Twin Butte Energy announces 2014 year end financial and operating results: Record cash flow, executive appointment
CALGARY, March 23, 2015 /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, 2014, along with year-end reserves, an operational update and executive appointment.
Just under a year ago as part of a review of the Company's operations and opportunities, the Board of Directors initiated strategic changes to accelerate the transition of Twin Butte to a medium gravity, higher value asset base. In May 2014 the Company announced two new executives, including Rob Wollmann as President, to help lead this transition. With an enhanced vision for the future of Twin Butte, the Company has made significant strides in this transition, evidenced by the positive 2014 yearend results, and expects the positive transition to accelerate during the upcoming year even in a low price environment.
Twin Butte is pleased to announce that Rob Wollmann has been promoted to the position of President and Chief Executive Officer and concurrently Jim Saunders will move to Executive Chairman of the Board of Directors of the Corporation. Mr. Saunders will continue to be a committed significant shareholder of Twin Butte and an active member of the executive team, providing guidance and support to the executive team's execution of Twin Butte's business plan.
Highlights of 2014 include:
- Transitioned the Company to a medium gravity oil focused producer.
- Generated $208 million of funds flow, including record 4th quarter funds flow of $54.3 million ($0.16/share).
- Returned $67.3 million dollars to shareholders through monthly dividends (32% payout).
- Maintained financial discipline by managing total payout to 95% (99% pre- of DRIP/SDP).
- Reduced net debt from $361.6 million at December 31, 2013 to $353.3 million at December 31, 2014. The Company's net debt will continue to decrease in 2015.
- Completed an organic capital program of $144.1 million ($137.6 million net of dispositions), including the drilling of 109 gross (105.7 net) wells at a 97% success rate.
- Established Provost, the Company's medium oil core area, as a sustainable, long term growth asset.
- Delivered successful results on both the new Sparky and Lithic channel plays at Provost at lower than anticipated capital costs and higher than expected productivity.
- Accelerated the horizontal development potential of the company's Lloydminster heavy oil core area.
- Increased average annual production by 21% to 21,256 boe/d, while increasing the oil & liquids weighting to 90% from 88%.
- Improved asset predictability with second consecutive year of positive proved producing reserve revisions.
- Improved the quality of corporate reserves, with medium oil core area (Provost) total proved plus probable (2P) reserves growing 5 MMBoe to 26.3 MMBoe and now representing 43% of corporate total up from 31% at 2013 year-end.
Priorities for Twin Butte in 2015 remain:
- Continue to maintain and enhance balance sheet flexibility : Decrease total debt, improve cost structure
- Maintain financial discipline quarterly (capital plus dividends will not exceed cash flow).
- Should oil prices remain weak, Twin Butte will further reduce capital spending and if necessary reduce the dividend.
- Realize targeted corporate cost savings both through improved operating and capital efficiency, and lower service costs.
- Continue the transition to a more predictable, longer life, higher netback medium oil production base
- Direct over 80% of capital spending to Provost development wells, and constructing incremental oil and water handling facilities to ensure low decline, long term base production.
- Selectively allocate development capital within the Company's Lloydminster - heavy oil core area.
- By year-end 2015 Provost is expected to represent over 50% of corporate production (Q4 2014 41%).
- Further expand the Company's drilling inventory
- Following 2014 drilling successes on three of the core plays at Provost (Dina/Cummings, Sparky and Lithic channels) the Company has, and will continue to actively grow its footprint and drilling inventory through a combination of crown land sales, property swaps, small asset purchases and farm-ins. Drillable inventory now exceeds 4 years.
Certain selected financial and operational information for the three and twelve months ended December 31, 2014 and 2013 is outlined below and should be read in conjunction with Twin Butte's audited financial statements for the years ended December 31, 2014 and 2013 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 |
|||||
| 2014 |
2013 |
% Change |
2014 |
2013 |
% Change |
|
| Financial ($ 000's, except per share amounts) |
||||||
| Petroleum and natural gas sales |
110,219 |
104,578 |
5% |
555,073 |
386,537 |
44% |
| Funds flow (1) |
54,324 |
36,978 |
47% |
207,927 |
137,358 |
51% |
| Per share basic |
0.16 |
0.12 |
33% |
0.60 |
0.52 |
15% |
| Per share diluted |
0.16 |
0.12 |
33% |
0.60 |
0.52 |
15% |
| Net income (loss) |
(84,086) |
(88,028) |
-4% |
(57,340) |
(115,633) |
50% |
| Per share basic |
(0.24) |
(0.28) |
-14% |
(0.17) |
(0.44) |
61% |
| Per share diluted |
(0.24) |
(0.28) |
-14% |
(0.17) |
(0.44) |
61% |
| Dividends declared |
17,394 |
15,577 |
12% |
67,304 |
52,286 |
29% |
| Dividends declared, Post DRIP |
14,482 |
14,413 |
0% |
58,950 |
46,730 |
26% |
| Capital expenditures(1) |
34,128 |
33,632 |
1% |
137,627 |
77,175 |
78% |
| Corporate acquisitions (2) |
- |
356,521 |
- |
- |
356,521 |
- |
| Net debt (1) |
353,299 |
361,612 |
-2% |
353,299 |
361,612 |
-2% |
| Operating |
||||||
| Average daily production |
||||||
| Heavy crude oil (bbl per day) |
9,776 |
13,123 |
-26% |
11,185 |
13,630 |
-18% |
| Light & Medium crude oil (bbl per day) |
8,553 |
4,710 |
82% |
7,870 |
1,659 |
374% |
| Natural gas (Mcf per day) |
13,849 |
11,634 |
19% |
12,616 |
12,572 |
0% |
| Natural gas liquids (bbl per day) |
(207) |
188 |
-210% |
98 |
201 |
-51% |
| Barrels of oil equivalent (boe per day, 6:1) |
20,430 |
19,960 |
2% |
21,256 |
17,585 |
21% |
| % Oil and NGLs |
89% |
90% |
-2% |
90% |
88% |
2% |
| Average sales price |
||||||
| Heavy crude oil ($ per bbl) |
60.78 |
59.25 |
3% |
74.18 |
65.14 |
14% |
| Light & Medium crude oil ($ per bbl) |
66.17 |
64.31 |
3% |
80.01 |
68.72 |
16% |
| Natural gas ($ per Mcf) |
4.54 |
3.62 |
25% |
4.47 |
3.32 |
35% |
| Natural gas liquids ($ per bbl) |
120.82 |
74.89 |
61% |
50.43 |
76.88 |
-34% |
| Barrels of oil equivalent ($ per boe, 6:1) |
58.64 |
56.95 |
3% |
71.54 |
60.22 |
19% |
| Field netback ($ per boe) (1) |
||||||
| Petroleum and natural gas sales |
58.64 |
56.95 |
3% |
71.54 |
60.22 |
19% |
| Royalties |
(8.92) |
(11.50) |
-22% |
(12.95) |
(12.78) |
1% |
| Operating expenses |
(20.89) |
(21.12) |
-1% |
(21.19) |
(21.83) |
-3% |
| Transportation expenses |
(1.09) |
(0.82) |
33% |
(1.09) |
(1.19) |
-8% |
| Field netback (1) |
27.74 |
23.51 |
18% |
36.31 |
24.42 |
49% |
| Wells drilled |
||||||
| Gross |
19.0 |
26.0 |
-27% |
109.0 |
97.0 |
12% |
| Net |
18.0 |
24.3 |
-26% |
105.7 |
95.3 |
11% |
| Success (%) |
100 |
96 |
4% |
97 |
93 |
4% |
| Common Shares |
||||||
| Shares outstanding, end of period |
351,794,723 |
343,079,562 |
3% |
351,794,723 |
343,079,562 |
3% |
| Weighted average shares outstanding – diluted |
350,507,629 |
309,082,232 |
13% |
347,340,214 |
265,191,273 |
31% |
| (1) Funds flow, Corporate acquisitions, Capital expenditures, Net debt and Field netback are non-GAAP measures. Refer to "Non-GAAP Measures" in this MD&A for further discussion and reconciliation to GAAP measures if applicable. |
||||||
Corporate:
2014 was a year of significant positive transition for Twin Butte continuing the evolution to a horizontal medium oil focused asset base from a vertical heavy oil asset base. In 2015 that transition will be more pronounced.
Twin Butte remains committed long term to the dividend model believing it is the best way to monetize the Company's asset base for maximum shareholder return. If low commodity prices persist the Company will maintain financial discipline and decrease debt, not risk its balance sheet or underlying asset value, reduce capital spending and reevaluate the current dividend level to ensure long term viability of the business.
Financial:
Twin Butte's full year 2014 financial and operating results demonstrate the Company's ability to pay an attractive dividend and maintain a strong balance sheet while completing a disciplined capital plan. The Company paid $67.3 million in dividends ($59.0 million post DRIP) in 2014 which when combined with net organic capital spending of $137.6 million, generated an all-in payout ratio of 95%. At yearend 2014, Company net debt decreased to approximately $353 million, from $362 million at December 31, 2013. Net debt is expected to decrease throughout 2015.
Funds flow for 2014 increased from 2013 by 52% (15% per share), reaching $208 million as a result of a full year of the higher netback production from the Provost area, strong drilling results and strong average commodity prices.
Twin Butte's commodity hedging strategy, in place over the last several years, is designed to minimize annual cash flow volatility. Despite the current low oil price environment the Company is well protected in 2015 with a 2014 year end mark to market value of its hedge book of $109 million. Although the Company's hedge position does not extend into 2016 it provides Twin Butte time to make rational strategic decisions on the future. Funds flow for the first quarter of 2015 is estimated to be $45 million strongly supported by the hedge book.
Operations:
The Company's 2014 capital investment of $144.1 million ($137.6 million net of dispositions) was focused on horizontal drilling in its medium oil Provost and heavy oil Lloydminster areas. The capital program included the drilling of 109 gross wells (105.7 net) of which 79% were horizontal. Provost capital was $89.3 million representing 65% of total net capital.
Production averaged 21,256 boe/d in 2014 which was up 21% from the 2013 average of 17,585 boe/d. Fourth quarter 2014 production averaged 20,430 boe/d. Q4 production was negatively impacted (~500 boe/d) due to the resolution of an allocation issue at Pincher Creek and the initial impacts of the shut-in of uneconomic heavy production in December.
Production for the first quarter of 2015 is anticipated to be approximately 19,200 boe/d. Due to current low commodity prices, the Company continues to have approximately 1000 boe/d shut in.
Provost – Medium oil
Confidence in the depth and quality of the Provost area inventory, on the back of the strong 2014 and Q1 2015 results, continues to grow. Area highlights include:
- Dina/Cummings
- Well results at Rosenheim consistently exceeded expectation with on average peak oil productivity over 100 bbls/d per well
- Significant Gillespie exploratory discovery and subsequent land acquisition adding drilling inventory
- Consistent infill and extension results were achieved at both the Provost Cummings I pool and Horseshoe Lake, with further land consolidation. Both areas have significant remaining inventory.
- Positive technical revisions (Proved and Proved plus Probable) were recognized across the Dina/Cummings horizontals
- Sparky
- 11 horizontal wells drilled to date (7 in 2014, 4 in Q1 2015)
- Post frac fluid recovery initial per well productivity has exceeded expectation at approximately 100 boe/d (85% oil).
- Based upon McDaniel's year- end report average Proved plus Probable reserves 79 Mboe per well.
- Additional prospective lands acquired through crown land sales, property swaps and in Q1 through a multi-section farm-in agreement, consolidating the Company's position at Sounding Lake, and adding incremental drilling inventory
- 11 horizontal wells drilled to date (7 in 2014, 4 in Q1 2015)
- Lithic channels
- 6 horizontal wells drilled to date (3 in 2014, 3 in Q1 2015)
- 4 wells at Gillespie currently producing, on average, 110 bbls/d oil.
- Final tie-ins for the remaining 2 wells ongoing.
- Additional prospective lands acquired through crown land sales adding incremental drilling inventory
- 6 horizontal wells drilled to date (3 in 2014, 3 in Q1 2015)
- Capital costs
- The Company has made significant headway in drilling and completion costs at Provost over the past several months.
- Average drilling costs at Provost dropped over 10% in Q1 relative to 2nd half 2014 performance, completion costs are down greater than 25% over the same period.
- On both the Dina/Cummings perforated monobore horizontals and the Sparky/Lithic multistage frac horizontals the Company's technical experts have found numerous approaches to both save money and deliver a better, more productive well bore. Expected drill, complete and equip costs for a half mile long multistage frac Sparky horizontal are currently ~$1.0MM, down from an average of $1.25MM in 2014.
- Additional cost saving opportunities have been identified, and will be implemented when development resumes.
- The Company has made significant headway in drilling and completion costs at Provost over the past several months.
- Netbacks/Economics
- Average field netbacks at Provost were $50.93 per boe in 2014 reflecting strong realized pricing ($76.98/boe), low average royalties (12.9%) and low operating and transportation costs ($16.14/boe).
- Based upon our initial well results both the Sparky and Lithic channel plays offer economic returns competitive with the best oil plays in western Canada. At a long term price of $60 per bbl (WCS Cdn) future development is expected to deliver recycle ratios over 2x.
- Average field netbacks at Provost were $50.93 per boe in 2014 reflecting strong realized pricing ($76.98/boe), low average royalties (12.9%) and low operating and transportation costs ($16.14/boe).
Lloydminster - Heavy
Focus intensified on building a more predictable, longer life asset base. For the second year in a row positive proved developed producing technical revisions primarily associated with recently drilled horizontals are giving Twin Butte further confidence the heavy assets fit in the go forward plan. Successful horizontal development at Wildmere/Auburndale continued throughout 2014 with production results ahead of expectation. This area has both incremental drilling and longer term, water flood potential. New horizontal and multi leg horizontal opportunities targeting undeveloped heavy oil resources were identified with positive initial results at both Lashburn and Silverdale. Average field netbacks for 2014 across the heavy properties were $31.62 per boe. Operating cost savings on the heavy oil properties are being realized due to the shut in of the highest cost barrels, an average reduction in service costs of ~10%, lower propane prices, reduced trucking costs and lower disposal fees.
The Company believes not only is there significant upside to funds flow associated with the heavy oil production base but also the potential for material horizontal development upside at economics competitive with Provost as the asset base is looked at from a different point of view.
Reserves:
Twin Butte's year end 2014 reserve report demonstrates significant steps forward in reserve quality, and a second consecutive year of positive proved developed producing technical revisions showing increasing predictability of the asset base.
Provost (1) proved plus probable reserves increased 5 MMBoe (23%) due to the success of the development program, positive technical revisions due to better than forecasted production performance, and increased undeveloped bookings offsetting 2014 drilling. The strong reserve recognition at Provost delivered 2014 proved plus probable Finding Development and Acquisition costs of $20.66/boe (including FDC).
Twin Butte's horizontal heavy oil development delivered new reserves efficiently. Consistent with the strategic shift to more predictable barrels the Company removed 7.6 MMBoe from its reserve book associated with 233 gross (162 net) proved and probable undeveloped vertical heavy locations, and proven non-producing reserves associated with existing vertical heavy wells. That, along with lower capital investment than previous years, decreased total proved plus probable Lloydminster heavy area reserves from 29.6 MMBOE to 20.5 MMBOE.
At Pincher Creek, in the "Other" asset grouping, an historic allocation adjustment at a third party operated processing facility, realized in late 2014, associated with inlet gas volumes and natural gas liquids yield was corrected resulting in a 2.4 MMBOE negative proved plus probable technical revision which offset positive drilling and technical revisions in the Battlebend area located on the periphery of Provost. All adjustments in historic Pincher Creek production allocation are reflected in the Company's year-end financial statements.
In aggregate total 2P reserves, impacted by the heavy oil and Pincher Creek technical revisions, decreased approximately 7 MMBOE from 68.2 to 61.2 MMBOE. Excluding these, reserve replacement on a proved plus probable basis was 121%.
(1) From a NI-51-101 perspective Provost reserves are captured as both light/medium and heavy categories.
Core Areas – Total Proved plus Probable (2P) Reconciliation, Netback Analysis, and F&D and Recycle Ratio
| 2P Reconciliation |
Company (Mboe) |
NPV10 ($MM) |
Provost – "Medium" (Mboe) |
NPV10 ($MM) |
Lloyd – "Heavy" (Mboe) |
NPV10 ($MM) |
Other (Mboe) |
NPV10 ($MM) |
||||
| December 31, 2013 |
68,227 |
$1,143 |
21,320 |
$502 |
29,566 |
$530 |
17,341 |
$112 |
||||
| Production |
(7,758) |
(2,872) |
(4,161) |
(725) |
||||||||
| Additions |
9,546 |
7,059 |
2,400 |
87 |
||||||||
| Technical Revisions |
(8,135) |
763 |
(6,862) |
(2,037) |
||||||||
| Acquisitions |
118 |
0 |
118 |
0 |
||||||||
| Dispositions |
(776) |
0 |
(525) |
(252) |
||||||||
| December 31, 2014 |
61,222 |
$982 |
26,270 |
$593 |
20,537 |
$306 |
14,416 |
$84 |
||||
| Netback Analysis |
||||||||||||
| Revenue ($/boe) |
71.54 |
76.98 |
73.27 |
40.10 |
||||||||
| Royalties ($/boe) |
-12.95 |
-9.91 |
-16.05 |
-7.24 |
||||||||
| Op + Trans. Costs ($/boe) |
-22.28 |
-16.14 |
-25.60 |
-27.46 |
||||||||
| Operating Netback ($/boe) |
36.31 |
50.93 |
31.62 |
5.41 |
||||||||
| 2014 Capital ($MM) |
137.6 |
89.3 |
38.0 |
10.2 |
||||||||
| Change in FDC ($MM) |
||||||||||||
| Drills and Additions |
120.9 |
86.9 |
35.0 |
-1.0 |
||||||||
| Revisions |
-133.7 |
-14.6 |
-116.9 |
-2.1 |
||||||||
| A&D |
-6.3 |
0.0 |
-5.1 |
-1.2 |
||||||||
| Company |
Provost |
Lloyd -Heavy |
Other |
|||||||||
| 2P F&D and Recycle Ratio |
F&D |
Recycle |
F&D |
Recycle |
F&D |
Recycle |
F&D |
Recycle |
||||
| Additions (Excl change in FDC) |
$14.41 |
2.5 |
12.65 |
4.0 |
15.83 |
2.0 |
116.97 |
0.0 |
||||
| Additions (Incl change in FDC) |
$27.08 |
1.3 |
24.96 |
2.0 |
30.41 |
1.0 |
105.45 |
0.1 |
||||
| Adds + Tech Rev (Excl change in FDC) |
$97.49 |
0.4 |
11.42 |
4.5 |
-8.52 |
n/a |
-5.23 |
n/a |
||||
| Adds + Tech Rev (Incl change in FDC) |
$88.44 |
0.4 |
20.66 |
2.5 |
9.84 |
3.2 |
-3.62 |
n/a |
||||
| FD&A (Excl change in FDC) |
$182.69 |
0.2 |
11.42 |
4.5 |
-7.81 |
n/a |
-4.63 |
n/a |
||||
| FD&A (Incl change in FDC) |
$157.33 |
0.2 |
20.66 |
2.5 |
10.09 |
3.1 |
-2.68 |
n/a |
||||
| 2P Reserve Replacement |
||||||||||||
| Excluding Revisions |
123% |
246% |
58% |
12% |
||||||||
| Including Revisions |
18% |
272% |
-107% |
-269% |
||||||||
| (1) From a reserve booking standpoint Provost relates to Twin Butte's SE Medium CGU, Heavy to the Heavy Oil CGU's, and Other combines Pincher Creek, Plains and West-Central CGUs. |
| (2) Refer to the Company's Annual Information Form for details on McDaniel's year end 2014 price forecast, refer to the 2013 Annual information form for McDaniel's year end 2013 price forecast. |
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, 2014.
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 |
2,821.8 |
2,658.6 |
13,991.4 |
12,401.2 |
962.0 |
661.6 |
||||||||||||
| Developed Non-Producing |
49.1 |
45.8 |
1,347.1 |
1,162.6 |
241.4 |
162.9 |
||||||||||||
| Undeveloped |
1,181.2 |
1,047.5 |
7,030.8 |
6,108.6 |
195.0 |
142.3 |
||||||||||||
| Total Proved |
4,052.0 |
3,752.0 |
22,369.3 |
19,672.4 |
1,398.4 |
966.7 |
||||||||||||
| Probable |
2,265.4 |
1,964.8 |
18,313.6 |
15,406.7 |
568.0 |
391.8 |
||||||||||||
| Total Proved Plus Probable |
6,317.5 |
5,716.8 |
40,682.9 |
35,079.1 |
1,966.3 |
1,358.5 |
||||||||||||
| Total Proved Plus Probable Developed Producing |
3,750.7 |
3,505.9 |
19,187.4 |
16,816.2 |
1,201.3 |
824.1 |
||||||||||||
| 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 |
37,207.0 |
31,963.1 |
23,976.4 |
21,048.6 |
||||||||||||||
| Developed Non-Producing |
5,671.6 |
4,655.1 |
2,582.9 |
2,147.1 |
||||||||||||||
| Undeveloped |
7,787.9 |
6,601.1 |
9,705.0 |
8,398.6 |
||||||||||||||
| Total Proved |
50,666.5 |
43,219.3 |
36,264.1 |
31,594.3 |
||||||||||||||
| Probable |
22,864.2 |
18,892.3 |
24,957.7 |
20,912.0 |
||||||||||||||
| Total Proved Plus Probable |
73,530.7 |
62,111.6 |
61,221.8 |
52,506.3 |
||||||||||||||
| Total Proved Plus Probable Developed Producing |
47,501.6 |
40,619.5 |
32,249.2 |
28,069.5 |
||||||||||||||
| (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, 2014 Before Income Taxes and Discounted at (%/year) |
||||
| Reserve Category |
0% |
5% |
10% |
|
| ($000s) |
($000s) |
($000s) |
||
| Proved |
||||
| Developed Producing |
550,269 |
465,318 |
408,856 |
|
| Developed Non-Producing |
48,159 |
36,306 |
29,836 |
|
| Undeveloped |
192,301 |
144,294 |
108,591 |
|
| Total Proved |
790,730 |
645,919 |
547,283 |
|
| Probable |
766,338 |
561,756 |
435,187 |
|
| Total Proved Plus Probable |
1,557,067 |
1,207,675 |
982,470 |
|
| Total Proved Plus Probable Developed Producing |
809,506 |
653,279 |
554,244 |
|
| (1) Based on McDaniel forecast prices and costs. |
| Capital Expenditures (1) |
|
| 2014 Capital |
|
| Expenditures |
|
| Type |
$(000's) |
| Land |
1,531 |
| Seismic |
1,553 |
| Drilling & Completions |
92,350 |
| Equipping & Facilities |
43,806 |
| G&A and Other |
4,892 |
| Total Development Costs |
144,132 |
| Acquisitions and Dispositions (net) |
(6,505) |
| Total Capital |
137,627 |
| (1) Capital expenditures is a non-GAAP measure calculated as the purchase or sale price of an asset, plus development capital expenditures added to PP&E |
Net Asset Value
The following net asset value ("NAV") table shows a NAV calculation under which the Company's reserves would be produced at forecast future prices and costs. The value is a snapshot in time and is based on various assumptions, including commodity prices and foreign exchange rates that vary over time. It should not be assumed that the NAV per share represents the fair market value of Twin Butte shares. The calculations below do not reflect the value of the Company's prospect inventory to the extent that the prospects are not recognized within the NI 51-101 compliant reserve assessment.
Using Twin Butte's Reserve Value at December 31, 2014 – Forecast Pricing and Costs (Pre-tax)
| ($MM except as noted) |
|
| 10% |
|
| Proved plus Probable Reserve Value |
982.5 |
| Undeveloped Land Value (1) |
52.2 |
| Net Debt(2) |
(353.3) |
| Option Proceeds |
1.4 |
| Basic Shares Outstanding (MM) |
351.8 |
| Estimated Net Asset Value $ per Share - Basic |
$1.94 |
| Fully Diluted Shares Outstanding (MM) |
359.5 |
| Estimated Net Asset Value $ per Share – Fully Diluted |
$1.90 |
| (1) Independent assessment of 367,364 net undeveloped acres at an average price of $142/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 and will continue to successfully transition to a higher value, more predictable production base. 2014 results at Provost, and on the heavy oil horizontal program, along with the ongoing addition of new inventory has provided increased confidence in the Company's ability to continue this transition.
Longer term Twin Butte's asset base can be sustained and the dividend maintained at WCS prices above $65 per barrel. Reducing this 'sustaining' price through continued improvements in operating and capital cost structures and well deliverability will remain a focus.
Due to the late 2014 drop in oil prices, on December 18, 2014 the Company's Board of Directors approved a reduced capital budget of $120 million for 2015. First half 2015 capital spending will be less than $45 million. The second half capital spending plan, currently budgeted at $75 million, will further decrease unless commodity prices begin to rebound. The Company will maintain financial discipline and continue to reduce debt through 2015.
The Company's dividend remains at $0.01 per share per month ($42MM annually) and will be reviewed in May in advance of the Annual General Meeting scheduled to be held May 15, 2015.
With over 50% of 2015 expected oil production hedged at the equivalent of approximately $100Cdn per bbl WTI (~$80Cdn per bbl WCS), and an expanding development drilling inventory validated by a successful 2014 drilling program, Twin Butte is well positioned to navigate the current low price environment, achieve its priorities for 2015, and be better positioned with a lower cost structure, more predictable, higher netback asset base entering 2016. Twin Butte intends not only to survive but strengthen its asset base during this low commodity price environment.
As significant shareholders in Twin Butte, senior management and the Board of Directors are fully aligned with shareholders in the objective of maximizing the value of the asset base, prudently managing the Company's balance sheet and positioning the Company to thrive over the long term. To reinforce this point senior management has taken a 10% reduction in salary and the Board of Directors fees have been reduced by 10%.
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 dividend and 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: 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, convertible debentures, and 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.: Rob Wollmann, President and Chief Executive Officer; R. Alan Steele, Vice President Finance, Chief Financial Officer and Corporate Secretary; Jim Saunders, Executive Chairman; Tel: (403) 215-2045, Website: www.twinbutteenergy.com
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