Rock Energy Inc. Achieves Record Production and Cash Flow, Increases Capital Spending and Guidance for 2014, and Reports Second

Rock Energy Inc. Achieves Record Production and Cash Flow, Increases Capital 
Spending and Guidance for 2014, and Reports Second Quarter Results 
NEWS RELEASE TRANSMITTED BY Marketwired 
FOR: Rock Energy Inc. 
TSX SYMBOL:  RE 
AUGUST 12, 2014 
Rock Energy Inc. Achieves Record Production and Cash Flow, Increases Capital
Spending and Guidance for 2014, and Reports Second Quarter Results 
CALGARY, ALBERTA--(Marketwired - Aug. 12, 2014) - Rock Energy Inc. (TSX:RE)
("Rock" or the "Company") is pleased to report its
financial and operating results for the three and six months ended June 30,
2014. 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 June 30, 2014 and related Management's
Discussion and Analysis ("MD&A"). Copies of Rock's materials
may be obtained on www.sedar.com and on our website at www.rockenergy.ca.  
CORPORATE SUMMARY 
/T/ 
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Three Months Ended     Six Months Ended 
FINANCIAL                                     June 30,             June 30, 
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2014       2013      2014       2013 
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Crude oil and natural gas                                                   
 revenue ('000)                     $37,422    $18,215   $69,864    $31,443  
Funds from operations ('000) (1)    $19,276     $6,665   $34,590     $9,705 
  Per share - basic                   $0.48      $0.17     $0.87      $0.25  
- diluted                         $0.46      $0.17     $0.83      $0.25  
Net income (loss) ('000)             $8,292       $100   ($9,009)   ($3,508)
  Per share - basic                   $0.21          -    ($0.23)    ($0.09) 
- diluted                         $0.20          -    ($0.23)    ($0.09) 
Capital expenditures, net ('000)    $12,004     $2,175   $34,892    $14,891  
As at      As at   
June 30,   June 30,  
2014       2013 
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Net debt ('000) (2)                                                          
$16,775     $8,165 
Common shares outstanding                             40,179,008 39,343,244 
Options outstanding                                    3,271,971  3,223,641  
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OPERATIONS                          Three Months Ended     Six Months Ended  
June 30,             June 30, 
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2014       2013      2014       2013 
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Average daily production                                                    
  Crude oil and natural gas                                                  
liquids (bbls/d)                   4,730      2,704     4,675      2,737 
  Natural gas (mcf/d)                 1,549      2,379     1,611      2,519 
  Barrels of oil equivalent                                                  
(boe/d)                            4,988      3,100     4,944      3,157  
Average product prices                                                      
  Crude oil and natural gas                                                  
liquids ($/bbl)                   $85.32     $71.27    $80.62     $60.23 
  Natural gas ($/mcf)                 $4.99      $3.86     $5.65      $3.65 
  Total ($/boe)                      $82.45     $64.56    $78.08     $55.03  
Field netback ($/boe) (1)            $47.82     $28.61    $43.79     $21.18 
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(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 companies.                     
(2) Net debt excludes commodity price contracts.                             
/T/ 
LETTER TO THE SHAREHOLDERS  
During the second quarter of 2014, Rock achieved record daily production and
cash flow. Although the quarter experienced a relatively low level of activity
(as is typical during spring break-up) the Company completed preparations for
the upcoming summer drilling season. 
The quarter was highlighted by the following specific accomplishments: 
/T/ 
--  Drilled 4 (4.0 net) oil wells with 100% casing success including 1 (1.0 
net) horizontal Viking oil well at Onward and 3 (3.0 net) successful 
Mannville oil wells at Onward;  
--  Averaged 4,988 boe per day (95% crude oil and liquids) of production 
representing a 61% increase from a year ago; 
--  Spent a total of $12.0 million net on the capital expenditure program; 
--  Generated funds from operations for the quarter of $19.3 million ($0.48/ 
basic share) which is an increase of 23% from Q1 2014 and 182% increase 
from a year ago; 
--  Net debt at the end of Q2 was $16.8 million and effective August 12, 
2014 the Company's bank has increased the lending facility to $80.0 
million; 
--  To date in Q3, the company has drilled another 6 (6.0 net) horizontal 
Viking oil wells at Onward, 2 (2.0 net) horizontal oil wells at 
Mantario, 1 (1.0 net) standing step out well at Mantario, and 2 (2.0 
net) unsuccessful exploration wells (West Mantario, Atlee Buffalo); and 
--  In conjunction with the acquisition of the two offsetting Mantario 
assets in Q1, Rock applied for, and on August 6, 2014 received, approval 
for the expansion of the EOR project at Mantario. 
/T/ 
Rock's average realized price in the second quarter of 2014 was $82.45 per
boe compared to $73.58 per boe in the first quarter of 2014. The increase in
price realization is primarily attributed to an increase in WTI pricing, and a
higher percentage of Viking light oil production. 
Operating costs decreased during the quarter by 18% to $14.82 per boe compared
to $18.04 per boe in the first quarter of 2014. This decrease is attributable
to a change in production mix resulting from the sale of the heritage heavy oil
assets, combined with the increase in lower cost production from both Mantario
and Onward. Incremental operating costs associated with spring break-up were
minimal; however wet weather was a challenging factor in July and to date in
early August. 
Rock generated a field netback of $47.82 per boe in the second quarter of 2014
compared to $39.64 per boe in the first quarter of 2014. Though royalties were
higher on a per boe produced basis in the quarter, field netbacks were
positively impacted by improved product pricing and reduced operating costs.  
Gross capital expenditures for the second quarter of 2014 were $12.0 million,
including $3.7 million for the drilling program, $8.6 million for facilities,
$0.6 million for land and seismic offset by $0.9 million of non-core property
divestitures. 
Rock's daily production for the second quarter of 2014 averaged 4,988
boe/d (95% oil and liquids).  
Mantario 
Rock continues to move forward with the construction of the battery and
infrastructure for the implementation of the water/chemical flood at Mantario.
This summer the Company has drilled 2 (2.0 net) horizontal wells and 1 (1.0
net) step out vertical location to the south-east of the main pool. We have
also drilled one unsuccessful exploration well to the south west of the main
pool. For the remainder of the year the Company will drill another 6 (6.0 net)
vertical step out locations, 7 (7.0 net) horizontal producers into the main
pool, and convert 9 (9.0 net) wells into injectors. The Company plans to have
the pressure maintenance scheme (water flood) operational by the beginning of
Q4 this year, and in conjunction with the recent approval for the project
expansion, is working to accelerate the EOR scheme (polymer flood) and have it
operational during Q1, 2015, once the EOR project is operational the Company
will be eligible to receive its royalty credit and thus a significant increase
in cash flow. 
Exploration efforts in Mantario during the remainder of the year will be
focused on testing 2 - 3 new pools along the existing main Mantario shore face.
In addition, Rock will test another 2 - 3 new exploration targets in the
greater Mantario area.  
Onward Viking 
During the second quarter of 2014, the Company did not complete any horizontal
oil wells in the Viking Formation at Onward. As a result of this lack of
drilling (due to spring break-up), Viking production from this area (which
peaked at approximately 500 bopd) has declined to 250-275 bopd. Drilling of
Viking wells has resumed after break up and to date we have drilled 7 (7.0 net)
horizontal step out wells. These wells are currently being completed and
brought on stream. Rock plans to drill an additional 5 step-out wells by the
end of the year to extend this play and more fully evaluate the Company's
remaining lands in this area. Another 6 step out wells will be drilled in Q1
2015 which have been delayed due to surface access limitations requiring winter
conditions. With the delay of this capital spending, the Company has decided to
reallocate funds to begin drilling development locations in the areas already
de-risked by our previous activity. In addition, Rock has elected to expand our
capital program to drill an extra 10 (10.0 net) wells for a total of 15 (15.0
net) Viking development locations by year end. With this additional activity,
Rock is now forecasting Viking light oil production to reach approximately
1,000 bopd by year end. 
Onward Mannville 
During the fourth quarter of 2013, Rock drilled a discovery well at
11-16-34-24W3 into a new Lloydminster pool (West Onward). This discovery well
has been producing at rates exceeding 100 bopd for the last three months.
During the second quarter, Rock drilled 3 (3.0 net) follow-up locations. These
wells were successful in encountering the main Lloydminster formation and are
being completed and brought on stream. One of the wells encountered an
additional pay zone in the Bakken and initial completion results from this zone
have been very encouraging, yielding initial rates of over 50 bopd. We are
mapping this new zone to determine the size of the pool, and identify the
follow-up locations. In addition to this development work, Rock has identified
another 3 - 4 exploration targets that the Company plans to test in the next 12
months. 
Outlook and 2014 Guidance 
The strong financial performance during the second quarter, and the opportunity
to accelerate production and cash flow growth, has prompted the Company to
expand its capital program to $110 million (from $91 million) and revise its
guidance upward for the year. The incremental capital will be used for the
additional Viking development locations at Onward and to accelerate the
implementation of polymer injection at Mantario. While this additional capital
spending will not have a significant impact on 2014 results, it will provide
substantial benefits in 2015. 
The Company is now forecasting to generate average 2014 production of 4,900 -
5,100 boe/d (95% oil). For the remainder of 2014, Rock is assuming that WTI
averages $98.50 US/bbl, WTI - WCS differential averages $20.00 US/bbl, AECO gas
price averages $4.00 CDN/mcf and the exchange rate averages $1.08 CDN/US. Given
these assumptions, the Company is forecasting funds from operations of $70 -
$72 million ($1.75 - $1.80/share). With the forecasted funds from operations
and capital spending plan, the net debt at the end of the year is targeted to
be $55 - $57 million (0.6 times forecasted annualized fourth quarter funds from
operations) against its newly amended credit facility of $80 million. 
The third quarter of 2014 will see the Company invest approximately $40 million
towards constructing the facilities at Mantario, drilling the infill locations
for the development of the Mantario pool, drilling the step out wells to
delineate the Viking light oil play at Onward, and testing 4 - 6 new
exploration ideas in core areas.  
The Company is also actively engaged in a process of divesting our remaining
non-core assets while we build production and value in our core areas through
both acquisition and drilling projects. We remain focused on building a suite
of assets that will continue to provide our shareholders with a solid,
long-life, predictable base of sustainable 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: forecast average production; forecast funds from
operations; forecast net debt; forecast capital spending; anticipated
in-service date for, and royalty rates and royalty credits from the Mantario
water/chemical flood program; and Rock's drilling plans for 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. 
For further information please visit Rock's website at www.rockenergy.ca. 
-30-
FOR FURTHER INFORMATION PLEASE CONTACT: 
On behalf of the Board of Directors,
Allen J. Bey
President and Chief Executive Officer
403.218.4380
or
Todd Hirtle
Vice President Finance and Chief Financial Officer
403.218.4380 
INDUSTRY:  Energy and Utilities - Oil and Gas  
SUBJECT:  ERN 
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-0- Aug/13/2014 00:58 GMT
 
 
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