Razor Energy (ticker: RZE) announced second quarter results last week, showing net income of $2.5 million, or $0.16 per share. This result is a significant improvement over both Q2 2017 and Q1 2018, when the company reported a loss of 1.6 million and earnings of 0.3 million, respectively.

Much of this improvement in results is due to the improved oil price, which can have a profound effect on Razor’s operating netback. The company’s financial situation is such that a small increase in WTI price leads to a large increase in field cash flow. For example, Razor reports that increasing WTI from $65/bbl to $70/bbl, 8% growth, would increase the company’s field cash flow by 47%.

Razor’s WTI Torque High as Small Price Increase Brings Large Earnings Jump

Razor is also increasing production, and produced 5,023 BOEPD in Q2, up 59% year-over-year. This output comes slightly above expectations, as earlier presentations suggested the company would produce 4,854 BOEPD in Q2. The company expects to add a further 400 BOEPD in the second half of the year, giving Razor a 2018 exit rate of 5,400 BOEPD.

Razor’s WTI Torque High as Small Price Increase Brings Large Earnings Jump

Most of Razor’s production growth is currently accomplished by reactivating existing wells on the firm’s Swan Hills and Kaybob acreage. The company brought eight wells back online in Q2. Razor will exclusively reactivate wells in the second half of the year, as it continues to interpret and evaluate the four wells the firm drilled in Q1.

Much of the company’s current efforts focus on controlling operating costs, thereby improving netbacks. In June Razor installed natural gas generators on its properties to reduce reliance on the grid for electricity. This should provide lower operating expenses in Q3.


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