Razor schedules special shareholder meeting to vote on issuance of preferred stock
Razor Energy Corp (TSXV: RZE) announced its yearend reserves and net asset value, 2018 CapEx spending breakdown, future development costs and other financial news.
HIGHLIGHTS
| · | Proved Developed Producing (“PDP”) reserves value discounted at 10% (“NPV10”) before tax is $148.7 million, or $6.11 per share net asset value (details below). |
| · | For comparison, excluding the impact of total corporate ADR(1) of $28.1 million and IWC(1) of $21.2 million, the PDP at NPV10 would be $198.0 million (11 % increase over year-end 2017). |
| · | PDP reserve volumes were 12,193 Mboe (90% oil and liquids), which represents an increase of 2% over year-end 2017. |
| · | Total Proved (“1P”) reserves were 15,398 Mboe and Total Proved plus Probable (“2P”) reserves were 20,224 Mboe, which represent an increase of 2% and decrease of 1%, respectively, over year-end 2017. |
| · | The Company’s Reserve Life Index(2) is 7.7 years for PDP, 9.7 years for 1P and 12.8 years for 2P reserves based on January 2019 field-reported production of 4,345 boepd. |
| · | Razor’s reserves replacement(2) was 116% for PDP, 118% of 1P and 94% of 2P based on total 2018 production of 1,790 MMBoe. |
Notes:
| (1) | Razor’s ADR and IWC programs are compliant with the Alberta Energy Regulator’s rules and regulations, scheduled according to remaining reserves life, inflated at 2% per annum and then discounted at 10%. |
2018 CAPITAL EXPENDITURES
Razor spent $15.9 million on exploration, development and acquisition activities in 2018, including reactivations and drilling ($12.0 million) and acquisitions ($3.9 million). This total excludes facilities and pipeline maintenance ($9.0 million) and one-time capital expenditures associated with non-reserve-adding projects ($12.6 million total), comprised of self-generated natural gas power ($9.5 million), an oilfield information technology upgrade ($1.8 million) at South Swan Hills Unit and corporate/energy services related costs ($1.3 million).
NET ASSET VALUE(1)
Net Asset Value, including estimated December 31, 2018 cash and working capital was:
| NPV10 (M$) | Net Asset Value per share(1,2,3) |
|
| Proved Developed Producing | 148,671 | $6.11 |
| Total Proved | 197,733 | $9.34 |
| Proved Plus Probable | 209,047 | $10.09 |
Notes:
| (1) | The estimated Net Asset Values are based on the estimated net present value of all future net revenue from Razor’s reserves (net of ADR and IWC costs), before tax, as estimated by Sproule as at December 31, 2018. All Net Asset Values cited in this press release are the resulting NPV per reserves category per basic share less net debt of $55.8 million at December 31, 2018. See “Reader Advisories – Oil and Gas Metrics” and “Reader Advisories – Non-IFRS Measures” contained in this news release. |
| (2) | Basic shares outstanding of approximately 15.2 million at December 31, 2018. There are no dilutive instruments currently outstanding. |
| (3) | All 2018 financial amounts are unaudited. See “Reader Advisories – Unaudited Financial Information”. |
Summary of Pricing and Inflation Rate Assumptions – Forecast Prices and Costs
The forecast cost and price assumptions assume increases in wellhead selling prices and include inflation with respect to future operating and capital costs. Crude oil and natural gas benchmark reference pricing, inflation and exchange rates utilized by Sproule as at December 31, 2018 were as follows:
| Year | Exchange Rate (CAD/USD) |
WTI Cushing Oklahoma 40 API (USD/bbl) |
Canadian Light Sweet 40 API (CAD/bbl) |
Hardisty Bow River 25 API (CAD/bbl) |
Natural Gas AECO (CAD/mmbtu) |
| 2019 | 0.77 | 63.00 | 75.27 | 60.97 | 1.95 |
| 2020 | 0.80 | 67.00 | 77.89 | 63.87 | 2.44 |
| 2021 | 0.80 | 70.00 | 82.25 | 68.27 | 3.00 |
| 2022 | 0.80 | 71.40 | 84.79 | 70.37 | 3.21 |
| 2023 | 0.80 | 72.83 | 87.39 | 72.54 | 3.30 |
| 2024 | 0.80 | 74.28 | 89.14 | 73.99 | 3.39 |
| 2025 | 0.80 | 75.77 | 90.92 | 75.47 | 3.49 |
| 2026 | 0.80 | 77.29 | 92.74 | 76.98 | 3.58 |
| 2027+ | +2.0%/yr. | +2.0%/yr. | +2.0%/yr. | +2.0%/yr. | +2.0%/yr. |
Reconciliation of Company Gross Reserves by Principal Product Type(1), (2)
The following table sets forth the reconciliation of the Company’s reserves at Forecast Prices and Costs:
| Light and Medium Crude Oil | Natural Gas Liquids | |||||||||||
| Factors | Gross Proved Developed Producing (Mbbl) |
Gross Proved (Mbbl) |
Gross Proved + Probable (Mbbl) |
Gross Proved Developed Producing (Mbbl) |
Gross Proved (Mbbl) |
Gross Proved + Probable (Mbbl) |
||||||
| December 31, 2017 | 8,141 | 10,188 | 14,024 | 2,533 | 3,327 | 4,303 | ||||||
| Acquisitions | 678 | 868 | 1,058 | 68 | 91 | 111 | ||||||
| Category Change | 796 | 11 | 8 | 402 | (1 | ) | (3 | ) | ||||
| Disposition | – | – | – | – | – | – | ||||||
| Extensions/Infill Drilling | 12 | 85 | 93 | 2 | 28 | 33 | ||||||
| Economic Factors | 67 | 89 | 120 | 14 | 19 | 26 | ||||||
| Technical Revision | (125 | ) | 859 | 219 | (29 | ) | (6 | ) | (64 | ) | ||
| Working Interest Adj. | (53 | ) | (67 | ) | (78 | ) | (32 | ) | (41 | ) | (49 | ) |
| Production | (1,153 | ) | (1,153 | ) | (1,153 | ) | (408 | ) | (408 | ) | (408 | ) |
| December 31, 2018 | 8,363 | 10,880 | 14,291 | 2,550 | 3,009 | 3,949 | ||||||
| Conventional Natural Gas | Barrels of Oil Equivalent | |||||||||||
| Factors | Gross Proved Developed Producing (Mmcf) |
Gross Proved (Mmcf) |
Gross Proved + Probable (Mmcf) |
Gross Proved Developed Producing (Mboe) |
Gross Proved (Mboe) |
Gross Proved + Probable (Mboe) |
||||||
| December 31, 2017 | 7,412 | 9,343 | 12,001 | 11,909 | 15,072 | 20,327 | ||||||
| Acquisitions | 342 | 488 | 601 | 803 | 1,040 | 1,269 | ||||||
| Category Change | 1,005 | 223 | 263 | 1,366 | 47 | 49 | ||||||
| Disposition | – | – | – | – | – | – | ||||||
| Extensions/Infill Drilling | 12 | (57 | ) | (74 | ) | 16 | 106 | 114 | ||||
| Economic Factors | (21 | ) | (8 | ) | (32 | ) | 78 | 107 | 141 | |||
| Technical Revision | 422 | 564 | 679 | (84 | ) | 946 | 268 | |||||
| Working Interest Adj. | (114 | ) | (138 | ) | (162 | ) | (104 | ) | (131 | ) | (154 | ) |
| Production | (1,376 | ) | (1,376 | ) | (1,376 | ) | (1,790 | ) | (1,790 | ) | (1,790 | ) |
| December 31, 2018 | 7,681 | 9,054 | 11,900 | 12,193 | 15,397 | 20,223 | ||||||
Notes:
| (1) | The tables summarize the data contained in the Sproule Report and as a result may contain slightly different numbers due to rounding. |
| (2) | Conventional Natural Gas includes associated and non-associated gas. |
Future Development Costs
The following table sets forth development costs deducted in the estimation of Razor’s future net revenue attributable to the reserve categories noted below:
| Forecast Prices and Costs (M$) | ||
| Year | Proved Reserves | Proved plus Probable |
| 2019 | 1,585 | 1,990 |
| 2020 | 12,521 | 24,561 |
| 2021 | 28,619 | 34,096 |
| 2022 | – | – |
| Thereafter | – | – |
| Total Undiscounted | 42,725 | 60,647 |
| Total Discounted at 10% | 35,929 | 51,482 |
The future development costs are estimates of capital expenditures required in the future for Razor to convert proved developed non-producing reserves and probable reserves to proved developed producing reserves. The undiscounted future development costs are $42.7 million for proved reserves and $60.6 million for proved plus probable reserves (in each case based on forecast prices and costs).
Preferred shares to be voted upon
Razor announced a special meeting of shareholders will be held on Monday, April 1, 2019 at 1:00 p.m. at the offices of McCarthy Tetrault LLP, the Company’s legal counsel, Suite 4000, 421 – 7th Avenue S.W., Calgary, Alberta. At the Meeting, shareholders will be asked to approve a special resolution to amend the articles of the Company to create a new class of an unlimited number of preferred shares, issuable in series.
Razor believes that the capacity to issue preferred shares will provide the company with increased flexibility in its capital structure and in raising future capital. The creation of the preferred shares would permit management of the Company to negotiate with potential investors regarding the rights and preferences of a series of preferred shares that may be issued to meet market conditions and financing opportunities as they arise, without the expense and delay in connection with calling a shareholders’ meeting to approve specific terms of any series of preferred shares.
Razor Energy is presenting at the upcoming EnerCom Dallas oil and gas investor conference, Feb. 27-28, 2019, in Dallas, Texas. Register for the conference here.
SWAN HILLS/KAYBOB CORE REGION
- 444(302 net) sections, or 284,160 (193,280 net) acres, of land (held by production) with majority-owned infrastructure
- October 2018 field-estimated production of 4,900 boepd at 87 percent light oil & natural gas liquids with stable 10 percent base decline provides solid foundation
- Production and development is focused on light oil in Swan Hills Beaverhill Lake and Kaybob Triassic Montney formations
- Organic growth through reactivations, downhole operations, water shut-offs, waterflood optimization and pipeline & facility enhancements
