CALGARY, AB, March 9, 2022 /CNW/ - (TSX:
RBY) – Rubellite Energy Inc. ("Rubellite", or the
"Company"), a pure play Clearwater
oil exploration and development company, is pleased to:
- Report fourth quarter and year-end 2021 financial and operating
results;
- Provide a summary of the Company's year-end 2021 reserves as
evaluated by the independent engineering firm McDaniel and
Associates Consultants Ltd. ("McDaniel");
- Provide a drilling operations update;
- Announce that Rubellite has entered into a letter of intent to
execute a farm-in and option arrangement in the Peavine area of
northern Alberta, capturing
exposure to an additional 61 sections of land prospective for the
Clearwater formation; and
- Provide 2022 guidance.
Annual financial and operating results reflect the period from
September 3, 2021, which was the
effective date of the completion of the Plan of Arrangement under
the Business Corporations Act (Alberta) involving Perpetual Energy Inc.
("Perpetual"), the shareholders of Perpetual, and Rubellite. Select
financial and operational information is outlined below, and should
be read in conjunction with Rubellite's audited financial
statements and related Management's Discussion and Analysis
("MD&A") for the period ended December
31, 2021. A complete copy of Rubellite's audited financial
statements, MD&A and Annual Information Form are available
through the Company's website at www.rubelliteenergy.com and SEDAR
at www.sedar.com.
This release contains certain specified financial measures
that are not recognized by GAAP and used by management to evaluate
the performance of the Company and its business. Since certain
specified financial measures may not have a standardized meaning,
securities regulations require that specified financial measures
are clearly defined, qualified and, where required, reconciled with
their nearest GAAP measure. See "Non-GAAP and Other Financial
Measures" for further information on the definition,
calculation and reconciliation of these measures. This release also
contains forward-looking information. See "Forward-Looking
Information". Readers are also referred to the other advisory
sections at the end of the MD&A for additional
information.
HIGHLIGHTS
- Rubellite has steadily executed its business plan, running a
two-rig drilling program since late November, and currently has a
total of 26 (24.5 net) multi-lateral wells contributing to oil
sales production, with an additional 4 (3.5 net) wells rig released
and in the start-up stage of recovering load oil.
- Current production is approximately 1,700 bbl/d of conventional
heavy oil, based on field estimates, and will continue to ramp up
throughout the remainder of the first quarter as new wells reach
full recovery of base oil load fluid and are optimized. As per
previous guidance, the Company is on track to reach its production
milestone of in excess of 2,000 bbl/d in late March.
- The Company has grown its land position for exposure to the
Clearwater play to close to 180
net sections, up 72% from the 104 net sections held by Rubellite at
its inception in July of 2021.
Fourth Quarter 2021
- Fourth quarter 2021 exploration and development capital
expenditures(1) totaled $15.7
million, in-line with previous guidance of between
$16.0 and $18.0 million. Including land purchases, total
capital expenditures(1) were $17.2 million.
- Drilling activity for the fourth quarter totaled eight (8.0
net) horizontal multi-lateral Clearwater wells, including six (6.0 net)
wells rig released at Ukalta and two (2.0 net) rig released at
Figure Lake prior to year-end 2021. The Company secured a second
drilling rig in late November to follow-up positive results in the
Figure Lake area.
- Sixteen (15.0 net) wells were contributing to sales production
at year-end 2021, while an additional five (5.0 net) wells were rig
released and recovering oil-based drilling mud ("OBM") used during
the drilling process. OBM recoveries are not recorded as sales
production as the OBM is recycled for future drilling operations to
the extent possible or sold and credited back to drilling
capital.
- Production ramped up progressively through the fourth quarter
of 2021 as new wells fully recovered base-oil load fluid, filled
tank inventories and then commenced delivery to sales terminals.
Rubellite recorded average sales production of 603 bbl/d (100%
conventional heavy oil), slightly lower than previously forecast
production based on field estimates as extremely cold weather
conditions in late December hindered trucking of produced volumes
to sales terminals and deferred the sale of several loads of
produced heavy oil volumes to early January.
- Operating netbacks(1) were $2.6 million, or $47.10/bbl, reflecting strong Western Canadian
Select ("WCS") benchmark prices and a realized oil price after
hedging of $72.67/bbl.
- Adjusted funds flow(1) in the fourth quarter of 2021
was $1.5 million ($0.03/share), and included $0.7 million in transaction costs related to the
acquisition of the Clearwater Assets. Excluding transaction costs,
adjusted funds flow was $2.2 million
($0.09/share). Cash flow from
operating activities in the fourth quarter and year-ended 2021 were
$1.1 million and $1.1 million, respectively.
- Total proved plus probable reserves were 6.0 MMboe at
December 31, 2021, an increase of 68%
relative to the reserves recognized in the report of McDaniel for
the Clearwater Assets effective June 1,
2021 immediately prior to the inception of Rubellite. The
net present value ("NPV") of Rubellite's total proved plus probable
reserves (discounted at 10%), was $123.2
million. See "Year-End 2021 Reserves".
- Net positive working capital(1) at year-end 2021 was
$5.4 million. Subsequent to year-end,
the borrowing limit on the Company's reserves-based revolving
credit facility was increased to $25
million and the initial term was extended by 12 months to
May 31, 2023.
(1)
|
Non-GAAP measure,
Non-GAAP ratio or supplementary financial measure that does not
have any standardized meaning under IFRS and therefore may not be
comparable to similar measures presented by other entities. Refer
to the section entitled "Non-GAAP and Other Financial Measures"
contained within this release.
|
OPERATIONS UPDATE
Rubellite is continuing to operate a two-rig drilling program
across its three core producing properties to follow up its initial
exploration success in Figure Lake, and accelerate development at
Ukalta, and Marten Hills.
At Ukalta, ten (10.0 net) new development wells targeting the
primary lower Clearwater zone have
been rig released since Rubellite's inception. As of today's date,
eight of the new development wells at Ukalta are now contributing
to oil sales production volumes, and five of those wells have
completed their respective IP30 production periods. IP30 rates
ranging from 96 to 189 bbl/d, and averaging 148 bbl/d, have been
recorded as compared to the Ukalta type curve of approximately 135
bbl/d. Three of the remaining Ukalta development wells completed
their load oil recovery in mid to late February and are showing
similar positive indications of type curve performance based on
initial sales production rates. The remaining Ukalta wells just
recently commenced OBM recovery and are expected to reach full
recovery of OBM and start producing sales volumes prior to the end
of March. Performance from the new Ukalta wells will be monitored
closely as operating parameters are optimized.
Drilling operations at Ukalta will continue through spring
break-up with three (3.0 net) multi-lateral development wells and a
vertical water disposal well planned at the existing 13-35 pad
situated proximal to a high-grade access road. When field
conditions allow, drilling operations at Ukalta will continue to a
six-well pad, targeting to extend the primary Clearwater zone development to the north.
At Figure Lake, Rubellite contracted a second drilling rig in
late November to execute a four well winter follow-up drilling
program at the existing South Figure Lake pad. The first two
development wells completed their OBM recovery operations in late
January and recorded IP30 rates of 86 and 115 bbl/d respectively,
bringing the IP30 average of the four Figure Lake south pad wells
that have had at least 30 days of sales production to 116 bbl/d, as
compared to the Figure Lake type curve IP30 of approximately 115
bbl/d. Two additional wells drilled on the south pad were rig
released in January, reached the end of their OBM recovery periods
during the third week of February, and are now producing volumes to
sales with positive indications of performance at or above the
Figure Lake type curve. The drilling rig moved north in early
February to execute a development program at Marten Hills prior to
spring break-up. Drilling operations are expected to recommence at
Figure Lake late in the second quarter, with up to 12 new
horizontal multi-lateral wells and a vertical water disposal well
planned for the remainder of 2022.
At Marten Hills, the planned four (2.0 net) well drilling
program commenced in early February of which two (1.0 net)
eight-leg multi-lateral wells have been rig released. One (0.5 net)
well has recently commenced sales production while the other is
just beginning OBM recovery operations. The remaining two (1.0 net)
wells in the program are expected to be rig-released prior to the
end of March or early April. New wells will continue to be brought
on in a step-wise fashion and operating conditions will be
optimized through their early start-up production periods.
Drilling costs have escalated somewhat due to increased OBM
costs which are directly related to the price of base oil.
Rubellite has recently secured a lower cost source of base oil in
closer proximity to drilling operations to mitigate the rising
costs. The Company is successfully reducing time lags for
production start-up on new multi-well pads by constructing pads to
accommodate concurrent drilling and production operations and
pre-building permanent production facilities, thereby improving
capital efficiencies and accelerating economic returns. In
addition, the new on-site water disposal wells to be drilled at
Ukalta and Figure Lake are expected to enhance field netbacks
during the second half of 2022.
SIGNIFICANT PEAVINE TRANSACTION AND EXPLORATION
OPPORTUNITY
Rubellite is pleased to announce that the Company has signed a
letter of intent to pursue a farm-in and option agreement (the
"Peavine Transaction") in the Peavine area, in the vicinity of
recent industry Clearwater
drilling activity and southwest of Rubellite's existing option
acreage at West Dawson in northern
Alberta. The arrangement provides
exposure to an additional 61.25 gross sections of land prospective
for the Clearwater formation. A
minimum of two exploratory wells will be drilled and completed
prior to April 1, 2023, targeting to
establish production and evaluate the future development potential
of these Clearwater lands.
Commensurate with growing production and adjusted funds flow,
Rubellite plans to continue to pursue transactions to grow its land
base and expand its inventory of opportunities across this emerging
play.
2022 OUTLOOK AND GUIDANCE
Rubellite's Board of Directors has approved an exploration and
development capital spending(5) budget of up to
$48 million for 2022 to drill,
complete equip and tie-in up to 33 (30 net) horizontal
multi-lateral wells in its three core operating areas as well as
two (2.0 net) vertical water disposal wells to mitigate water
handling costs. Forecast capital activities are expected to be
fully funded from adjusted funds flow(5) and the
recently expanded credit facility. The Figure Lake drilling program
will be partially funded by the Figure Lake GORR financing, which
will provide approximately $0.2
million per well for the next 12 wells planned in Figure
Lake area.
The table below summarizes Rubellite's anticipated exploration
and development capital spending(5) and drilling
activities during the first quarter and full year for 2022.
2022 Exploration and Development Forecast Capital
Expenditures(5)
|
Q1
2022
($
millions)
|
# of
wells(1)
(gross/net)
|
Full Year
2022
($
millions)
|
# of
wells(1)
(gross/net)
|
Ukalta
|
|
6 / 6.0
|
|
14 / 14.0
|
Figure
Lake(2)
|
|
2 / 2.0
|
|
13 / 13.0
|
Marten Hills
|
|
3 / 1.5
|
|
6 / 3.0
|
Total(3)(4)
|
$20 -
$22
|
11
/9.5
|
$44 -
$48
|
33 /
30.0
|
(1)
|
Well count reflects
wells rig released during the period. One (1.0 net) well at Ukalta
and one (0.5 net) well at Marten Hills are expected to spud late in
Q1 2022 and rig release in early April. Full year 2022 well counts
exclude two (2.0 net) vertical water disposal wells in Q2 and Q3
2022 at Ukalta and Figure Lake respectively.
|
(2)
|
Capital expenditures at
Figure Lake are reduced for the Figure Lake GORR financing which is
forecast to contribute $0.4 million in Q1 2022 and $2.0 million in
2022.
|
(3)
|
Q1 2022 capital
expenditures include $3.5 million for equipment, tubulars and OBM
inventory procurement for the remainder of 2022 drilling program.
Full year 2022 capital expenditures of $44 to $48 million include
spending for two vertical water disposal wells.
|
(4)
|
Excludes activity on
exploratory option blocks, undeveloped land purchases and
acquisitions, if any.
|
(5)
|
Non-GAAP measure,
Non-GAAP ratio or supplementary financial measure that does not
have any standardized meaning under IFRS and therefore may not be
comparable to similar measures presented by other entities. Refer
to the section entitled "Non-GAAP and Other Financial Measures"
contained within this release.
|
Development drilling activity across Rubellite's three core
operating areas is forecast to drive rapid production growth. Daily
average sales production is expected to increase 91% to 107% from
fourth quarter 2021 levels to average 1,150 to 1,250 boe/d (100%
heavy oil) for the first quarter of 2022. The two-rig drilling
program planned after spring break-up at Ukalta and Figure Lake is
expected to continue to drive progressive growth over the remainder
of 2022 and deliver full year 2022 average sales production levels
of between 2,200 to 2,400 bbl/d
2022 Guidance assumptions are as follows:
Guidance Assumptions
|
|
2022
|
Annual average sales
production (bbl/d)
Exploration and
development expenditures(1)(2) ($ millions)
|
|
2,200 -
2,400
$44 -
$48
|
Heavy oil wellhead
differential (C$/bbl)(3)
Royalties
|
|
$8.00 -
$9.00
11% -
12%
|
Operating costs
($/bbl)
|
|
$5.50 -
$6.50
|
Transportation costs
($/bbl)
|
|
$5.50 -
$6.50
|
G&A
($/bbl)
|
|
$4.00 -
$4.50
|
(1)
|
Excludes activity on
exploratory option blocks, undeveloped land purchases and
acquisitions, if any.
|
(2)
|
Non-GAAP measure,
Non-GAAP ratio or supplementary financial measure that does not
have any standardized meaning under IFRS and therefore may not be
comparable to similar measures presented by other entities. Refer
to the section entitled "Non-GAAP and Other Financial Measures"
contained within this release.
|
(3)
|
Differential relative
to the Western Canadian Select (Cdn$/bbl) reference price prior to
any price management activities.
|
2022 guidance excludes capital spending for undeveloped lands,
acquisitions, if any, and for commitment wells to earn lands
pursuant to the Peavine Transaction and for other exploratory
option blocks. The Company expects to fund the drilling of four to
six (3.0 – 4.0 net) exploratory wells to earn acreage and delineate
area type curves prior to April 1,
2023. In addition, Rubellite plans to pursue additional
investments to continue to grow its land base and the inventory of
prospective Clearwater drilling
locations.
YEAR-END 2021 RESERVES
The Company's year-end 2021 reserves information is based on an
independent reserves evaluation report prepared by McDaniel &
Associates Consultants Ltd. (the "McDaniel Reserve Report").
Rubellite's proved plus probable reserves at year-end 2021 are 6.0
MMboe, comprised of 100% crude oil. The reserves are a combination
of the initial Clearwater asset
acquisition of 3.9 MMboe from Perpetual that closed September 3, 2021 and reserve extensions of 2.1
MMboe that represented incremental growth of 54% over the four
months period ended December 31,
2021.
The McDaniel Reserve Report highlights include:
- Total proved reserves were 3.2 MMboe at year-end 2021,
representing 53% of the Company's proved plus probable
reserves.
- Proved plus probable producing reserves were 1.8 MMboe at
December 31, 2021, representing 30%
of total proved plus probable reserves.
- Future development costs ("FDC") are $46.5 million in the proved plus probable
category. McDaniel recognized proved plus probable undeveloped
reserves for 40 (36.0 net) multi-lateral horizontal heavy crude oil
location in the Clearwater
play.
- Based on an equal weighting of three consultant average price
(McDaniel, GLJ, Sproule) forecasts (the "Consultant Average Price
Forecast") used by McDaniel, the net present value ("NPV") of
Rubellite's total proved plus probable reserves (discounted at 10%)
before income tax, was $123.2
million.
- All abandonment, decommissioning and reclamation obligations
are included in the McDaniel Reserve Report.
- Based on the Consultant Average Price Forecast, Rubellite's
reserve-based net asset value ("NAV") (discounted at 10%) at
year-end 2021 is estimated at $143.4
million ($3.27 per
share).
Reserves Disclosure
Working interest reserves included herein refer to working
interest reserves before royalty deductions. Reserves information
is based on the McDaniel Reserve Report, with an effective date of
December 31, 2021, and has been
prepared in accordance with National Instrument 51-101 ("NI
51-101") using the Consultant Average Price Forecast. Complete NI
51-101 reserves disclosure including after-tax reserve values,
reserves by major property and abandonment costs will be included
in Rubellite's Annual Information Form, which, when filed, will be
available on the Company's website at
www.rubelliteenergy.com and SEDAR at
www.sedar.com. Rubellite's reserves at December 31, 2021 are summarized below:
Working Interest Reserves at December
31, 2021(1)
|
Light and
Medium
Crude Oil
(Mbbl)
|
Heavy
Oil
(Mbbl)
|
Conventional
Natural Gas
(MMcf)
|
Natural
Gas Liquids
(Mbbl)
|
Oil
Equivalent
(Mboe)
|
Proved
Producing
|
–
|
1,366
|
–
|
–
|
1,366
|
Proved
Non-Producing
|
–
|
-
|
–
|
–
|
-
|
Proved
Undeveloped
|
–
|
1,809
|
–
|
–
|
1,809
|
Total
Proved
|
-
|
3,174
|
-
|
-
|
3,174
|
Probable
Producing
|
–
|
426
|
–
|
–
|
426
|
Probable
Non-Producing
|
–
|
-
|
–
|
–
|
-
|
Probable
Undeveloped
|
–
|
2,421
|
–
|
–
|
2,421
|
Total
Probable
|
-
|
2,847
|
-
|
-
|
2,847
|
Total Proved plus
Probable
|
-
|
6,022
|
-
|
-
|
6,022
|
(1)
|
May not add due to
rounding.
|
Reserves Reconciliation
Working Interest
Reserves(1)
|
|
|
|
Barrels of Oil
Equivalent (Mboe)
|
Proved
|
Probable
|
Proved and
Probable
|
Opening Balance,
July 12, 2021
|
-
|
-
|
-
|
Extensions and Improved
Recovery
|
578
|
1,566
|
2,144
|
Discoveries
|
-
|
-
|
-
|
Technical
Revisions
|
-
|
-
|
-
|
Acquisitions
|
2,671
|
1,281
|
3,953
|
Dispositions
|
-
|
-
|
-
|
Production
|
(75)
|
-
|
(75)
|
Economic
Factors
|
-
|
-
|
-
|
Closing Balance,
December 31, 2021
|
3,174
|
2,847
|
6,022
|
(1)
|
May not add due to
rounding.
|
Acquisition reserves include the initial Clearwater assets acquired from Perpetual as
well as reserves added to land purchased in the Figure Lake
property.
In the proved plus probable reserve category, the acquisition of
3,953 Mboe was comprised of 9 (8.0 net) producing wells and 31
(27.0 net) undeveloped locations. Following the acquisition, 13
(13.0 net) locations were drilled that resulted in proved plus
probable adds of 2,144 Mboe attributed to the addition of 5 (5.0
net) producing wells, the transfer of 7 (7.0 net) wells from the
proved plus probable undeveloped category to the proved plus
probable developed category and the addition of 16 (16.0 net)
proved plus probable undeveloped locations.
The table below summarizes the FDC estimated by McDaniel by play
type to bring proved plus probable non-producing and undeveloped
reserves to production.
Future Development Capital(1)
($
millions)
|
2022
|
2023
|
2024
|
2025
|
2026
|
Remainder
|
Total
|
Figure Lake
|
10.6
|
9.9
|
–
|
–
|
–
|
–
|
20.5
|
Ukalta
|
17.7
|
2.5
|
–
|
–
|
–
|
–
|
20.3
|
Marten Hills
|
3.6
|
2.2
|
–
|
–
|
–
|
–
|
5.7
|
Total
|
31.9
|
14.6
|
0.0
|
0.0
|
0.0
|
0.0
|
46.5
|
(1)
|
May not add due to
rounding.
|
The McDaniel Reserve Report estimates that FDC of $46.5 million will be required to drill 40 (36.0
net) multi-lateral horizontal heavy oil locations to develop the
Company's proved plus probable reserves recognized in the
Clearwater play.
RESERVE LIFE INDEX
Rubellite's proved plus probable reserves to production ratio,
also referred to as reserve life index ("RLI"), was 6.6 years at
year-end 2021, while the proved RLI was 4.6 years, based upon the
2022 production estimates in the McDaniel Reserve Report.
NET PRESENT VALUE OF RESERVES SUMMARY
Rubellite's heavy crude oil reserves were evaluated by McDaniel
using the Consultant Average Price Forecast effective
January 1, 2022, but does not include
provision for financial oil and natural gas price hedges, foreign
exchange contracts, income taxes, interest, debt service charges
and general and administrative expenses. The following table
summarizes the NPV of future revenue from reserves at December 31, 2021, assuming various discount
rates:
NPV of Reserves, before income
tax(1)(2)(3)
($ millions except
as noted)
|
Undiscounted
|
5%
|
10%
|
15%
|
Discounted
at 20%
|
Unit Value
Discounted at
10%/Year ($/boe)(4)
|
Proved
Producing
|
48
|
44
|
41
|
37
|
35
|
33.08
|
Proved
Non-Producing
|
0
|
0
|
0
|
0
|
0
|
-
|
Proved
Undeveloped
|
44
|
37
|
31
|
27
|
23
|
19.24
|
Total
Proved
|
93
|
82
|
72
|
64
|
58
|
25.19
|
Probable
Producing
|
15
|
11
|
9
|
7
|
6
|
22.29
|
Probable
Non-Producing
|
0
|
0
|
0
|
0
|
0
|
-
|
Probable
Undeveloped
|
70
|
54
|
43
|
35
|
29
|
19.65
|
Total
Probable
|
85
|
65
|
51
|
42
|
35
|
20.05
|
Total Proved plus
Probable
|
178
|
146
|
123
|
106
|
93
|
22.76
|
|
|
|
|
|
|
|
|
(1)
|
January 1, 2022
Consultant Average price forecast
|
(2)
|
Inclusive of all future
asset retirement obligations.
|
(3)
|
May not add due to
rounding.
|
(4)
|
Unit values are based
on net reserve volumes.
|
McDaniel's NPV10 estimate of Rubellite's total proved plus
probable reserves at year-end 2021 was $123.2 million. At a 10% discount factor, total
proved reserves account for 58% of the proved plus probable value.
Proved plus probable producing reserves represent 40% of the total
proved plus probable value (discounted at 10%) as obligations for
non-producing wells, facilities and pipelines and forecast
corporate marketing adjustments reduce the value of the developed
producing reserves.
FAIR MARKET VALUE OF UNDEVELOPED LAND
Rubellite held 80,371 net undeveloped acres of land at
December 31, 2021. Undeveloped acres
refers to land where there are not any existing active wells within
the rights associated with those, and includes 72,380 net acres
where there are no proved or probable reserves assigned that were
assigned value at year-end 2021. An independent third-party
estimate of the fair market value of the Company's undeveloped,
non-reserve acreage was prepared by Seaton-Jordan & Associates Ltd.
("Seaton-Jordan") and is based on
past Crown land sale activity, adjusted for tenure and other
considerations. The fair market value of Rubellite's undeveloped
land at year-end 2021 is estimated by Seaton-Jordan at $15.0
million, an increase of 6% from $14.1
million relative to the undeveloped land assessment at
June 2021.
NET ASSET VALUE
The following NAV table shows what is normally referred to as a
"produce-out" NAV calculation under which the Company's reserves
would be produced at forecast future prices and costs. The value is
a snapshot in time and is based on various assumptions including
commodity prices and foreign exchange rates that vary over time. It
should not be assumed that the NAV represents the fair market value
of Rubellite's shares. The calculations below do not reflect the
value of the Company's prospect inventory to the extent that the
prospects are not recognized within the NI 51-101 compliant reserve
assessment, except as they are valued through the estimate of the
fair market value of undeveloped land.
Pre-tax NAV at
December 31, 2021
|
|
|
|
|
|
Discounted
at
|
($ millions, except
as noted)
|
Undiscounted
|
5%
|
10%
|
15%
|
Total Proved plus
Probable Reserves(2)
|
177.9
|
146.5
|
123.2
|
105.8
|
Fair market value of
undeveloped lands(3)
|
15.0
|
15.0
|
15.0
|
15.0
|
Bank debt, net of
working capital(1)(4)
|
5.4
|
5.4
|
5.4
|
5.4
|
NAV
|
198.1
|
166.7
|
143.4
|
126.0
|
Common shares
outstanding (million)
|
43.8
|
43.8
|
43.8
|
43.8
|
NAV per share
($/share)
|
4.52
|
3.81
|
3.27
|
2.88
|
|
|
|
|
|
|
(1)
|
Financial information
is per Rubellite's 2021 audited consolidated financial
statements.
|
(2)
|
Reserve values per
McDaniel Reserve Report as at December 31, 2021. All asset
retirement obligations including future abandonment and
reclamation costs are included in the McDaniel Reserve
Report.
|
(3)
|
Independent third-party
estimate; Excludes undeveloped land with reserves
assigned.
|
(4)
|
Non-GAAP measure,
Non-GAAP ratio or supplementary financial measure that does not
have any standardized meaning under IFRS and therefore
may not be comparable to similar measures presented by other
entities. Refer to the section entitled "Non-GAAP and Other
Financial Measures"
contained within this release.
|
The above evaluation includes FDC expectations required to bring
undeveloped reserves on production, as recognized by McDaniel, that
meet the criteria for booking under NI 51-101. The fair market
value of undeveloped land does not reflect the value of the
Company's extensive prospect inventory which is anticipated to be
converted into reserves and production over time through future
capital investment.
Financial and Operating Highlights
($ thousands, except
as noted)
|
|
Three months
ended
December 31, 2021
|
Year ended
December 31, 2021(1)
|
Financial
|
|
|
|
Oil revenue
|
|
3,931
|
4,923
|
Net income
(loss)
|
|
(1,265)
|
7,702
|
Per share
– basic(3)
|
|
(0.03)
|
0.34
|
Per share
– diluted(3)
|
|
(0.03)
|
0.33
|
Cash flow from
operating activities
|
|
863
|
1,115
|
Adjusted funds flow –
pre-transaction costs(2)
|
|
2,158
|
2,666
|
Adjusted funds
flow(2)
|
|
1,469
|
1,595
|
Per share
– basic(2)(3)
|
|
0.03
|
0.07
|
Per share
– diluted(2)(3)
|
|
0.03
|
0.07
|
Total net
debt
|
|
|
|
Net capital
expenditures(2)
|
|
17,180
|
83,914
|
Exploration and development(2)
|
|
15,660
|
15,811
|
Land and
acquisitions(2)
|
|
1,520
|
68,103
|
Wells
Drilled(4) – gross (net)
|
|
8/8.0
|
10/10.0
|
Common shares
outstanding (thousands)
|
|
|
|
Weighted average – basic
|
|
41,834
|
22,702
|
Weighted average – diluted
|
|
42,360
|
23,228
|
Operating
|
|
|
|
Daily average heavy oil sales production (bbl/d)
|
|
603
|
593
|
Average
prices
|
|
|
|
West Texas
Intermediate ($US/bbl)
|
|
77.13
|
75.73
|
Western
Canada Select (($Cdn/bbl)
|
|
78.65
|
77.37
|
Realized
oil price(5) – before hedging ($/bbl)
|
|
70.94
|
69.76
|
Realized
oil price(5) – after hedging
($/bbl)
|
|
72.77
|
71.20
|
(1)
|
Reflects activity from
incorporation on July 12, 2021 and operating results from September
3, 2021, the effective date of the completion of the
Arrangement, to December 31, 2021
|
(2)
|
Non-GAAP measure,
Non-GAAP ratio or supplementary financial measure that does not
have any standardized meaning under IFRS and therefore
may not be comparable to similar measures presented by other
entities. Refer to the section entitled "Non-GAAP and Other
Financial Measures"
contained within this release.
|
(3)
|
Per share amounts are
calculated using the weighted average number of basic or diluted
common shares outstanding for the period.
|
(4)
|
Five (4.0 net)
additional wells were drilled in 2021 prior to the effective date
of the completion of the Plan of Arrangement on September 3,
2021.
|
(5)
|
Realized oil prices
included physical sales contracts for which delivery was made
during the reporting period; After hedging includes realized
gains
and losses on financial derivatives and foreign exchange
contracts.
|
ADDITIONAL INFORMATION
About Rubellite
Rubellite is a Canadian energy company engaged in the
exploration, development and production of heavy crude oil from the
Clearwater formation in
Eastern Alberta, utilizing
multi-lateral drilling technology. Rubellite has a pure play
Clearwater asset base and is
pursuing a robust organic growth plan focused on superior corporate
returns and free funds flow generation while maintaining a
conservative capital structure and prioritizing ESG
excellence. Additional information on Rubellite can be
accessed at the Company's website at www.rubelliteenergy.com and on
SEDAR at www.sedar.com.
The Toronto Stock Exchange has neither approved nor disapproved
the information contained herein.
ADVISORIES
RESERVES DATA
There are numerous uncertainties inherent in estimating
quantities of crude oil, natural gas and NGL reserves and the
future cash flows attributed to such reserves. The reserve and
associated cash flow information set forth above are estimates
only. In general, estimates of economically recoverable crude oil,
natural gas and NGL reserves and the future net cash flows
therefrom are based upon a number of variable factors and
assumptions, such as historical production from the properties,
production rates, ultimate reserve recovery, timing and amount of
capital expenditures, marketability of oil and natural gas, royalty
rates, the assumed effects of regulation by governmental agencies
and future operating costs, all of which may vary materially. For
those reasons, estimates of the economically recoverable crude oil,
NGL and natural gas reserves attributable to any particular group
of properties, classification of such reserves based on risk of
recovery and estimates of future net revenues associated with
reserves prepared by different engineers, or by the same engineers
at different times, may vary. The Company's actual production,
revenues, taxes and development and operating expenditures with
respect to its reserves will vary from estimates thereof and such
variations could be material.
All evaluations and reviews of future net revenue are stated
prior to any provisions for interest costs or general and
administrative costs and after the deduction of estimated future
capital expenditures for wells to which reserves have been
assigned. The after-tax net present value of the Company's oil and
gas properties reflects the tax burden on the properties on a
stand-alone basis and utilizes the Company's tax pools. It does not
consider the corporate tax situation, or tax planning. It does not
provide an estimate of the after-tax value of the Company, which
may be significantly different. The Company's financial statements
and the management's discussion and analysis should be consulted
for information at the level of the Company.
The estimates of reserves and future net revenue for individual
properties may not reflect the same confidence level as estimates
of reserves and future net revenue for all properties, due to
effects of aggregations. The estimated values of future net revenue
disclosed in this news release do not represent fair market value.
There is no assurance that the forecast prices and cost assumptions
used in the reserve evaluations will be attained and variances
could be material.
The reserve data provided in this news release presents only a
portion of the disclosure required under NI 51-101. All of the
required information will be contained in the Company's Annual
Information Form for the year ended December
31, 2021, which will be filed on SEDAR (accessible at
www.sedar.com) on or before March 31,
2022.
BOE VOLUME CONVERSIONS
Barrel of oil equivalent ("boe") may be misleading, particularly
if used in isolation. In accordance with NI 51-101, a conversion
ratio for conventional natural gas of 6 Mcf:1 bbl has been used,
which is based on an energy equivalency conversion method primarily
applicable at the burner tip and does not represent a value
equivalency at the wellhead. In addition, utilizing a conversion on
a 6 Mcf:1 bbl basis may be misleading as an indicator of value as
the value ratio between conventional natural gas and heavy crude
oil, based on the current prices of natural gas and crude oil,
differ significantly from the energy equivalency of 6 Mcf:1 bbl. A
conversion ratio of 1 bbl of heavy crude oil to 1 bbl of NGL has
also been used throughout this news release.
The following abbreviations used in this news release have the
meanings set forth below:
bbl
|
barrels
|
bbl/d
|
barrels per
day
|
boe
|
barrels of oil
equivalent
|
MMboe
|
million barrels of oil
equivalent
|
INITIAL PRODUCTION RATES
Any references in this news release to 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 and are not
necessarily indicative of long-term performance or ultimate
recovery. Readers are cautioned not to place reliance on such rates
in calculating the aggregate production for the Company. Such rates
are based on field estimates and may be based on limited data
available at this time.
ESTIMATES OF DRILLING LOCATIONS
Unbooked drilling locations are the internal estimates of
Rubellite based on the Clearwater
assets prospective acreage and an assumption as to the number of
wells that can be drilled per section based on industry practice
and internal review. Unbooked locations do not have attributed
reserves or resources (including contingent and prospective).
Unbooked locations have been identified by Rubellite's management
as an estimation of Rubellite's multi-year drilling activities
based on evaluation of applicable geologic, seismic, engineering,
production and reserves information. There is no certainty that
Rubellite will drill all unbooked drilling locations and if drilled
there is no certainty that such locations will result in additional
oil and natural gas reserves, resources or production. The drilling
locations on which Rubellite will actually drill wells, including
the number and timing thereof is ultimately dependent upon the
availability of funding, regulatory approvals, seasonal
restrictions, oil and natural gas prices, costs, actual drilling
results, additional reservoir information that is obtained and
other factors. While a certain number of the unbooked drilling
locations have been de-risked by Rubellite by drilling existing
wells in relative close proximity to such unbooked drilling
locations, the majority of other unbooked drilling locations are
farther away from existing wells where management of Rubellite has
less information about the characteristics of the reservoir and
therefore there is more uncertainty whether wells will be drilled
in such locations and if drilled there is more uncertainty that
such wells will result in additional oil and gas reserves,
resources or production.
NON-GAAP AND OTHER FINANCIAL MEASURES
Throughout this news release and in other materials disclosed by
the Company, Rubellite employs certain measures to analyze
financial performance, financial position, and cash flow. These
non-GAAP measures, non-GAAP ratios and other supplemental financial
measures do not have any standardized meaning prescribed under IFRS
and therefore may not be comparable to similar measures presented
by other entities. The non-GAAP measures, non-GAAP ratios and other
supplemental financial measures should not be considered to be more
meaningful than GAAP measures which are determined in accordance
with IFRS, such as net income (loss), cash flow from operating
activities, and cash flow used in investing activities, as
indicators of Rubellite's performance.
Adjusted funds flow: Adjusted funds flow is calculated
based on net cash flows from operating activities, excluding
changes in non-cash working capital and expenditures on
decommissioning obligations since the Company believes the timing
of collection, payment or incurrence of these items is variable.
Expenditures on decommissioning obligations may vary from period to
period depending on capital programs and the maturity of
Rubellite's operating areas. Expenditures on decommissioning
obligations are managed through the capital budgeting process which
considers available adjusted funds flow. Management uses adjusted
funds flow and adjusted funds flow per boe as key measures to
assess the ability of the Company to generate the funds necessary
to finance capital expenditures, expenditures on decommissioning
obligations and meet its financial obligations.
Adjusted funds flow pre-transaction costs is calculated as
adjusted funds flow less transaction costs. Management has excluded
transaction costs from the calculation as these are not related to
cash flow from operating activities as they relate to the
acquisition of the Clearwater Assets.
Adjusted funds flow per share is calculated using the weighted
average number of shares outstanding used in calculating net income
(loss) per share. Adjusted funds flow is not intended to represent
net cash flows from operating activities calculated in accordance
with IFRS.
Adjusted funds flow per boe is calculated as adjusted funds flow
divided by total production sold in the period.
The following table reconciles net cash flows from (used in)
operating activities as reported in the Company's statements of
cash flows, to adjusted funds flow and adjusted funds flow - pre
transaction costs:
($ thousands, except
as noted)
|
|
Q4
2021
|
Q3 2021
|
2021
|
Net cash flows from
operating activities
|
|
1,115
|
-
|
1,115
|
Change in non-cash
working capital
|
|
354
|
126
|
480
|
Adjusted fund
flow
|
|
1,469
|
126
|
1,595
|
Transaction
costs
|
|
689
|
382
|
1,071
|
Adjusted funds flow –
pre transaction costs
|
|
2,158
|
507
|
2,666
|
|
|
|
|
|
Adjusted funds flow per
share
|
|
0.03
|
0.70
|
0.07
|
Adjusted funds flow per
boe
|
|
26.50
|
33.55
|
22.60
|
Adjusted funds flow –
pre transaction costs - per share
|
|
0.06
|
0.70
|
0.12
|
Adjusted funds flow –
pre transaction costs - per boe
|
|
38.93
|
33.55
|
37.78
|
Free funds flow: Free funds flow is defined as adjusted
funds flow less total net capital expenditures.
Operating netback: Operating netback is calculated by
deducting royalties, production and operating expenses, and
transportation costs from realized revenue. Operating netback is
also calculated on a per boe basis using total production sold in
the period. Rubellite considers operating netback to be an
important performance measure as it demonstrates its profitability
relative to current commodity prices. Realized revenue is realized
oil revenue which includes realized gains (losses) on financial
crude oil and foreign exchange contracts. Realized revenue is used
by management to calculate the Company's net realized commodity
prices, taking into account the monthly settlements of financial
crude oil and natural gas forward sales, collars, basis
differentials, and forward foreign exchange sales. These contracts
are put in place to protect Rubellite's adjusted funds flow from
potential volatility.
Working capital: Working capital is calculated by
adding cash, accounts receivable and prepaids less accounts
payables and accrued liabilities. Rubellite considers working
capital to be an important measure as it demonstrates
liquidity.
Net Debt: Net debt is calculated by deducting any
borrowing under the Credit Facility from working capital. Rubellite
considers working capital to be an important measure as it
demonstrates long-term capital management and operating
performance.
Realized revenue: Realized revenue is calculated as
oil revenue less realized gains on derivatives and is an important
measure of risk management activities to demonstrate operating
performance.
Capital Expenditures: Rubellite uses capital expenditures
to measure its capital investments compared to the Company's annual
capital budgeted expenditures. Rubellite's capital budget excludes
acquisition and disposition activities as well as the accounting
impact of any accrual changes or payments under certain lease
arrangements. Total net capital expenditures are defined as capital
expenditures adjusted for any acquisitions and non–core
dispositions.
Non-GAAP Financial Ratios: Rubellite calculates
certain non-GAAP measures per boe as the measure divided by
weighted average daily production. Management believes that per boe
ratios are a key industry performance measure of operational
efficiency and one that provides investors with information that is
also commonly presented by other crude oil and natural gas
producers. Rubellite also calculates certain non-GAPP measures per
share as the measure divided by outstanding common shares.
FORWARD-LOOKING INFORMATION
Certain information in this news release including management's
assessment of future plans and operations, and including the
information contained under the headings "Fourth Quarter 2021
Highlights" and "2022 Outlook and Guidance" may constitute
forward-looking information or statements (together
"forward-looking information") under applicable securities laws.
The forward-looking information includes, without limitation,
statements with respect to: future capital expenditure and
production forecasts; expectations for enhanced field netbacks in
2022 as a result of on-site water disposal wells to be drilled at
Ukalta and Figure Lake; expectations as to drilling activity plans
and the benefits to be derived from such drilling including the
production growth and ability for the business plan to be fully
funded; expectations respecting Rubellite's future exploration,
development and drilling activities and Rubellite's business
plan.
Forward-looking information is based on current expectations,
estimates and projections that involve a number of known and
unknown risks, which could cause actual results to vary and in some
instances to differ materially from those anticipated by Rubellite
and described in the forward-looking information contained in this
news release. In particular and without limitation of the
foregoing, material factors or assumptions on which the
forward-looking information in this news release is based include:
the successful operation of the Clearwater assets; forecast commodity prices
and other pricing assumptions; forecast production volumes based on
business and market conditions; foreign exchange and interest
rates; near-term pricing and continued volatility of the market;
accounting estimates and judgments; future use and development of
technology and associated expected future results; the ability to
obtain regulatory approvals; the successful and timely
implementation of capital projects; ability to generate sufficient
cash flow to meet current and future obligations; Rubellite's
ability to operate under the management of Perpetual pursuant to
the management services agreement; the ability of Rubellite to
obtain and retain qualified staff and equipment in a timely and
cost-efficient manner, as applicable; the retention of key
properties; forecast inflation and other assumptions inherent in
Rubellite's current guidance and estimates; the continuance of
existing tax, royalty, and regulatory regimes; the accuracy of the
estimates of reserves volumes; ability to access and implement
technology necessary to efficiently and effectively operate assets;
and the ongoing and future impact of the coronavirus and
Russia's military actions in
Ukraine on commodity prices and
the global economy, among others.
Undue reliance should not be placed on forward-looking
information, which is not a guarantee of performance and is subject
to a number of risks or uncertainties, including without limitation
those described herein and under "Risk Factors" in Rubellite's
Annual Information Form and MD&A for the year ended
December 31, 2021 and in other
reports on file with Canadian securities regulatory authorities
which may be accessed through the SEDAR website (www.sedar.com) and
at Rubellite's website (www.rubelliteenergy.com). Readers are
cautioned that the foregoing list of risk factors is not
exhaustive. Forward-looking information is based on the estimates
and opinions of Rubellite's management at the time the information
is released, and Rubellite disclaims any intent or obligation to
update publicly any such forward-looking information, whether as a
result of new information, future events or otherwise, other than
as expressly required by applicable securities law.
SOURCE Rubellite Energy Inc.