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Raging River rises

Also: Niko finds the funding it needs, but it didn't come cheap

When he was younger, Max Fawcett wanted to make a mint in the markets. Now as the managing editor of Alberta Venture he gets to write about them. Close enough, right? He can be reached at mfawcett@albertaventure.com

Jul 18, 2013

by Max Fawcett

Raging River Exploration (TSE:RRX) is off to a good start. The junior producer, which emerged from a 2012 deal with Crescent Point Energy, debuted on the Toronto Stock Exchange just a few months ago, and the early returns have been promising. The oil-weighted company’s shares popped to a 52-week (and, by definition, all-time) high on Wednesday after its 2Q13 production exceeded expectations (despite a wet spring) and management increased production guidance in an operational update. Now, as the Calgary Herald’s Dan Healing reported, the company is moving ahead with its plans for the rest of the year. “Raging River reported drilling four successful Viking oil wells in the three months ended June 30 and completing eight wells that had been drilled in the previous quarter. Since July 1, it said it has drilled 12 gross (10.3 net) wells, adding that production has recently reached 4,800 boe/d. That’s just shy of its revised annual average production target of 4,850 boe/d and exit rate of 5,700 boe/d (both up 100 boe/d from targets moved higher in March). The company also reported it had lowered its average on-stream cost per well to $875,000 — it was about $950,000 a year ago.”

Meanwhile, Niko Resources (TSE:NKO) shareholders got some good news as well last week, as the company secured debt financing that will allow it to fund its operations for the balance of the year. The $60 million worth of debt that it raised didn’t come cheaply, though, as FirstEnergy’s Darren Engels noted in a report. “Niko expects that proceeds of the loan will be US$52.5 million. This is quite a significant discount to the par value of the loan. The total cost of this funding, including the amortization of the discount, amounts to approximately 15.1 per cent per year.” Ouch. Still, as Engels pointed out, it may well be worth the price it paid given the alternatives. “While this debt appears to be very expensive, it further reduces funding uncertainty. Issuing incremental financing most likely implies that the asset dispositions of US$157 million are not expected in the near-term.”

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