CALGARY, July 15, 2013 /CNW/ - Twin Butte Energy Ltd. (TSX: TBE) ("Twin
Butte" or the "Company") is pleased to provide an operational update.
Based on field estimates for June, average production for Q2 2013 is
estimated to be between 16,500 and 16,700 boe per day, falling slightly
short of internal expectations of 17,200 boe per day or a 3% variance.
Extremely wet weather and prolonged spring breakup conditions severely
limited the Company's ability to access leases and truck produced oil,
often forcing wells to be shut-in. Cash flow is estimated to be in the
$31 - $32.5 million range or slightly ahead of the first quarter.
Capital expenditures were also limited due to the weather and extended
road bans with estimated capital for the second quarter of $16 million
or approximately $4 million below internal targets. Net debt will
decrease to approximately $196 million with an all in payout ratio of
approximately 84 percent. With the payout ratio running well below 100
percent year to date the Company expects to be able to increase the
third quarter capital plan and bring the year to date payout ratio back
closer to 100 percent.
At our Primate property, the Company has had another significant drop in
production over the past 10 days resulting in current production levels
of 1,400 boe per day as compared to forecast volumes of over 2,000 boe
per day as a result of increased water inflow on a number of wells.
After the last step change in January we had modelled a 40% decline and
the field was performing within that range but with this recent move we
are now updating our forecast to show no material volumes beyond 2014
as a result of the challenges with this reservoir. Reservoir modelling
of what Twin Butte had believed to be analogous pools has not provided
an accurate forecast when compared to actual performance. Forecasting
this field's point forward performance is very difficult in light of
the inconsistent and unique performance we have seen this year, and
therefore we are forecasting at the low end of our potential scenarios
on this field.
Although extremely disappointing and unexpected the Company views the
Primate situation as an isolated performance issue. All other
properties have been generally tracking forecast volume levels. Twin
Butte has and will continue to take a very disciplined approach to
running the business. The Company will not risk its balance sheet or
deviate from its fundamental principle of maintaining financial
flexibility and an all in payout ratio of 100 percent or less.
Corporate production is currently 16,100 boe per day with approximately
400 boe per day of productive capability from recently drilled wells.
The Company anticipates the majority of these wells should be on stream
by early August. Year to date drilling performance has generated
excellent results. A recent focus has been at Wildmere where the
Company has drilled 15 horizontal wells, 8 of which are on-stream.
Average results have exceeded the Company's type curve generating in
excess of 80 bbls per day per well. Drilling costs have reduced as more
drilling experience is gained in the area with all in costs per well
coming in at between $900,000 and $950,000, generating excellent
capital efficiencies. The area will remain active through the third
quarter until horizontal drilling plans commence at Frog Lake early in
the fourth quarter.
With the revised production levels the Company now expects 2013 cash
flow to be approximately $112 million. Consistent with the Company's
fundamental principle of protecting the balance sheet, 2013 net capital
expenditures will be reduced to approximately $70 million or a
reduction of $15 million which should provide exit production volumes
of approximately 15,500 boe per day and hold the payout ratio at 100
Twin Butte anticipates releasing Q2 2013 financial and operating results
on August 14, 2013 after market close.
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
In the interest of providing Twin Butte's shareholders and potential
investors with information regarding Twin Butte, 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 and aggregate
payments, including payout ratios.
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;
continued productivity issues with respect to certain properties
identified in this press release; that audited financial results will
not differ materially from the Company's internally prepared financial
information; that preliminary results in regards to the Company's
reserves, as evaluated by the Company's independent engineers, will not
differ materially upon completion of such evaluation; participation in
the Company's DRIP or SDP; 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; production risks; 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.
This press release, in particular the information in respect of
anticipated cash flows, may contain Future Oriented Financial
Information ("FOFI") within the meaning of applicable securities laws.
The FOFI has been prepared by management of the Company to provide an
outlook of the Company's activities and results. The FOFI has been
prepared based on a number of assumptions including the assumptions
discussed under the heading "Forward-Looking Statements" and
assumptions with respect to production rates and commodity prices. The
actual results of operations of the Company and the resulting financial
results may vary from the amounts set forth herein, and such variation
may be material. The Company and its management believe that the FOFI
has been prepared on a reasonable basis, reflecting the best estimates
and judgments, and represent, to the best of management's knowledge and
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