Twin Butte Energy Ltd. Reports Third Quarter 2011 Financial Results

CALGARY, Nov. 14, 2011 /CNW/ - Twin Butte Energy Ltd. ("Twin Butte" or the "Company") (TSX: TBE) is pleased to announce that it has filed its unaudited financial statements and related management's discussion and analysis ("MD&A") for the three and nine months ended September 30, 2011 on the Company's website at www.twinbutteenergy.com and on SEDAR at www.sedar.com.  Certain selected financial and operational information for the three and nine months ended September 30, 2011 are set out below and should be read in conjunction with Twin Butte's unaudited financial statements and related MD&A.

Highlights

Twin Butte Energy Ltd. ("Twin Butte" or the "Company") (TSX: TBE) is pleased to announce its financial and operational results for the three and nine months ended September 30, 2011.

  Three months ended  September  30   Nine months ended  September 30  
  2011 2010 % Change 2011 2010 % Change
Financial ($ thousands, except per share amounts)            
Petroleum and natural gas sales 34,885 23,382 49% 105,361 72,765 45%
Funds flow (1) 14,042 10,069 39% 44,588 28,055 59%
Per share basic & diluted 0.10 0.08 25% 0.33 0.22 45%
Net (loss) income 7,522 (2,250) 434% 18,026 734 2356%
Per share basic 0.06 (0.02) 400% 0.14 0.01 1300%
Per share diluted 0.05 (0.02) 350% 0.13 0.01 1223%
Capital expenditures  22,079 13,511 63% 59,215 33,110 79%
Capital dispositions (8) (1,746) -100% (11,651) (10,403) 12%
Net debt (2) 83,857 76,238 10% 83,857 76,238 10%
Operating            
Average daily production            
Crude oil (bbl per day) 4,507 2,575 75% 4,303 2,382 81%
Natural gas (Mcf per day) 16,803 21,972 -24% 18,024 22,352 -19%
Natural gas liquids (bbl per day) 291 244 19% 281 264 6%
Barrels of oil equivalent (boe per day, 6:1) 7,599 6,481 17% 7,588 6,372 19%
Average sales price            
Crude oil ($ per bbl) 64.10 61.04 5% 67.33 63.13 7%
Natural gas ($ per Mcf) 4.00 3.73 7% 4.08 4.41 -7%
Natural gas liquids ($ per bbl) 78.63 61.57 28% 80.51 66.45 21%
Barrels of oil equivalent ($ per boe, 6:1) 49.90 39.21 27% 50.86 41.83 22%
Operating netback ($ per boe) (3)            
Petroleum and natural gas sales 49.90 39.21 27% 50.86 41.83 22%
Realized (loss) gain on derivative instruments 2.65 3.18 -17% 1.21 2.11 -43%
Royalties (11.30) (7.97) 42% (10.01) (8.71) 15%
Operating expenses (16.25) (12.93) 26% (15.33) (13.58) 13%
Transportation expenses (1.90) (1.58) 20% (1.80) (1.58) 14%
Operating netback 23.10 19.91 16% 24.93 20.07 24%
Wells drilled             
Gross 42.0 23.0 83% 113.0 60.0 88%
Net 25.8 13.6 90% 73.4 35.6 106%
Success (%) 96 93 3% 96 97 -1%
             
Common Shares            
Shares outstanding, end of period 135,408,937 128,184,335 6% 135,408,937 128,184,335 6%
Weighted average shares outstanding - diluted 137,551,262 128,184,335 7% 136,219,131 127,206,180 7%

 

(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.

(2) Net debt is a non-IFRS measure representing the total of bank indebtedness, accounts payables and other liabilities, less accounts receivables, less 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.

Report to Shareholders

Twin Butte is pleased to report its third quarter operational and financial results which are highlighted by funds flow of $14.0 million, a 39 percent increase from the third quarter of 2010. Although experiencing a number of major facility outages the Company produced 7,599 boe per day which is an increase of 17 percent from the third quarter of 2010. Corporate liquid production continues to increase being 63 percent in the third quarter.

Twin Butte experienced major facility turnarounds, one in British Columbia in June and early July (300 boe per day down for two weeks in the third quarter) and Whitecourt in September (520 boe per day down for two weeks) which led to an average 140 boe/d being shut in for the quarter. The Company completed a capital program of $22.1 million in the quarter, drilling 42 gross (25.8 net) wells for a 96 percent success rate. The Company maintains a strong balance sheet with net debt at September 30 of $83.9 million or 1.5 times annual run rate cash flow, on a $128 million credit facility.

Operations:

Frog Lake in the Eastern Plains of Alberta continued to be a focus for the Company in the third quarter where 32 gross (18.2 net) wells were drilled at a 100 percent success rate. The Company's continued drilling success at Frog Lake demonstrates the depth and repeatability of the drilling inventory in that area which currently stands at almost 250 net wells. In addition to our Frog Lake area, the Company tested a number of new plays in the third quarter. At Earlie, a new asset within the Company's heavy oil fairway, 3.0 gross (1.5 net) wells were drilled in the third quarter including two horizontal wells. The horizontal wells targeted the Lloydminster and McLaren formations and both have demonstrated production rates in excess of 60 bbls per day of heavy oil. Two additional horizontal wells have been drilled successfully at Earlie in the fourth quarter. With an inventory of over 25 gross (12.5 net) wells at Earlie this area will remain a focus through 2012.

In west central Alberta the company drilled its first horizontal multistage frac, Manville oil well. After approximately two months of production the well appears to be stabilizing, at approximately 85 boe/d, which is encouraging as the company sees numerous similar opportunities in the area. At Esther in the eastern plains where the company has established a ten section 100 percent owned block of land the Company drilled a successful Viking horizontal well in the third quarter. Twin Butte plans on evaluating production for a number of months before proceeding with further development.

Strategic Combination With Emerge Oil & Gas Inc:

The Company announced in a press release dated November 13, 2011 the details regarding the strategic combination with Emerge Oil and Gas Inc. ("Emerge"). Twin Butte will be acquiring the shares of Emerge through a plan of arrangement where Emerge shareholders will receive 0.585 shares of Twin Butte for each share of Emerge. The company expects to mail the joint circular in mid December with a closing date expected to be in mid January.

Management has reviewed the combined Twin Butte and Emerge asset base, and believes there is the opportunity to provide attractive total returns to investors by providing both sustainable income (via dividends) and moderate internal production growth.  The oil leveraged combined assets have the potential to generate sufficient cash flow to pay a strong dividend while leaving sufficient cash flow to fund internally generated annual production growth, targeted at approximately 3 to 5 percent. Subject to the completion of the transaction, the Twin Butte Board of Directors plan to implement an annualized dividend of $0.18 per share that is anticipated to be declared in the first month subsequent to completion of the Transaction.

The predictability of the drilling results and capital efficiency at Frog Lake and Emerge's heavy oil properties was one of the primary drivers for the Company's decision to change its corporate strategy from high growth to a sustainable model of income (dividend paying) and modest production growth.  Twin Butte believes the combined assets performance characteristics are a perfect fit for the model and will continue to deliver positive drilling results and cash flow for many years.

With over 900 million barrels of oil in place and a low recovery factor to date of less than 2 percent, significant recoverable reserve upside potential remains at Frog Lake. Emerge's heavy oil properties have in excess of 600 million barrels of oil in place with a 4 percent recovery factor to date. Twin Butte remains committed to applying new drilling, completion and production techniques including the evaluation of thermal applications to ensure maximum reserve recoveries are ultimately achieved.

Outlook:

The announcement on November 13, 2011 of the strategic combination with Emerge puts Twin Butte in an enviable position in that it has a strong balance sheet, a predictable production profile and a current inventory of over 500 net heavy oil drilling locations after incorporating the Emerge inventory. This will allow a controlled pace of development and prioritized capital spending to maximize capital efficiencies, economic returns and minimize payout times.

The success of the Company's organic development program through our heavy oil fairway over the past two years demonstrates the potential for consistent moderate production and reserves growth in 2012 and beyond. Under our new income and moderate growth model this inventory will ensure the sustainability of the Company's cash flow and dividend for many years. Twin Butte will continue to position itself in scalable and repeatable play types in core areas that can provide consistent returns.

Due to the planned combination with Emerge and the conversion to a moderate growth dividend paying model the Company has decided to reduce its 2011 capital plan from $65 million to approximately $58 million. This will result in  yearend debt of approximately $81 million which when combined with Emerge's forecast year end net debt, will put the company in a very comfortable debt position of approximately $146 million after transaction costs, versus a pro-forma bank line of $203 million. The cut in capital will reduce year end 2011 exit rates to approximately 7,800 boes per day.

Twin Butte is a value oriented intermediate producer with a significant low risk, high rate of return drilling inventory focused on large original oil in place and large original gas in place play types. With a stable low decline production base, Twin Butte is well positioned to live within cash flow while providing shareholders a sustainable dividend with growth potential over both the short and long term. Twin Butte is committed to continually enhance its asset quality while focusing on the sustainability of its dividend.

Jim Saunders
President and C.E.O.
November 14, 2011

Financial Statements

The Company's unaudited financial statements and associated Management's Discussion and Analysis ("MD&A") for the three and six months ended June 30, 2011 will be available on Twin Butte's website at www.twinbutteenergy.com located within "Investor Info" under "Financial Documents". Additionally, these documents will be filed, in due course, on the System for Electronic Document Analysis and Retrieval ("SEDAR"). These documents can be retrieved electronically from the SEDAR system by accessing Twin Butte's public filings under "Search for Public Company Documents" within the "Search Database" module at www.sedar.com.  To the extent investors do not have access to the internet, copies of the audited financials and related MD&A can be obtained on request without charge by contacting Investor Relations at (403) 215-2045 or at 410, 396 - 11 Avenue SW, Calgary, Alberta, T2R 0C5.

Twin Butte Energy Ltd. is a publicly traded Canadian energy company involved in the exploration, development and production of natural gas and crude oil in western Canada.

Reader Advisory

Certain information regarding Twin Butte set forth in this news release including management's assessment of the Company's future plans and operations, the effect on the Company and on shareholders of Twin Butte, production increases and future production levels contain forward-looking statements that involve substantial known and unknown risks and uncertainties.  These forward-looking statements are subject to numerous risks and uncertainties, certain of which are beyond Twin Butte's control including, without limitation, the impact of general economic conditions, industry conditions, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, lack of availability of qualified personnel, stock market volatility, and ability to access sufficient capital from internal and external sources.  Twin Butte's actual results, performance or achievements may differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits that Twin Butte will derive there from.  Additional information on these and other factors that could affect Twin Butte's results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com), or Twin Butte's website (www.twinbutteenergy.com).  Furthermore, the forward-looking statements contained in this joint news release are made as at the date of this joint news release and Twin Butte does not undertake any obligation to update publicly or to revise any of the forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

In this news release, reserves and production data are commonly stated in barrels of oil equivalent ("boe") using a six to one conversion ratio when converting thousands of cubic feet of natural gas ("Mcf") to barrels of oil ("bbl") and a one to one conversion ratio for natural gas liquids ("NGLs" or "ngls"). Such conversion may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf: 1 bbl is based on energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

The TSX does not accept responsibility for the adequacy or accuracy of this news release.

SOURCE Twin Butte Energy Ltd.

For further information:

Jim Saunders, President and Chief Executive Officer
Telephone:  (403) 215-2040
Fax:         (403) 215-2055

or

R. Alan Steele, Vice President Finance and Chief Financial Officer
Telephone:  (403) 215-2692
Fax:         (403) 215-2055

www.twinbutteenergy.com

Profil de l'entreprise

Twin Butte Energy Ltd.

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