe in the fourth quarter of 2013. Though both royalty and operating costs were higher on a per boe produced basis in the quarter, field netbacks were positively impacted by improved product pricing.

Gross capital expenditures for the first quarter of 2013 were $22.9 million, including $14.3 million for the drilling program, $4.4 million for facilities, $1.6 million for land and seismic and $9.9 million for acquisitions offset by $7.3 million of divestitures.

Rock's daily production for the first quarter of 2014 averaged 4,899 boe/d (94% oil and liquids). Currently the Company is producing approximately 5,000 boe/d. Though the Company is experiencing some impact from spring break up on our operations, we do not expect it to have a significant effect on our average production for the second quarter.

Asset Rationalization

During the first quarter of 2014, Rock completed the acquisition of approximately 290 bopd from the two offset owners on the west side of our main pool at Mantario for a combined total cost of $9.9 million. With these acquisitions, Rock now controls 100% of the Mantario main pool and is able to consolidate our operations and expand the scope of the EOR project.

Rock sold substantially all of its heritage heavy oil assets in the Lloydminster region (Alberta and Saskatchewan). With the successful completion of the transaction, the Company has divested of approximately 450 bopd of heavy oil, including the associated infrastructure and related abandonment liabilities, for approximately $7.3 million.

These transactions are significant steps in the transformation of Rock into a focused producer with higher net backs and lower operating costs.


Rock is proceeding with the implementation of a water/chemical flood at Mantario to maximize recovery from this pool. The Company plans to have the pressure maintenance scheme (water flood) operational by the fourth quarter of this year, and the EOR scheme (polymer flood) operational by Q2, 2015. On April 15, 2014 Rock received formal approval from the Government of Saskatchewan for the EOR project at Mantario. Incremental capital spent on the EOR project starting on April 15, 2014 will qualify to reduce the royalty rate paid by the project to 1% until the qualified capital is recovered. Rock has estimated that the Company will experience a reduction in royalty costs of approximately $15 - $20 million during 2015, and then a further reduction for 2016 as additional qualified incremental capital is spent.

In conjunction with the acquisition of the offsetting working interest owners, Rock is now applying to the Saskatchewan Government to expand the EOR project to include the entire main pool. We expect to receive approval by mid-summer. The expansion of this project will provide a more efficient and complete recovery of the reserves contained in the pool and additional royalty relief associated with the incremental capital costs.

At the present time Rock is moving forward with the construction of the battery and infrastructure for this project, and once break up is over we will also begin the drilling of the new infill producing wells and conversion of the water/polymer injectors. Rock will also drill 6 new vertical step-out wells to further delineate the extent of the main pool. Production from the Mantario pool is currently averaging approximately 3,500 bopd from 41 wells.

Exploration efforts in Mantario during the remainder of the year will be focused on testing 2 - 3 new pools along the main Mantario shore face. In addition, Rock will test another 2 - 3 new exploration targets in the greater Mantario area.

Onward Viking

During the first quarter of 2014, the Company drilled an additional 8 (8.0 net) horizontal oil wells into the Viking Formation at Onward. Production rates (IP30) for these wells continue to average approximately 50 bopd. With a total of 18 (18.0 net) wells drilled in to the play, Rock believes the Company has successfully demonstrated an economically viable light oil Viking resource play on 15.5 sections. Under full development at 16 wells per section this would generate approximately 230 remaining development drilling locations. Rock plans to drill an additional 17 step-out wells by the end of the year to extend this play and more fully evaluate the Company's remaining lands in this area.

Onward Mannville

During the fourth quarter of 2013, Rock drilled a discovery well at 11-16-34-24W3 into a new Lloydminster pool (West Onward). This discovery well has been producing at rates exceeding 100 bopd for the last three months. With this success the Company has mapped a potential new pool that indicates potentially 10 - 15 development locations, and plans to drill the first 3 - 4 follow up wells in the third quarter of this year. In addition to this development project Rock has identified another 3 - 4 exploration targets that the Company plan to test in the next 12 months.

Leadership Changes

Rock is pleased to announce that as of April 1, 2014 Mr. Scott Kober was promoted to Vice President, Engineering, responsible for our reserves evaluation, reservoir management and business development. Scott has over 18 years of experience in the industry and has been working with Rock for the last 18 months as Manager, Engineering. Scott's efforts have been instrumental in the development of the Mantario field and the rationalization of our asset base.

Mr. Bill Slavin has decided not to stand for re-election to our Board of Directors. We wish to thank Bill for his many years of service with Rock, and his invaluable contribution to our progress.

Outlook and 2014 Guidance

The strong performance from first quarter activities, and the acquisition of the working interest partners in the Mantario pool have prompted the Company to expand its capital program to $91 million (from $85 million) and revise its guidance for the year. The additional capital was used to close the second acquisition at Mantario.

The Company is now forecasting to generate average 2014 production of 4,800 - 5,000 boe/d (95% oil). For the remainder of 2014, Rock is assuming that WTI averages $95.00 US/bbl, WTI - WCS differential averages $20.00 US/bbl, AECO gas price averages $4.00 CDN/mcf and the exchange rate averages $0.92 CDN/US. Given these assumptions, the Company is forecasting funds from operations of $64 - $66 million ($1.60 - $1.65/share). With the forecasted funds from operations and capital spending plan, the net debt at the end of the year is targeted to be $42 - $44 million (0.6 times forecasted annualized fourth quarter funds from operations) against its combined credit facility of $70 million.

During the second quarter of 2014, the Company is working hard to prepare for a very active summer. The third quarter of 2014 will see the Company invest approximately $40 million towards constructing the facilities at Mantario, drilling the infill locations for the development of the Mantario pool, drilling the step out wells to delineate the Viking light oil play at Onward, and testing 4 - 6 new exploration ideas in core areas. The Company is actively engaged in a process of divesting our remaining non-core assets while we build production and value in our core areas through both acquisition and drilling projects. We remain focused on building a suite of assets that will continue to provide our shareholders with a solid, long-life, predictable base of sustainable cash flow.

Advisory Regarding Forward-Looking Information and Statements

This press release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words "will", "expects", "believe", "plans", "potential" and similar expressions are intended to identify forward-looking statements or information. More particularly and without limitation, this press release contains forward looking statements and information concerning: forecast average production; forecast funds from operations; forecast net debt; forecast capital spending; anticipated in-service date for, and royalty rates and royalty credits from the Mantario water/chemical flood program; and Rock's drilling plans for its crude oil properties.

Statements relating to "reserves" are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described can be profitably produced in the future.

The forward-looking statements and information in this press release are based on certain key expectations and assumptions made by Rock, including prevailing commodity prices and exchange rates; applicable royalty rates and tax laws; future well production rates; reserve and resource volumes; the performance of existing wells; the success obtained in drilling new wells; the sufficiency of budgeted capital expenditures in carrying out planned activities; the availability and cost of labour and services; and the receipt, in a timely manner, of regulatory and other required approvals. Although Rock believes that the expectations and assumptions on which such forward-looking statements and information are based are reasonable, undue reliance should not be placed on the forward-looking statements and information because Rock can give no assurance that they will prove to be correct. There is no certainty that Rock will achieve commercially viable production from its undeveloped lands and prospects.

Since forward-looking statements and information 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 risks associated with the oil and natural gas industry in general, such as: 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 reserves, production, costs and expenses; health, safety and environmental risks; commodity price and exchange rate fluctuations; marketing and transportation of petroleum and natural gas and loss of markets; environmental risks; competition; incorrect assessment of the value of acquisitions; failure to realize the anticipated benefits of acquisitions; ability to access sufficient capital from internal and external sources; stock market volatility; and changes in legislation, including but not limited to tax laws, royalty rates and environmental regulations.

Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could affect the operations or financial results of Rock are included in reports on file with applicable securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com). The forward-looking statements and information contained in this press release are made as of the date hereof and Rock 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.

For further information please visit Rock's website at www.rockenergy.ca.

Rock Energy Inc.
Allen J. Bey
President and Chief Executive Officer

Rock Energy Inc.
Todd Hirtle
Vice President Finance and Chief Financial Officer

More Stories By Marketwired .

Copyright © 2009 Marketwired. All rights reserved. All the news releases provided by Marketwired are copyrighted. Any forms of copying other than an individual user's personal reference without express written permission is prohibited. Further distribution of these materials is strictly forbidden, including but not limited to, posting, emailing, faxing, archiving in a public database, redistributing via a computer network or in a printed form.

Latest Stories
Traditional on-premises data centers have long been the domain of modern data platforms like Apache Hadoop, meaning companies who build their business on public cloud were challenged to run Big Data processing and analytics at scale. But recent advancements in Hadoop performance, security, and most importantly cloud-native integrations, are giving organizations the ability to truly gain value from all their data. In his session at 19th Cloud Expo, David Tishgart, Director of Product Marketing ...
Without lifecycle traceability and visibility across the tool chain, stakeholders from Planning-to-Ops have limited insight and answers to who, what, when, why and how across the DevOps lifecycle. This impacts the ability to deliver high quality software at the needed velocity to drive positive business outcomes. In his general session at @DevOpsSummit at 19th Cloud Expo, Eric Robertson, General Manager at CollabNet, will discuss how customers are able to achieve a level of transparency that e...
The Quantified Economy represents the total global addressable market (TAM) for IoT that, according to a recent IDC report, will grow to an unprecedented $1.3 trillion by 2019. With this the third wave of the Internet-global proliferation of connected devices, appliances and sensors is poised to take off in 2016. In his session at @ThingsExpo, David McLauchlan, CEO and co-founder of Buddy Platform, discussed how the ability to access and analyze the massive volume of streaming data from millio...
WebRTC has had a real tough three or four years, and so have those working with it. Only a few short years ago, the development world were excited about WebRTC and proclaiming how awesome it was. You might have played with the technology a couple of years ago, only to find the extra infrastructure requirements were painful to implement and poorly documented. This probably left a bitter taste in your mouth, especially when things went wrong.
SYS-CON Events announced today that Pulzze Systems will exhibit at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. Pulzze Systems, Inc. provides infrastructure products for the Internet of Things to enable any connected device and system to carry out matched operations without programming. For more information, visit http://www.pulzzesystems.com.
SYS-CON Events announced today that Interface Masters Technologies, a leader in Network Visibility and Uptime Solutions, will exhibit at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. Interface Masters Technologies is a leading vendor in the network monitoring and high speed networking markets. Based in the heart of Silicon Valley, Interface Masters' expertise lies in Gigabit, 10 Gigabit and 40 Gigabit Eth...
Enterprise IT has been in the era of Hybrid Cloud for some time now. But it seems most conversations about Hybrid are focused on integrating AWS, Microsoft Azure, or Google ECM into existing on-premises systems. Where is all the Private Cloud? What do technology providers need to do to make their offerings more compelling? How should enterprise IT executives and buyers define their focus, needs, and roadmap, and communicate that clearly to the providers?
Successful digital transformation requires new organizational competencies and capabilities. Research tells us that the biggest impediment to successful transformation is human; consequently, the biggest enabler is a properly skilled and empowered workforce. In the digital age, new individual and collective competencies are required. In his session at 19th Cloud Expo, Bob Newhouse, CEO and founder of Agilitiv, will draw together recent research and lessons learned from emerging and established ...
One of biggest questions about Big Data is “How do we harness all that information for business use quickly and effectively?” Geographic Information Systems (GIS) or spatial technology is about more than making maps, but adding critical context and meaning to data of all types, coming from all different channels – even sensors. In his session at @ThingsExpo, William (Bill) Meehan, director of utility solutions for Esri, will take a closer look at the current state of spatial technology and ar...
As software becomes more and more complex, we, as software developers, have been splitting up our code into smaller and smaller components. This is also true for the environment in which we run our code: going from bare metal, to VMs to the modern-day Cloud Native world of containers, schedulers and microservices. While we have figured out how to run containerized applications in the cloud using schedulers, we've yet to come up with a good solution to bridge the gap between getting your conta...
SYS-CON Events announced today that Streamlyzer will exhibit at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. Streamlyzer is a powerful analytics for video streaming service that enables video streaming providers to monitor and analyze QoE (Quality-of-Experience) from end-user devices in real time.
You have great SaaS business app ideas. You want to turn your idea quickly into a functional and engaging proof of concept. You need to be able to modify it to meet customers' needs, and you need to deliver a complete and secure SaaS application. How could you achieve all the above and yet avoid unforeseen IT requirements that add unnecessary cost and complexity? You also want your app to be responsive in any device at any time. In his session at 19th Cloud Expo, Mark Allen, General Manager of...
SYS-CON Media announced today that @WebRTCSummit Blog, the largest WebRTC resource in the world, has been launched. @WebRTCSummit Blog offers top articles, news stories, and blog posts from the world's well-known experts and guarantees better exposure for its authors than any other publication. @WebRTCSummit Blog can be bookmarked ▸ Here @WebRTCSummit conference site can be bookmarked ▸ Here
DevOps theory promotes a culture of continuous improvement built on collaboration, empowerment, systems thinking, and feedback loops. But how do you collaborate effectively across the traditional silos? How can you make decisions without system-wide visibility? How can you see the whole system when it is spread across teams and locations? How do you close feedback loops across teams and activities delivering complex multi-tier, cloud, container, serverless, and/or API-based services?
Without lifecycle traceability and visibility across the tool chain, stakeholders from Planning-to-Ops have limited insight and answers to who, what, when, why and how across the DevOps lifecycle. This impacts the ability to deliver high quality software at the needed velocity to drive positive business outcomes. In his session at @DevOpsSummit 19th Cloud Expo, Eric Robertson, General Manager at CollabNet, will show how customers are able to achieve a level of transparency that enables everyon...