Twin Butte Energy Announces 2011 Year End Results
CALGARY, March 22, 2012 /CNW/ - (TSX: TBE) - Twin Butte Energy Ltd. ("Twin Butte" or the "Company") is pleased to report financial and operational results for the three and twelve months ended December 31, 2011 and year-end reserves information.
Highlights of Twin Butte's highly successful 2011 are as follows:
- Record annual and quarterly production of 7,615 boe per day (an increase of 16% over 2010) and 7,695 boe per day (an increase of 7% over Q4 2010). These figures are after selling approximately 220 boe per day of production in 2011. This growth was accomplished while under spending annual cash flow.
- Increased annual and quarterly liquids production weightings to 61.3% (increased from 44.1% in 2010) and 64% (increased from 50.9% in Q4 2010), respectively. Current liquid weighting post the January 2012 combination with Emerge Oil & Gas Inc. ("Emerge") is approximately 80%.
- Generated record annual and quarterly funds flow of $61.3 million (50% increase over 2010) and $16.7 million (increase of 29% over Q4 2010). On a per share basis funds flow increased by 41% year over year to $0.45, and by 20% when comparing fourth quarter 2011 to 2010, or $0.12 vs. $0.10.
- Executed a net capital program of $57.4 million which included the drilling of 125 gross (80.9 net) wells at a 96 percent success rate.
- Maintained an underleveraged balance sheet with year end 2011 net debt of $77.2 million compared to an existing credit facility of $128 million. Eight non-core asset dispositions were completed in 2011, for proceeds of $11.9 million. An additional three dispositions valued at $6.2 million have been closed to date in 2012 further reducing the Company's net debt. Post the January 2012 combination with Emerge current net debt is approximately $135 million on current bank lines of $205 million.
- Generated three year average total proved plus probable finding, development and acquisition ("FD&A")costs of $10.59 per boe including changes in future development cost, representing a 2.5 times recycle ratio based on fourth quarter 2011 operating netbacks of $26.72 per boe. This is after accounting for technical revisions that negatively affected year end 2011 reserves.
- Announced the strategic combination with Emerge which subsequently closed on January 9, 2012. This combination created an 80% oil weighted, intermediate conventional heavy oil producer with production of approximately 13,500 boe per day. Post the combination the Company has implemented a monthly dividend of $0.015 per share.
Certain selected financial and operations information for the three and
twelve months ended December 31. 2011 and 2010 comparatives are
outlined below and should be read in conjunction with Twin Butte's
audited annual Consolidated Financial Statements and accompanying
Management Discussion and Analysis ("MDA"). Full versions of the
statements and accompanying notes along with the Company's Annual
Information Form ("AIF") have been filed on SEDAR and also on the
Three months ended
Twelve months ended
|2011||2010||% Change||2011||2010||% Change|
Financial ($ thousands, except per
|Petroleum and natural gas sales||41,216||29,111||42%||146,577||101,876||44%|
|Funds flow (1)||16,686||12,887||29%||61,273||40,941||50%|
|Per share basic & diluted||0.12||0.10||20%||0.45||0.32||41%|
|Net (loss) income||(37,047)||(52)||7,444%||(19,021)||682||2,889%|
|Per share basic||(0.27)||(0.01)||2,636%||(0.14)||(0.01)||1,320%|
|Per share diluted||(0.27)||(0.01)||2,598%||(0.14)||(0.01)||1,293%|
|Net debt (2)||77,168||96,027||(20%)||77,168||96,027||(20%)|
|Average daily production|
|Crude oil (bbl per day)||4,620||3,338||38%||4,382||2,623||67%|
|Natural gas (Mcf per day)||16,628||21,085||(21%)||17,673||22,033||(20%)|
|Natural gas liquids (bbl per day)||304||310||(2%)||287||276||4%|
|Barrels of oil equivalent (boe per day, 6:1)||7,695||7,161||7%||7,615||6,571||16%|
|Average sales price|
|Crude oil ($ per bbl)||78.36||64.49||22%||70.26||63.56||11%|
|Natural gas ($ per Mcf)||3.51||3.83||(8%)||3.95||4.27||(7%)|
|Natural gas liquids ($ per bbl)||91.12||66.10||38%||83.34||66.35||26%|
Barrels of oil equivalent ($ per boe,
|Operating netback ($ per boe) (3)|
|Petroleum and natural gas sales||58.22||44.18||32%||52.74||42.48||24%|
|Realized (loss) gain on derivative instruments||(1.16)||2.51||(146%)||0.61||2.22||(73%)|
|Shares outstanding, end of period||135,418,937||128,197,668||6%||135,418,937||128,197,668||6%|
Weighted average shares outstanding -
|(1) Funds flow from operations and funds flow from operations netback are non-GAAP 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-GAAP 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-GAAP 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.|
As highlighted by the Company's year-end financial and operating results, 2011 was another year of positive growth and transition. Over the past three years the team at Twin Butte has successfully transitioned the Company from a conventional junior gas producer to a liquid weighted intermediate producer with a multi-year, low risk conventional heavy oil drilling inventory.
The strategic combination with Emerge which closed in January 2012 continued that transition with current liquid weighting being approximately 80 percent. The Company's move to a dividend paying organization has been well received in the financial markets and Twin Butte believes the Company will be able to deliver attractive total returns to investors through a very sustainable dividend and moderate production per share growth for the foreseeable future. The Company's oil leveraged assets have the potential and capital efficiency to generate sufficient cash flow to pay the strong dividend while leaving sufficient cash flow to fund internally generated annual production growth, targeted at approximately 3 to 5 percent.
The Company paid its first two dividends of $0.015 per month per share on February 15 and March 15, 2012, for shareholders of record on January 31 and February 29, 2012. It has announced shareholders of record on March 31 will receive the same dividend on April 16, 2012. The Board of Directors have approved the dividend payable for April, May and June production months which will be payable on May 15, June 15 and July 16, 2012 respectively.
Consistent with the Company's increasing liquids weighting, quarterly funds flow from operations continue to increase, the fourth quarter $16.7 million being the second highest quarter ever achieved. Yearly funds flow hit a record of $61.3 million, a 50 percent increase from 2010 and a 41 percent increase in funds flow per share from 2010. As previously announced post the announcement of the Emerge transaction and the decision to implement a monthly dividend, fourth quarter 2011 capital expenditures were restricted to $10.1 million (net of dispositions) representing only 60 percent of funds flow. Although this represented a lower level of spending as compared to previous quarters, production grew in the fourth quarter to 7,695 from 7,599 boe per day in the third quarter.
In addition, the Company's balance sheet remains very strong. Year-end net debt of $77.2 million represented 1.2 times Q4 annualized cash flow. Pro-forma the closing of the Emerge transaction corporate net debt is $139 million including all transaction costs on a combined debt facility of $205 million. To date in 2012 approximately $6.2 million of proceeds has been realized from the sale of three non-core assets producing approximately 170 boe's per day. It is anticipated the Company's cash flow in the first quarter of 2012 will exceed dividend payments and capital expenditures thereby providing further reduction in net debt.
Even with the recent widening of price differential from WTI to the WCS Canadian heavy index Twin Butte's 2012 cash flow forecast of $100 million is well protected with our hedging program. Approximately 75% of our current gas production hedged at $4.21/GJ at AECO for the year. In addition, 45% of current heavy oil production is hedged at a WCS price of $84.04 for the first half of the year and approximately 20 percent of current heavy oil production is hedged at a WCS price of $82.70 for the second half of the year. These hedges in combination with current strip pricing and light to heavy differentials suggest Twin Butte's heavy and overall liquid wellhead price should be approximately $10 per Bbl above pricing estimated in our 2012 cash flow forecast. At the current annual dividend rate of $0.18 per share this cash flow forecast suggests an all-in (dividend and capital expenditure) payout ratio of less than 100 percent of cash flow, one of the lowest of the dividend paying E&P companies.
During 2011 Twin Butte drilled 125 gross (80.9 net) wells with a 96 percent success rate demonstrating the predictable and repeatable potential of the Company's drilling inventory which currently is estimated to be over 500 net conventional heavy oil wells. All but 9 net wells were drilled within the Company's core heavy oil fairway all of which were successful. One hundred percent of Twin Butte's 2012 capital will be spent in this area representing approximately 90 net wells.
At Frog Lake, the Company's most active area in 2011, 109 gross (67.8 net) wells were drilled at a 100 percent success rate. 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. As discussed in the reserves section below, the Company did encounter performance issues in a GP pool that had been drilled in 2010 at Frog Lake. These performance issues suggest only minimal capital will be spent on the GP point forward and the majority of the remaining GP locations have been removed from Twin Butte's drilling inventory and reserve evaluation.
To date in 2012 20 gross (10.2 net) wells have been drilled successfully in the Rex formation at Frog Lake. It is anticipated a total of 75 gross (43 net) wells will be drilled on this property in 2012. Production from Frog Lake has increased appreciably since the Company acquired the property late in 2009 and it is anticipated that this profitable growth will continue based on our current sizable drilling inventory.
Outside of Frog Lake, the Company has been and will be active in the greater Lloydminster area at Earlie, Silverdale, and Primate. These areas account for the remainder of Twin Butte's conventional heavy oil drilling inventory. Although these areas have slightly different producing characteristics than Frog Lake they offer the same predictability and drilling repeatability that Frog Lake has and will be developed with a combination of vertical and horizontal wells. First quarter 2012 drilling has seen 6 net wells drilled at Silverdale and 6 net wells drilled at Primate.
In addition, ongoing facility work to optimize operating expenses and net backs, have been completed at Frog Lake and Primate.
Even with the current wider differentials of WTI to WCS Twin Butte anticipates netbacks exceeding $35 per boe in its heavy oil areas which generate recycle ratios approaching 4 times and payouts of less than 10 months. These wells generate return on investment in the top 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.
The Company's yearly capital plan of $66 million remains unchanged. Current Company production is 13,500 boe per day post the disposition of assets producing 170 boe per day.
Year End 2011 Reserves
Twin Butte is pleased to provide information on its oil and gas reserves
as of December 31, 2011, 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
|Forecast Prices and Costs|
Light and Medium Crude
|Heavy Oil||Natural Gas Liquids|
|Reserve Category||Gross (1)||Net (2)||Gross (1)||Net (2)||Gross (1)||Net (2)|
|Total Proved Plus Probable||2,016.8||1,763.8||15,218.0||12,329.7||2,202.5||1,444.3|
Total Proved Plus Probable
|Forecast Prices and Costs|
|Natural Gas||Oil Equivalent|
|Reserve Category||Gross (1)||Net (2)||Gross (1)||Net (2)|
|Total Proved Plus Probable||97.1||82.6||35,619.7||29,298.5|
|Total Proved Plus Probable Developed Producing||63.3||54.1||16,875.5||13,929.1|
|(1) "Gross" reserves means the total working interest share of remaining recoverable reserves owned by Twin Butte before deductions of royalties payable to others.|
|(2) "Net" reserves means Twin Butte gross reserves less all royalties payable to others.|
|(3) "Oil Equivalent" amounts have been calculated using a conversion of six thousand cubic feet of natural gas to one barrel of oil. BOEs may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.|
Summary of Net Present Value of Future Net Revenue
As at December 31, 2011
Before Income Taxes and Discounted at (%/year)
|Total Proved Plus Probable||
Total Proved Plus Probable Developed
Reconciliation of Gross Company Interest Reserves (1) (2)
By Principal Product Type
Forecast Prices and Costs
Light and Medium
|December 31, 2010||1,510.1||883.8||2,393.9||7,447.2||7,118.9||14,566.1|
|and Improved Recoveries||98.8||42.4||141.1||2,153.1||2,172.2||4,325.3|
|December 31, 2011||1,402.7||614.2||2,016.9||6,788.1||8,429.9||15,218.0|
|Natural Gas Liquids||
Natural Gas Including
|December 31, 2010||1,465.4||697.5||2,162.9||74,998.7||35,019.5||110,018.2|
|and Improved Recoveries||4.7||(2.6)||2.1||1,363.6||(640.8)||722.7|
|December 31, 2011||1,556.4||646.1||2,202.5||67,068.6||30,026.1||97,094.7|
|Oil Equivalent (3)|
|December 31, 2010||22,922.5||14,536.8||37,459.3|
|and Improved Recoveries||2,483.8||2,105.1||4,589.0|
|Acquisitions and Dispositions||(520.3)||(467.7)||(988.1)|
|December 31, 2011||20,925.3||14,694.6||35,619.9|
|(1) Gross Company interest reserves include solution gas but do not include royalty|
|(2) Reserve information as at December 31, 2010 and 2011 is prepared in accordance with NI 51-101|
(3) Oil equivalent amounts have been calculated using a conversion of six
thousand cubic feet of natural gas to one barrel of oil. BOEs may be
misleading, particularly if used in isolation. A boe conversion ratio
of six thousand cubic feet of natural gas to one barrel of oil is based
on an energy equivalency conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the wellhead.
|Capital Program Efficiency|
2009 - 2011
|Excluding Future Development Cost|
|FD&A cost - Proved ($/boe)|
|Additions and revisions (1)||51.32||10.63||27.06||20.78|
|Acquisitions (net of dispositions)||18.13||4.52||8.76||7.79|
|FD&A costs - Proved plus probable ($/boe)|
|Additions and revisions (1)||34.67||7.04||14.56||13.51|
|Acquisitions (net of dispositions)||9.54||3.35||5.51||5.05|
|Operating netback per boe (2)||25.39||20.81||19.28||22.46|
|Recycle ratio (2)|
|Proved plus probable||0.4||3.5||3.2||3.0|
|Including Future Development Costs|
|FD&A costs - Proved ($/boe)|
|Additions and revisions (1)||42.64||13.36||2.81||18.47|
|Acquisitions (net of dispositions)||18.13||16.17||10.51||11.06|
|FD&A costs - Proved plus probable ($/boe)|
|Additions and revisions (1)||32.65||9.68||11.88||14.58|
|Acquisitions (net of dispositions)||9.54||12.29||8.40||8.85|
|Recycle ratio (2)|
|Proved plus probable||0.5||2.0||2.2||2.1|
|(1) The aggregate of the additions and revisions costs incurred in the most recent financial year and the change during that year in estimated future development costs generally will not reflect total finding and development costs related to reserve additions for that year.|
(2) Recycle ratio is calculated as operating netback divided by FD&A costs
(proved plus probable). Operating netback is calculated as revenue
(including realized hedging gains and losses) minus royalties,
production and operating expenses and transportation expenses.
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
The following table sets forth Twin Butte's reserve life index based on
total proved and proved plus probable reserves and actual Q4 2011
production of 7,695 boe/d.
|Reserve Life Index (years)|
|Proved Plus Probable|
|Oil and NGL (bbl/d)||4,924||5.4||10.8|
|Natural Gas (mcf/d)||16,628||11.1||16.0|
|Oil Equivalent (boe/d)||7,695||7.5||12.7|
McDaniel December 31, 2011 Forecast Prices
Select Summary Pricing and Inflation Rate Assumptions (Forecast Prices)
Future Development Costs (Undiscounted)
Proved Plus Probable Reserves
Net Asset Value
The following net asset value ("NAV") table shows a 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 per share 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 NI51-101 compliant reserve assessment.
Using Twin Butte's Reserve Value at December 31, 2011 - Forecast Pricing and Costs (Pre tax)
|($MM except as noted)||10% Before Tax||15% Before Tax|
|Proved plus Probable Reserve Value||494.3||409.8|
|Undeveloped Land Value (1)||37.1||37.1|
|Basic Shares Outstanding||135.4||135.4|
|Estimated Net Asset Value $ per Share - Basic||$3.35||$2.73|
|Fully Diluted Shares Outstanding||145.4||145.4|
Estimated Net Asset Value $ per Share - Fully
|(1) Independent assessment of 207,762 net undeveloped acres at average price of $178/acre.|
The combined Proved and Probable technical revisions represent a negative revision of approximately 7 percent on the year end 2010 balance. The natural gas revision (32 percent of overall revision) was predominantly discretionary by management, as the Company's capital expenditure forecast for the next number of years is directed strictly to oil activity. Therefore Twin Butte felt it was prudent to reduce the number of undeveloped gas locations represented in the report.
The negative revision associated with the Company's heavy oil properties was predominantly associated with the redefinition of the Company's heavy oil type well. In 2009 the type well assumed approximately 45 Mboe of recoverable oil. Based on positive overall 2010 drilling results, the type well was increased to approximately 57 Mboe at year end 2010. Largely due to the underperformance of the GP formation in one pool at Frog Lake during 2011, the type well was reduced to 50 Mboe at year end 2011. This type well revision in combination with a number of undeveloped GP locations being removed from the report accounted for the total negative revision. Of note is that the proved developed producing reserves booked at year end 2010 after adjustment for production actually increased at year end 2011, and the heavy oil proved and probable reserve replacement ratio was 150% of heavy oil production, representing the positive performance of the non GP producing wells. As noted earlier the Company's focus at Frog Lake in 2012 and beyond is on the Rex formation that has delivered consistent positive results.
The above noted revisions in combination with the additions achieved in 2011 have lead to a finding and development cost including change in forward development capital of $32.65 per boe compared to the Company's three year average of $14.58 per boe.
Also in 2011 the Company sold a number of non-core producing and nonproducing assets. The prices received for these assets were reflective of current market conditions but were below the year-end 2011 proved and probable present values reflected in the reserve report. When combined with the 2011 finding and development costs reflected above, 2011 finding, development and acquisition costs including forward development capital changes were $56.95 per boe compared to a three year average of $10.59 per boe, or a 2.5 times recycle ratio.
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 500 net heavy oil drilling locations after incorporating the Emerge inventory. This will allow a sustained pace of repeatable development drilling and prioritized 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's employees, executive, and Board have continued to work very diligently throughout 2011 to achieve the Company's success. The team remains extremely motivated to meet and exceed the expectations it has set and to deliver strong returns to the shareholders. Our thanks goes out to all who have contributed in our success.
Twin Butte anticipates 2012 will continue to see the Company progress its business plan. We believe the combination of a sustainable dividend and moderate per share growth will continue to attract investor interest. We remain committed to continually enhance the Company's asset quality through 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.
March 22, 2012
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 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.
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