Rock Energy Inc. Announces Strong Q3 2013 Results, Increases Capital Program and Revises Guidance

Rock Energy Inc. Announces Strong Q3 2013 Results, Increases Capital Program 
and Revises Guidance 
CALGARY, ALBERTA -- (Marketwired) -- 11/07/13 -- Rock Energy Inc.
(TSX:RE) ("Rock" or the "Company") is pleased to report its financial
and operating results for the three months and nine months ended
September 30, 2013. Rock is a Calgary-based crude oil exploration,
development and production company. 
Rock has filed its unaudited condensed interim Consolidated Financial
Statements for the period ended September 30, 2013 and related
Management's Discussion and Analysis ("MD&A"). Copies of Rock's
materials may be obtained on and on our website at 

CORPORATE SUMMARY                                                           
                                      Three Months Ended  Nine Months Ended 
FINANCIAL                               September 30,       September 30,   
                                           2013     2012      2013     2012 
Crude oil and natural gas revenue      $ 28,874 $ 10,988  $ 60,317 $ 33,765 
Funds from operations ('000) (1)       $ 11,499 $  3,711  $ 21,204 $ 10,432 
  Per share - basic                    $   0.29 $   0.09  $   0.54 $   0.27 
    - diluted                          $   0.29 $   0.09  $   0.54 $   0.27 
Net income ('000)                      $  5,041 $ (2,186) $  1,533 $ (5,862)
  Per share - basic                        0.13    (0.06) $   0.04 $  (0.15)
    - diluted                              0.13    (0.06) $   0.04 $  (0.15)
Capital expenditures ('000)            $ 12,530 $  7,395  $ 29,547 $ 22,701 
(excluding dispositions)                                                    
                                                      As at            As at
                                              September 30,    September 30,
                                                       2013             2012
Working capital deficiency, including bank                                  
 debt and excluding commodity price                                         
 contracts ('000)                          $          9,286 $          2,614
Common shares outstanding                        39,364,578       39,101,582
Options outstanding                               3,142,941        2,905,435
                                        Three Months Ended Nine Months Ended
OPERATIONS                                 September 30,     September 30,  
                                             2013     2012     2013     2012
Average daily production                                                    
  Crude oil and natural gas liquids                                         
   (bbls/d)                                 3,585    1,720    3,023    1,716
  Natural gas (mcf/d)                       1,805    3,131    2,279    3,360
  Barrels of oil equivalent (boe/d)         3,886    2,242    3,403    2,276
Average product prices                                                      
  Crude oil and natural gas liquids                                         
   ($/bbl)                               $  86.27 $  64.94 $  70.55 $  67.37
  Natural gas ($/mcf)                    $   2.61 $   2.47 $   3.37 $   2.28
  Total ($/boe)                          $  80.77 $  53.27 $  64.93 $  54.15
Field netback ($/boe) (1)                $  38.27 $  18.43 $  27.75 $  18.83
(1) Funds from operations, funds from operations per share and field netback
are not terms prescribed by International Financial Reporting Standards     
(IFRS), and so are considered non-GAAP measures. Funds from operations      
represents cash generated from operating activities before changes in non-  
cash working capital and decommissioning expenditures. Rock considers funds 
from operations a key measure as it demonstrates the Company's ability to   
generate the cash necessary to fund future growth through capital           
investment. Funds from operations per share is calculated using the same    
share basis which is used in the determination of net income (loss) per     
share. Field netback is calculated as crude oil and natural gas revenues    
after deducting royalties, operating costs and transportation costs,        
resulting in an approximation of initial cash margin in the field on crude  
oil and natural gas production. Rock's use of these non-GAAP measurements   
may not be comparable with the calculation of similar measures for other    

During the third quarter of 2013, Rock continued to deliver strong
production and cash flow growth. The Company made significant
progress in developing its Mantario oil pool, and generated positive
exploratory drilling results within the Southwest Saskatchewan core
area at both Mantario and Onward. 
The quarter was highlighted by the following specific

--  Generated funds from operations for the quarter of $11.5 million
    ($0.29/share). This is an increase of 71% from Q2/2013 ($0.17/share) and
    210% more than Q3 of 2012;
--  Averaged 3,886 boe per day (92% crude oil and liquids) of production
    representing an increase of (25%) from Q2/ 2013, and a 73% increase from
    a year ago;
--  Drilled 7 (7.0 net) new wells at Mantario, including 4 (4.0 net)
    development wells on 40 acre spacing and 1 (1.0 net) well further
    extending the initial pool boundary;
--  Drilled 4 (4.0 net) wells at Onward including the initial 2 (2.0 net)
    Viking horizontal test wells. Announced preliminary drilling results and
    accumulation of a significant land base at Onward for a potential Viking
    light oil resource play;
--  Spent a total of $12.2 million on a capital expenditure program
    (excluding acquisitions and divestitures); and
--  Acquired minor properties in our Onward area for $0.3 million. 

Rock generated a field netback of $38.27 per boe in the third quarter
of 2013 compared to $28.61 per boe in the second quarter of 2013. The
improvement in netbacks can largely be attributed to strong commodity
Rock's realized price in the third quarter of 2013 was $80.77 per boe
compared to $64.56 per boe in the second quarter of 2013. The main
contributors to the increase in real
ized prices have been the
increase in the reference crude oil WTI and WCS prices and with
narrowing differentials the corresponding reduction in blending
costs. The reference price for WCS in Q3/2013 was $91.74/bbl while in
Q2/2013 it was $76.92/bbl. 
Operating costs continued to decrease during the third quarter to
$19.30 per boe compared to $20.16 per boe in the second quarter of
2013. Rock expects to continue to reduce our operating costs going
forward through the addition of lower cost production from Mantario
and continued optimization initiatives at our operations in the
greater Lloydminster area. 
Gross capital expenditures for the third quarter of 2013 were $12.2
million, which were in line with our forecast capital program, but
considerably more than in the second quarter which was affected by
spring break up conditions. 
Rock's daily production for the third quarter of 2013 averaged 3,886
boe/d (92% oil and liquids). Currently the Company is producing over
4,000 boe/d. 
Area Activity Update 
During the third quarter Rock drilled seven (7.0 net) wells at
Mantario. This activity resulted in five (5.0 net) oil wells and two
(2.0 net) unsuccessful wells. Four of the wells drilled were 40 acre
locations to delineate the main pool, and three were drilled to test
flank extensions of the main pool. One of the extension wells was
successful, and the other two did not encounter the primary target.
unsuccessful wells were cased as potential water source wells. The
company now has 31 oil wells drilled into the main pool producing
over 2,700 bopd. 
The Company has continued to work towards the implementation of down
spaced drilling, a water flood for pressure maintenance, and
ultimately, the implementation of a polymer flood on the Mantario
pool. During October, the first infill horizontal test wells were
drilled and completed and will be evaluated over the fourth quarter.
In addition, we have commenced capital spending to order long lead
equipment necessary for the construction of a central processing
facility and water injection plant. 
At Onward, the Company announced it has assembled over 37 net
sections of largely contiguous land, and confirmed the existence of
light oil in the Viking Formation thereon. In late September, Rock
drilled and completed its first two horizontal wells in the Viking,
which had an average 30 day initial production rate of 40 bbls/d, in
line with Management expectations and economic thresholds for the
To further test and derisk the Viking play at Onward, Rock's Board of
Directors have approved a $6 million expansion to the 2013 capital
program. This incremental capital will allow for 5 additional Viking
wells to be drilled into the formation during Q4, as well as add
additional capital to secure long lead time equipment for the
Mantario infrastructure. 
In addition to the development activity at Onward and Mantario, Rock
plans to drill 2 - 3 exploratory wells to test new pools and
formations in the South West Saskatchewan core area during the fourth
quarter of 2013. 
Rock's Board of Directors have approved an increase to the capital
budget by $6 million to $48 million which includes drilling an
estimated total of 42 (41.0 net) wells in 2013. The capital program
now includes an anticipated $22 million focused on the development
program at Mantario, $6 million to further test and derisk the Viking
lands at Onward, $6 million in the greater Lloydminster area, $5
million for water flood initiatives associated with the development
of its Onward asset and $9 million on exploration initiatives
including drilling, land and seismic. 
Given the expanded capital budget, and results achieved to date, the
Company is forecasting to produce an average of approximately 3,300 -
3,500 boe/d during 2013. Assuming that for the remainder of 2013
crude oil prices average US $95.00 WTI per barrel, the WTI to WCS
differential averages $30.00/bbl and natural gas at AECO averages
$3.00 CDN/mcf with an exchange rate of $1.00 CDN$/US$, the Company
would generate funds from operations of $28 - $30 million (or $0.72 -
$0.76/share) and have a year-end 2013 net debt position of
approximately $22 million (0.7 times fourth quarter funds from
operations annualized). 
For 2014 Rock's Board of Directors have approved a capital spending
program of $62 million. This capital budget will provide for the
drilling of 35 - 40 wells, development of the production/water flood
facility at Mantario, the continued development of the Viking light
oil resource play at Onward and an active exploration program. 
Specifically the program includes the drilling of 15 infill wells
($15 million) and the construction of the production/water flood
facility at Mantario ($23 million), $11 million to drill 10
horizontal Viking wells to further test and derisk the lands at
Onward, $4 million to the Plains core area to drill 5 wells, and $9
million for exploration activities including land, seismic and the
drilling of 5 - 10 exploratory wells. 
With this capital spending program, the Company is forecasting to
produce an average of 4,000 - 4,200 boe per day, representing a year
over year increase of approximately 15-20% from average 2013
projected levels. 
Assuming 2014 crude oil prices average US $95.00 WTI per barrel, the
WTI to WCS differential averages $20.00/bbl and natural gas at AECO
averages $3.00 CDN/mcf with an exchange rate of $1.02 CDN$/US$, the
company is forecasting to generate annual cash flow of $42 million
($1.08/share) and have year-end debt of $42 million (1.0 times cash
The asset at Mantario continues to perform very well and Management
believes it will be developed into a premier asset with a long
reserve life, low decline, and high recovery factor. The Viking play
at Onward is expected to provide a light oil production base, and
Rock is focused on discovering the full potential of this asset. In
addition to these development projects, the Company will be testing
numerous exploration plays that could provide the next leg of growth. 
The Company has continued to make progress in delivering on
production growth and cost reduction targets. Rock's asset base is
generating predictable cash flow for the Company. With ample
opportunity, a strong balance sheet and a foundation of cash flow,
Rock has the capability to provide its future growth. 
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 Rock's
expectation of operating costs, future drilling and development under
its capital program, as well as forecasts for average production,
commodity prices, heavy oil differentials, funds from operations and
net debt. 
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
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 ( 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. 
For further information please visit Rock's website at
Rock Energy Inc.
Allen J. Bey
President and Chief Executive Officer
Rock Energy Inc.
Todd Hirtle
Vice President, Finance and Chief Financial Officer
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