Twin Butte Energy Announces 2013 Year End Financial and Operating Results
CALGARY, March 20, 2014 /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, 2013, along with year-end reserves and an operational update for first quarter 2014 activity.
During 2013 Twin Butte continued to enhance its asset base with the acquisition of Black Shire Energy Inc. ("Black Shire") which added a new, medium oil operating area and commenced its transition to a horizontal weighted driller in all areas. The fourth quarter results include the impact of the Black Shire operations from November 5th onwards.
Highlights of Twin Butte's successful 2013 are as follows:
- Closed the corporate acquisition of Black Shire on November 5, adding approximately 7,000 boe per day of production weighted 93% to medium gravity oil that improves corporate netbacks while reducing corporate decline rates.
- Completed an organic capital program of $106.4 million ($77.2 million net of dispositions) including the drilling of 97 gross (95.3 net) wells at a 93% success rate.
- Increased average annual production by 20% to 17,585 boe/d while increasing the oil & liquids weighting to 88% from 84%.
- Reinforced the sustainability of the dividend model by holding total payout to 94% (90% net of DRIP/SDP).
- Increased proven plus probable reserves by 21% to 68.2 MMBOE from 56.2MMBOE in previous year.
- Generated total proved plus probable organic drilling finding and development ("F&D") costs of $21.39 per boe including changes in future development costs, before revisions, representing a 1.6 times recycle ratio based on estimated 2014 operating netbacks of $34.30 per boe.
Certain selected financial and operational information for the three and twelve months ended December 31, 2013 and 2012 is outlined below and should be read in conjunction with Twin Butte's audited financial statements for the years ended December 31, 2013 and 2012 and accompanying management discussion and analysis filed with the Canadian securities regulatory authorities which may be accessed through the SEDAR website (www.sedar.com) and also on the Company's website.
| Three months ended December 31 | Twelve months ended December 31 | |||||
| 2013 | 2012 | % Change | 2013 | 2012 | % Change | |
| Financial ($ 000's, except per share amounts) | ||||||
| Petroleum and natural gas sales | 106,849 | 88,673 | 20% | 394,588 | 304,729 | 29% |
| Funds flow (1) | 36,978 | 37,754 | -2% | 137,358 | 136,034 | 1% |
| Per share basic | 0.12 | 0.16 | -25% | 0.52 | 0.67 | -22% |
| Per share diluted | 0.12 | 0.16 | -25% | 0.52 | 0.66 | -21% |
| Net income (loss) | (88,028) | (5,381) | -1536% | (115,633) | 31,530 | -467% |
| Per share basic | (0.28) | (0.02) | -1300% | (0.44) | 0.15 | -393% |
| Per share diluted | (0.28) | (0.02) | -1300% | (0.44) | 0.15 | -393% |
| Dividends declared | 15,577 | 10,579 | 47% | 52,286 | 37,249 | 40% |
| Dividends declared, Post DRIP | 14,208 | 9,443 | 50% | 46,883 | 35,573 | 32% |
| Capital expenditures (2) | 33,632 | 38,530 | -13% | 77,176 | 87,742 | -12% |
| Corporate acquisitions (2) | 356,521 | 134,972 | 164% | 356,521 | 428,392 | -17% |
| Net debt (3) | 361,612 | 201,703 | 79% | 361,612 | 201,703 | 79% |
| Operating | ||||||
| Average daily production | ||||||
| Heavy crude oil (bbl per day) | 13,123 | 14,450 | -9% | 13,630 | 11,343 | 20% |
| Light & Medium crude oil (bbl per day) | 4,710 | 672 | 601% | 1,659 | 742 | 124% |
| Natural gas (Mcf per day) | 11,634 | 13,174 | -12% | 12,572 | 14,009 | -10% |
| Natural gas liquids (bbl per day) | 188 | 213 | -12% | 201 | 261 | -23% |
| Barrels of oil equivalent (boe per day, 6:1) | 19,960 | 17,531 | 14% | 17,585 | 14,681 | 20% |
| % Oil and NGLs | 90% | 87% | 3% | 88% | 84% | 5% |
| Average sales price | ||||||
| Heavy crude oil ($ per bbl) | 60.28 | 58.88 | 2% | 66.33 | 63.19 | 5% |
| Light & Medium crude oil ($ per bbl) | 66.19 | 75.14 | -12% | 70.73 | 78.50 | -10% |
| Natural gas ($ per Mcf) | 3.78 | 3.52 | 7% | 3.47 | 2.57 | 35% |
| Natural gas liquids ($ per bbl) | 77.50 | 76.01 | 2% | 80.02 | 82.74 | -3% |
| Barrels of oil equivalent ($ per boe, 6:1) | 58.19 | 54.98 | 6% | 61.47 | 56.71 | 8% |
| Operating netback ($ per boe) (4) | ||||||
| Petroleum and natural gas sales | 58.19 | 54.98 | 6% | 61.47 | 56.71 | 8% |
| Cash (loss) gain on derivative instruments | 1.41 | 4.83 | -71% | 0.60 | 5.47 | -89% |
| Royalties | (11.50) | (9.83) | -17% | (12.78) | (11.97) | -7% |
| Operating expenses | (21.12) | (19.73) | -7% | (21.83) | (18.55) | -18% |
| Transportation expenses | (2.06) | (2.82) | 27% | (2.44) | (2.52) | 3% |
| Operating netback | 24.92 | 27.43 | -9% | 25.02 | 29.14 | -14% |
| Wells drilled | ||||||
| Gross | 26.0 | 23.0 | 13% | 97.0 | 95.0 | 2% |
| Net | 24.3 | 23.0 | 6% | 95.3 | 77.2 | 23% |
| Success (%) | 96 | 87 | 10% | 93 | 95 | -2% |
| Common Shares | ||||||
| Shares outstanding, end of period | 343,079,562 | 248,311,634 | 38% | 343,079,562 | 248,311,634 | 38% |
| Weighted average shares outstanding - diluted | 309,082,232 | 239,331,527 | 29% | 265,191,273 | 205,581,356 | 29% |
| (1) Funds flow from operations and funds flow from operating 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) Corporate acquisitions is a non-GAAP measure and includes total consideration plus working capital deficiency acquired in a corporate acquisition. Capital expenditures is a non-GAAP measure calculated as the purchase or sale price of an asset, plus development capital expenditures added to PP&E. Corporate acquisitions are excluded from this measure. |
| (3) Net debt is a non-GAAP measure representing the total of bank indebtedness, accounts payables and accrued liabilities, cash dividend payable, less accounts receivables, deposits and prepaids. |
| (4) Operating netback is a non-GAAP measure calculated as the average per boe of the Company's oil and gas sales plus realized gains on derivatives, less royalties, operating and transportation expenses. |
Corporate:
As highlighted by the Company's year end financial and operational results, during 2013, Twin Butte progressed and strengthened the Company's business model of delivering a long term stable dividend with moderate production growth. Strong financial discipline combined with a focused and successful capital plan ensured the Company maintained its monthly dividend while not overleveraging the Company's balance sheet and maintaining an all-in payout ratio of 90%. The fourth quarter acquisition of Black Shire significantly strengthened Twin Butte by adding a new core operating area in Provost with financial and performance attributes which augment and enhance the performance of the Company's historic heavy oil assets. The acquisition significantly improved Twin Butte's corporate sustainability by increasing its corporate netback, decreasing its corporate decline rate while adding a sizeable drilling inventory with capital efficiencies comparable to Twin Butte's existing heavy oil drilling inventory.
Twin Butte's strategic shift in 2013 to more horizontal drilling activity versus vertical delivered positive results by year end. The Company anticipates that this strategic shift will continue in 2014 with a 75% to 80% drilling weighting to horizontal activity planned.
Financial:
Twin Butte's full year 2013 financial and operating results demonstrate the Company's ability to pay a sustainable dividend and maintain a strong balance sheet while completing a disciplined capital plan. The Company paid $52.3 million in dividends ($46.9 million post DRIP) in 2013 which when combined with net $77.2 million in organic capital spending generated an all-in payout ratio of 90%, consistent with 2012. In the fourth quarter, the Company completed the Black Shire acquisition for total proceeds of $356.5 million consisting of cash, assumed debt and the issuance of Twin Butte shares to Black Shire shareholders. A portion of the cash for the transaction was financed with a $70 million equity issue at $1.95 per share. The Company subsequently issued $85 million principal amount of 6.25% convertible unsecured subordinated debentures due December 31, 2018. At year end, Company net debt, including the debentures, was approximately $362 million, and the Company had $252.2 million drawn on its credit facility of $400 million.
During 2013, the Company continued its successful program of non-core asset dispositions, completing seven separate transactions for gross proceeds of $29.6 million. These dispositions further focused the Company's asset base with proceeds being used to partially fund the Company's ongoing organic capital plans in its core operating areas in Lloydminster and Provost.
Funds flow for 2013 increased slightly from 2012 reaching $137 million. This figure is expected to increase to over $210 million in 2014 as a result of a full year of the higher netback production from the Provost area. Funds flow for the first quarter of 2014 is estimated to be $46-47 million.
Being primarily a heavy oil producer, the Company was not immune to the volatility of differentials from WTI to the WCS Canadian heavy oil index through 2013. Industry concerns with respect to potential transportation restrictions and refinery capacity for heavy oil barrels translated into a WCS price varying from a high in August of $94.66 per barrel to a low in February of $58.96 per barrel. Although differentials have significantly contracted in early 2014, Twin Butte anticipates continued volatility over the remainder of the year but longer term believes a WCS price in excess of $80 per barrel is reasonable. The Company's proactive hedging or risk management strategy stabilized realized pricing ensuring consistency of cash flow for the dividend and capital plan. For 2014, the Company is well positioned with approximately 47% of its anticipated heavy oil production hedged at approximately $75.00 per bbl. The Company has commenced layering in hedges for 2015 at WTI prices of close to $100 per barrel and WCS prices of approximately $77.00 per bbl.
The Black Shire acquisition has improved the Company's dividend sustainability since the Provost area's production is medium quality oil which, along with lower operating and royalty costs, will generate an operating netback premium of between $15 to 20 per barrel above the Company's Lloydminster heavy oil barrels.
Operations:
The Company's 2013 capital plan was focused in its core heavy oil area at Lloydminster with the exception of two wells drilled in December on the acquired Provost assets. The $106.4 million of gross capital ($77.2 million net of dispositions) capital program included the drilling of 97 gross wells (95.3 net) of which 42% were horizontal. Strategically, this is up significantly from 2012 when only 3% of the Company's drilling was horizontal. 2014 will see the continued the shift to more horizontal drilling with 75% of the Company's wells anticipated to be horizontal. This is part of the ongoing transition of the Company to a more predictable and more sustainable base production profile.
Twin Butte's most active drilling area in 2013 was a horizontal heavy oil development in Wildmere, Alberta. The Wildmere asset was acquired in Q4 2012 and subsequently 30 horizontal wells were drilled on the property in 2013. Successful step-out wells drilled on the property in late 2013 and early 2014 have delineated an additional 20 horizontal locations which will be pursued in 2014.
Frog Lake had four horizontal wells drilled in 2013, following up on a successful horizontal drill in 2011. These wells should lead to additional horizontal drilling later in 2014 and onwards.
The Swimming property had nine wells drilled in 2013, comprised of eight vertical and one horizontal. Additional drilling at this property is planned for 2014.
Twin Butte's most active Saskatchewan drilling program was at Celtic where seven vertical wells were drilled in 2013. This area will see continued activity in 2014 to follow-up on significant 2013 new pool discoveries.
At Provost, a development horizontal drilling program commenced with two wells in 2013 followed by 15 wells in the first quarter of 2014. Based on the high productivity and high oil cuts on the drilled wells completed to date, the Company anticipates drilling a minimum of 45 wells in 2014 at Provost. Two new oil and water handling facilities commissioned at Provost late in the fourth quarter and early in the first quarter, along with the Company's other extensive infrastructure, will enable the new wells to be brought on stream promptly throughout the year.
2013 production averaged 17,585 boe/d which was up 20% from the 2012 average of 14,681 boe/d. Fourth quarter 2013 production hit a new corporate high, averaging 19,960 boe/d primarily due to the Black Shire acquisition which was effective November 5th.
Production for the first quarter of 2014 is anticipated to be approximately 22,500 boe/d. This rate is slightly lower than Twin Butte's year end 2013 exit rate as difficult weather related operating conditions were experienced during January and February. Current production is approximately 23,000 boe/d.
Year to date, the Company has drilled 34 gross (34 net) wells, including 18 horizontal wells of which 15 were in the Provost area. The Company has prepared for breakup by positioning three drilling rigs on pads to drill 12 wells during the first six weeks of Q2. These wells will be completed and tied-in after break-up when field conditions permit.
Reserves:
In 2013, Twin Butte continued to grow corporate reserves through its organic capital plan (drilling) and the strategic acquisition of Black Shire. Year-end proved and proved and probable reserves were up 22% and 21% respectively, from year end 2012 levels. With 100% of the Company's 2013 capital activity directed towards oil, the liquid reserve weighting grew to 80% from 73% in 2012.
For reconciliation purposes, the 2013 capital plan was broken down as to $106.4 million, $29.2 million and $356.5 million, respectively, for the drilling, disposition and acquisition program. The tables below show additions by each commodity and reserve classification. The Company's organic drilling program added 6.1 MMboe's of reserves whereas acquisitions added 18.0 MMboe's of reserves partially offset by 2.9 MMboe's of reserve dispositions. Changes or negative revisions to the year end 2012 reserve estimate were 2.7 MMboe's or 4.8% of the year end 2012 reserves. These changes were primarily in the probable category as Twin Butte experienced positive revisions on a proved basis for the second year in a row. Proved producing reserves booked at year end 2012 also experienced positive revisions. Approximately 20% of this revision was in natural gas where Twin Butte has not directed any capital for the past three years. Earlier reported performance issues at the Company's Primate property in western Saskatchewan accounted for an additional 20% of the negative revisions. The Company's move to a greater percentage of its drilling activity being horizontally based is a direct reflection of the target sizes and average booked reserve per vertical well getting smaller. Overall, the organic program generated a very reasonable finding and development cost of $21.29 per boe including changes in forward development capital, however, incorporating the negative revisions, this figure increased to $38.46 per boe.
The acquisition component of Twin Butte's 2013 capital plan was dominated by the Black Shire acquisition which added approximately 18 MMboe's of reserves. These reserves were added at a very attractive price of $23.93 per boe including forward capital but excluding any value for undeveloped land which the Company anticipates will generate a forward recycle ratio of close to 2.0 times.
All-in finding development, acquisition and disposition costs, including changes in forward development capital was $24.22 per boe before revisions and $27.76 per boe including revisions. At year end 2013, the Company had 385,000 net acres of undeveloped and non-producing acreage which was independently valued at year end at $83 million.
The Company's reserves data set forth below is based on an evaluation and review completed by the independent reserve engineering firm, McDaniel & Associates Consultants Ltd ("McDaniel"), with an effective date of December 31, 2013. McDaniel evaluated approximately 74% (90% of total proved plus probable future net revenue discounted at 10%) of Twin Butte's assigned total proved plus probable reserves and reviewed the internal evaluation completed by Twin Butte on the remaining portion, which primarily included certain non-core natural gas properties. McDaniel's evaluation and review was prepared in accordance with standards contained in the Canadian Oil and Gas Evaluation Handbook ("COGEH") and the reserves definitions contained in National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities ("NI 51-101") and the COGEH.
Summary of Total Company Reserves
| Forecast Prices and Costs | ||||||||||||||
| Light and Medium Crude Oil |
Heavy Oil | Natural Gas Liquids |
||||||||||||
| Reserve Category | Gross (1) | Net (2) | Gross (1) | Net (2) | Gross (1) | Net (2) | ||||||||
| (Mbbl) | (Mbbl) | (Mbbl) | (Mbbl) | (Mbbl) | (Mbbl) | |||||||||
| Proved | ||||||||||||||
| Developed Producing | 2,656.1 | 2,471.9 | 14,254.3 | 12,353.4 | 1,788.6 | 1,209.5 | ||||||||
| Developed Non-Producing | 47.7 | 44.7 | 1,862.8 | 1,585.0 | 392.9 | 264.8 | ||||||||
| Undeveloped | 485.3 | 420.0 | 7,634.0 | 6,615.0 | 336.2 | 235.3 | ||||||||
| Total Proved | 3,189.1 | 2,936.5 | 23,751.1 | 20,553.5 | 2,517.7 | 1,709.7 | ||||||||
| Probable | 1,840.4 | 1,622.8 | 22,642.3 | 19,146.2 | 949.9 | 653.3 | ||||||||
| Total Proved Plus Probable | 5,029.5 | 4,559.3 | 46,393.4 | 39,699.7 | 3,467.6 | 2,363.0 | ||||||||
| Total Proved Plus Probable Developed Producing | 3,585.8 | 3,323.4 | 19,898.5 | 17,083.6 | 2,163.9 | 1,465.9 | ||||||||
| Forecast Prices and Costs | ||||||||||||||
| Natural Gas | Oil Equivalent(3) | |||||||||||||
| Reserve Category | Gross (1) | Net (2) | Gross (1) | Net (2) | ||||||||||
| (MMcf) | (MMcf) | (Mboe) | (Mboe) | |||||||||||
| Proved | ||||||||||||||
| Developed Producing | 41,310.8 | 34,510.7 | 25,584.1 | 21,786.6 | ||||||||||
| Developed Non-Producing | 7,086.1 | 5,733.8 | 3,484.4 | 2,850.2 | ||||||||||
| Undeveloped | 6,996.4 | 5,871.6 | 9,621.6 | 8,248.9 | ||||||||||
| Total Proved | 55,393.4 | 46,116.1 | 38,690.1 | 32,885.8 | ||||||||||
| Probable | 24,623.2 | 20,209.7 | 29,536.5 | 24,790.5 | ||||||||||
| Total Proved Plus Probable | 80,016.6 | 66,325.8 | 68,226.7 | 57,676.3 | ||||||||||
| Total Proved Plus Probable Developed Producing | 51,372.2 | 42,864.7 | 34,210.3 | 29,017.0 | ||||||||||
| (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. Given the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6 mcf: 1 bbl, utilizing a conversion ratio of 6 Mcf: 1 bbl may be a misleading indication of value. |
| (4) Numbers in tables may not add due to rounding. |
Summary of Net Present Value of Future Net Revenue (1)
As at December 31, 2013
Before Income Taxes and Discounted at (%/year)
| Reserve Category | 0% | 5% | 10% | 15% | |
| ($000s) | ($000s) | ($000s) | ($000s) | ||
| Proved | |||||
| Developed Producing | 616,509.6 | 535,769.0 | 480,101.3 | 438,884.4 | |
| Developed Non-Producing | 88,405.7 | 62,623.2 | 50,690.0 | 43,254.1 | |
| Undeveloped | 191,329.2 | 152,155.2 | 123,598.1 | 101,858.6 | |
| Total Proved | 896,244.4 | 750,547.4 | 654,389.3 | 583,997.1 | |
| Probable | 832,023.4 | 615,459.6 | 488,464.8 | 401,541.1 | |
| Total Proved Plus Probable | 1,728,267.8 | 1,366,007.0 | 1,142,854.1 | 985,538.2 | |
| Total Proved Plus Probable Developed Producing | 884,396.9 | 726,929.5 | 632,141.0 | 566,466.8 | |
| (1) Based on McDaniel forecast prices and costs. |
Reserve Reconciliation
Reconciliation of Gross Company Interest Reserves (1)(2)(4)
By Principal Product Type
Forecast Prices and Costs
| Light and Medium Crude Oil |
Heavy Oil | ||||||||||||||||
| Proved (Mbbl) |
Probable (Mbbl) |
Proved + Probable (Mbbl) |
Proved (Mbbl) |
Probable (Mbbl) |
Proved + Probable (Mbbl) |
||||||||||||
| December 31, 2012 | 1,232.5 | 733.9 | 1,966.4 | 17,525.0 | 17,830.5 | 35,355.5 | |||||||||||
| Discoveries, Extensions | |||||||||||||||||
| and Improved Recoveries | 93.8 | 60.3 | 154.1 | 4,123.5 | 1,651.8 | 5,775.3 | |||||||||||
| Technical Revisions | 283.4 | 112.8 | 396.2 | 64.5 | (2,714.9) | (2,650.4) | |||||||||||
| Acquisition(5) and Dispositions |
1,793.1 | 933.5 | 2,726.6 | 7,405.4 | 5,875.0 | 13,280.4 | |||||||||||
| Production | (213.7) | 0.0 | (213.7) | (5,367.3) | 0.0 | (5,367.3) | |||||||||||
| December 31, 2013 | 3,189.1 | 1,840.4 | 5,029.5 |
23,751.1 | 22,642.3 | 46,393.4 | |||||||||||
| Natural Gas Liquids | Natural Gas Including Solution Gas |
||||||||||||||||
| Proved (Mbbl) |
Probable (Mbbl) |
Proved + Probable (Mbbl) |
Proved (MMcf) |
Probable (MMcf) |
Proved + Probable (MMcf) |
||||||||||||
| December 31, 2012 | 2,561.1 | 1,047.1 | 3,608.2 | 62,140.2 | 29,431.0 | 91,571.2 | |||||||||||
| Discoveries, Extensions | |||||||||||||||||
| and Improved Recoveries | 4 | 2 | 6 | 757.8 | 158.9 | 916.7 | |||||||||||
| Technical Revisions | 112.9 | (49.2) | 63.7 | (426.7) | (2,640.5) | (3,067.2) | |||||||||||
| Acquisitions and Dispositions | (87.3) | (50.0) | (137.3) | (2,489.1) | (2,326.0) | (4,815.1) | |||||||||||
| Production | (73.0) | 0.0 | (73.0) | (4,589.0) | 0.0 | (4,589.0) | |||||||||||
| December 31, 2013 | 2,517.7 | 949.9 | 3,467.6 | 55,393.4 | 24,623.2 | 80,016.6 | |||||||||||
| Oil Equivalent (3) | |||||||||||||||||
| Proved (Mboe) |
Probable (Mboe) |
Proved + Probable (Mboe) |
|||||||||||||||
| December 31, 2012 | 31,675.2 | 24,516.6 | 56,191.8 | ||||||||||||||
| Discoveries, Extensions | |||||||||||||||||
| and Improved Recoveries | 4,347.6 | 1,740.6 | 6,088.2 | ||||||||||||||
| Technical Revisions | 390.1 | (3,091.9) | (2,701.8) | ||||||||||||||
| Acquisitions and Dispositions | 8,696.2 | 6,371.3 | 15,067.5 | ||||||||||||||
| Production | (6,419.0) | 0.0 | (6,419.0) | ||||||||||||||
| December 31, 2013 | 38,690.1 | 29,536.5 | 68,226.6 | ||||||||||||||
| (1) Gross Company interest reserves include solution gas but do not include royalties. |
| (2) Reserve information as at December 31, 2012 and 2013 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. Given the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6 Mcf: 1 bbl, utilizing a conversion ratio of 6 Mcf: 1 bbl may be a misleading indication of value. |
| (4) Numbers in tables may not add due to rounding. |
| (5) The reserve volumes attributed to the acquisitions are the Company's best estimate at the effective date based on the December 31, 2012 independent reserve evaluation for the assets less production. |
Capital Expenditures (1)
| Type |
2013 Capital Expenditures $(000's) |
| Land | 3,766 |
| Seismic | 2,420 |
| Drilling & Completions | 65,234 |
| Equipping & Facilities | 31,538 |
| G&A and Other | 3,479 |
| Total Development Costs | 106,437 |
| Acquisition - Black Shire | 356,521 |
| Dispositions net | (29,261) |
| Total A&D | 327,260 |
| Total Capital | 433,697 |
| (1) Capital expenditures is a non-GAAP measure calculated as the purchase or sale price of an asset, plus development capital expenditures added to PP&E |
Capital Program Efficiency
| 2013 | |||||
| Excluding Future Development Costs | |||||
| FD&A cost - Proved ($/boe) | |||||
| Additions and revisions (1) | 22.47 | ||||
| Acquisitions & Dispositions | 37.63 | ||||
| Total | 32.28 | ||||
| FD&A costs - Proved plus probable ($/boe) |
|||||
| Additions and revisions (1) | 31.43 | ||||
| Acquisitions & Dispositions | 21.72 | ||||
| Total | 23.50 | ||||
| Forecast 2014 operating netback per boe (2) | 34.30 | ||||
| Recycle ratio (2) | |||||
| Proved plus probable | 1.5 | ||||
| Including Changes in Future Development Costs | |||||
| FD&A costs - Proved ($/boe) (3) |
|||||
| Additions and revisions (1) | 24.59 | ||||
| Acquisitions & Dispositions | 41.51 | ||||
| Total | 35.54 | ||||
| FD&A costs - Proved plus probable ($/boe) (3) |
|||||
| Additions and revisions (1) | 38.46 | ||||
| Acquisitions & Dispositions | 25.36 | ||||
| Total | 27.76 | ||||
| Forecast 2014 operating netback per boe (2)(3) | 34.30 | ||||
| Recycle ratio (2) | |||||
| Proved plus probable | 1.2 |
| (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. |
| (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. Given the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6 Mcf: 1 bbl, utilizing a conversion ratio of 6 Mcf: 1 bbl may be a misleading indication of value. |
Under NI 51-101, the methodology to be used to calculate FD&A costs includes incorporating changes in future development capital ("FDC") required to bring the proved undeveloped and probable reserves to proved producing status. For continuity, Twin Butte has presented FD&A costs calculated excluding and including changes in FDC. Changes in forecast FDC occur annually as a result of development, acquisition and disposition activities and capital cost estimates that reflect the independent evaluator's 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 estimated average first quarter 2014 production of 22,500 boe/d.
| Reserve Life Index (years) | |||
| Production | Total Proved |
Proved Plus Probable | |
| Oil and NGL (bbl/d) | 20,400 | 4.0 | 7.4 |
| Natural Gas (mcf/d) | 12,600 | 12.0 | 17.4 |
| Oil Equivalent (boe/d) | 22,500 | 4.7 | 8.3 |
Future Development Costs (Undiscounted)
| Year | Proved Reserves ($000s) |
Proved Plus Probable Reserves ($000s) |
| 2014 | 57,900 | 111,600 |
| 2015 | 57,200 | 112,700 |
| 2016 | 41,000 | 91,400 |
| 2017 | 7,900 | 16,700 |
| 2018 | 1,300 | 700 |
| Remaining | 1,900 | 7,300 |
| Total (Undiscounted) | 167,200 | 340,400 |
Net Asset Value
The following net asset value ("NAV") table shows a NAV calculation under which the Company's reserves would be produced at forecast future prices and costs. The value is a snapshot in time and is based on various assumptions, including commodity prices and foreign exchange rates that vary over time. It should not be assumed that the NAV per share represents the fair market value of Twin Butte shares. The calculations below do not reflect the value of the Company's prospect inventory to the extent that the prospects are not recognized within the NI 51-101 compliant reserve assessment.
Using Twin Butte's Reserve Value at December 31, 20123 - Forecast Pricing and Costs (Pre tax)
($MM except as noted)
| 5% | 10% | |||
| Proved plus Probable Reserve Value | 1,366.0 | 1,142.9 | ||
| Undeveloped Land Value (1) | 83.3 | 83.3 | ||
| Net Debt(2) | (361.6) | (361.6) | ||
| Option Proceeds | 1.7 | 1.7 | ||
| Basic Shares Outstanding (MM) | 343.1 | 343.1 | ||
| Estimated Net Asset Value $ per Share - Basic | 3.17 | $2.52 | ||
| Fully Diluted Shares Outstanding (MM) | 349.1 | 349.1 | ||
| Estimated Net Asset Value $ per Share - Fully Diluted | 3.12 | $2.48 | ||
| (1) | Independent assessment of 385,367 net undeveloped acres at an average price of $216/acre. |
| (2) | Net debt is a non-GAAP measure representing the total of bank indebtedness, accounts payable and accrued liabilities, cash dividend payable, less accounts receivables, deposits and prepaids |
Outlook
Twin Butte has continued to execute on its strategy of delivering moderate growth while paying a sustainable dividend. With year-end 2013 debt of approximately $361.6 million and anticipated 2014 cash flow in excess of $210 million, the Company is well financed to pay its annual dividend and complete its forecast 2014 capital plan of $145 million while maintaining an all-in payout ratio of under 100%. The recent move into Provost has strengthened and enhanced the Company's dividend sustainability and provided a platform for longer term moderate growth. Heavy oil at Lloydminster has and will remain a core focus for the Company, however, with enhanced netbacks and recycle rates at Provost, more capital will be directed to these assets.
The Company will continue to match its capital plan to forecast cash flow less dividends. Recent positive movement in both oil pricing and the light to heavy oil differentials, combined with the Company's strong hedge position, allows Twin Butte to remain confident in the long term sustainability of the dividend and supports a possible expansion of the 2014 capital plan.
While remaining strongly positioned with its low risk drilling inventory, the Company continues to review acquisition opportunities to further diversify and enhance the Company's commodity and play type risk.
About Twin Butte:
Twin Butte Energy Ltd. is a dividend paying value oriented intermediate producer with a significant low risk, high rate of return drilling inventory focused on large original oil and gas in place play types. With a stable low decline production base, Twin Butte is well positioned to provide shareholders with 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. The common shares of Twin Butte are listed on the TSX under the symbol "TBE".
Reader Advisory
Forward-Looking Statements
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: the amount of horizontal drilling activity planned for 2014; future dividend levels; funds flow and cash flow forecasts; 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; future results from operations and operating metrics, including future production growth and other matters set forth under the heading "Outlook" herein, including estimated budget levels and targeted pay-out ratio in respect of the payment of dividends. 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, Twin Butte has 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; Twin Butte's ability to obtain equipment in a timely manner to carry out development activities; decline rates based on analogous information; its ability to market its oil and natural gas successfully to current and new customers; the impact of increasing competition; Twin Butte's ability to obtain financing on acceptable terms; and Twin Butte's ability to add production and reserves through its 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: the risks associated with the oil and gas industry; commodity prices; operational risks in exploration; development and production; delays or changes in plans; risks associated with the uncertainty of reserve estimates; health and safety risks, and; the uncertainty of estimates and projections of production, costs and expenses. 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. The recovery and reserve estimates of Twin Butte's reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. 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.
Reserve Life Index
The reader is also cautioned that this news release contains the term reserve life index ("RLI"), which is not a recognized measure under generally accepted accounting principles ("GAAP"). Management believes that this measure is a useful supplemental measure of the length of time the reserves would be produced over at the rate used in the calculation. Readers are cautioned, however, that this measure should not be construed as an alternative to other terms determined in accordance with GAAP as a measure of performance. Twin Butte's method of calculating this measure may differ from other companies, and accordingly, they may not be comparable to measures used by other companies.
Operating Netback
The reader is also cautioned that this news release contains the term operating netback, which is not a recognized measure under GAAP and is calculated as a period's sales of petroleum and natural gas, net of royalties less net production and operating expenses as divided by the period's sales volumes. Management uses this measure to assist them in understanding Twin Butte's profitability relative to current commodity prices and it provides an analysis tool to benchmark changes in operational performance against prior periods and to peers on a comparable basis. Readers are cautioned, however, that this measure should not be construed as an alternative to other terms such as net income determined in accordance with GAAP as a measure of performance. Twin Butte's method of calculating this measure may differ from other companies, and accordingly, they may not be comparable to measures used by other companies.
Net Debt
The reader is cautioned that this news release contains the term net debt, which is not a recognized measure under GAAP and is calculated as bank debt adjusted for working capital excluding mark-to-market derivative contracts. Working capital excluding mark-to-market derivative contracts is calculated as current assets less current liabilities both of which exclude derivative contracts and current liabilities excludes the current portion of debt. Management uses net debt to assist them in understanding Twin Butte's liquidity at specific points in time. Mark-to-market derivative contracts are excluded from working capital, in addition to net debt, as management intends to hold each contract through to maturity of the contract's term as opposed to liquidating each contract's fair value or less.
Future Oriented Financial Information
This news 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 and may not be appropriate for other purposes. 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 management's best estimates and judgments.
SOURCE: Twin Butte Energy Ltd.
Twin Butte Energy Ltd.
Jim Saunders
Chief Executive Officer
Bruce Hall
President & Chief Operating Officer
R. Alan Steele
Vice President Finance, Chief Financial Officer
and Corporate Secretary
Tel: (403) 215-2045
Website: www.twinbutteenergy.com
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