CALGARY, AB, Jan. 18, 2022
/CNW/ - (TSX: RBY) – Rubellite Energy Inc.
("Rubellite" or the "Company"), a pure play Clearwater oil exploration and development
company, is pleased to release its fourth quarter and current
production results, announce a material expansion in Rubellite's
land base and prospect inventory and provide operational and
hedging updates, all of which highlight successful advancement of
Rubellite's growth focused business plan centered around the
attractive Clearwater play.
Highlights include:
- Q4 2021 average oil sales production of 647 bbl/d;
- Current oil sales production of over 1,100 bbl/d;
- Strong preliminary performance from new development wells
recently rig released in the Ukalta area relative to Rubellite's
type curve;
- Ongoing two-rig program on track to deliver oil sales
production milestone of >2,000 bbl/d during Q1 2022;
- 35% growth in land base, adding 38 net sections for
$6.7 million (~$689/ha);
- Material growth in drilling location inventory to 550 potential
drilling locations (primarily 8-leg multi-laterals), 240 of which
have been internally classified as development / step-out and 310
as exploratory; and
- As benchmark oil prices have continued to strengthen, commodity
price management positions are being layered in for 2022 and 2023
to protect Rubellite's robust organic growth plan.
PRODUCTION
Rubellite is pleased to report that the Company recorded fourth
quarter oil sales production of 647 bbl/d, in line with the fourth
quarter guidance range of 650 – 700 bbl/d, despite extremely cold
weather conditions in late December which hindered trucking to
sales, new well startups and field operations generally.
Rubellite's fourth quarter drilling program at Ukalta began to
contribute materially to the ramp up of oil sales production
volumes throughout December, which averaged 918 bbl/d, as new
multi-lateral wells were rig released and achieved full recovery of
oil-based drilling mud ("OBM") losses which are not recorded
as sales production as the OBM is re-used in future drilling
operations or sold and credited back to drilling capital.
Four new wells drilled in the fourth quarter at Ukalta began to
contribute to Rubellite's reported oil sales production volumes
over the course of December, after they each achieved full recovery
of their OBM. Four additional new multi-lateral wells, two at
Ukalta and two at Figure Lake, were rig released and commenced OBM
recovery operations during the month of December. As of today's
date, one more of these four wells has recently concluded its OBM
recovery period and has been permanently tied-in to facilities. The
remaining three December drills, along with three additional new
wells that are scheduled to be rig released in January will
continue to recover OBM and commence their respective IP30
production periods after OBM is recovered over the next few weeks.
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.
Rubellite currently has a total of 18 (17.0 net) multi-lateral
wells contributing to oil sales production and 3 (3.0 net)
additional wells rig released and in the start-up stage of
recovering OBM. Current sales production is over 1,100 bbl/d of
conventional heavy oil and will continue to ramp up over the month
of January and throughout the remainder of the first quarter as new
wells reach full recovery of OBM and are optimized, and an
additional 9 (7.0 net) planned wells are drilled, recover their OBM
and commence delivery to sales terminals. As per previous guidance,
the Company is on track to reach its sales production milestone of
in excess of 2,000 bbl/d during the first quarter of 2022.
OPERATIONS UPDATE
Since its inception in July 2021,
Rubellite has rig released a total of 16 (15.0 net) new
multi-lateral Clearwater wells,
including two (1.0 net) at Marten Hills, seven (7.0 net) at Figure
Lake and seven (7.0 net) at Ukalta. Of the 16 new wells, 11 have
recovered their full OBM and are contributing to reported oil sales
production volumes, including 8 of those wells that have more than
30 days of production post OBM recovery and whose performance can
begin to be evaluated relative to type curves. As new wells
continue to move through their expected production lag time periods
related to multi-well pad configurations and OBM recovery before
oil sales production is reported, oil sales volumes are now growing
quickly as permanent tie-ins are executed and wells are beginning
to be optimized.
At Ukalta, five of seven wells rig released in 2021 were
development wells targeting the primary lower Clearwater zone with either six or eight
lateral legs, while two wells were exploratory in nature targeting
new zones within the Clearwater
formation. As of today's date, all five of the new development
wells at Ukalta are now contributing to oil sales production
volumes, and two of those wells have completed their respective
IP30 production periods. Both of these wells had six lateral legs
and exceeded type curve expectations with IP30 rates of
approximately 185 and 175 bbl/d respectively as compared to the
Ukalta type curve of approximately 140 bbl/d for a six-leg
8,400m lateral. The remaining three
Ukalta development wells are at early stages post OBM recovery and
are all showing similar positive indications of good quality
reservoir based on drilling and fluid recovery rates. An additional
location from the same surface location is anticipated to rig
release this week and is anticipated to have its OBM recovered
before the end of the month. Performance from the new Ukalta wells
will be monitored closely as operating parameters are
optimized.
Rubellite continues to utilize two drilling rigs targeting
multi-lateral development in the Clearwater play. At Ukalta, following rig
release of the final development well on the 2-12 pad, the first of
three additional development wells planned on the existing 9-9 pad
will spud later this week. These wells are all expected to be
turned over to production operations prior to spring break-up.
After a short break in drilling operations at Ukalta, as the rig is
windowed out for approximately 30 days, Rubellite expects to spud
its first of three additional new wells in early March on the
existing 13-35 pad at Ukalta which is situated proximal to
high-grade road, and continue drilling operations on that pad
through spring break-up.
At Figure Lake, following up its exploratory success, Rubellite
successfully accessed a second drilling rig in late November to
execute a four well winter drilling program expanding the existing
South Figure Lake pad. The first two development wells had eight
lateral legs and commenced OBM recovery operations in late
December. Both wells are nearing the end of their OBM recovery
periods with positive performance indications. The third
development well on the South Figure Lake pad was recently rig
released and drilling operations have commenced on the final well
in this program. These additional two South Figure Lake wells are
expected to be turned over to operations in late January following
which the drilling rig will move north to execute a four (2.0 net)
well development program at Marten Hills prior to spring
break-up.
Drilling costs, net of forecast OBM recoveries, are on track and
showing continuous improvement as expected with the increased scale
of activity and continuity of operations. The Company is continuing
to work to reduce time lags for production start-up on multi-well
pads by utilizing the drilling rig for completion operations,
pre-building permanent production facilities and setting up pads
for concurrent drilling and production operations, thereby
improving capital efficiencies and accelerating economic
returns.
LAND ACQUISITION AND INVENTORY DELINEATION AND GROWTH
Rubellite is pleased to announce that the Company has been
successful in executing multiple land acquisition transactions to
grow its Clearwater play land
position to 142.5 sections, up 36% from the 104.5 sections held by
Rubellite at its inception in mid-July. By closing the equity
financings on October 5, 2021 at the
high end of the range for the non-brokered private placement,
$9.5 million of additional capital
was secured to grow its asset base and accelerate organic
production and adjusted funds flow growth. Close to $6.7 million has been invested to secure
additional Clearwater rights
through multiple crown land sales and several other small
transactions. Rubellite continues to pursue transactions to grow
its land base and the Company's development and exploration
opportunity inventory.
Incorporating the results from its drilling programs, competitor
activities and land acquisition activities, Rubellite has refined
the characterization of its prospect inventory and updated the
scope of opportunities captured on its growing land base. Rubellite
now has identified 550 drilling locations, primarily eight-leg
multi-lateral wells, up from 370 locations, primarily six-leg
multi-lateral wells, identified at its inception. Based on
Rubellite and competitor drilling results to date, close to 240
locations are internally categorized as either low risk,
development wells or step out locations within the mapped outline
of existing proven zones where economic production rates have been
verified. The remaining 310 prospect inventory locations are
exploratory, representing the potential of mappable prospective
Clearwater zones on Rubellite
lands where economic production has not yet been established.
COMMODITY PRICE RISK MANAGEMENT UPDATE
Rubellite's commodity price risk management strategy is focused
on managing downside risk and increasing certainty in adjusted
funds flow by mitigating the effect of commodity price volatility.
Physical forward sales contracts and financial derivatives are used
to increase certainty in adjusted funds flow, manage the balance
sheet, ensure adequate funding for capital programs and lock in
investment returns, and to take advantage of perceived anomalies in
commodity markets. Rubellite also utilizes foreign exchange
derivatives and physical or financial derivatives related to oil
basis differentials between West Texas Intermediate ("WTI") and
Western Canada Select ("WCS) benchmark prices in order to mitigate
the effects of fluctuations in foreign exchange rates and basis
differentials on the Company's realized revenue.
WTI benchmark oil prices have strengthened over the past several
months and current and forward WCS oil prices have largely mirrored
or surpassed these increases as WCS differentials have tightened
somewhat and the Canadian dollar relative to US currency has
weakened modestly. Rubellite has been in action executing a hedging
program designed to protect a base level of funds flow to support
capital investment to drive free funds flow above the Company's
growth-focused development drilling program spending in 2022 and
beyond. WCS oil price protection is in place for an average volume
of approximately 1,125 bbl/d at close to $71.25/bbl for 2022.
As at January 18, 2022, Rubellite
has entered into the following commodity price management
contracts:
Commodity
|
Volumes
sold
|
Term
|
Reference/
Index
|
Contract
Traded
Bought/sold
|
Average Price
($/bbl)
|
Market
Price
($/bbl)
|
|
|
|
|
|
|
|
Crude Oil
|
200 bbl/d
|
Jan 1, 2022 – Mar 31,
2022
|
WTI
(USD$/bbl)
|
Swap -
sold
|
$75.00
|
$82.90
|
Crude Oil
|
500 bbl/d
|
Jan 1, 2022 – Jun 30,
2022
|
WCS FP
(CAD$/bbl)
|
Swap -
sold
|
$71.14
|
$84.92
|
Crude Oil
|
200 bbl/d
|
Jan 1, 2022 – Dec 31,
2022
|
WCS FP
(CAD$/bbl)
|
Swap -
sold
|
$76.15
|
$82.00
|
Crude Oil
|
100 bbl/d
|
Feb 1, 2022 – Feb 28,
2022
|
WCS FP
(CAD$/bbl)
|
Swap -
sold
|
$69.50
|
$87.05
|
Crude Oil
|
300 bbl/d
|
Feb 1, 2022 – Dec 31,
2022
|
WCS FP
(CAD$/bbl)
|
Swap -
sold
|
$70.34
|
$81.92
|
Crude Oil
|
200 bbl/d
|
Mar 1, 2022 – Mar 31,
2022
|
WCS FP
(CAD$/bbl)
|
Swap -
sold
|
$70.40
|
$86.50
|
Crude Oil
|
300 bbl/d
|
Apr 1, 2022 – Dec 31,
2022
|
WCS FP
(CAD$/bbl)
|
Swap -
sold
|
$69.40
|
$80.80
|
Crude Oil
|
300 bbl/d
|
Jul 1, 2022 – Dec 31,
2022
|
WCS FP
(CAD$/bbl)
|
Swap -
sold
|
$69.70
|
$79.10
|
Crude Oil
|
200 bbl/d
|
Mar 1, 2022 – Dec 31,
2022
|
WCS Diff
(CAD$/bbl)
|
Swap -
sold
|
$(17.25)
|
$(16.80)
|
Crude Oil
|
100 bbl/d
|
Jan 1, 2023 – Dec 31,
2023
|
WTI
(USD$/bbl)
|
Swap -
sold
|
$64.50
|
$71.20
|
Q1 2022 OUTLOOK
Rubellite is on track to achieve its exploration and development
capital spending guidance released November
11, 2021 for combined fourth quarter of 2021 through the
first quarter of 2022 spending of $26
to $30 million. Forecast exploration
and development capital expenditures include spending to drill,
complete, equip and tie-in wells, net of OBM recovery which
is credited back to drilling capital. Undeveloped land
purchases and acquisitions have been excluded from exploration and
development capital guidance.
Development drilling activity across Rubellite's three operating
areas is forecast to drive rapid production growth. Production
sales volumes are expected to reach in excess of 2,000 bbl/d during
the first quarter of 2022. The Company expects to update first
quarter and full year 2022 guidance after stabilized production
results from the ongoing Ukalta and Figure Lake drilling programs
have been established. Rubellite also plans to continue exploration
activities to pursue additional prospective land capture and
de-risk acreage.
In the context of current strip pricing, Rubellite's organic
growth business plan is expected to be fully funded, drive material
adjusted funds flow growth over the next two years and generate
free funds flow in excess of exploration and development spending
in 2022.
An updated Corporate Overview presentation has been posted to
the Company's website at www.rubelliteenergy.com.
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.
BOE VOLUME CONVERSIONS: Barrel of oil
equivalent ("boe") may be misleading, particularly if used in
isolation. In accordance with National Instrument 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
|
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 Measures
This news release contains the terms "adjusted funds flow"
and "free funds flow", which do not have standardized meanings
prescribed by GAAP. Management believes that in addition to net
income (loss) and net cash flows from (used in) operating
activities as defined by GAAP, these terms are useful supplemental
measures to evaluate operating performance. Users are cautioned
however that these measures should not be construed as an
alternative to net income (loss) or net cash flows from operating
activities determined in accordance with GAAP as an indication of
Rubellite's performance and may not be comparable with the
calculation of similar measurements by other entities.
For additional reader advisories in regards to non-GAAP
financial measures, including Rubellite's method of calculation and
reconciliation of these terms to their corresponding GAAP measures,
see the section entitled "Non-GAAP Measures" within the Company's
MD&A filed on SEDAR.
Adjusted funds flow: Adjusted funds flow
is calculated based on cash flows from (used in) operating
activities, excluding changes in non-cash working capital and
expenditures on decommissioning obligations since Rubellite
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 the Company'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 (used in) operating activities calculated in accordance
with IFRS.
Free funds flow: Free funds flow is defined as
adjusted funds flow less total net capital expenditures. Total net
capital expenditures is defined as total capital expenditures
before acquisitions and non–core dispositions.
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 "Q1 2022 Outlook" 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:
expectations as to increased sales production as new wells fully
recover load oil from the drilling process; drilling activity plans
and the planned two-rig drilling program for the remainder of the
first quarter of 2022 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; the estimated initial working capital and debt of
Rubellite; and the anticipated focus of 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 ability of Rubellite to successfully operate the Clearwater assets; forecast commodity prices
and other pricing assumptions; forecast production volumes based on
business and market conditions; foreign exchange 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 Rubellite 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 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
Management Information Circular dated August
4, 2021 and in other reports on file with Canadian
securities regulatory authorities which may be accessed through the
SEDAR website (www.sedar.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.