ASSET ACQUISITION
The Acquisition includes approximately 800 bbl/d of conventional heavy oil sales production, along with 215 net sections of land on the
Key Highlights:
- The Acquisition adds:
- Approximately 800 bbl/d of conventional heavy oil sales production;
- 107 net sections of prospective acreage(1), of which 96 net sections are undeveloped, adjacent to and highly synergistic with Rubellite's existing land base in the greater
Figure Lake area; - 49 gross high-grade drilling locations in greater
Figure Lake , with 25 of these internally-defined locations considered development / step-out, providing immediate flexibility within the Company's drilling schedule; and - 108 net sections of exploratory undeveloped land(1) in the Nixon area, approximately 80 kilometers north of
Figure Lake .
Strategic Rationale:
- Directly aligned with Rubellite's
Clearwater -focused robust growth business plan, adding high netback heavy oil base production, extensive high-grade development and step-out inventory and prospective exploratory opportunities; - Boosts Rubellite's position as a key producer in the
Southern Clearwater area, increasing base production by over 20%; - Value-add inherent through operating, administrative and capital execution synergies across the greater
Figure Lake land base; - Enhances adjusted funds flow(2) and improves positioning to accelerate organic growth, fund exploration activities, and to pursue further consolidation opportunities in the
Clearwater play; and - Materially increases undeveloped land position and exposure to multiple exploration prospects.
(1) | 204 net sections (52,130 net hectares) of land designated as undeveloped with an independently-assessed market value of |
(2) | Non-GAAP financial measure, non-GAAP ratio or supplementary financial measure. See "Non-GAAP and Other Financial Measures" in this news release. |
CREDIT FACILITY EXPANSION
Concurrent with the closing of the Acquisition, the Company's credit facility will increase to
OPERATIONS UPDATE
Rubellite recorded average conventional heavy oil sales production of 3,154 bbl/d for the third quarter of 2023, based on preliminary estimates. Current conventional heavy oil production, based on field estimates for the first two weeks of October, is approximately 3,577 bbl/d, driven by strong early time performance from new development wells in the
At
The drilling rig has now moved to a new pad located at 9-3-63-18W4 (the "9-3 Pad") to drill a total of six (6.0 net) development wells in the mapped sweet spot at
Rubellite has temporarily contracted a second rig for the balance of 2023 to accelerate evaluation of step out locations at the south end of
Running the two-rig program for the balance of 2023 as outlined, Rubellite expects to drill up to eleven (11.0 net) multi-lateral horizontal wells in the fourth quarter of 2023, for a full year 2023 total of twenty-seven (27.0 net) multi-lateral development infill and step-out wells all located in the greater
In its Northern Exploration area, the Company has made an election to drill a second earning well (0.5 net) at
(1) | Type curve assumptions are based on the Total Proved plus Probable Undeveloped reserves contained in the McDaniel Reserve Report as disclosed in the Company's Annual Information Form which is available under the Company's profile on SEDAR+ at www.sedarplus.ca. "McDaniel" means |
OUTLOOK AND GUIDANCE
In conjunction with the Acquisition, Rubellite has revised its guidance for 2023 as follows:
Previous 2023 Guidance | Revised 2023 Guidance | |
Sales Production (bbl/d) | 2,900 - 3,100 | 3,100 - 3,200 |
Development spending ($ millions)(1) | ||
Multi-lateral development wells (net)(1) | 25.0 - 26.0 | 27.0 |
Exploration spending ($ millions)(1) | ||
Exploration wells (net) | 2.5 - 4.5 | 2.5 |
Heavy oil wellhead differential ($/bbl)(1) | ||
Royalties (% of revenue)(1) | 9.5% - 10.5% | 9.5% - 10.5% |
Production & operating costs ($/boe)(1) | ||
Transportation costs ($/boe)(1) | ||
General & administrative costs ($/boe)(1) |
(1) Non-GAAP financial measure, non-GAAP ratio or supplementary financial measure. See "Non-GAAP and Other Financial Measures" in this news release. |
ABOUT RUBELLITE
Rubellite is a Canadian energy company engaged in the exploration, development and production of heavy crude oil from the
ADVISORIES
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.
ABBREVIATIONS
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
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 determinate 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.
PRELIMINARY FINANCIAL INFORMATION
Certain anticipated operating and financial results for 2023 included in this news release such as production information, capital expenditures and bank debt at closing of the Acquisition are estimated based on preliminary estimates as of the date of this news release. These estimated results are subject to change upon the completion of the unaudited financial statements for the interim period ended
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 and other 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 and other 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 (used in) operating activities, and cash flow from (used in) investing activities, as indicators of Rubellite's performance.
Non-GAAP Financial Measures
Capital Expenditures: Rubellite uses capital expenditures related to exploration and development spending to measure its capital investments compared to the Company's annual capital budgeted expenditures. Rubellite's capital budget excludes acquisition and disposition activities.
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 is not intended to represent net cash flows from operating activities calculated in accordance with IFRS.
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-GAAP measures per share as the measure divided by outstanding common shares.
Supplementary Financial Measures
"Royalties (% of revenue)" is comprised of royalties, as determined in accordance with IFRS, divided by oil revenue from sales oil production as determined in accordance with IFRS.
"Production & operating costs ($/boe)" is comprised of operating expense, as determined in accordance with IFRS, divided by the Company's total sales oil production.
"Transportation cost ($/boe)" is comprised of transportation cost, as determined in accordance with IFRS, divided by the Company's total sales oil production.
"General & administrative costs ($/boe)" is comprised of G&A expense, as determined in accordance with IFRS, divided by the Company's total sales oil production.
"Heavy oil wellhead differential ($/bbl)" represents the differential the Company receives for selling its heavy crude oil production relative to the Western Canadian Select reference price (Cdn$/bbl) prior to any price or risk management activities.
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 "Operations Update" and "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: the anticipated benefits to be derived from the Acquisition, the closing of the Acquisition, the timing for the completion of the Acquisition and the funding of the Acquisition; future capital expenditures, production and various cost forecasts; the anticipated sources of funds to be used for capital spending; expectations as to drilling activity, regulatory application and the benefits to be derived from such drilling including production growth; expectations respecting Rubellite's future exploration, development and drilling activities and Rubellite's business plan; and including the information and statements contained under the heading "Outlook and Guidance" and "About Rubellite".
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 completion of the Acquisition; the successful operation of the
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
SOURCE
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