Twin Butte Energy Ltd. Reports Second Quarter 2010 Financial Results

CALGARY, Aug. 9 /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 months ended June 30, 2010 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 months ended June 30, 2010 and June 30, 2009 comparatives 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 six months ended June 30, 2010.

    
    -------------------------------------------------------------------------
                   Three months ended June 30     Six months ended June 30
    -------------------------------------------------------------------------
                     2010       2009       %       2010       2009       %
                                        Change                        Change
    -------------------------------------------------------------------------
    Financial ($
     thousands,
     except per
     share
     amounts)
    -------------------------------------------------------------------------
    Petroleum and
     natural gas
     sales            23,880      8,359   186%      49,383     17,756   178%
    Funds flow(1)      8,261      2,691   207%      17,986      7,011   157%
    Per share
     basic &
     diluted            0.06       0.06     0%        0.14       0.15    -7%
    Net (loss)/
     income           (1,739)    (3,328)  -48%       1,338     (8,186) -116%
    Per share
     basic &
     diluted           (0.01)     (0.07)  -86%        0.01      (0.14) -107%
    Capital
     expenditures      8,247        793   940%      19,599      6,205   216%
    Capital
     dispositions     (2,938)    (9,815)  -70%      (8,657)    (9,815)  -12%
    Corporate
     acquisitions          -          -                  -          -
    Net debt(2)       74,336     39,889    86%      74,336     39,889    86%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operating
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average daily
     production
    Crude oil (bbl
     per day)          2,490        696   258%       2,284        692   230%
    Natural gas
     (Mcf per
     day)             22,423     12,302    82%      22,545     12,482    81%
    Natural gas
     liquids
     (bbl per
     day)                262        118   122%         274        127   116%
    Barrels of oil
     equivalent
     (boe per day,
     6:1)              6,489      2,864   127%       6,316      2,899   118%
    Average sales
     price
    Crude oil ($
     per bbl)          60.82      63.04    -4%       64.32      54.79    17%
    Natural gas ($
     per Mcf)           4.17       3.46    21%        4.75       4.38     8%
    Natural gas
     liquids ($
     per bbl)          67.08      45.62    47%       68.66      43.36    58%
    Barrels of oil
     equivalent ($
     per boe, 6:1)     40.44      32.07    26%       43.20      33.84    28%

    Operating netback
     ($ per boe)
    Petroleum and
     natural gas
     sales             40.44      32.07    26%       43.20      33.84    28%
    Realized gain (loss)
     on financial
     derivatives        2.56       1.58    62%        1.55       4.38   -65%
    Royalties          (8.72)     (0.55) 1485%       (9.10)     (2.78)  227%
    Operating
     expenses         (14.34)    (13.70)    5%      (13.92)    (13.54)    3%
    Transportation
     expenses          (1.42)     (2.32)  -39%       (1.59)     (2.49)  -36%
    Operating netback  18.52      17.08     8%       20.14      19.41     4%
    Wells drilled
    Gross               12.0          -   100%        37.0        3.0  1133%
    Net                  7.5          -   100%        22.0        3.0   633%
    Success (%)         100%       100%     0%        100%       100%     0%

    Common Shares
    ------------------------------------------------------------------
    ------------------------------------------------------------------
    Shares
     outstanding,
     end of
     period      128,184,335 47,128,425   172% 128,184,335 47,128,425   172%
    Weighted
     average
     shares
     outstanding
     - diluted   128,153,310 47,128,425   172% 126,137,313 47,128,425   168%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Funds flow means cash flow from operating activities before changes
        in non-cash working capital and expenditures on asset retirement
        obligations. See Management's Discussion & Analysis Non-GAAP
        Measures.
    (2) Net debt is defined as the sum of working capital deficiency and
        other liabilities excluding financial derivative assets or
        liabilities. Net debt is a Non-GAAP Measure.
    (3) Operating netback is a Non-GAAP Measure and is the net of revenue,
        realized gain on financial derivatives, royalties, operating and
        transportation expenses.
    

Report to Shareholders

Quarterly momentum continues with increased production and reduced net debt.

Corporate:

While unseasonably wet weather has hampered industry activity across Western Canada Twin Butte's second quarter performance demonstrates continued operational momentum with a six percent increase in production over the first quarter. This was accomplished even though capital expenditures net of non core dispositions have been 61 percent of cash flow for the last two quarters. Maintaining a strong balance sheet continues to be a priority for Twin Butte with net debt declining over the quarter to $74.3 million while our recently renewed credit facility remains at $120.0 million.

Twin Butte's program of disposing of non-core assets remains methodical and successful. Seven dispositions were completed in the second quarter for proceeds of $3.1 million before adjustments. To date in the third quarter we have executed agreements to dispose of an additional three assets for $1.62 million. Since completing the Buffalo acquisition in October 2009 thirteen transactions have been completed which has further focused our asset base while providing incremental capital above our cash flow to fuel our capital plan.

During the second half of 2010 Twin Butte will continue to spend cash flow and proceeds of non-core dispositions while remaining committed to keeping net debt below $80 million. This will provide ample capital to meet and exceed our internal growth targets while preserving incremental financial capacity to be opportunistic should opportunities present themselves.

Operations:

Corporate production averaged 6,489 boe per day in the second quarter of 2010 up substantially from the Q4 2009 average of 5,699 boe per day (post Buffalo acquisition). Liquids production continues to grow with the second quarter production averaging 42 percent. With continued success at our Frog Lake heavy oil and Bruce light oil plays and over 90 percent of the capital plan focused on oil based activities, oil production weighting will grow to in excess of 50 percent by the end of the year.

Current production is approximately 6,600 boe per day and is expected to surpass 6,750 boe per day later this month with the start up of our new facility at Bruce. Consistent results from our capital plan has allowed Twin Butte's production to grow even though over 400 boe per day of production has been sold since the Buffalo acquisition.

In the second quarter Twin Butte executed a successful capital program of $8.2 million ($5.3 net of dispositions) which included the drilling of 12 gross (7.5 net) wells at a 100 percent success rate. To date in the third quarter an additional 9 gross (7 net) wells have been drilled at an 89 percent success rate. Based on this success and our current financial position the Company now anticipates spending a minimum of $48 million ($38 million net of dispositions) in 2010. With continued success in our disposition program, proceeds will be recycled into an enhanced capital program with a focus on oil projects.

At Frog Lake in the Eastern Plains of Alberta, the Company completed a 10 gross (5.5 net) oil well drilling program in the second quarter and to date in the third quarter an additional 4 gross wells have been drilled at a 100 percent success rate. We anticipate drilling up to an additional 50 gross wells on the property before year end. Company production from Frog Lake has increased appreciably to over 1,950 from 1,100 boe per day since Twin Butte acquired the property late in 2009. Twin Butte anticipates its current drilling inventory will allow continued profitable production growth for years to come.

A second Frog Lake 3D seismic survey which we anticipate will be complete in the third quarter in combination with our first quarter 3D program will cover the majority of the company's lands. These surveys will not only fine tune our extensive development drilling inventory but will further define potential on our undrilled exploratory acreage. As our production grows at Frog Lake so do our third party operating costs. These trucking, oil processing and water disposal costs were the major portion of our corporate operating cost increase in the second quarter over the first quarter. To reduce the costs we continue to construct fluid processing and water disposal facilities.

At Bruce in the Eastern Plains, two 100 percent interest horizontal oil wells were drilled in the second quarter with two additional 100 percent wells being drilled to date in the third quarter. These wells (five horizontal wells to date) continued to delineate a Q4 2009 oil discovery. To handle increased solution gas volumes from the property Twin Butte is currently constructing a gas plant, which should be commissioned before month end. This will allow two cased wells to commence production while minimizing third party processing fees. Based on 3D seismic coverage the opportunity exists for a number of additional wells on the play which we will continue to delineate over the remainder of 2010.

At Princess in the Eastern Plains we have now cased our first horizontal Pekisko oil well (100 percent) with results looking promising. Completion operations will commence shortly. Based on completion success a number of follow up wells are planned. Unfortunately a second 100 percent horizontal well targeting the Glauconite formation encountered high pressure water from offset water injection and was subsequently abandoned.

In the Ansell area of the Deep Basin of Alberta, the Company has recently cased a horizontal well targeting liquids rich Cardium gas. This well will de-risk the play on our lands which have already been successfully developed by offset competitors. We anticipate completion and production testing to commence before month end. The company has a number of other horizontal gas opportunities (Notikewin and Wilrich) in the area which will be developed when gas pricing dictates.

Twin Butte is in an enviable position of having a significant inventory of both oil and gas drilling locations allowing us to prioritize capital to maximize return and minimize payout times. Although the capital plan is almost exclusively oil based, some capital will be spent to de-risk different scalable gas plays in the Eastern Plains and the Deep Basin of Alberta. This derisking will ensure the Company's significant resource style gas growth opportunities are ready to be executed upon when gas pricing improves.

Outlook:

Our organic exploration and development program continues to work. We have and continue to establish a number of scalable play types in core areas that will make a meaningful difference to future corporate growth. This growth has been demonstrated over the past three quarters and will continue through 2010. We remain committed to achieving our internal growth targets and anticipate exiting 2010 at 7,200 boe per day.

Our new strategy and corporate direction was set in 2009. We have been and will remain disciplined in pursuing this strategy. We continue to do what we said we would do. This has led to a financially stronger company which continues to demonstrate its growth potential. Our strategy is working and will continue to unfold in 2010.

Twin Butte is a value oriented junior producer with a significant 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 2010 capital plan is highly focused in two core areas (Alberta Plains and West Central Alberta/Deep Basin) 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.

On behalf of the Board of Directors,

Jim Saunders

President and Chief Executive Officer

August 9, 2010

For further information regarding Twin Butte Energy Ltd., the reader is invited to visit the Company's website at www.twinbutteenergy.com.

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.

As referred to above, to view Twin Butte's unaudited financial statements and related MD&A for the three months ended June 30, 2010 please visit www.twinbutteenergy.com or 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 - 11th Avenue SW, Calgary, Alberta, T2R 0C5.

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.

%SEDAR: 00001562E

SOURCE Twin Butte Energy Ltd.

For further information: 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

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Twin Butte Energy Ltd.

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