TWIN BUTTE ENERGY ANNOUNCES 2010 YEAR END RESERVES AND FINDING, DEVELOPMENT AND ACQUISITION COSTS

CALGARY, Feb. 9 /CNW/ - Twin Butte Energy Ltd. ("Twin Butte") or (" Company") is pleased to provide information on its oil and gas reserves as of December 31, 2010, as evaluated by the Company's independent reserve engineering firm, McDaniel & Associates Consultants Ltd ("McDaniel"). The evaluation of Twin Butte's petroleum and natural gas reserves was conducted pursuant to National Instrument 51-101 - Standards of Disclosure for oil and Gas Activities ("NI 51-101") and the Canadian Oil and Gas Evaluation Handbook ("COGEH") reserves definitions.

Highlights of the Twin Butte 2010 capital program and year end reserves are as follows:

  • Executed a capital program of $45.7 million ($35.2 million net of dispositions) which included the drilling of 88 gross (51.0 net) wells with a 99 percent success ratio.

  • Completed a strategic asset acquisition valued at $20 million which further enhances the Company's oil exposure, drilling inventory and overall asset quality.

  • Completed 14 non-core asset dispositions to enhance balance sheet flexibility, supplement the capital program, and further focus the Company asset base.

  • A 23 percent increase in total proved plus probable oil and gas reserves, increasing by 6.9 million barrels of oil equivalent ("boe") to 37.5 million boe, replacing corporate 2010 production 3.9 times.

  • Finding, development and acquisition ("FD&A") including future development costs ("FDC") of $10.48 per boe on a proved plus probable basis and $14.28 per boe on a proved basis.

  • A capital recycle ratio of 2.5 times on proved plus probable FD&A including FDC.

  • Current reserve life index of 13.3 years based on proved plus probable reserves and estimated December 2010 production level of 7,700 boe/d, and 8.2 years based on proved reserves.

  • Increased liquid reserves as a percentage of total reserves from 35 percent to 51 percent.

  • Net asset value per share based on proved plus probable (PV 10%) reserves of $3.56 ($3.42 fully diluted)


Corporate Reserves Summary

December 31, 2010 Summary Reserves (Company interest before royalties)

McDaniel - December 31, 2010  forecast pricing Light /Med
Crude Oil & NGL's
Heavy Oil Natural Gas Oil Equivalent % Total
(Columns may not add due to rounding) (Mbbls) (Mbbls) (BCF) (Mboe) 
(6:1)
 
Proved Developed Producing
2,342 2,254 63.4 15,171 40.5
Proved Developed Non-Producing 119 536 2.8 1,118 3.0
Proved Undeveloped 515 4,658 8.8 6,634 17.7
Total Proved 2,976 7,447 75.0 22,923 61.2
Total Probable 1,581 7,119 35.0 14,537 38.8
Total Proved Plus Probable 4,557 14,566 110.0 37,459 100
Total Proved Plus Probable Developed Producing 2,883 2,939 77.8 18,796 50.2


Net Present Value of Future Net Revenue

December 31, 2010 Net present Values ("NPV") Summary

($ MM) Before Income Taxes Discounted At (%/year)
Reserves Category (columns
may not add due to rounding)
0% 5% 10% 15% 20%
Proved Developed Producing 382.3 257.8 202.9 171.8 151.3
Proved Developed Non-Producing 23.2 19.0 15.8 13.3 11.3
Proved Undeveloped 145.8 112.8 91.4 75.8 63.9
Total Proved 551.3 389.5 310.1 260.9 226.5
Total Probable 418.6 275.0 207.0 164.6 134.9
Total Proved Plus Probable 969.9 664.5 517.1 425.6 361.5


Select Summary Pricing and Inflation Rate Assumptions (Forecast Prices)

Year WTI Crude Oil ($US/bbl) Edmonton Light
Crude Oil
($C/bbl)
Alberta Heavy Crude Oil ($C/bbl) Alberta
Natural Gas AECO -
Spot ($C/MMbtu)
Edmonton NGL Mix ($C/bbl) Inflation rate %/Year Exchange rate ($US/$Cdn)
2011 85.00 84.20 66.70 4.25 61.40 2.0 0.975
2012 87.70 88.40 68.70 4.90 64.50 2.0 0.975
2013 90.50 91.80 68.60 5.40 67.30 2.0 0.975
2014 93.40 94.80 70.80 5.90 69.80 2.0 0.975
2015 96.30 97.70 73.00 6.35 72.30 2.0 0.975
2016 99.40 100.90 75.40 6.75 74.90 2.0 0.975
2017 101.40 102.90 76.90 7.10 76.50 2.0 0.975
2018 103.40 104.90 78.40 7.40 78.20 2.0 0.975
2019 105.40 107.00 80.00 7.60 79.80 2.0 0.975
2020 107.60 109.20 81.60 7.75 81.50 2.0 0.975
thereafter +2% +2% +2% +2% +2% 2.0 0.975


Corporate Working Interest Reserves Reconciliation (Forecast Prices and Costs)

Oil Equivalent (Mboe) Total Proved Total Proved plus
Probable
Opening Balance 18,923 30,527
Extensions/ Discoveries 3,913 6,134
Technical Revisions 383 356
Acquisitions 2,545 3,824
Dispositions (443) (984)
Production (2,398) (2,398)
Closing Balance 22,923 37,459

Twin Butte is pleased to note that this is the third consecutive year of positive reserve revisions which highlights the quality and consistency of the Company's annual independent evaluation.


Capital Efficiency  - Finding, Development and Acquisition Costs  ($000's) except as noted

Exploration and Development  Proved Proved plus
Probable
2010 Capital Expenditures (1) 45,664 45,664
Future development capital ("FDC") opening balance -12/31/2009 (2) 49,042 114,397
FDC closing balance - 12/31/2010 (2) 60,785 131,572
Total Change in FDC (2) 11,743 17,175
Total Capital Expenditures with FDC (1) 57,407 62,839
Reserve additions and revisions from exploration & development (mboe) 4,296 6,491
Finding & development costs before FDC ($/boe) 10.63 7.04
Finding & development costs including FDC ($/boe) 13.36 9.68

Acquisition less Disposition Proved Proved plus
Probable
2010 Net Capital  (3) 9,502 9,502
FDC opening balance 12/31/2009 (2) 0 0
FDC closing year 12/31/2010 (2) 24,482 25,416
Total Change in FDC (2) 24,482 25,416
Total Capital Expenditures with FDC (3) 33,984 34,918
Reserve Additions  (mboe) 2,102 2,840
Acquisition costs before FDC ($/boe) 4.52 3.35
Acquisition costs including FDC ($/boe) 16.17 12.29

Total FD&A Proved Proved plus
Probable
2010 Total Capital Expenditures (4) 55,166 55,166
FDC opening balance - 12/31/2008 (2) 49,042 114,397
FDC closing balance - 12/31/2009 (2) 85,267 156,987
Total Change in FDC (2) 36,226 42,590
Total Capital Expenditures with FDC (4) 91,392 97,757
Total Reserve Additions  (mboe) 6,398 9,331
FD&A costs before FDC ($/boe) 8.62 5.91
FD&A costs including FDC ($/boe) 14.28 10.48
      (1)  Capital expenditures for fiscal 2010 are estimated and unaudited and include drilling credits of $3,9MM
      (2)  Future capital expenditures required to convert proved non-producing and probable reserves into proved producing  which do not include drilling credits
      (3) Based on cash and share consideration plus assumed net debt
      (4) Total capital expenditures are estimated and unaudited and are net of the capital proceeds associated with the Company's 2010 non-core property disposition program. Total capital expenditures exclude non-cash ARO and future tax allocations

Under NI - 51-101, the methodology to be used to calculate FD&A costs includes incorporating changes in future development capital required to bring the proved undeveloped and probable reserves to proved producing status. For continuity, Twin Butte has presented FD&A costs calculated both excluding and including FDC. Changes in forecast FDC occur annually as a result of development, acquisition and disposition activities and capital cost estimates that reflect the independent evaluators best estimate of what it will cost to bring the proved undeveloped and probable reserves on production.

Reserve Life Index (RLI)

The reserve life index has been calculated based on year end reserves divided by estimated December 2010 production rates.


  Proved Proved plus
Probable
Total Company Interest Reserves (mboe) 22,923 37,459
Estimated December 2010 production (boe/d) 7,700 7,700
RLI based on estimated December 2010 production (years) 8.2 13.3


Net Asset Value

The following net asset value ("NAV") table shows NAV calculation under which the Company's reserves would be produced at forecast future prices and costs. The value is a snapshot in time and is based on various assumptions, including commodity prices and foreign exchange rates that vary over time. It should not be assumed that the NAV represents the fair market value of Twin Butte shares. The calculations below do not reflect the value of the Company's prospect inventory to the extent that the prospects are not recognized within the NI-51-101 compliant reserve assessment.

Using Reserve Value at December 31, 2010 - Forecast Pricing and Costs (Pre tax)

($MM except as noted) 10% Before Tax 15% Before Tax
Proved plus Probable Reserve Value 517.1 425.6
Undeveloped Land Value (1) 35.5 35.5
Estimated Net Debt (96.0) (96.0)
Option Proceeds 11.3 11.3
Basic Shares Outstanding 128.2 128.2
Estimated Net Asset Value $ per Share - Basic $3.56 $2.85
Fully Diluted Shares Outstanding (2) 136.7 136.7
Estimated Net Asset Value $ per Share - Fully Diluted $3.42 $2.75
      (1) Independent assessment of 250,468 net undeveloped acres at average price of $142/acre
      (2) Not including 7.7MM warrants exercisable at $2.14 as these were out of money at year end based on closing share price of $2.04

Twin Butte anticipates releasing its audited financial statements for the year ended December 31, 2010, on or about March 22, 2011

As highlighted by the Company's year end reserve report, 2010 was another year of positive growth and transition.  Over the past two years the new management team at Twin Butte has successfully transitioned the company from a conventional junior gas producer to a liquid weighted producer with a multiyear, low risk oil drilling inventory, ensuring reserve and production growth for years. Since year end 2008 proved and probable reserves have grown 353 percent while liquid weighting has grown from 32 percent to in excess of 50 percent.

Twin Butte has previously released 2011 guidance in our November 25,2010 and January 12,2011 press releases. As noted the strong operational momentum established in 2010 will continue in 2011. A base capital plan of $60.5 million ($50.1 million net of a previously announced January disposition) will underspend anticipated cash flow and will focus on drilling a 110 gross (67.3 net) moderate risk oil wells. Based on continued success, the Company's strong financial position, and significant oil well drilling inventory this base program may be expanded later in 2011.

Director Change

Twin Butte announces the resignation of Murray Sinclair as a Director of the Company. Mr. Sinclair has been a Director of Twin Butte since the amalgamation with Buffalo Resources in October 2009 and has consistently provided valuable insight to the strategic direction of the Company. The Board of Directors and Management of Twin Butte sincerely thank Mr. Sinclair for his support.

Twin Butte is a value oriented emerging intermediate producer with a significant and growing repeatable and scalable drilling inventory focused on large original oil in place and large original gas in place play types. With a stable low decline production base the Company is well positioned to live within cash flow while providing shareholders with sustainable growth potential over both the short and long term. The 2011 capital plan is highly focused to two core areas of Frog Lake and Eastern Plains while providing the flexibility to quickly be accelerated should economic conditions allow. Twin Butte is committed to continually enhance its asset quality while focusing on per share growth.

Forward-Looking Statements

In the interest of providing Twin Butte's shareholders and potential investors with information regarding Twin Butte and Buffalo, 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 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; 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 document, 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 document, 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 equivalent (boe) are calculated using the conversion factor of 6 Mcf (thousand cubic feet) of natural gas being equivalent to one barrel of oil. 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.

     

SOURCE Twin Butte Energy Ltd.

For further information:

Twin Butte Energy Ltd.    
Jim Saunders
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
   
Website:  www.twinbutteenergy.com

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Twin Butte Energy Ltd.

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