Rubellite Energy Corp. Reports Third Quarter Financial and Operating Results

Press Release

Calgary, Alberta – November 12, 2024 (TSX:RBY) – Rubellite Energy Corp. (“Rubellite” or the “Company”), is pleased to report its third quarter 2024 financial and operating results.

Select financial and operational information is outlined below and should be read in conjunction with Rubellite’s unaudited condensed interim consolidated financial statements and related Management’s Discussion and Analysis (“MD&A”) for the three and nine months ended September 30, 2024, which are available through the Company’s website at www.rubelliteenergy.com and Sedar+ at www.sedarplus.ca.

This news release contains certain specified financial measures that are not recognized by GAAP and used by management to evaluate the performance of the Company and its business. Since certain specified financial measures may not have a standardized meaning, securities regulations require that specified financial measures are clearly defined, qualified and, where required, reconciled with their nearest GAAP measure. See “Non GAAP and Other Financial Measures” in this news release and in the MD&A for further information on the definition, calculation and reconciliation of these measures. This news release also contains forward-looking information. See “Forward-Looking Information”. Readers are also referred to the other information under the “Advisories” section in this news release for additional information.

THIRD QUARTER 2024 HIGHLIGHTS

• Third quarter conventional heavy oil sales production of 5,954 bbl/d was 32% higher than the second quarter of 2024 (Q2 2024 – 4,503 bbl/d) and 89% above the third quarter of 2023 (Q3 2023 – 3,154 bbl/d). During the third quarter, the acquisition of Buffalo Mission Energy Corp. (the “BMEC Acquisition”) contributed approximately 1,528 bbl/d and there were eleven (10.5 net) wells brought on production from the drilling program.

• Exploration and development capital expenditures⁽¹⁾ totaled $33.7 million for the third quarter to drill, complete, equip and tie-in eleven (11.0 net) multi-lateral horizontal development / step-out delineation wells at Figure Lake and five (2.5 net) multi-lateral horizontal development wells at Frog Lake. Spending on facilities of $2.9 million in the quarter were for the Figure Lake gas conservation project, bringing total gas plant and pipeline expenditures for 2024 to $5.4 million.

• Adjusted funds flow before transaction costs⁽¹⁾ in the third quarter was $25.0 million ($0.37 per share), a 21% increase from the second quarter of 2024 (Q2 2024 – $20.7 million; $0.33/share) and a 60% increase from the third quarter of 2023 (Q3 2023 – $15.6 million; $0.25 per share) driven by the growth in sales production, partially offset by higher cash costs.

• Cash costs⁽¹⁾ were $13.5 million or $24.72/boe in the third quarter of 2024 (Q2 2024 – $9.3 million or $22.58 per boe; Q3 2023 – $5.9 million or $20.27/boe). On a per boe basis, the higher costs were driven by increased royalties and production and operating costs as a result of the BMEC Acquisition and higher G&A costs, partially offset by decreased transportation costs on lower trucking rates.

• Net income was $15.0 million in the third quarter of 2024 (Q3 2023 – $3.9 million net income), driven by higher adjusted funds flow and an $11.4 million unrealized gain on risk management contracts.

• As at September 30, 2024, net debt⁽¹⁾ was $147.9 million, an increase from $51.0 million as at December 31, 2023 as a result of the BMEC Acquisition during the third quarter of 2024.
• Rubellite had available liquidity⁽²⁾ at September 30, 2024 of $25.5 million, comprised of the $100.0 million borrowing limit of Rubellite’s first lien credit facility and $20.0 million bank syndicate term loan, less current bank borrowings of $92.2 million and outstanding letters of credit of $2.4 million.
• Subsequent to September 30, 2024, in conjunction with the closing of the recombination transaction with Perpetual Energy Inc. on October 31, 2024, the Company’s credit facility has been increased to $140.0 million and the $20.0 million bank syndicate term loan has been repaid. The initial revolving term remains unchanged at May 31, 2025 and may be extended for a further twelve months to May 31, 2026. The next semi-annual borrowing base redetermination is scheduled on or before May 31, 2025.
• Non-GAAP financial measure, non-GAAP ratio or supplementary financial measure. See “Non-GAAP and Other Financial Measures” in this news release.

OPERATIONS UPDATE

In the third quarter of 2024, the Company contracted two rigs and drilled and rig released a total of eleven (11.0 net) horizontal wells in the Greater Figure Lake area, all targeting the Clearwater Formation. Production results from the 2024 drilling program have averaged IP(30) 138 bbl/d (21 wells) and IP(60) 111 bbl/d (17 wells) to date, as compared to the McDaniel Type Curve⁽¹⁾ rates of 120 and 112 bbl/d, respectively. Production results at East Edwand were encouraging, where a step-out delineation well at 06-09-062-16W4 was drilled using a conventional 50m inter-leg design, recorded an IP(30) of 172 bbl/d and IP(60) of 140 bbl/d. Repeatable results from the 2024 capital program across the Greater Figure Lake field continue to meet expectations, solidifying confidence in the geologic model and affirming the identified drilling inventory in excess of 243.0 net drilling locations (182.0 net unbooked⁽¹⁾).

During the second and third quarters of 2024, the Company executed pilot drilling at the 6-19-62-18W4 Pad (the “6-19 Pad”) to validate the predicted economic advantage of implementing tighter inter-leg spacing at Figure Lake. Specifically, the Company reduced the distance between laterals from 50m to approximately 33m, and commensurately increased the number of legs and therefore also increased the open hole lateral length per well to greater than 14,000 meters while maintaining the same approximate areal coverage per well. Four (4.0 net) wells were drilled with the tighter inter-leg spacing prior to the end of the third quarter at the 6-19 Pad. Early productivity data from the tighter spacing design is encouraging, both on a per meter and total production per well basis. The 00/08-23-062-19W4 was drilled with a 33m inter-leg spacing to a total lateral measured depth of 14,500 meters and achieved an IP(30) of 304 bbl/d. The offsetting 02/08-23-062-19W4 was drilled to a total lateral length of 18,600m using a hybrid multi-lateral / “fan” design and is on production at similar rates, recording an IP(24) of 362 bbl/d post load oil recovery. While productivity per meter of open reservoir varies with reservoir quality, the preliminary pilot results suggest that productivity per meter of open reservoir for the wells with tighter inter-leg spacing is statistically similar to the closest neighboring wells, supporting the expectation of economic production acceleration. Incremental drilling time and costs for the wells with tighter inter-leg spacing are also encouraging and in line with modeled assumptions, and in combination with early production data suggest that an increase in net asset value per unit area of land will be realized. Based on these initial results, four (4.0 net) additional 33m down-spaced wells are planned at the offsetting 1-25-62-19W4 Pad (the “1-25 Pad”) in the fourth quarter to further confirm accelerated production and increased capital efficiencies, and to facilitate statistical assessment of the technically anticipated increase in ultimate oil recovery factors. Production results will continue to be carefully analyzed over the remainder of the year and will inform the well design to be implemented in the future for economically optimized exploitation.

To advance solution gas conservation at Figure Lake, construction and installation of natural gas compression, dehydration, and associated facilities have progressed and are now substantially complete in advance of the expected re-activation of the gas sales meter by others in Q1 2025. Tie-in of solution gas at Figure Lake will significantly reduce emissions, and is forecast to deliver a rate of return in excess of 75%, enhanced by the re-activation of existing gas gathering pipelines and a forecasted reduction in carbon taxes related to elimination of flaring and incineration at multiple pad sites. Once operational, approximately 3 to 4 MMcf/d of natural gas sales is forecast at Figure Lake. The Company is also advancing a novel natural gas re-injection pilot at Figure Lake for enhanced oil recovery. Preliminary results of the gas re-injection pilot are expected by mid-2025.

At Frog Lake, the Company assumed operations after closing the BMEC Acquisition on August 2, 2024, and subsequently drilled and rig released five (2.5 net) horizontal wells in the third quarter of 2024. The wells, all targeting the Waseca Sand of the Mannville Stack, are currently recovering load fluid and beginning to cut oil as they clean up over a typical 60-90 day period. The Waseca Sand is the primary zone of development, but several wells are being planned to additionally test the General Petroleum and Sparky Sands in 2025, evaluate suitable well designs, confirm type curve assumptions, and extend known pool limits.

As at the end of the third quarter of 2024, the total number of new horizontal wells rig-released by the Company in 2024 is thirty (25.5 net).

Subsequent to the end of the quarter, the Company spud an exploratory four-leg multi-lateral horizontal well approximately 90km north of Figure Lake in the Nixon/Calling Lake area to test a new play for which the Company currently holds 108.0 net sections of land. Preliminary stabilized production results post load fluid recovery are expected in the first quarter of 2025.

In total in 2024, the Company expects to drill thirty-four (34.0 net) Clearwater multi-lateral wells at Figure Lake, eleven gross (5.75 net) wells on the acquired Mannville Stack assets at Frog Lake in connection with the BMEC Acquisition, and one (1.0 net) exploration horizontal well at Calling Lake. The Company is also continuing to advance additional exploration activities, pursuing additional land capture and play concept de-risking activities.

• Type curve assumptions are based on the Total Proved plus Probable Undeveloped reserves contained in the McDaniel Reserve Report as disclosed in the Company’s Annual Information Form which is available under the Company’s profile on SEDAR+ at sedarplus.ca. “McDaniel” means McDaniel & Associates Consultants Ltd. independent qualified reserves evaluators. “McDaniel Reserve Report” means the independent engineering evaluation of the heavy crude oil and conventional natural gas reserves, prepared by McDaniel with an effective date of December 31, 2023 and a preparation date of March 14, 2024. See “Estimated Drilling Locations.

OUTLOOK AND GUIDANCE

Production sales volumes for the fourth quarter of 2024 are expected to average 9,900 to 10,400 boe/d, 77% oil and liquids, and exit the year at 11,300 to 11,800 boe/d unchanged from previous guidance. Relative to the pro forma recombination transaction 2024 guidance contained in the September 17, 2024 news release, refinements to Q4 2024 guidance assumptions are outlined in the table below. Guidance assumptions on the Q4 2024 exit rate are largely unchanged outside of a $0.50 per boe reduction to general and administrative cost assumptions and a $0.50 per bbl reduction to the heavy oil wellhead differential. Heavy oil production is expected to average 7,400 to 7,800 bbl/d and exit the year at 7,500 to 7,900 bbl/d, unchanged from the heavy oil production guidance contained in our August 8th press release.

Growth is expected to continue into 2025 with the return of the second drilling rig to Figure Lake after completion of the horizontal exploratory test well at Calling Lake for the drilling of four (4.0 net) additional planned development / step out wells. Thereafter, drilling operations will continue with one rig at Figure Lake and one rig at Frog Lake through to winter break up. Given the preliminary results of the down-space pilot at the 6-19 Pad at Figure Lake, six (6.0 net) of the wells planned for the fourth quarter at Figure Lake, including four (4.0 net) of the five (5.0 net) wells planned for the 1-25 Pad and two (2.0 net) wells on a pad at South Edwand are now designed with tighter inter-leg spacing, resulting in incremental capital spending in the fourth quarter relative to previous guidance. Capital spending for the Calling Lake exploration well was also moved forward into the fourth quarter of 2024 and one additional well at Frog Lake (capital carried at 100%) is now being planned. A combination of these items resulted in the increase to Q4 2024 capital spending guidance by $5 to $6 million and the well count from 12.0 to 13.25 net wells. The change to the Q4 2024 royalty guidance is related to several wells achieving C* payout earlier than previously expected and the increase to the Q4 2024 operating costs relates to Frog Lake as expected optimizations are still being integrated into ongoing operations.

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