CALGARY, Jan. 5 /CNW/ - Twin Butte Energy Ltd. (TBE-TSX) is pleased to announce that it has either closed or has signed definitive agreements to divest a number of noncore producing and nonproducing assets for proceeds of $13.3 million, subject to standard closing adjustments. Twin Butte's corporate production will be reduced by approximately 280 boe/d, to its post disposition January 01, 2010 level of 6,200 boe/d. There will be no associated decrease in the company's credit facility which will remain at $120 million after the dispositions. Twin Butte estimates net debt, proforma the dispositions to be approximately $99 million, providing additional financial flexibility to proceed with its 2010 capital program.
Transaction metrics associated with this first phase of dispositions demonstrates the Company's ability to realize excellent value for its noncore assets in an extremely competitive disposition market. Twin Butte plans to continue with a methodical program of disposing of noncore assets through 2010 to further focus the Company's operations, subject to realizing prices that do not dilute shareholder value.
Q4 2009 Operations Update:
Twin Butte conducted an active and very successful Q4 2009 drilling program. With continued relative strength in oil prices as compared to natural gas prices, the focus of the program was slightly modified to concentrate on our substantial oil drilling inventory. At Frog Lake 14 gross (50% WI) wells were drilled at 100% success. The drilling in combination with a 6 well recompletion/workover program has led to record production levels at Frog Lake of approximately 1,500 boe/d. With current netbacks in the $35 per bbl level, the Company anticipates superior recycle ratios in excess of 4 times from this operation. Frog Lake will play a key role in Twin Butte's 2010 capital program representing almost 60 percent of the Company's planned expenditures.
At our Ansell property in the West Central Alberta/Deep Basin core area Twin Butte participated in a successful vertical Cardium gas well (40% WI). The well which commenced production prior to year end proved the Company's geologic/geophysical model substantiating an additional 12 similar well locations on trend. A successful exploration well (100% WI) was drilled in NE British Columbia which proved the play concept and will lead to a future multiwell natural gas horizontal drilling program with multistage frac potential.
The Company's Board of Directors has recently approved a 2010 capital program of $38 million ($35 million net of Alberta drilling credits). The program which represents an expenditure level of slightly less than anticipated cashflow is over 80 percent oil weighted thereby further increasing the Company's liquid production ratio to just over 50 percent by year end 2010. Twin Butte currently has an oil drilling inventory in excess of 185 net wells. Due to current natural gas prices and a detailed economic prioritization of the Company's drilling inventory, approximately 20 percent of the 2010 capital program will be gas weighted. Twin Butte will continue to build and enhance its resource style gas drilling inventory in the Deep Basin and Bruce in anticipation of natural gas price increases. Twin Butte's current natural gas drilling inventory is in excess of 230 net locations.
A substantial portion of the 2010 capital program will be allocated to Frog Lake where the Company lands are estimated to have over 350 million barrels of oil in place. The Company anticipates the drilling of 80 gross (40 net) wells in combination with an extensive recompletion/workover program and the shooting of at least one three dimensional seismic program. With a defined drilling inventory of 300 wells, Frog Lake offers a repeatable and scalable long term oil play to the Company.
A portion of the capital program will be allocated to enhance two additional areas in the Company's oil drilling inventory, with horizontal delineation drilling of a Q3 2009 discovery at Bruce, and the development of a new horizontal Pekisko play at Princess.
Based on current natural gas prices the Company's West Central Alberta/Deep Basin program will be restricted to the drilling of 2 gross (0.8 net) wells including the Company's first horizontal multistage frac Notikewin well. Funds have been allocated to a Deep Basin natural gas commingling workover program as well as some facility enhancement work preparing for a larger natural gas oriented drilling program in 2011. At least 2 net horizontal Viking wells will be drilled at Bruce to define the Company's natural gas resource play. With volumetric gas in place of 25 Bcf per section the play offers huge potential for reserve growth over the next few years. The Company has amassed an impressive 40 sections of land, largely 100 percent on this play which could ultimately see the repeatable development of over 100 wells.
A summary of Twin Butte's 2010 guidance follows,
Current Shares Outstanding: 109,714,335 - Basic
113,759,335 - Fully Diluted
2010 Production: 6,400-6,500 boe/d (45% liquids) Average
6,750-6,850 boe/d (52% liquids) Exit
Cash Flow: $40-42 million
based on $75/Bbl US WTI; $5.25/GJ AECO;
Cash Flow per share: $0.36-0.38
Capital Expenditures: $38 million
$35 million net of Alberta drilling
Twin Butte is a value oriented emerging intermediate 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 to 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.
2009 was a year of positive transition. Over the next twelve months Twin Butte will continue to see its asset base grow while becoming more focused. The Company will focus on profitable organic growth by developing its significant oil inventory while, at the same time positioning the natural gas inventory for later development. The Company's long term strategy has not changed and is intact.
In the interest of providing Twin Butte's shareholders and potential investors with information regarding Twin Butte and Buffalo, including management's assessment of the future plans and operations of Twin Butte, certain statements contained in this news release constitute forward-looking statements or information (collectively "forward-looking statements") within the meaning of applicable securities legislation. Forward-looking statements are typically identified by words such as "anticipate", "continue", "estimate", "expect", "forecast", "may", "will", "project", "could", "plan", "intend", "should", "believe", "outlook", "potential", "target" and similar words suggesting future events or future performance. In addition, statements relating to "reserves" are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described exist in the quantities predicted or estimated and can be profitably produced in the future.
With respect to forward-looking statements contained in this news release, we have made assumptions regarding, among other things: future capital expenditure levels; future oil and natural gas prices and differentials between light, medium and heavy oil prices; future oil and natural gas production levels; future exchange rates and interest rates; our ability to obtain equipment in a timely manner to carry out development activities; our ability to market our oil and natural gas successfully to current and new customers; the impact of increasing competition; our ability to obtain financing on acceptable terms; and our ability to add production and reserves through our development and exploitation activities. Although Twin Butte believes that the expectations reflected in the forward looking statements contained in this document, 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 document, as there can be no assurance that the plans, intentions or expectations upon which the forward-looking statements are based will occur. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur, which may cause Twin Butte's actual performance and financial results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things, the following: volatility in market prices for oil and natural gas; general economic conditions in Canada, the U.S. and globally; and the other factors described under "Risk Factors" in Twin Butte's most recently filed Annual Information Form available in Canada at www.sedar.com. Readers are cautioned that this list of risk factors should not be construed as exhaustive.
The forward-looking statements contained in this news release speak only as of the date of this news release. Except as expressly required by applicable securities laws, Twin Butte does not undertake any obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this news release are expressly qualified by this cautionary statement.
Barrels of Oil Equivalent
Barrels of oil equivalent (boe) are calculated using the conversion factor of 6 Mcf (thousand cubic feet) of natural gas being equivalent to one barrel of oil. Boes 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.
This news release does not constitute an offer to sell or the solicitation of an offer to buy any securities within the United States.
SOURCE Twin Butte Energy Ltd.
For further information: For further information: Twin Butte Energy Ltd., Jim Saunders, President and Chief Executive Officer, Tel: (403) 215-2040, Fax: (403) 215-2055; R. Alan Steele, Vice President, Finance, Chief Financial Officer and Corporate Secretary, Tel: (403) 215-2692, Fax: (403) 215-2055, Website: www.twinbutteenergy.com