Twin Butte Announces Record Operational and Financial Results
CALGARY, Aug. 14, 2012 /CNW/ - Twin Butte Energy Ltd. ("Twin Butte" or the "Company") (TSX: TBE) is pleased to announce its financial and operational results for the three months ended June 30, 2012.
Highlights of Twin Butte's highly successful second quarter of 2012 are as follows:
Recorded quarterly production of 14,193 boe per day, an increase of 88
percent over Q2 2011 and a 34 percent increase in production per share
from the same period of 2011.
Increased quarterly liquids production weighting to 82 percent from 62
percent in Q2 2011.
Generated record quarterly funds flow of $33.8 million, a 91 percent
increase over Q2 2011. On a per share basis, funds flow increased by
38 percent year over year to $0.18 for the quarter.
Executed a net capital (net of dispositions) program of $9.5 million which included the drilling of 16 gross (14.5 net) wells at a 93
percent success rate.
Completed a strategic $14 million acquisition of producing assets within
our core Lloydminster heavy oil area. The acquisition included
approximately 320 boe per day of production as well as over 20 net
sections of prospective acreage with four recently shot three
dimensional seismic surveys.
Announced the strategic acquisition of private heavy oil producer Avalon
Exploration which is scheduled to close in late August. The Acquisition
materially increases the size and scope of heavy oil lands and
opportunities for Twin Butte.
Paid $8.5 million in dividends ($0.015/share/month) reflecting a yield
of 7.4% based on Twin Butte's June 30 closing price of $2.42
- Maintained a strong balance sheet with quarter end net debt of $124.5 million on a credit facility of $205 million. Achieved an all in payout ratio of 95 percent with free funds flow (funds flow less dividend and capital) of $1.7 million for the quarter.
Certain selected financial and operations information for the three months ended June 30, 2012 and 2011 comparatives are outlined below and should be read in conjunction with Twin Butte's audited annual Consolidated Financial Statements and accompanying Management Discussion and Analysis ("MDA"). Full versions of the statements and accompanying notes along with the Company's Annual Information Form ("AIF") have been filed on SEDAR and also on the Company website.
Three months ended
Six months ended
Financial ($ thousands, except per
|Petroleum and natural gas sales||70,173||38,748||81%||142,670||70,476||102%|
|Funds flow (1)||33,762||17,686||91%||60,162||30,543||97%|
|Per share basic||0.18||0.13||38%||0.32||0.23||39%|
|Per share diluted||0.17||0.13||31%||0.32||0.23||39%|
|Net income (loss)||29,340||12,765||130%||44,323||10,504||322%|
|Per share basic||0.15||0.10||52%||0.23||0.08||191%|
|Per share diluted||0.15||0.09||50%||0.23||0.08||191%|
|Capital acquisitions with E&E||14,046||-||-||12,846||-||-|
|Net debt (2)||124,459||75,960||64%||124,459||75,960||64%|
|Average daily production|
|Crude oil (bbl per day)||11,415||4,377||161%||10,801||4,198||157%|
|Natural gas (Mcf per day)||15,063||17,380||-13%||15,601||18,645||-16%|
|Natural gas liquids (bbl per day)||267||282||-5%||309||276||12%|
Barrels of oil equivalent (boe per day,
|Average sales price|
|Crude oil ($ per bbl)||62.83||75.10||-16%||66.87||69.06||-3%|
|Natural gas ($ per Mcf)||2.10||4.21||-50%||2.22||4.13||-46%|
|Natural gas liquids ($ per bbl)||83.29||84.99||-2%||87.10||81.52||7%|
|Barrels of oil equivalent ($ per boe, 6:1)||54.33||56.36||-4%||57.18||51.36||11%|
|Operating netback ($ per boe) (3)|
|Petroleum and natural gas sales||54.33||56.36||-4%||57.18||51.36||11%|
Realized (loss) gain on derivative
|Shares outstanding, end of period||192,458,098||135,295,737||42%||192,458,098||135,295,737||42%|
Weighted average shares outstanding -
(1) Funds flow from operations and funds flow from operations netback are non-IFRS measures that represent the total and the average per boe, respectively, of cash provided by operating activities, before adjusting for changes in non-cash working capital items and expenditures on decommissioning liabilities. This includes one time transaction costs of $2 million.
(2) Net debt is a non-IFRS measure representing the total of bank indebtedness, accounts payables and accrued liabilities, cash dividend payable, less accounts receivables, deposits and prepaids.
(3) Operating netback is a non-IFRS measure calculated as the average per boe of the Company's oil and gas sales, realized gains on derivatives, less royalties, operating and transportation expenses.
Twin Butte's second quarter financial and operating results continue to demonstrate the Company's ability to pay a sustainable dividend and maintain a strong balance sheet while completing a disciplined efficient capital plan. Our strategy of delivering shareholders long term returns comprised of both income and moderate production growth while maintaining conservative payout ratios is working and is anticipated to provide shareholders long term positive gains.
On June 25 Twin Butte announced the strategic acquisition of a private company, Avalon Exploration. Avalon has current production of 1,900 bbls per day of conventional heavy oil as well as over 85,000 net of undeveloped acres in the Lloydminster area, effectively doubling Twin Butte's undeveloped heavy oil lands in this area. Twin Butte will also receive a significant seismic data base of 556 km of proprietary data and 2,271 km of trade data. The acquisition materially increases the size and scope of heavy oil lands and opportunities for Twin Butte and further establishes Twin Butte as a significant operator in the area. Twin Butte management has a successful history of operating and growing heavy oil production and has extensive operational experience within the Lloydminster heavy oil fairway which will ensure a seamless transition and ultimately generate numerous operational efficiencies. As a larger, stronger company, Twin Butte will use its financial flexibility to capitalize on its expanded low risk drilling inventory. In addition the Company's credit facility will be increased to $240 million from the current $205 million upon closing. It is anticipated that net debt following the closing of the transaction will be approximately $160 million.
Consistent with the Company's expanded production base and increased liquids weighting, quarterly funds flow from operations reached a record $33.8 million in the quarter ($135.2 million annualized). This level of funds flow should provide shareholders comfort that our yearly dividend of approximately $36 million ($0.015/share/month) and our capital plan of $70 million is easily financed with our funds flow. After deducting Q2 capital and dividends of $23.6 and $8.5 million respectfully the excess cash of $1.7 million was used for debt reduction. Twin Butte's philosophy remains that balance sheet strength is paramount and will ensure the long term sustainability of the dividend. Quarter-end net debt of $124.5 million represented 0.9 times second quarter annualized cash flow.
Twin Butte remains active on the hedging front to offset the continued volatility in both oil and gas reference prices as well as price differential from WTI to the WCS Canadian heavy index. Twin Butte's 2012 cash flow forecast is well protected with our hedging program. Approximately 84 percent of our current gas production is hedged at $4.21/GJ at AECO for the remainder of 2012. A recent increase in spot gas prices has the Company evaluating the restart of gas production that was shut in during the first quarter.
Approximately 57 percent of our estimated oil production is hedged for the second half of 2012 at a WCS equivalent of approximately $81 Cdn per bbl. With the majority of the Company's oil production being heavy oil priced off of the WCS benchmark we will endeavor to try and align our hedges to this reference price where possible.
We will be disciplined on hedging for 2013 as well with a recent transaction hedging approximately 60 percent of our anticipated gas production for 2013 at $4.50 per GJ at AECO. We now have approximately 18 percent of our estimated oil production hedged for 2013 at a WTI price of $94.00, and a further 8 percent hedged at a WCS price of $80.00.
Dividend Reinvestment Plan (the "DRIP")
The Board of Directors have approved a DRIP effective immediately, allowing eligible shareholders to participate in the DRIP commencing with dividends to be paid on September 17, 2012 to shareholders of record as of August 31, 2012.
A registered shareholder who wishes to enroll in the DRIP for a particular dividend to be paid by Twin Butte must deliver a completed Authorization Form to Valiant Trust Company (the "Plan Agent"), before 3:00 p.m. (Calgary time) on the business day prior to the record date for such dividend. Beneficial shareholders who wish to participate in the DRIP should contact the broker or other Nominee through which their Common Shares are held to provide appropriate enrollment instructions and to ensure any deadlines or other requirements that such broker or Nominee may impose or be subject to are met. Authorization Forms for both registered and beneficial shareholders received after the applicable enrolment deadline will be accepted but only effective for subsequent dividends.
A complete copy of the DRIP is available on Twin Butte's website at www.twinbutteenergy.com or by calling the Manager of the Plan Agent, at (403) 233-2801. Shareholders should carefully read the complete text of the DRIP before making any decisions regarding their participation in the DRIP.
During the second quarter of 2012 Twin Butte drilled 16 gross (14.5 net) wells with a 93 percent success rate demonstrating the predictable and repeatable nature of the Company's drilling inventory which currently is estimated to be over 600 net conventional heavy oil wells post the Avalon acquisition. All wells were drilled within the Company's core heavy oil fairway where Twin Butte anticipates spending one hundred percent of its 2012 capital.
At Frog Lake, the Company's most active area for the past two years, drilling continued in Q2 with 9 gross (7.5 net) wells drilled successfully. The Company's focus in 2012 and beyond at Frog Lake will be on the Rex formation which has provided very consistent results for the past two years. Two step out or pool extension wells were successfully drilled in Q2, and an additional four in Q3, which has significantly expanded this play. A three dimensional seismic survey is planned over these extension wells for later this year to help define the long term opportunity. A recent farm in arrangement for five sections of land will continue to enhance the Company's drilling inventory allowing profitable growth to continue in the area for some time.
The Company continues to be active in the greater Lloydminster area at Silverdale, and Primate where the remainder of the Q2 wells were drilled. These areas account for the majority of the remainder of Twin Butte's conventional heavy oil drilling inventory pre the Avalon acquisition. Although these areas have slightly different producing characteristics than Frog Lake, they offer the same predictability and drilling repeatability.
The Company continued to enhance its water disposal and production infrastructure in the Lloydminster area in Q2 which has allowed production to be optimized and corporate operating costs to remain below area industry average.
In April the Company completed a 320 bbl per day acquisition to the south west of Frog Lake which added over twenty 100 percent working interest sections of undeveloped land partially covered with four, recently shot, three dimensional seismic surveys. These lands complement our existing area lands and early evaluations indicate at least 20 drillable locations on the lands. Twin Butte will be drilling its first wells on the subject lands over the next few weeks.
This and the Avalon acquisition are consistent with Twin Butte's historic strategy of acquiring quality assets, with large resource potential within focus areas where Twin Butte has expertise.
Production has grown materially from the first quarter rate of 13,228 boe per day to 14,198 boe per day in Q2. This growth is partially attributable to the 320 bbl per day acquisition completed in April but is primarily due to strong flush production from the Company's successful first quarter drilling program. Production from these wells has now stabilized which has led to a small production decrease going into Q3. Drilling results from the Q2 drilling program will largely be recognized in Q3 as wet operating conditions have prevented timely completion of some of the new wells. Although the Q3 capital plan is well under way, continued wet operating conditions have delayed some of our early Q3 drilling.
In late June, the Company was notified by a third party gas processer that a planned 2013 facility turnaround was being accelerated into mid-2012. Once the turnaround commenced the operator notified Twin Butte that as a result of a fire during turnaround operations the planned 3 week operation will be extended to four months. This will negatively impact Twin Buttes Pincher Creek production by 525 boe per day (75 percent gas) from late June till early November or decrease annual 2012 Corporate production by approximately 175 boe per day.
Current Company production is 13,200 boe per day excluding the Pincher Creek and Avalon volumes. Including volumes from the Avalon transaction Twin Butte now anticipates averaging approximately 14,150 boe's per day in 2012. Based on a $90 WTI and a $69 WCS price for the second half of 2012 (currently below strip pricing) Twin Butte anticipates 2012 cash flow to exceed $120 million.
The Company's original capital plan of $66 million will increase marginally with the Avalon transaction to approximately $70 million. Based on the above cash flow and current monthly dividends of $0.015 per share total payout ratio for 2012 will be approximately 86 percent, one of the lowest in the industry.
Twin Butte is in an enviable position in that it has a strong balance sheet, a predictable production profile and a current inventory of over 600 net heavy oil drilling locations. These wells generate return on investment in the top 10 percentile of all plays in North America and the Company believes its current sizable drilling inventory has the ability to fuel the Company's dividend and moderate growth strategy for years to come.
This will allow a sustained pace of repeatable development drilling and disciplined capital spending to maximize capital efficiencies, economic returns and minimize payout times, providing visible sustainability to Twin Butte's dividend and anticipated Company growth.
Twin Butte anticipates future quarters will show similar levels of capital efficiency, dividend sustainability and a very disciplined approach as the Company progresses its business plan. We are confident that the combination of a sustainable dividend and moderate per share growth will continue to attract investor interest. Management remains committed to continually enhancing the Company's asset base through a combination of organic growth and strategic acquisitions.
About Twin Butte
Twin Butte is a value oriented, intermediate producer with a significant and growing scalable and repeatable drilling inventory focused on large original oil in-place conventional heavy oil exploitation. With a stable low decline production base the Company is well positioned to live within cash flow while providing shareholders with a sustainable dividend and moderate per share production growth potential over the long term.
President and C.E.O.
August 14, 2012
In the interest of providing Twin Butte's shareholders and potential investors with information regarding Twin Butte and Avalon, including management's assessment of the future plans and operations of Twin Butte, certain statements contained in this news release constitute forward-looking statements or information (collectively "forward-looking statements") within the meaning of applicable securities legislation. Forward-looking statements are typically identified by words such as "anticipate", "continue", "estimate", "expect", "forecast", "may", "will", "project", "could", "plan", "intend", "should", "believe", "outlook", "potential", "target" and similar words suggesting future events or future performance. In particular but without limiting the foregoing, this news release contains forward-looking statements pertaining to the following: future dividend levels; the volumes and estimated value of Twin Butte's oil and natural gas reserves; the life of Twin Butte's reserves; the volume and product mix of Twin Butte's oil and natural gas production; future oil and natural gas prices; future operational activities; and future results from operations and operating metrics, including future production growth and net debt. In addition, 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 exist in the quantities predicted or estimated and can be profitably produced in the future.
With respect to forward-looking statements contained in this news release, we have made assumptions regarding, among other things: future capital expenditure levels; future oil and natural gas prices and differentials between light, medium and heavy oil prices; results from operations including future oil and natural gas production levels; future exchange rates and interest rates; our ability to obtain equipment in a timely manner to carry out development activities; our ability to market our oil and natural gas successfully to current and new customers; the impact of increasing competition; our ability to obtain financing on acceptable terms; and our ability to add production and reserves through our development and exploitation activities. Although Twin Butte believes that the expectations reflected in the forward looking statements contained in this news release, and the assumptions on which such forward-looking statements are made, are reasonable, there can be no assurance that such expectations will prove to be correct. Readers are cautioned not to place undue reliance on forward-looking statements included in this news release, as there can be no assurance that the plans, intentions or expectations upon which the forward-looking statements are based will occur. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur, which may cause Twin Butte's actual performance and financial results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things, the following: volatility in market prices for oil and natural gas; general economic conditions in Canada, the U.S. and globally; and the other factors described under "Risk Factors" in Twin Butte's most recently filed Annual Information Form available in Canada at www.sedar.com. Readers are cautioned that this list of risk factors should not be construed as exhaustive.
The forward-looking statements contained in this news release speak only as of the date of this news release. Except as expressly required by applicable securities laws, Twin Butte does not undertake any obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this news release are expressly qualified by this cautionary statement.
Barrels of Oil Equivalent
Barrels of oil equivalents (boe) may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf: 1 bbl (barrel) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. In addition, as the value ratio between natural gas and crude oil based on the current prices of natural gas and crude oil is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indicated value.
SOURCE: Twin Butte Energy Ltd.For further information:
Twin Butte Energy Ltd.
President and Chief Executive Officer
Tel: (403) 215-2040
Fax: (403) 215-2055
R. Alan Steele
Vice President, Finance, Chief Financial Officer and Corporate Secretary
Tel: (403) 215-2692
Fax: (403) 215-2055