Razor Energy Corp. (“Razor” or the “Company”) (TSXV: RZE) announces
its third quarter 2020 financial and operating results. Selected
financial and operational information is outlined below and should
be read in conjunction with Razor’s unaudited condensed
consolidated interim financial statements and management’s
discussion and analysis for the quarter ended September 30, 2020
which are available on SEDAR at www.sedar.com and the Company’s
website www.razor-energy.com.
Q3
2020 HIGHLIGHTS
OPERATING
- Achieved
operating expenses of $22.35/boe in the third quarter of 2020, down
24% from the same period in 2019 due to a strict focus on cost
reductions and operating efficiencies. For the nine months ended
September 30, 2020 Razor operated properties realized operating
expenses of $23.49/boe while non-operated property operating
expenses averaged $49.03/boe during the same period.
- Production
volumes in the third quarter of 2020 averaged 3,573 boe/d, down 18%
from the production volumes in the same period of 2019 and down 6%
from the second quarter of 2020. Decreased production volumes are
the result of reduced spending on well reactivations and repairs,
operated well curtailments, and non-operated production
interruptions in the Swan Hills and Kaybob areas.
- Reported $5.6
million of funds flow in the third quarter of 2020 compared to $2.6
million of funds flow in the third quarter of 2019. The increase in
funds flow was due to the continued focus on reducing operating
expenses by the Company and significant decreases in royalties due
to low oil prices during 2020 which were partially offset by
decreased realized commodity prices.
- Razor continues
to operate its natural gas-powered generation 9 MW facility which
has reduced its reliance on grid electric power and resulted in
savings of $0.5 million in Q3 2020 (Q3 2019 - $0.6 million).
Electricity and fuel decreased 15% in Q3 2020 as compared to the
same quarter of last year mostly due to a 7% decrease in
consumption, 6% decrease in average electricity pool prices and a
decreased reliance on compressed natural gas and lower production
levels.
- Received
approval for $1.5 million in funding under the Alberta government’s
Site Rehabilitation Program (“SRP”) to assist with abandonment and
reclamation activities.
CAPITAL
- Eliminated all operated production
related capital investment except for critical end of life
expenditures.
- Invested $0.3 million on its
capital program in the third quarter of 2020, mainly on the South
Swan Hills Co-Produced Geothermal Natural Gas power project.
STRATEGY
- In the third quarter, the Company
continued the process of selectively restarting its heavy oil and
light oil wells which were shut in during the second quarter of
2020 due to lower prices. Razor’s crude oil inventories were
reduced by 12,805 barrels and at September 30, 2020, the Company
held 8,306 barrels of crude oil in inventory.
- The Company uses in house marketing expertise to take advantage
of pricing opportunities and enhance returns.
- Razor implemented cost saving
measures by internalizing certain oilfield services through its
subsidiary, Blade Energy Services Corp. ("Blade"), which provides
services such as crude oil hauling along with earthworks and
environmental services. Blade conducted $0.6 million of services on
behalf of Razor during Q3 2020 and $1.7 million of services for the
nine months ended September 30, 2020.
NEAR AND MEDIUM-TERM
OBJECTIVES
- Renew the Amended Term Loan
Facility with the Alberta Investment Management Corporation
(“AIMCo”), which matures on January 31, 2021.
- Reduce net debt through continued
minimization of capital spending and increased efficiencies to
reduce operating and general and administrative costs.
- Actively identify and consider
business combinations with other oil and gas producers as well as
service companies.
- Continued focus on implementing a
technically viable and commercially sustainable solution to recover
geothermal waste heat to power.
- Further analyze ancillary
opportunities including power generating projects, oil blending,
and services integration.
MANAGEMENT STRATEGY
AND OUTLOOKRazor’s Amended Term Loan
Facility with AIMCo matures on January 31, 2021. AIMCo has
indicated their intention to work with the Company to renew the
loan.
The Company continues to focus on cost control
on its operated properties and the stabilizing effect of reduced
operating costs in each area. However, the continued volatility in
both West Texas Intermediate (“WTI”) and Edmonton light sweet crude
oil differentials has resulted in limited capital spending in 2020.
Razor will take a cautious and case-by-case approach to spending
for the remainder of 2020 and into 2021, focusing on low risk, low
capital opportunities to increase field and corporate netbacks.
Production levels will not be a priority with the significant
decrease in oil prices resulting from the COVID-19 virus, lowered
global demand, and uncertainty related to supply.
In response to the aforementioned decrease
in oil prices, during the early part of the second quarter of
2020 Razor shut in all
of its operated heavy oil production, along
with certain light oil wells which were sub-economic
at the time. The Company also built oil inventory in anticipation
of improved future crude oil prices. Since June 2020, WTI
pricing and local price differentials have improved as global
demand for oil has stabilized as countries gradually ease COVID-19
lockdown restrictions. Starting in the latter part of the second
quarter, the Company began the process of restarting its heavy oil
and light oil wells which were shut in. During the third quarter,
Razor reduced crude oil inventory by 12,805 barrels and at
September 30, 2020, the Company held 8,306 barrels of crude oil in
inventory.
The Company has restarted all the wells shut in
during Q2 2020, actively monitors the economics for all its
operated production and anticipates reactivating additional wells
as prices further improve. These reactivations have the potential
to add over 1,000 boe/d of production. Reactivation timing is
dependent on new debt refinancing, positive cash flow from
operations, WTI prices and local price differentials all of
which have material uncertainty.
The preparation of financial forecasts is
challenging at this time. However, Razor anticipates
minimal cash flow from operations during the remainder of 2020
and into 2021 if oil prices remain at current levels. The
Company is working to protect cash flow by limiting field spending
and applying for government assistance programs where available.
The Canada Emergency Wage Subsidy (“CEWS”) has provided the Company
just over $1.1 million since the subsidy was introduced, $726
thousand in the second quarter and $397 thousand in the third
quarter of 2020. The CEWS has been accounted for as a reduction in
general and administrative expenses of $684 thousand and a
reduction in operating expenses of $440 thousand for the nine
months ended September 30, 2020. Razor has also been successful in
obtaining approved applications under the Alberta Site
Rehabilitation Program (“SRP”) to assist with its abandonment and
reclamation activities. The total value of approved applications to
date is $1.5 million.
RAZOR'S RESPONSE TO
COVID-19
Razor is dedicated to ensuring the health,
safety and security of its employees, contractors, partners and
residents within all its operating areas and communities. The
Company has implemented business procedures that comply with
Alberta Health Guidelines to protect the well-being of all
stakeholders. Razor has successfully transitioned most of its
corporate staff back to the head office and the field sites
continue to take site specific pre-cautionary measures related to
COVID-19. Recently, new directives have been submitted to the
public by Alberta Health Services and Razor will endeavour to
adhere to published protocols.
SELECT QUARTERLY HIGHLIGHTS
The following tables summarizes key financial
and operating highlights associated with the Company’s financial
performance.
|
Three Months Ended Sept 30, |
|
Nine Months Ended Sept 30, |
|
($000's, except for per share amounts and production) |
2020 |
|
2019 |
|
2020 |
|
2019 |
|
Production |
|
|
|
|
Light Oil (bbl/d) |
2,047 |
|
2,600 |
|
2,228 |
|
2,669 |
|
Natural gas (mcf/d) 1 |
4,411 |
|
6,206 |
|
4,538 |
|
4,524 |
|
NGL (boe/d) |
791 |
|
734 |
|
865 |
|
866 |
|
Total (boe/d) |
3,573 |
|
4,368 |
|
3,849 |
|
4,289 |
|
Sales volumes |
|
|
|
|
Light Oil (bbl/d) |
2,186 |
|
2,598 |
|
2,231 |
|
2,756 |
|
Natural gas (mcf/d)1 |
4,411 |
|
6,206 |
|
4,538 |
|
4,524 |
|
NGL (bbl/d) |
791 |
|
734 |
|
865 |
|
866 |
|
Total (boe/d) |
3,712 |
|
4,367 |
|
3,852 |
|
4,377 |
|
Oil inventory volumes
(bbls) |
8,306 |
|
11,378 |
|
8,306 |
|
11,378 |
|
Revenue |
|
|
|
|
Oil and NGLs sales |
11,345 |
|
17,548 |
|
31,717 |
|
60,016 |
|
Natural gas sales |
712 |
|
- |
|
2,078 |
|
- |
|
Sale of commodities purchased
from third parties 4 |
- |
|
122 |
|
- |
|
8,576 |
|
Blending and processing income |
1,286 |
|
2,395 |
|
3,960 |
|
6,968 |
|
Other revenue |
155 |
|
461 |
|
916 |
|
1,000 |
|
Total
revenue |
13,498 |
|
20,526 |
|
38,671 |
|
76,560 |
|
Cash flows from (used in)
operating activities |
2,124 |
|
(46 |
) |
3,837 |
|
12,316 |
|
Per share -basic and diluted |
0.10 |
|
- |
|
0.18 |
|
0.79 |
|
Funds flow 2 |
5,598 |
|
2,639 |
|
3,923 |
|
7,682 |
|
Per share -basic and diluted |
0.27 |
|
0.16 |
|
0.19 |
|
0.49 |
|
Adjusted funds flow 2 |
5,562 |
|
2,653 |
|
4,257 |
|
7,654 |
|
Per share -basic and diluted |
0.26 |
|
0.16 |
|
0.20 |
|
0.49 |
|
Net income (loss) |
(1,838 |
) |
(6,183 |
) |
(40,149 |
) |
(17,720 |
) |
Per share - basic and diluted |
(0.09 |
) |
(0.38 |
) |
(1.91 |
) |
(1.14 |
) |
Dividend paid |
- |
|
- |
|
263 |
|
- |
|
Dividends per share |
- |
|
0.04 |
|
0.01 |
|
0.11 |
|
Weighted average number of shares outstanding (basic and
diluted) |
21,064 |
|
15,535 |
|
21,064 |
|
16,268 |
|
Gross Capital expenditures |
481 |
|
2,518 |
|
1,493 |
|
11,212 |
|
Government Grants |
(270 |
) |
(1,980 |
) |
(1,121 |
) |
(4,436 |
) |
Netback
($/boe) |
|
|
|
|
Oil and natural gas sales 3 |
35.31 |
|
43.68 |
|
32.02 |
|
50.23 |
|
Royalties |
(1.44 |
) |
(8.07 |
) |
(2.79 |
) |
(7.96 |
) |
Operating expenses |
(22.35 |
) |
(29.34 |
) |
(26.92 |
) |
(32.49 |
) |
Transportation and treating |
(2.27 |
) |
(1.82 |
) |
(1.92 |
) |
(2.16 |
) |
Operating netback 2 |
9.25 |
|
4.45 |
|
0.39 |
|
7.62 |
|
Gain/ (Loss) on sale of commodities purchased from third
parties4 |
- |
|
0.30 |
|
- |
|
0.01 |
|
Net blending and processing income 2 |
2.31 |
|
4.11 |
|
2.97 |
|
3.56 |
|
Realized loss on commodity contracts settlement 3 |
0.79 |
|
(1.64 |
) |
(1.41 |
) |
(2.36 |
) |
Other revenues5 |
6.84 |
|
3.07 |
|
5.38 |
|
1.55 |
|
General and administrative |
(2.40 |
) |
(3.24 |
) |
(3.29 |
) |
(3.66 |
) |
Impairment |
(0.10 |
) |
- |
|
(23.47 |
) |
- |
|
Interest |
(5.03 |
) |
(3.08 |
) |
(4.04 |
) |
(3.07 |
) |
Corporate netback 2 |
11.66 |
|
3.97 |
|
(23.46 |
) |
3.65 |
|
1) Natural gas production and sales volumes
include internally consumed natural gas used in power generation.2)
Refer to "Non-IFRS measures".3) Excludes the effects of financial
risk management contracts but includes the effects of fixed price
physical delivery contracts.4) From time to time, Razor purchases
commodity products from third parties to fulfill sales commitments,
and subsequently sells these products to its customers.5) Other
revenues received during the nine months ended September 30, 2020
include $4.7 million of non-recurring insurance proceeds related to
environmental clean-up costs as a result of an injection line
failure in 2019 as well as proceeds from business interruption
insurance related to a non-operated pipeline being offline for
repairs in 2019.
SELECT QUARTERLY HIGHLIGHTS
The following tables summarizes key financial
and operating highlights associated with the Company’s financial
performance.
|
September 30, |
|
December 31, |
|
($000's, except for share amounts) |
2020 |
|
2019 |
|
Total assets |
163,853 |
|
189,158 |
|
Cash |
2,635 |
|
1,905 |
|
Long-term debt
(principal) |
48,505129 |
|
45,876 |
|
Minimum lease obligation |
3,887 |
|
5,329 |
|
Net debt 1 |
68,442 |
|
66,911 |
|
Number
of shares outstanding |
21,064,466 |
|
21,064,466 |
|
1) Refer to "Non-IFRS measures". |
|
|
|
|
OPERATIONAL
UPDATE
Sales volumes in the third quarter of 2020
averaged 3,712 boe/d, down 15% from the sales volumes in the same
period in 2019. As at September 30, 2020, Razor had 8,306 bbls of
light oil inventory (December 31, 2019 - 9,251 bbls) and sold
12,805 bbls during the third quarter of 2020 due to improved crude
oil pricing.
Production averaged 3,573 boe/d in Q3 2020 down
18% from the same quarter in 2019, primarily due to reduced
spending on well reactivations and repairs. In addition, both
operated and non-operated curtailments and voluntary shut-ins due
to weaker market pricing further negatively affected production in
the quarter. For the first nine months of 2020, production averaged
3,849 boe/d, down 10% as compared to the same period last year, as
the Company’s non-operated production was impacted by production
curtailments and shut ins in the Swan Hills and Kaybob areas. This
was offset by production in the Southern Alberta area due to the
Little Rock acquisition, effective September 11, 2019.
Effective July 2018, Razor began utilizing a
portion of its own natural gas production to generate electrical
power. Natural gas production of internally consumed gas for the
three and nine months ended June 30, 2020 was 1,126 mcf/d and 1,317
mcf/d, respectively.
Razor realized an oil price of $49.08/bbl during
the third quarter of 2020, which was a 10% discount to the WTI
(CAD) price and is an improvement from the 19% discount in Q2 2020
and up from the 14% discount in Q3 2019. These discounts were
partially due to lower average oil quality realized by the Company
as a result of the Little Rock acquisition in Q3 2019, which added
WCS exposure to Razor's oil pricing portfolio, as well as timing of
monthly sales contracts. For the nine months September 30, 2020 the
Company realized oil price was down 38% from the same period of
2019 mostly due to a lower WTI index price.
During the third quarter of 2020, the Company
realized an operating netback of $9.25/boe, up from an operating
netback of $4.45/boe in the third quarter of 2019. Realized prices
decreased by $8.37/boe, however, and the impact of decreased prices
was offset by royalty decreases of $6.63/boe due to significantly
lower oil prices and reduced operating expenses of $6.99/boe in
comparison to the same period in 2019.
Royalty rates averaged 4% in the third quarter
of 2020 as compared to 18% for the same period in 2019. This
decrease in royalties is mostly due to the decrease in commodity
prices and production volumes. For the first nine months of the
year, royalties averaged 9%, down from 16% from the same period
last year, mostly due to lower prices and production volumes.
Operating expenses decreased 24%, on a per boe
basis, in the third quarter of 2020 compared to the same period in
2019 and was down $4.2 million on a total dollar basis. The Company
has limited its well intervention activity in response to the
current weak commodity price environment. Workovers and facility
expenses averaged $0.41/boe in the third quarter of 2020, down 94%
from $6.98/boe in the same quarter of 2019, while fuel and
electricity costs were $7.73/boe in both third quarters of 2020 and
2019. Razor operated properties had an operating cost of $23.49/boe
for the first nine months of 2020, while non-operated properties
had an operating cost of $49.03/boe for the same period.
The top cost drivers, fuel and electricity,
labour, property taxes, facility repairs, chemicals and
non-operated pipeline repairs accounted for 65% of total operating
expenses in the third quarter of 2020 (Q3 2019 – 68%). For the
first nine months of 2020, these same top cost drivers accounted
for 72% of total operating expenses (2019 – 67%).
Electricity and fuel decreased 15% in Q3 2020 as
compared to the same quarter of last year mostly due to a 7%
decrease in consumption, a 6% decrease in average electricity pool
prices and decreased reliance on compressed gas and lower
production levels.
For the first nine months of 2020, the cost of
electricity and fuel decreased 10% as compared to the same period
of last year, with average electricity pool prices decreasing by
28% and usage increasing by 6%. Razor continues to operate its
natural gas-powered generation 9 MW facility which reduced its
reliance on grid electric power and resulted in savings of $0.5
million in Q3 2020 (Q3 2019 - $0.6 million). For the first nine
months of 2020, the Company incurred electricity savings of $1.7
million (2019 - $1.6 million).
CAPITAL
PROGRAM
In the third quarter of 2020, due to the
volatile commodity price environment, the Company did not initiate
any projects related to finding and development capital and expects
limited activity in Q4 2020.
Operated capital investment in the first nine
months of 2020 consisted primarily of $0.9 million on the Razor’s
Co-Produced Geothermal Natural Gas power project, $0.4 million on
field equipment and a variety of project cost adjustments from
prior periods, offset by government grants of $1.1 million.
During the third quarter of 2020, Razor invested
$0.3 million on its South Swan Hills Co-Produced Geothermal Natural
Gas power project. The Company projects the capital cost of
the project to be $37 million, which will generate 21 MW of grid
connected power, of which 6MW will emerge from clean power
generation.
ENVIRONMENTAL, SOCIAL AND
GOVERNANCE
Starting in 2020, Razor has committed to the
Alberta Energy Regulator’s (“AER”) Area Based Closure program (“ABC
program”), which requires companies to commit to an inactive
liability reduction target. The program encourages the oil
and gas industry to abandon and reclaim inactive sites, thereby
de-risking future liabilities to the general public. Benefits to
companies joining the program include focusing expenditures on
end-of-life activities as well as enabling companies to maintain
compliance on low risk infrastructure through regular inspection
rather than allocating funds to well suspension activities which
provide no actual reduction in liability.
Razor’s original spend target in 2020 under the
ABC program was anticipated to be $2.3 million but on May 14, 2020,
the AER reduced all liability reduction targets for 2020 to zero in
response to COVID-19 and the decline in oil prices. Razor’s
liability reduction target is $3.1 million in 2021.
Razor has been successful in obtaining approved
applications under the Alberta Site Rehabilitation Program (“SRP”).
To date, Razor has received approval for $1.5 million in funding to
assist with abandonment and reclamation activities. The
Company also expects to receive additional grants in subsequent
phases of the SRP. As at September 30, none of the work
related to these approved applications is complete and therefore no
decommissioning costs have been recognized related to these
projects.
Razor has participated in the energy management
program at Energy Efficiency Alberta and has decreased its annual
GHG emissions through behind the fence power generation and other
energy efficiency programs. This 9 MW power project has
reduced GHG emissions by 6700 tCO2 per annum for a cumulative
reduction of approximately 15,000 tCO2 since inception.
Razor’s goal of a lower carbon future will include capturing green
energy within the 21 MW Co-Produced Geothermal Natural Gas power
project which will eliminate 31,000 tCO2 per annum over an expected
minimum 20 year project life.
Razor is actively involved in community
engagement and recognizes the importance of supporting charitable
organizations in the communities in which the Company operates and
its employees live. Since commencing operations in 2017, Razor has
supported STARS air ambulance, the Swan Hills school, The Terry Fox
Foundation, Kids Cancer Care, Ovarian Cancer Canada, Movember
Foundation, Vivo for Healthier Generations and Crohn’s and Colitis
Canada. In addition, the Company has provided sponsorship
funds for community engagement, initiatives, and sporting
events.
ABOUT RAZOR
Razor is a publicly-traded junior oil and gas
development and production company headquartered in Calgary,
Alberta, concentrated on acquiring, and subsequently enhancing, and
producing oil and gas from properties primarily in Alberta. The
Company is led by experienced management and a strong, committed
Board of Directors, with a long-term vision of growth focused on
efficiency and cost control in all areas of the business. Razor
currently trades on TSX Venture Exchange under the ticker
“RZE.V”.
For additional
information
please
contact:
Doug
BaileyPresident and Chief Executive Officer |
Kevin
BraunChief Financial Officer |
Razor Energy Corp.800, 500-5th Ave SW Calgary, Alberta T2P
3L5Telephone: (403)
262-0242www.razor-energy.com
READER
ADVISORIES
FORWARD-LOOKING STATEMENTS:
This press release may contain certain statements that may be
deemed to be forward-looking statements. Such statements relate to
possible future events, including, but not limited to, the
Company’s ability to continue to operate in accordance with
developing public health efforts to contain COVID-19, the Company’s
ability to renew the Amended Term Loan Facility, the Company’s
objectives, including the Company’s capital program and other
activities, including ancillary opportunities such as power
generation, oil blending and services integration, restarting
wells, future rates of production, anticipated abandonment,
reclamation and remediation costs for 2020, possible business
combination transactions, assistance from government programs
including under the SRP and Canadian Emergency Wage Subsidy,
commitments under the ABC program and energy management program and
other environmental, social and governance initiatives. 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
“anticipate”, “believe”, "expect", “plan”, “estimate”, “potential”,
“will”, “should”, “continue”, “may”, “objective” and similar
expressions. The forward-looking statements are based on certain
key expectations and assumptions made by the Company, including but
not limited to expectations and assumptions concerning the
availability of capital, current legislation, receipt of required
regulatory approvals, the timely performance by third-parties of
contractual obligation, the success of future drilling and
development activities, the performance of existing wells, the
performance of new wells, the Company’s growth strategy, general
economic conditions, availability of required equipment and
services prevailing commodity prices, price volatility, price
differentials and the actual prices received for the Company's
products. Although the Company believes that the expectations and
assumptions on which the forward-looking statements are based are
reasonable, undue reliance should not be placed on the
forward-looking statements because the Company can give no
assurance that they will prove to be correct. Since forward-
looking statements address future events and conditions, by their
very nature they involve inherent risks and uncertainties. Actual
results could differ materially from those currently anticipated
due to a number of factors and risks. These include, but are not
limited to, risks associated with the oil and gas industry and
geothermal electricity projects in general (e.g., operational risks
in development, exploration and production; delays or changes in
plans with respect to exploration or development projects or
capital expenditures; variability in geothermal resources; as the
uncertainty of reserve estimates; the uncertainty of estimates and
projections relating to production, costs and expenses, and health,
safety and environmental risks), electricity and commodity price
and exchange rate fluctuations, changes in legislation affecting
the oil and gas and geothermal industries and uncertainties
resulting from potential delays or changes in plans with respect to
exploration or development projects or capital expenditures. In
addition, the Company cautions that COVID-19 may continue to have a
material adverse effect on global economic activity and worldwide
demand for certain commodities, including crude oil, natural gas
and NGL, and may continue to result in volatility and disruption to
global supply chains, operations, mobility of people and the
financial markets, which could continue to affect commodity prices,
interest rates, credit ratings, credit risk, inflation, business,
financial conditions, results of operations and other factors
relevant to the Company. The duration of the current commodity
price volatility is uncertain. Please refer to the risk factors
identified in the annual information form and management discussion
and analysis of the Company which are available on SEDAR at
www.sedar.com. The forward-looking statements contained in this
press release are made as of the date hereof and the Company
undertakes no obligation to update publicly or revise any
forward-looking statements or information, whether as a result of
new information, future events or otherwise, unless so required by
applicable securities laws.
This press release contains future-oriented
financial information and financial outlook information
(collectively, "FOFI") about Razor's prospective results of
operations, sales volumes, including sale of inventory volumes,
production and production efficiency, balance sheet, capital
spending, cost and net debt reductions, operating efficiencies,
investment infrastructure and components thereof, all of which are
subject to the same assumptions, risk factors, limitations, and
qualifications as a set forth in the above paragraph. FOFI
contained in this document was approved by management as of the
date of this document and was provided for the purpose of providing
further information about Razor's future business operations. Razor
disclaims any intention or obligation to update or revise any FOFI
contained in this document, whether as a result of new information,
future events or otherwise, unless required pursuant to applicable
law. Readers are cautioned that the FOFI contained in this document
should not be used for purposes other than for which it is
disclosed herein.
NON-IFRS MEASURES: This press
release contains the terms "funds flow", "adjusted funds flow",
"net blending and processing income", "net debt", "income (loss) on
sale of commodities purchased from third parties", "operating
netback" and "corporate netback", which do not have standardized
meanings prescribed by International Financial Reporting Standards
("IFRS") and therefore may not be comparable with the calculation
of similar measures by other companies. Funds flow represents cash
generated from operating activities before changes in non-cash
working capital. Adjusted funds flow represents cash flow from
operating activities before changes in non-cash working capital and
decommissioning obligation expenditures incurred. Management uses
funds flow and adjusted funds flow to analyze operating performance
and leverage, and considers funds flow and adjusted funds flow from
operating activities to be key measures as it demonstrates the
Company's ability to generate cash necessary to fund future capital
investments and repay debt. Net blending and processing income is
calculated by adding blending and processing income and deducting
blending and processing expense. Net debt is calculated as the sum
of the long-term debt and lease obligations, less working capital
(or plus working capital deficiency), with working capital
excluding mark-to-market risk management contracts. Razor believes
that net debt is a useful supplemental measure of the total amount
of current and long-term debt of the Company. Income (loss) on sale
of commodities purchased from third parties is calculated by adding
sales of commodities purchased from third parties and deducting
commodities purchased from third parties. Income (loss) on sale of
commodities purchased from third parties may not be comparable to
similar measures used by other companies. Operating netback equals
total petroleum and natural gas sales less royalties and operating
costs calculated on a boe basis. Razor considers operating netback
as an important measure to evaluate its operational performance as
it demonstrates its field level profitability relative to current
commodity prices. Corporate netback is calculated by deducting
general & administration, acquisition and transaction costs,
and interest from operating netback. Razor considers corporate
netback as an important measure to evaluate its overall corporate
performance.
ADVISORY PRODUCTION
INFORMATION: Unless otherwise indicated herein, all
production information presented herein is presented on a gross
basis, which is the Company's working interest prior to deduction
of royalties and without including any royalty interests.
BARRELS OF OIL EQUIVALENT: The
term "boe" or barrels of oil equivalent may be misleading,
particularly if used in isolation. A boe conversion ratio of six
thousand cubic feet of natural gas to one barrel of oil equivalent
(6 Mcf: 1 bbl) is based on an energy equivalency conversion method
primarily applicable at the burner tip and does not represent a
value equivalency at the wellhead. Additionally, given that the
value ratio based on the current price of crude oil, as compared to
natural gas, is significantly different from the energy equivalency
of 6:1; utilizing a conversion ratio of 6:1 may be misleading as an
indication of value.
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TSX
Venture
Exchange
nor its
Regulation
Services
Provider
(as that
term is
defined in the
policies of the
TSX
Venture
Exchange)
accepts
responsibility for the adequacy
or accuracy of this
news release.
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