CALGARY, June 24 /CNW/ - Twin Butte Energy Ltd. ("Twin Butte" or the
"Company") (TSX: TBE) is pleased to announce that the Board of Directors have
approved a 67 percent increase in the 2008 Capital budget to $45 million up
from the previously announced $27 million. Capital will be allocated to
development opportunities in the Provost, Bulwark, Jayar and NE British
Columbia core areas, and to high impact exploratory opportunities in the
Brassey and Kelly areas of NE British Columbia.
Consistent operational performance, the impact of successful acquisitions
and recent high impact farmins have created a significant inventory of
opportunities and a solid production base for the Company. This platform
combined with recent commodity price increases allows for an expanded budget
within Twin Butte's current cash flow. Fourth quarter annualized cash flow is
projected to be $56 million against year end net debt of approximately
$48 million giving an estimated 2008 exit debt to Q4 annualized cash flow
ratio of less than one, maintaining the Company's excellent financial
The increased capital spending will result in an upward revision to the
Company's 2008 exit production rate to more than 3,650 boe/d up from
management's previously estimated exit rate of more than 3,300 boe/d.
Approximately $12 million of the capital increase will be allocated
towards the drilling of earning wells on the high impact Montney resource play
at Brassey and Kelly and to facilities projects. These projects establish the
Company in a resource play land base that represents a significant growth
opportunity to Twin Butte and a high impact exploration portfolio on a go
forward basis. The remaining $6.0 million is allocated to development
opportunities focused on lower risk production and cash flow additions.
In North East British Columbia, the Company has been actively preparing
for a multi well drilling program scheduled for the third quarter in the
Brassey, Kelly and Oak/Lagarde areas.
At Brassey, Twin Butte has commenced drilling operations spudding the
earning well on June 16th. The Brassey farmin is on a 4 section land block
where the Company has committed to drill a single well that earns and
continues the P&NG rights from surface to the base of the Montney formation
for a 5 year term in the entire 4 section block. Twin Butte has elected to
drill the first well horizontally utilizing a vertical stratigraphic test
which will allow for better delineation of the land block and a higher
probability of commercial production. Under re-negotiated terms Twin Butte
will pay 100 percent of the drilling and casing costs of the initial well, but
will pay only 60% of the completion and tie in costs of the initial well and
all subsequent wells. The Company believes these are excellent terms and
provide an advantageous entry point into the play with the Brassey lands
directly offsetting a recent land sale where a bonus price of $3.9 million was
paid for each section. This places an equivalent net value of $9.4 million on
the farm-in lands alone. Montney pay from area offset wells average 76 metres
in thickness with a potential original gas in place (OGIP) reserve estimate of
greater than 50 BCF per section. The lands are located approximately 3.0 miles
from a tie in point which combined with the large gas resource and favorable
farm-in terms gives the potential for a material impact on the Company.
The second farm-in on a 10 DSU (11 section) block in the Kelly area is
prospective for both Montney and Doig production and offsets an 8 mmcf/d Doig
producing well. The Company has committed to drill and complete one vertical
test well in late Q3 at 100 percent working interest to earn a 60 percent
working interest in the entire 11 section block. Again, Twin Butte is the
operator and all costs after completion of the initial vertical well will be
shared 60:40. While the current commitment is to drill a vertical well, the
Company is evaluating the option of drilling a stratigraphic test then
proceeding immediately with a horizontal well as per the current program for
Brassey. The final decision on this will be made prior to spud of the well
based on technical considerations and discussions with the farmor.
At Oak/Lagarde the Company will commence a 3 well development program in
the third quarter targeting the Baldonnel and Halfway formations. The initial
wells are offsets to existing production and represent a low risk development
opportunity with first production from the area anticipated in October.
At Jayar, the Company has continued to flow back the first multifrac
horizontal well in the Dunvegan light oil pool which is currently flowing back
and recovering fracture load fluid. The Company has commenced planning for a
second horizontal well which is scheduled to be drilled in late August.
Twin Butte is continuing to evaluate different fracture treatment fluids
targeting improved frac flowback and well cleanup performance which the
Company plans to implement on the upcoming well.
The Jayar Dunvegan pool is a low permeability reservoir that had been
previously developed utilizing vertical drilling and completion technology.
Successful development represents significant upside potential from this
37.5 mmbbl OOIP light oil reservoir. Twin butte has an 85.5% working interest
in the pool.
Twin Butte commenced drilling operations on a two well program well in
the Thunder area spudding the first well on June 21st. The program is
targeting one step out oil location and one gas exploration prospect
representing the first of several ongoing exploration leads in the area that
are currently being evaluated with 2D and 3D seismic programs.
At Provost, the Company will be spudding the first of a two well
horizontal step out drilling program in late June targeting the Dina "RR"
pool. This is a follow up to a successful two well horizontal drilling program
completed in the first quarter with all wells now producing to a Company
operated battery facility that came on line in the first quarter. The current
drilling program represents the second round in a multi well development
program of up to 10 total wells targeting the Dina pool. The pool contains an
estimated 10 million bbls of original oil in place ("OOIP") with only
120,000 bbls recovered to date from vertical production wells. The new battery
and disposal facility will serve to reduce trucking costs and allow well
production to be optimized. The first two horizontal wells came on production
in early April and are currently producing at attractive rates.
At Bulwark, the Company will be spudding the first well of a four well
shallow multi zone program in late June following up on a successful two well
drilling program in the first quarter. The primary target is the Viking light
oil pool and the Company has an ongoing development drilling program planned
for the area with an additional five well program slated for the fourth
At Richdale, the Company will be drilling a two well program in the third
quarter pursuing Mannville light oil targets. These prospects are development
risk opportunities keying on bypassed pay.
Upward Revision to 2008 Guidance
The Board of Directors have approved a revised capital budget of
$45 million which represents a very active drilling program for the Company
which will include the drilling of 29 gross (28.3 net) wells. The Company is
targeting prospects ranging from low risk oil and gas development in
SE Alberta, Thunder, Jayar and NE British Columbia, to high impact exploratory
earning wells in NE British Columbia. Capital is allocated with $38.4 million
for drilling and facilities, and $6.6 million for land, seismic and other.
Based on the expanded budget the Company expects to realize average
production for 2008 in excess of 3,150 boe/d with exit production now greater
than 3,650 boe/d. This represents an increase in average daily production of
approximately 87% over 2007. Current production is in excess of 3,100 boe/d.
The capital spending level will generate estimated 2008 fourth quarter
annualized cash flow of $56 million with year end debt of approximately
$48 million. This represents a debt to fourth quarter 2008 annualized cash
flow of less than 1.0 times.
For budget purposes for the year the Company has used a go forward gas
price of $9.75/GJ ($10.25/Mcf) at AECO and a go forward oil price of
US$115/bbl WTI, with an exchange rate of 1.0 C$/US$.
Twin Butte 2008 Revised Guidance is summarized as follows:
Average production rate 3,150 - 3200 boe/d
Exit production rate (greater than) 3,650 boe/d
Annualized Q4 cash flow $56 million
Annualized Q4 cash flow per share $1.27
Capital program $45 million
Year end debt $48 million
Authorized bank line $64.5 million
Unused bank line capacity $16.5 million
Shares outstanding (basic) 43.4 million
Shares outstanding (fully diluted) 46.6 million
The Company's key characteristics are illustrated as follows:
- Reserves of 9.1 MMboe (P+P);
- Stable production base (greater than) 3,100 boe/d;
- Net asset value of $ 4.46 per share utilizing current forward market
pricing which does not include Montney upside;
- A reserve life index of 8.0 years (P+P);
- Tax pools of approximately $193 million;
- Net undeveloped land totaling approximately 147,000 acres not
including 15 section BC farmins;
- Solid balance sheet with current net debt of approximately
$46 million, and total credit facilities of $64.5 million;
- Year end debt of less than 1.0 times cash flow;
- Shares outstanding (basic) of 43.4 million;
- Shares outstanding (fully diluted) of 46.6 million;
- Significant oil potential at Jayar and Provost;
- Exciting exploration and resource potential in British Columbia; and
- Significant drilling inventory of (greater than) 80 locations.
Twin Butte's management continues to position the Company both
operationally and financially with excellent growth potential for 2008 and
beyond. The Company has a solid reserve and production base, a strong balance
sheet and a significant tax pool advantage. This combination will enable
Twin Butte to effectively pursue management's growth strategy with confidence.
On behalf of the Board of Directors,
President and C.E.O.
June 24, 2008
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, ability
to access sufficient capital from internal and external sources and
uncertainty related to the effect of the Arrangement. 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 therefrom. 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.
For further information:
For further information: Twin Butte Energy Ltd., 600, 334 - 8th Avenue
S.W., Calgary, Alberta, T2P 2Z2; Ron Cawston, President and Chief Executive
Officer, (403) 215-2040; or R. Alan Steele, Vice President Finance and Chief
Financial Officer, (403) 215-2692, www.twinbutteenergy.com