Razor Energy Corp. Announces Second Quarter Results

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CALGARY, Alberta, Aug. 29, 2023 (GLOBE NEWSWIRE) -- Razor Energy Corp. (“Razor” or the “Company”) (TSXV: RZE) announces its second quarter financial and operating results. Selected financial and operational information is outlined below and should be read in conjunction with Razor’s unaudited interim condensed consolidated financial statements, management’s discussion and analysis for the three and six months ended June 30, 2023 which are available on SEDAR at www.sedar.com and the Company’s website www.razor-energy.com.

All amounts are expressed in Canadian dollars. Certain metrics, including those expressed on an adjusted basis, are non-IFRS and other financial measures. See “Non-IFRS and Other Financial Measures” below.

RECAPITALIZATION TRANSACTION

On May 1, 2023, the Company announced a recapitalization transaction (the “Recapitalization Transaction”) which closed on June 16, 2023. This recapitalization transaction included debt settlement (“Debt Settlement”) and a rights offering to all holders of common shares in the capital of Razor (“Razor Common Shares”) by way of a rights offering circular (the “Rights Offering”), pursuant to which:

• Razor disposed of 70% of its common share holdings in FutEra Power Corp. (“FutEra”) and 100% of a class of newly created preferred shares in FutEra to settle $64.0 million of secured debt with Alberta Investment Management Corporation (“AIMCo”), on behalf of certain designated entities managed and advised by AIMCo;
• Razor retained a 30% common share position in FutEra (subject to further adjustment upon preferred share conversion); and
• FutEra is responsible for repayment of US$7.9 million of Razor’s current senior secured debt owed to Arena Investors, LP (“Arena”) under Razor’s Amended and Restated Term Loan Agreement dated March 9, 2022 (the “Arena Debt”).
  

No Razor Common Shares were issued as part of the Debt Settlement.

As a condition to the completion of the transactions contemplated by the Debt Settlement Agreement (as defined below), Razor completed a Rights Offering which closed on June 16, 2023 for gross proceeds of $8.0 million to re-accelerate production development. Razor commenced production enhancement activities in Q2 2023. The Recapitalization Transaction was successful in deleveraging Razor, reducing interest expense and provides an increased potential for transactions that would improve the oil and gas asset portfolio.

DEBT SETTLEMENT
On May 1 2023, the Company entered into a Debt Settlement Agreement (the “Debt Settlement Agreement”) with AIMCo which closed on June 16, 2023. Pursuant to this Debt Settlement Agreement, AIMCo and the Company have agreed to the settlement of all obligations owing by Razor to AIMCo under the AIMCo Term Loan through the transfer to AIMCo of equity interests held by Razor in its previously wholly-owned, non-listed subsidiary, FutEra.

As at June 16, 2023, Razor settled all outstanding indebtedness owed to AIMCo of $64.0 million by way of the sale and transfer by Razor to AIMCo of that number of FutEra Common Shares representing 70% of the issued and outstanding FutEra Common Shares and 100% of the issued and outstanding FutEra Preferred Shares. In addition, in accordance with the Debt Settlement Agreement, the Company conducted a rights offering to all holders of Razor Common Shares by way of a rights offering circular (the “Rights Offering”) which closed on June 16, 2023.

RIGHTS OFFERING
On May 9, 2023, the Company announced the Rights Offering to eligible holders of its common shares (the “Common Shares”) of record at the close of business on May 16, 2023 (the “Record Date”). This rights offering closed on June 16, 2023. A total of 20,249,985 rights were exercised, resulting in the issuance of 10,014,821 Common Shares and 10,014,821 Warrants for gross proceeds of $8.0 million.

Pursuant to the Rights Offering, each holder of Common Shares received one right (a “Right”) for each one Common Share held. Each whole Right entitled the holder to subscribe for 0.494555 of a unit (a “Rights Unit”). Each Rights Unit consisted of one Common Share (a “Unit Share”) and one transferable Common Share purchase warrant (a “Unit Warrant”). Each Unit Warrant entitled the holder to purchase one Common Share at a price of $1.20 per Common Share for a period of five years from the date of issuance. Holders of Common Shares needed to exercise 2.022 Rights to acquire one Right Unit. A holder of Rights paid $0.80 (the “Subscription Price”) to purchase one Right Unit.

OUTLOOK

Razor
Razor continues to look forward with plans for the future while remaining focused on its mid to long-term sustainability. Razor recognizes multiple deep value streams in its assets and is actively engaged in liberating them for the benefit of shareholders. The Company has an extensive opportunity set of high-quality wells requiring reactivation, many of which have payout metrics which exceed the Company’s economic thresholds. Razor will continue production enhancement activity throughout 2023. Certain activities involve repairs and maintenance work which will be expensed for accounting purposes and operating netbacks will be reduced during this timeframe. In aggregate, the annual base decline of these wells is anticipated to be consistent with the Company’s current corporate rate of approximately 12%. The Company continues to focus on cost control on its operated properties. In addition to the planned production enhancement program, Razor will take a cautious and case-by-case approach to capital spending in 2023, focusing on low risk, capital efficient opportunities to increase field efficiencies and corporate netbacks.

Razor has high reservoir quality, low decline, isolate carbonate Swan Hills reef light oil pools that contain large original oil in place with over 60 years of production history. Razor believes these reefs are ideally suited for open-hole horizontal development drilling upside.

SELECT QUARTERLY HIGHLIGHTS

The following tables summarizes key financial and operating highlights associated with the Company’s financial performance.

SECOND QUARTER OPERATIONAL UPDATE

Production volumes in Q2 2023 averaged 3,448 boe/d, a decrease of 21% from Q2 2022 volumes of 4,340 boe/d and represents a 14% decrease from Q1 2023 of 4,013 boe/d. Production volumes averaged 3,729 boe/d for the six months ended June 30, 2023, a decrease of 15% from the same period in the prior year (six months ended June 30, 2022 – 4,398 boe/d). Highlights of the changes in production volumes are as follows:

• Swan Hills – production volumes decreased 23% for Q2 2023 as compared to Q2 2022 and decreased 22% as compared to Q1 2023. Production volumes decreased 20% for the six months ended June 30, 2023 as compared to the same period in the prior year. The decrease in production volumes for both the three and six months ended June 30, 2023, is the result of decreased non-operated production as a result of infrastructure that went offline in the second half of 2022, limited workover activity, as well as the impact of wildfires throughout Q2 2023 which also impacted production as compared to the first quarter of 2023.
• Kaybob – production volumes decreased 16% for Q2 2023 as compared to Q2 2022 and were consistent with Q1 2023. Production volumes decreased 6% for the six months ended June 30, 2023 as compared to the same period in the prior year. The decrease in production volumes for the three and six months ended June 30, 2023 was the result of the timing of the Company’s 2022 reactivation program which increased production in the second half of 2022 and into 2023. The Company’s 2023 reactivation program commenced in June 2023.
• Southern Alberta – production volumes decreased 15% for Q2 2023 as compared to Q2 2022 and decreased 16% from Q1 2023. Production volumes decreased 4% for the six months ended June 30, 2023 as compared to the same period in the prior year. The decrease in production volumes for the three and six months ended June 30, 2023 was the result of a minor property disposition in Q2 2023 partially offset by the impact of the Company’s 2022 reactivation program which increased production in the second half of 2022 and into 2023.
  

Adjusted net operating expenses increased $0.3 million or 2% on a total dollar basis and increased 28% on a per boe basis in Q2 2023 compared to the same period in 2022. The increase in the adjusted net operating expense on a total dollar basis was due to increased operating costs associated with environmental activities as well as higher utility costs related to the increase in the AESO pool price by 29% as compared to the same period in the prior year partially offset by lower variable costs associated with decrease in production. Operating costs increased on a per boe basis as a result of this increase in operating costs combined with lower production volumes for Q2 2023.

For the six months ended June 30, 2023, adjusted net operating expense increased 13% on a total dollar basis and increased 37% on a per boe basis as compared to the six months ended June 30, 2022. The increase in the adjusted net operating expense on a total dollar basis was due to increased operating costs associated with environmental activities as well as higher utility costs related to the increase in the AESO pool price by 41% as compared to the same period in the prior year partially offset by lower variable costs associated with decreased production. Operating costs increased on a per boe basis as a result of this increase in operating costs combined with lower production volumes for 2023.

The primary factors affecting operating costs on a $/boe basis are production levels, workover activity and electricity pricing. Inherent within the Company’s hydrocarbon operations is a prominent fixed cost element, or those costs that are not correlated to production levels. On a relative basis these costs are higher with lower production. Razor’s reactivation program took place throughout 2022 and resumed in June 2023.

CAPITAL EXPENDITURES

During Q2 2023, Razor invested $1.0 million in the Swan Hills Geothermal Power Project, executed pipeline work of $0.2 million and spent $0.2 million on facilities. During the six months ended June 30, 2023, the Company invested $2.0 million on its Swan Hills Geothermal Power Project, executed pipeline work of $0.6 million, spent $0.4 milion on facilities and $0.4 million on turnarounds.

On June 29, 2023, the Company disposed of non-operated, non-core Enchant area assets for proceeds of $3.5 million. The disposition consisted of petroleum and natural gas properties with a net book value (net of decommissioning obligations) of $2.3 million resulting in a $1.2 million gain on disposition.

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”.

www.razor-energy.com

About Blade

Blade Energy Services is a subsidiary of Razor. Operating in west central Alberta, Blade’s primary services include fluid hauling, road maintenance, earth works including well site reclamation and other oilfield services.

www.blade-es.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 objectives and anticipated results, including the potential benefits and effects of the Recapitalization Transaction on Razor, the Company’s capital program and other activities; restarting wells; and execution of production enhancement programs. 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 resourc