Rubellite Energy Inc., a pure play Clearwater oil exploration and development company, is pleased to report fourth quarter and year-end 2022 financial and operating results, a summary of the Company's year-end 2022 reserves evaluated by independent qualified reserves evaluators McDaniel and Associates Consultants Ltd. ("McDaniel") and provide an operations and first quarter 2023 guidance update. A complete copy of Rubellite's audited financial statements, Management Discussion and Analysis ("MD&A") and Annual Information Form for the year ended December 31, 2022 are available on the Company's website at www.rubelliteenergy.com and SEDAR at www.sedar.com.
FOURTH QUARTER AND YEAR-END 2022 HIGHLIGHTS
• Achieved fourth quarter and annual conventional heavy oil sales production of 2,181 bbl/d and 1,670 boe/d respectively. Fourth quarter volumes represented a 262% increase compared to the same period in 2021 and a 24% increase from Q3 2022.
• Increased Q1 2023 production guidance to a range of 2,800 to 2,900 bbl/d versus previous guidance range of 2,200 to 2,600 bbl/d. Current conventional heavy oil sales production is approximately 3,000 bbl/d, based on field estimates for the first week of March.
• Generated adjusted funds flow(1) of $8.1 million ($0.15 per share) in the fourth quarter of 2022 and $23.0 million ($0.44 per share) for the full year of 2022. Fourth quarter adjusted funds flow represented a 454% increase compared to the same period in 2021 and a 26% increase from Q3 2022.
• Net cash flows from operating activities were $15.0 and $23.9 million in the fourth quarter and full year of 2022 respectively.
• Invested $20.5 million and $73.5 million in exploration and development capital expenditures(1) during the fourth quarter and full year of 2022, respectively, which contributed to the drilling of forty five (39.5 net) multi-lateral horizontal wells at Ukalta, Figure Lake and Marten Hills, and included pad construction and facilities installation for the ongoing drilling program. Activity in the fourth quarter related to the drilling of ten (7.9 net) multi-lateral horizontal wells at Figure Lake and Marten Hills as well as one (1.0 net) vertical stratigraphic evaluation well as part of the Northern Exploration program.
• Successfully acquired 23.0 net sections of land prospective for Clearwater heavy oil at a cost of $3.0 million during the fourth quarter, primarily located adjacent to recent Figure Lake drilling, bringing total land acquired in 2022 to 171.5 net sections at a cost of $20.5 million.
• Generated net income of $18.7 million ($0.34/share) and $24.6 million ($0.47/share) in the fourth quarter and full year of 2022 respectively, and was positively impacted by a deferred tax recovery.
• Net debt(1) was $28.2 million at year end, with a net debt to Q4 2022 annualized adjusted funds flow(1) ratio of 0.9 times.
• Rubellite had available liquidity(1) at December 31, 2022 of $30.0 million, comprised of the $40.0 million borrowing limit of Rubellite's first lien credit facility, less current borrowings of $12.0 million and cash and cash equivalents of $2.0 million.
OPERATIONS UPDATE
Three (0.9 net) new wells drilled in the fourth quarter at Marten Hills fully recovered oil based mud ("OBM") from the drilling process and completed their respective IP30 production periods, recording average IP30 production rates of 231 bbl/d, close to double the primary development type curve(1). With primary development on the Company's Marten Hills acreage now complete, the Company will continue to monitor the performance of several offsetting waterflood pilots and assess the potential for secondary recovery on its acreage at Marten Hills later in 2023.
At Figure Lake, a total of eight (8.0 net) multi-lateral horizontal wells were spud and seven (7.0 net) were rig released during the fourth quarter. Development drilling operations were focused on two existing pads, adding three (3.0 net) horizontal multi-lateral wells to the pad at 1-13-63-18W4 (the "1-13 Pad") and three (3.0 net) horizontal multi-lateral wells on the pad to the north at 9-23-63-18W4 (the "9-23 Pad"). Two wells were also spud on a new pad at 3-26-63-18W4 (the "3-26 Pad"), with one well rig-released in mid-December and the second rig released January 6, 2023. All three new wells drilled at the 1-13 Pad recovered their OBM load fluid during the fourth quarter of 2022 and progressed through their respective IP30 production periods, recording IP30 rates ranging from 128 to 212 bbl/d to average 159 bbl/d as compared to the Figure Lake type curve(1) IP30 of 116 bbl/d. The three wells on the 9-23 Pad drilled during the fourth quarter have fully recovered their respective OBM and recorded IP30 production rates of 168 bbl/d, 195 bbl/d and 204 bbl/d respectively. Two additional wells on the 9-23 Pad rig released in January are amongst the strongest Figure Lake wells drilled to date, averaging 231 bbl/d and 259 bbl/d respectively during their recently completed IP30 periods. Positive results continued from the offsetting 3-26 Pad, with the well rig released in mid-December recording an IP30 period average rate of 172 bbl/d; the second well rig released in early January, which was approximately 20% shorter than the Figure Lake type curve(1), averaging 117 bbl/d through its IP30 period, and the third well rig released on the 3-26 Pad in early February tracking above the Figure Lake type curve(1). Performance from the recent Figure Lake development wells continues to be positive and will be monitored to inform future corporate guidance as field operations are optimized.
The drilling rig was moved in mid-February to a new Figure Lake pad at 9-31-62-18W4 (the "9-31 Pad") and a step-out multi-lateral horizontal well was rig released in early March and has commenced OBM recovery operations. Finally at Figure Lake, the first of two wells have been spud on a new pad (the "10-19 Pad") on the Buffalo Lake Metis Settlement acreage acquired in the first quarter of 2023. Operationally, Rubellite intends to complete the drilling of the two wells on the 10-19 Pad in early April. The development / infill drilling program at Figure Lake will resume after break-up conditions allow for access in early May.
Rubellite spud the first of three (2.5 net) planned multi-lateral wells in its Northern Exploration Program in early January. The one (0.5 net before payout) horizontal multi-lateral well at Dawson (5-16-81-16W5) had approximately 7,500 meters of horizontal length as compared to a Figure Lake type curve(1) well with approximately 9,000 meters of horizontal length. The exploratory well at Dawson fully recovered its OBM load fluid and recorded an IP30 rate of 81 bbl/d. This exploration well's performance will be closely monitored through the remainder of the winter operating season with follow-up activity in winter 2023/24 under evaluation. In late January, the drilling rig moved to Peavine and drilled two (2.0 net) exploratory multi-lateral wells. The Peavine wells have completed their load oil recovery operations and began producing heavy oil volumes to sales progressively through February and early March. Performance of the Peavine wells will be closely monitored through the remainder of the winter operating season; however, initial results suggest future drilling in the Peavine area will not likely compete for capital relative to Rubellite's other attractive development projects at the current time.
YEAR-END 2022 RESERVES
Rubellite's proved plus probable reserves(1) at year-end 2022 are 10.3 MMboe, comprised of 100% heavy crude oil (2021 – 6.0 MMboe). Reserve additions offset production, resulting in an increase in total Company proved plus probable reserves year-over-year of 4.3 MMboe, representing incremental growth of 71%.
Highlights include:
• Total proved reserves were 6.1 MMboe at year-end 2022, representing 59% of the Company's proved plus probable reserves (2021 – 53%) and a 92% increase over 2021.
• Proved plus probable producing reserves were 3.9 MMboe at December 31, 2022, representing 38% of total proved plus probable reserves (2021 – 1.8 MMboe; 30%).
• The Figure Lake type curve(1) total proved plus probable reserves increased 13% to 130 Mboe per well with future development costs of $1.9 million per well. The Figure Lake type curve IP30 rates remained consistent with the YE 2021 type curve at 116 bbl/d as the positive performance data from new wells exceeding these IP30 rates was very recent at the time of preparation of the McDaniel Reserve Report.
• Based on the three consultant average price (McDaniel, GLJ, Sproule) forecasts (the "Consultant Average Price Forecast") used by McDaniel, the net present value ("NPV") of Rubellite's total proved plus probable reserves (discounted at 10%) before income tax, was $215.2 million (2021 – $123.2 million). The increase related primarily to the material increase in reserves at year-end 2022 as compared to the prior year.
• All abandonment, decommissioning and reclamation obligations are included in the reserve report, consistent with year-end 2021. All reserve well decommissioning obligations as well as the additional costs expected to be incurred to abandon and reclaim non-reserve wells, facilities and pipelines are included.
• Based on the Consultant Average Price Forecast, Rubellite's reserve-based net asset value ("NAV")(2) (discounted at 10%) at year-end 2022 is estimated at $218.4 million ($3.99 per share) as compared to $143.4 million ($3.27 per share) at year-end 2021.
OUTLOOK AND GUIDANCE
Rubellite is on track to spend a total of $17 - $20 million in Q1 2023 capital expenditure (see "Non-GAAP and Other Financial Measures") to drill, complete, equip and tie-in six (6.0 net) multi-lateral development / step-out wells at Figure Lake and the three (2.5 net) multi-lateral exploratory program which has already been completed. Forecast drilling activities are expected to be funded from adjusted funds flow and the Company's Credit Facility.
Factoring in the positive initial performance from the Q4 2022 and Q1 2023 drilling program to date, production sales volumes for the first quarter of 2023 are expected to average 2,800 - 2,900 bbl/d, exceeding previous November 10, 2022 guidance of 2,200 to 2,600 bbl/d. Based on field estimates for the last two weeks of February, heavy oil production to sales averaged 3,000 bbl/d.
Rubellite will closely monitor the production performance of the highly successful recent drilling program at Figure Lake and the Company anticipates providing full year guidance with the issuance of its Q1 2023 results in May.
Subsequent to year end, Rubellite acquired 20 net sections of prospective land through direct purchase related to the previously announced Land Acquisition and Drilling Commitment Agreement with the Buffalo Lake Métis Settlement. Rubellite plans to drill a minimum of four multi-lateral wells on this acreage to fulfill its operational commitments prior to December 31, 2023. The Company has now grown its land position for exposure to the Clearwater play to 343.9 net sections, up 231% from the 104 net sections held by Rubellite at its inception in July of 2021. A significant portion of the newly acquired lands are complementary to existing operating areas in Ukalta and Figure Lake on the southern Clearwater trend, while the remainder of the additional new acreage supplements Rubellite's exploratory acreage in the northern Clearwater play fairway and captures land on other Clearwater exploration prospects.
