Welcome!

News Feed Item

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

CALGARY, ALBERTA -- (Marketwired) -- 05/12/14 -- 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

----------------------------------------------------------------------------
----------------------------------------------------------------------------

FINANCIAL
----------------------------------------------------------------------------
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
----------------------------------------------------------------------------
----------------------------------------------------------------------------


OPERATIONS
----------------------------------------------------------------------------
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.

LETTER TO THE SHAREHOLDERS

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
    ago;
--  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.

Mantario

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.

Contacts:
Rock Energy Inc.
Allen J. Bey
President and Chief Executive Officer
403.218.4380

Rock Energy Inc.
Todd Hirtle
Vice President Finance and Chief Financial Officer
403.218.4380

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
A strange thing is happening along the way to the Internet of Things, namely far too many devices to work with and manage. It has become clear that we'll need much higher efficiency user experiences that can allow us to more easily and scalably work with the thousands of devices that will soon be in each of our lives. Enter the conversational interface revolution, combining bots we can literally talk with, gesture to, and even direct with our thoughts, with embedded artificial intelligence, whic...
There is a huge demand for responsive, real-time mobile and web experiences, but current architectural patterns do not easily accommodate applications that respond to events in real time. Common solutions using message queues or HTTP long-polling quickly lead to resiliency, scalability and development velocity challenges. In his session at 21st Cloud Expo, Ryland Degnan, a Senior Software Engineer on the Netflix Edge Platform team, will discuss how by leveraging a reactive stream-based protocol,...
Cloud Expo | DXWorld Expo have announced the conference tracks for Cloud Expo 2018. Cloud Expo will be held June 5-7, 2018, at the Javits Center in New York City, and November 6-8, 2018, at the Santa Clara Convention Center, Santa Clara, CA. Digital Transformation (DX) is a major focus with the introduction of DX Expo within the program. Successful transformation requires a laser focus on being data-driven and on using all the tools available that enable transformation if they plan to survive ov...
Mobile device usage has increased exponentially during the past several years, as consumers rely on handhelds for everything from news and weather to banking and purchases. What can we expect in the next few years? The way in which we interact with our devices will fundamentally change, as businesses leverage Artificial Intelligence. We already see this taking shape as businesses leverage AI for cost savings and customer responsiveness. This trend will continue, as AI is used for more sophistica...
In his session at 21st Cloud Expo, Raju Shreewastava, founder of Big Data Trunk, provided a fun and simple way to introduce Machine Leaning to anyone and everyone. He solved a machine learning problem and demonstrated an easy way to be able to do machine learning without even coding. Raju Shreewastava is the founder of Big Data Trunk (www.BigDataTrunk.com), a Big Data Training and consulting firm with offices in the United States. He previously led the data warehouse/business intelligence and B...
In his general session at 21st Cloud Expo, Greg Dumas, Calligo’s Vice President and G.M. of US operations, discussed the new Global Data Protection Regulation and how Calligo can help business stay compliant in digitally globalized world. Greg Dumas is Calligo's Vice President and G.M. of US operations. Calligo is an established service provider that provides an innovative platform for trusted cloud solutions. Calligo’s customers are typically most concerned about GDPR compliance, application p...
Digital transformation is about embracing digital technologies into a company's culture to better connect with its customers, automate processes, create better tools, enter new markets, etc. Such a transformation requires continuous orchestration across teams and an environment based on open collaboration and daily experiments. In his session at 21st Cloud Expo, Alex Casalboni, Technical (Cloud) Evangelist at Cloud Academy, explored and discussed the most urgent unsolved challenges to achieve f...
Continuous Delivery makes it possible to exploit findings of cognitive psychology and neuroscience to increase the productivity and happiness of our teams. In his session at 22nd Cloud Expo | DXWorld Expo, Daniel Jones, CTO of EngineerBetter, will answer: How can we improve willpower and decrease technical debt? Is the present bias real? How can we turn it to our advantage? Can you increase a team’s effective IQ? How do DevOps & Product Teams increase empathy, and what impact does empath...
DevOps promotes continuous improvement through a culture of collaboration. But in real terms, how do you: Integrate activities across diverse teams and services? Make objective decisions with system-wide visibility? Use feedback loops to enable learning and improvement? With technology insights and real-world examples, in his general session at @DevOpsSummit, at 21st Cloud Expo, Andi Mann, Chief Technology Advocate at Splunk, explored how leading organizations use data-driven DevOps to close th...
As many know, the first generation of Cloud Management Platform (CMP) solutions were designed for managing virtual infrastructure (IaaS) and traditional applications. But that's no longer enough to satisfy evolving and complex business requirements. In his session at 21st Cloud Expo, Scott Davis, Embotics CTO, explored how next-generation CMPs ensure organizations can manage cloud-native and microservice-based application architectures, while also facilitating agile DevOps methodology. He expla...
"Digital transformation - what we knew about it in the past has been redefined. Automation is going to play such a huge role in that because the culture, the technology, and the business operations are being shifted now," stated Brian Boeggeman, VP of Alliances & Partnerships at Ayehu, in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.
To get the most out of their data, successful companies are not focusing on queries and data lakes, they are actively integrating analytics into their operations with a data-first application development approach. Real-time adjustments to improve revenues, reduce costs, or mitigate risk rely on applications that minimize latency on a variety of data sources. In his session at @BigDataExpo, Jack Norris, Senior Vice President, Data and Applications at MapR Technologies, reviewed best practices to ...
You know you need the cloud, but you're hesitant to simply dump everything at Amazon since you know that not all workloads are suitable for cloud. You know that you want the kind of ease of use and scalability that you get with public cloud, but your applications are architected in a way that makes the public cloud a non-starter. You're looking at private cloud solutions based on hyperconverged infrastructure, but you're concerned with the limits inherent in those technologies. What do you do?
"I focus on what we are calling CAST Highlight, which is our SaaS application portfolio analysis tool. It is an extremely lightweight tool that can integrate with pretty much any build process right now," explained Andrew Siegmund, Application Migration Specialist for CAST, in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.
SYS-CON Events announced today that Synametrics Technologies will exhibit at SYS-CON's 22nd International Cloud Expo®, which will take place on June 5-7, 2018, at the Javits Center in New York, NY. Synametrics Technologies is a privately held company based in Plainsboro, New Jersey that has been providing solutions for the developer community since 1997. Based on the success of its initial product offerings such as WinSQL, Xeams, SynaMan and Syncrify, Synametrics continues to create and hone inn...