RMP Energy Provides Second Quarter 2012 Financial and Operating Results

Marketwired

CALGARY, ALBERTA--(Marketwire - Aug. 9, 2012) - RMP Energy Inc. ("RMP" or the "Company") (RMP.TO) today provided its financial and operating results for the three months ended June 30, 2012. For the second quarter, RMP reported cash flow from operations of $9.6 million ($0.10 per fully-diluted share) on revenue of $17.0 million and average daily production of 4,763 barrels of oil equivalent with a light oil and natural gas liquids weighting of 40%. Detailed financial and operating highlights are as follows:

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Financial

Highlights Three Months Ended June 30, Six Months Ended June 30,

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(thousands except

share and per boe

data) (6:1 oil

equivalent % %

conversion) 2012 2011 Change 2012 2011 Change

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Petroleum and

natural gas

revenue (1) 16,971 10,692 59 36,145 18,804 92

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Cash flow from

operations (2) 9,644 4,512 114 19,960 8,001 149

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Per share -

basic and

diluted 0.10 0.06 67 0.21 0.11 91

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Net income (loss) 2,678 (8,236) (133) 5,240 117 -

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Per share -

basic and

diluted 0.03 (0.11) (127) 0.05 - -

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E&D capital

expenditures 18,308 7,843 133 37,224 21,801 71

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Total capital

expenditures 17,686 41,924 (58) 36,668 55,997 (35)

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Net debt (3) -

period end 63,295 12,599 402 63,295 12,599 402

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Weighted average

basic shares 96,834,196 76,147,439 27 96,741,441 70,995,975 36

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Weighted average

diluted shares 96,834,196 76,147,439 27 96,741,441 70,995,975 36

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Issued and

outstanding

shares (4) 98,190,855 84,258,652 17 98,190,855 84,258,652 17

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Operating

Highlights

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Average daily

production:

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Natural gas

(Mcf/d) 17,178 15,153 13 17,519 13,820 27

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Liquids (Oil and

NGLs) (bbls/d) 1,900 618 207 1,975 571 246

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Oil equivalent

(boe/d) 4,763 3,143 52 4,895 2,874 70

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Average sales

price(1) :

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Natural gas

($/Mcf) 2.09 4.10 (49) 2.22 4.06 (45)

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Liquids (Oil and

NGLs) ($/bbl) 79.24 89.60 (12) 80.91 83.68 (3)

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Oil equivalent

($/boe) 39.16 37.38 5 40.57 36.15 12

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Operating expenses

($/boe) 7.12 10.53 (32) 7.91 10.14 (22)

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Operating netback

(5) ($/boe) 26.69 20.19 32 26.55 19.82 34

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Wells drilled:

gross (net) 2 (1.4) 1 (1.0) 100 7 (6.4) 6 (4.8) 17

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Notes:

(1) Petroleum and natural gas revenue and pricing includes realized hedging

gains or losses from commodity contract settlements.    

(2) Cash flow from operations or operating cash flow does not have any

standardized meaning prescribed by International Financial Reporting

Standards ("IFRS"). Please refer to the Reader Advisories within.    

(3) Net debt is not a recognized measure under IFRS. Please refer to the

Reader Advisories within.    

(4) As of August 9, 2012, common shares outstanding were 98.2 million.    

(5) Operating netback is not a recognized measure under IFRS. Please refer

to the Reader Advisories within.    

Second Quarter 2012 Financial Commentary

-- Second quarter production averaged 4,763 boe/d, with a light oil and

NGLs composition of 40%, as compared to an average output level of 3,143

boe/d with a 20% liquids weighting in the second quarter of 2011.

Production from the Company's Kaybob field was disrupted during the

months of May and June 2012 due to a longer-than-planned maintenance

turnaround at a mid-stream-operated gas plant. Additionally, early and

prolonged wet spring break-up surface conditions delayed well completion

and pump workover operations at Waskahigan.

-- In the second quarter, the Company incurred net exploration and

development capital expenditures of $18.3 million, including the $8.5

million acquisition of a 70% working interest in 12.25 sections (8.6

net) of contiguous undeveloped land, strategically located to the south

east of RMP's existing Waskahigan light oil asset base in West Central

Alberta. On June 11, 2012, the Company closed the minor disposition of

its non-core, low margin Gordondale property for $870 thousand. Disposed

production approximated 50 boe/d (60% natural gas weighted) with field

operating costs of approximately $45/boe and associated decommissioning

and abandonment obligations of approximately $1.0 million.

-- Petroleum and natural gas revenue for the second quarter amounted to

$17.0 million (including a realized oil hedging gain of $311 thousand),

of which 81% was derived from crude oil and NGL sales. The Company's

basis discount differential to the C$-converted WTI price was high when

compared to historical differentials averaging $15.58/bbl for the

quarter, as compared to $15.35/bbl in the first quarter of 2012 and

$0.33/bbl in the fourth quarter of 2011. Current month discount

differentials are approximately $10/bbl for its crude oil.

-- Operating expenses on a boe basis decreased 32% to $7.12/boe in the

quarter, as compared to the per-unit field expenses of $10.53/boe in the

second quarter of 2011.

-- RMP reported cash flow from operations of $9.6 million ($0.10 per share)

for the three months ended June 30, 2012, an increase of 114% (67% per

share) from the cash flow from operations for the second quarter of

2011. As a result of the Company's ongoing successful transition to an

oil-weighted producer, internal cash flow generating capabilities have

increased significantly. Field operating netbacks for the second quarter

of 2012 were $26.69/boe, as compared to the $20.19/boe in the second

quarter of 2011.

-- Net debt as of June 30, 2012 was $63.3 million, representing a leverage

ratio of 1.6 times annualized second quarter operating cash flow.

Effective May 11, 2012, the Company's borrowing limit under its bank

credit facility was increased to $90.0 million, facilitating additional

financial flexibility and liquidity. RMP is committed to maintaining its

strong financial position through continued vigilance on commodity

prices and internal cash flow generation in relation to capital

investment plans for the balance of this year. Currently drawn bank debt

is approximately $62.3 million. Pro forma bank debt, adjusted for the

net proceeds from the July 30th announced $10 million flow-through

financing, is approximately $53.1 million, (1.4 times annualized second

quarter operating cash flow). On June 20, 2012, the Company closed a

$2.5 million flow-through common share private placement in respect of

Canadian development expenses ("CDE"), pursuant to which 1.54 million

shares were issued at $1.62 per share.

-- Subsequent to the quarter-end, on July 30th, the Company announced that

it entered into a bought-deal equity financing involving the issuance of

4,445,000 flow-through common shares in respect of Canadian exploration

expenditures ("CEE") at a price of $2.25 per share for gross proceeds of

approximately $10 million. Closing is expected to occur on or about

August 21, 2012. This financing is strategic in nature as it provides

RMP with funding to advance its oil-directed exploration drilling

activities in the Montney formation on some of its recently-acquired

lands.

Second Quarter 2012 Operations Update

Waskahigan, West Central Alberta

With typical spring break-up conditions, field drilling and completion activities were muted in the second quarter. The Company drilled a 100% working interest horizontal oil well (5-3-64-23W5) and successfully completed a first-quarter drilled horizontal well (1.0 net) during the second quarter (12-3-64-23W5). In the first half of this year, RMP has drilled a total of six (6.0 net) horizontal wells at Waskahigan and recently drilled its seventh well of the year in July 2012. Pad drilling is providing cost efficiencies for drilling and fracture stimulation. Additionally, lower industry demand for services has resulted in lower costs for drilling rigs and pressure pumping equipment.

The Company has established a core Montney light oil project at Waskahigan, which has the size and scale to drive significant future production and cash flow growth. In this area, RMP has amassed a light oil drilling inventory of approximately 190 locations, with an average working interest of 94%.

RMP's execution of its development drilling program, infrastructure construction and operating cost optimization initiatives have been very successful at Waskahigan. Since the corporate re-structuring in May 2011, the Company has drilled sixteen (16.0 net) Waskahigan horizontal wells with 100% success. Operating costs for the second quarter were $5.40/boe at Waskahigan, a substantial decrease from the operating costs of approximately $12/boe in 2011. With start-up in mid-April 2012 of the Company's water disposal well, field operating costs at Waskahigan are expected to continue to decline.

Production results to-date from the Waskahigan field are encouraging. Since bringing on-stream the 4-36-63-23W5 discovery well in June 2010, RMP has produced and recovered a total of 573 thousand barrels of light oil from the Montney reservoir from a total of twenty (20.0 net) horizontal oil wells (through to June 30, 2012). Field output is tracking the Company's internal type curve expectations, which model an expected ultimate recovery ("EUR") for each well of approximately 160,000 barrels of light oil (220,000 boe).

In the second quarter, the Company kicked-off expansion plans for its Waskahigan oil battery, which will on completion increase oil handling capacity to approximately 6,000 bbls/d from the current capacity of 2,500 bbls/d. RMP's decision to expand its infrastructure at Waskahigan will allow for the: i) future handling of the Company's expanded production base, ii) processing of RMP's trucked-in Ante Creek oil production, and iii) the accommodation of third-party volumes from area operators of which the Company has been receiving numerous capacity enquiries. Battery expansion is anticipated to be fully-completed in the fourth quarter of this year.

Ante Creek, West Central Alberta

On August 3, 2012, the Company brought on-stream its wholly-owned 4-35-66-24W5 Montney oil well at Ante Creek. The well recently produced "flush" production at a restricted rate of approximately 1,300 bbls/d of light oil, or 1,400 boe/d including associated solution gas which is been conserved and processed at an area operator's gas plant. RMP is excited with the resource potential of its six section land block at Ante Creek and its five sections in South Ante Creek. The Company anticipates drilling a second 100% working interest horizontal well by the end of the year off the existing surface lease pad for the 4-35 well and potentially an exploration well on the South Ante Creek acreage. At Ante Creek, the Company has identified an additional 23 drilling locations at 100% working interest, and with success with its exploration location, significantly more locations could be added to the Company's drilling inventory in this area.

The Company's interim condensed consolidated financial statements and associated Management's Discussion and Analysis ("MD&A") for the three and six months ended June 30, 2012 is available on RMP's website at www.rmpenergyinc.com within "Investors" under "Financials". Additionally, these documents will be filed by the close of business today, on the Company's profile on the System for Electronic Document Analysis and Retrieval ("SEDAR"). These documents can be retrieved electronically from the SEDAR system by accessing RMP's public filings under "Search for Public Company Documents" within the "Search Database" module at www.sedar.com.

Abbreviations

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bbl barrel Mcf/d thousand cubic feet per day

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Mbbl thousand barrels MMcf/d million cubic feet per day

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bbls/d barrels per day Bcf billion cubic feet

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boe barrels of oil equivalent psi pounds per square inch

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Mboe thousand barrels of oil kPa kilopascals

equivalent

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boe/d barrels of oil equivalent per WTI West Texas Intermediate

day

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NGLs natural gas liquids C$ Canadian dollars

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Reader Advisories

Any references in this news release to initial and/or final raw test or production rates and/or "flush" production rates are useful in confirming the presence of hydrocarbons, however, such rates are not determinative of the rates at which such wells will commence production and decline thereafter. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production for the Company.

The information in this news release contains certain forward-looking statements. These statements relate to future events or our future performance. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "seek", "anticipate", "budget", "plan", "continue", "estimate", "approximate", "expect", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe", "would" and similar expressions. More particularly and without limitation, this new release contains forward looking information relating to: Waskahigan and Ante Creek area drilling inventory, the ongoing transition of RMP to an oil-weighted production company, operating expense reductions, forward market pricing discount for the Company's Waskahigan crude oil grade, Waskahigan well type curve EUR, expected closing of its CEE flow-through financing, pro forma bank indebtedness, the timing of the Company's Waskahigan oil battery expansion, and drilling plans for the Company's Ante Creek area. These statements involve substantial known and unknown risks and uncertainties, certain of which are beyond the Company's control, including: the impact of general economic conditions; industry conditions; changes in laws and regulations including the adoption of new environmental laws and regulations and changes in how they are interpreted and enforced; fluctuations in commodity prices and foreign exchange and interest rates; stock market volatility and market valuations; volatility in market prices for oil and natural gas; liabilities inherent in oil and natural gas operations; changes in income tax laws or changes in tax laws and incentive programs relating to the oil and gas industry ; geological, technical, drilling and processing problems and other difficulties in producing petroleum reserves; and obtaining required approvals of regulatory authorities. The Company's actual results, performance or achievement could differ materially from those expressed in, or implied by, such forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur or, if any of them do, what benefits that the Company will derive from them. The Company's forward-looking statements are expressly qualified in their entirety by this cautionary statement. Except as required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statements.

In this news release RMP has adopted a standard for converting thousands of cubic feet ("mcf") of natural gas to barrels of oil equivalent ("boe") of 6 mcf:1 boe. Use of boes may be misleading, particularly if used in isolation. The boe rate is based on an energy equivalent conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different than the energy equivalency of the 6:1 conversion ratio, utilizing the 6:1 conversion ratio may be misleading as an indication of value.

As an indicator of the Company's performance, the term cash flow from operations or operating cash flow contained within this news release should not be considered as an alternative to, or more meaningful than, cash flow from operating, financing or investing activities, as determined in accordance with International Financial Reporting Standards ("IFRS"). This term is not a recognized measure, does not have a standardized meaning nor is it a financial measure under IFRS. Cash flow from operations is widely accepted as a financial indicator of an exploration and production company's ability to generate cash which is used to internally fund exploration and development activities and to service debt. This measure is widely used by shareholders and investors in the valuation, comparison and investment recommendations of companies within the natural gas and crude oil exploration and production industry. Cash flow from operations, as disclosed within this news release, represents cash flow from operating activities before: expensed corporate acquisition-related costs, decommissioning obligation cash expenditures and changes in non-cash working capital from operating activities. The Company presents cash flow from operations per share whereby per share amounts are calculated consistent with the calculation of earnings per share.

Net debt refers to outstanding bank debt plus working capital deficit or less any working capital surplus (excludes current unrealized amounts pertaining to risk management commodity contracts). Net debt is not a recognized measure under IFRS and does not have a standardized meaning.

Operating netbacks refers to realized wellhead revenue less royalties, operating expenses and transportation costs per barrel of oil equivalent ("boe"). Operating netback is not a recognized measure under IFRS and does not have a standardized meaning.

Contact:
John Ferguson
RMP Energy Inc.
President and Chief Executive Officer
(403) 930-6303
john.ferguson@rmpenergyinc.com

Dean Bernhard
RMP Energy Inc.
Vice President, Finance and Chief Financial Officer
(403) 930-6304
dean.bernhard@rmpenergyinc.com
www.rmpenergyinc.com

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