These changes in the marketplace will take some time. Consequently, in order to minimize risk due to price fluctuations, Rock is actively hedging a portion of our production. We currently have 500 bbls/d hedged at WCS CDN$73.08/bbl until the September 30, 2013. We also transport up to 1,000 bbls per day by rail. Rock has been shipping its heavy oil by rail for over two years in order to bypass pipeline bottlenecks and achieve premium pricing.
Outlook and 2013 Guidance
During 2012, Rock took the steps needed to transition itself from a company with a foundation of heavy oil production and a natural gas resource play requiring significant capital, to one entirely focused on oil plays in the Plains and Southwest Saskatchewan regions. These are oil-prone areas where the Company has expertise, plays are generally accessible year-round, well costs are within Rock's financial capability, third-party processing infrastructure is not required and Rock can apply proven production practices to improve recovery factors. To prosper in Central Alberta and Saskatchewan, a company like Rock needs to focus on projects within its means and that generate early significant cash flow - in this price environment, these are oil targets - that it can then re-invest to continue to grow the production and cash flow, re-investing it into exploration and development of resource plays that are scalable and repeatable.
Rock's 2013 preliminary capital budget of $30 million is expected to provide 22% growth in average daily oil production. The capital program includes an anticipated $13 million focused on the our oil program at Mantario in Southwest Saskatchewan and an anticipated $2 million for water flood initiatives associated with the completion of our Onward asset. In addition, $6 million will target optimizing the Company's heritage heavy oil assets, including the installation of up to two high volume lift projects and the drilling of 4-6 oil wells. Rock has allocated $9 million (30%) to exploration initiatives including land, seismic, and drilling, and has a number of exciting exploration prospects which will be tested in the coming months. The Company has chosen not to revise its guidance at this time as we want to ensure the performance of the wells drilled in the first quarter before providing a forecast for the remainder of the year.
As Rock approaches the second quarter of 2013, the Company is excited about the team we have assembled, the assets we have discovered and developed, and the prospects that will allow us to develop a significant growth profile. We are focused on building a suite of assets that will continue to provide our shareholders with a solid, long-life, predictable base of cash flow.
Advisory Regarding Forward-Looking Information and Statements
This press release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words "will", "expects", "believe", "plans", "potential" and similar expressions are intended to identify forward-looking statements or information. More particularly and without limitation, this press release contains forward looking statements and information concerning: 2012 average production; anticipated production rates from the Onward waterflood program; and Rock's drilling plans on its crude oil properties.
Statements relating to "reserves" are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described can be profitably produced in the future.
The forward-looking statements and information in this press release are based on certain key expectations and assumptions made by Rock, including prevailing commodity prices and exchange rates; applicable royalty rates and tax laws; future well production rates; reserve and resource volumes; the performance of existing wells; the success obtained in drilling new wells; the sufficiency of budgeted capital expenditures in carrying out planned activities; the availability and cost of labour and services; and the receipt, in a timely manner, of regulatory and other required approvals. Although Rock believes that the expectations and assumptions on which such forward-looking statements and information are based are reasonable, undue reliance should not be placed on the forward-looking statements and information because Rock can give no assurance that they will prove to be correct. There is no certainty that Rock will achieve commercially viable production from its undeveloped lands and prospects.
Since forward-looking statements and information 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, the risks associated with the oil and natural gas industry in general, such as: operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to reserves, production, costs and expenses; health, safety and environmental risks; commodity price and exchange rate fluctuations; marketing and transportation of petroleum and natural gas and loss of markets; environmental risks; competition; incorrect assessment of the value of acquisitions; failure to realize the anticipated benefits of acquisitions; ability to access sufficient capital from internal and external sources; stock market volatility; and changes in legislation, including but not limited to tax laws, royalty rates and environmental regulations.
Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could affect the operations or financial results of Rock are included in reports on file with applicable securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com). The forward-looking statements and information contained in this press release are made as of the date hereof and Rock 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.
Rock Energy Inc.
Allen J. Bey
President and CEO
Rock Energy Inc.
Vice President Finance and CFO
Most Popular Stories
- SpaceX's Satellite Launch Is 'Game-Changer'
- Reid Confident Congress to Pass Immigration Bill
- Maui Visitor Killed in Shark Attack
- Donors Abandon GOP Over Gun Stance
- Mexico: 'Extremely Dangerous' Radioactive Material Stolen
- CEOs More Optimistic About Economy, Hiring
- Climate Change Early Warning System Urged
- Private Sector Employment Surges by 215,000 Jobs
- Calif. Likes Christie, Says Tea Party's a Drag
- Newtown 911 Tapes Being Released Today