Twin Butte Energy Ltd. Reports Third Quarter 2009 Financial Results
Highlights ------------------------------------------------------------------------- Three months ended Nine months ended September 30 September 30 ------------------------------------------------------------------------- 2009 2008 % 2009 2008 % Change Change ------------------------------------------------------------------------- Financial ($ thousands, except per share amounts) ------------------------------------------------------------------------- Petroleum and natural gas sales 8,519 20,235 (58%) 26,275 55,942 (53%) Cash flow(1) 2,906 9,895 (71%) 9,917 25,853 (62%) Per share basic & diluted 0.05 0.23 (78%) 0.20 0.62 (68%) Net (loss) income (3,542) 5,909 - (11,728) 1,405 - Per share basic & diluted (0.06) 0.14 - (0.24) 0.03 - Capital expenditures 2,042 17,623 (88%) 8,247 33,161 (75%) Capital dispositions - - - (9,815) - - Corporate acquisitions 10,625 - - 10,625 57,252 (81%) Net debt(2) 42,114 51,073 (18%) 42,114 51,073 (18%) ------------------------------------------------------------------------- Operating ------------------------------------------------------------------------- Average daily production Crude oil (bbl per day) 682 847 (19%) 688 724 (5%) Natural gas (Mcf per day) 12,269 13,298 (8%) 12,410 12,409 - Natural gas liquids (bbl per day) 167 139 20% 141 126 12% Barrels of oil equivalent (boe per day, 6:1) 2,894 3,202 (10%) 2,897 2,919 (1%) Average sales price Crude oil ($ per bbl) 67.57 113.51 (40%) 59.06 108.29 (45%) Natural gas ($ per Mcf) 3.10 8.34 (63%) 3.96 9.21 (57%) Natural gas liquids ($ per bbl) 50.34 92.54 (46%) 46.16 90.76 (49%) Barrels of oil equivalent ($ per boe, 6:1) 31.99 68.69 (53%) 33.22 69.95 (53%) Operating netback ($ per boe) Petroleum and natural gas sales 31.99 68.69 (53%) 33.22 69.95 (53%) Realized gain (loss) on financial derivatives 2.92 (3.88) - 3.89 (5.43) - Royalties (3.55) (12.59) (72%) (3.04) (11.54) (74%) Operating expenses (12.99) (11.90) 9% (13.36) (12.28) 9% Transportation expenses (2.41) (2.45) (2%) (2.46) (2.71) (9%) Operating netback 15.96 37.87 (58%) 18.25 37.99 (52%) Wells drilled Gross 2.0 13.0 (85%) 5.0 20.0 (75%) Net 2.0 13.0 (85%) 5.0 19.9 (75%) Success (%) 50% 85% 80% 90% ------------------------------------------------------------------------- Common Shares ------------------------------------------------------------------------- Shares outstanding, end of period 55,358,393 43,424,425 27% 55,358,393 43,424,425 27% Weighted average shares outstanding - basic 54,553,287 43,424,425 26% 49,630,576 41,189,826 20% ------------------------------------------------------------------------- (1) Cash flow means earnings before future taxes, depletion, depreciation and accretion, stock based compensation, and unrealized gain (loss) on financial derivatives contracts. See Management's Discussion & Analysis Non-GAAP Measures. (2) Net debt at September 30, 2009 excludes financial derivative assets less financial derivative liabilities in the amount of ($0.8) million. The net amount relates to a net unrealized loss on financial derivatives contracts recognized at September 30, 2009.
Report to Shareholders
OVERVIEW
Financial and operational performance of the Company in the third quarter continued to demonstrate the disciplined approach we have taken. Focus on operating and G&A controls during a low commodity pricing period has provided positive cash flow growth over the second quarter. We are doing the right things at the right time.
During the third quarter the new Twin Butte Team continued aggressively transforming the Company into a high asset quality early stage resource player. In July we closed the acquisition of Can-Able Energy Ltd. ("Can-Able") which provided an expanded presence in the Deep Basin while adding a drill ready inventory of Cardium and Notikewin locations. In August we announced the acquisition of Buffalo Resources Corp. ("Buffalo"), a significant game changing transaction which not only doubled the production and cash flow base of the Company, but added a number of resource rich assets that offer years of repeatable and scalable drilling opportunities for the Company.
Since both transactions significantly enhanced our drilling inventory, low capital spending of less than cash flow during the quarter ensured our balance sheet was positioned to not only close the deals but to immediately commence executing on our winter 2009/2010 drilling program. Post these two transactions, an asset disposition program was implemented and is designed to reposition our balance sheet. This has been well received by potential purchasers, and we will provide more information on this initiative later this year.
OPERATIONAL REVIEW
The Can-Able assets acquired were primarily at Ansell in the Deep Basin, which offer long reserve life production and a drill ready inventory that the company will soon capitalize on. Our winter program will include a number of liquid rich Cardium drilling locations which at current gas prices of
The Buffalo transaction, which doubles the Company's production base, closed early in the fourth quarter, strengthening our position in a number of core areas but more importantly, added two new scalable resource plays which we have already commenced developing. At Frog Lake, a conventional heavy oil play with significant original oil in place ("OOIP"), we have already drilled 9 successful wells as part of our 30 well winter drilling program with extremely encouraging results to date. This program, in combination with a 15 square km., three dimensional seismic program, planned for early in 2010, will help to expand our knowledge of the long term potential of the Company's current land position. Geological mapping indicates in excess of 350 million barrels of OOIP, with recovery factors currently less than 3 percent. With current oil quality differentials driving over
A second focus area acquired through the Buffalo transaction is a Viking gas property comprising more than 40 sections of high working interest lands in the Viking area. This resource play is currently gaining momentum with a number of industry players delineating an established resource in the Viking and Colorado Shales with horizontal multistage fracturing technology. This area alone could establish a horizontal program of in excess of 100 wells. With operated underutilized infrastructure in place we have the ability to quickly expand the area's production base with success.
The management team continues to refine, and expand our opportunity inventory, while focusing our operations to areas that can make a difference in future growth and profitability. In excess of 80 percent of our current asset value is in our four core areas. Over time the remaining assets will be divested as we continue to focus the Company in our core growth areas.
OUTLOOK
The new team has been in place for a year. While shareholders may observe a similar share price to a year ago, the Company and underlying asset quality is dramatically improved. Our plan is working but as in most transitions it is ongoing. The confidence of the management team and the Board are compelling.
Twin Butte has emerged post the third quarter and the closing of the Buffalo transaction as a high asset quality Company with significant opportunities for growth. Our organic growth potential, combined with noncore asset sales, will position the Company for our next growth step whether internal or transaction oriented. The team is in place and motivated to produce results. The Company is significantly stronger and more adept at working with changes in the market.
Twin Butte is a value oriented junior producer with a significant repeatable and scalable drilling inventory focused on large OOIP 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 executing a significant capital program generating double digit organic growth. We are committed to continually enhance our asset quality while focusing on per share growth.
The Company plans to communicate guidance in early December with regards to the 2010 budget.
On behalf of the Board of Directors, Jim Saunders President and Chief Executive Officer November 12, 2009
For further information regarding Twin Butte Energy Ltd., the reader is invited to visit the Company's website at www.twinbutteenergy.com.
Twin Butte Energy Ltd. is a publicly traded Canadian energy company involved in the exploration, development and production of natural gas and crude oil in western
As referred to above, to view Twin Butte's unaudited financial statements and related MD&A for the three and nine months ended
Reader Advisory
Certain information regarding Twin Butte set forth in this news release including management's assessment of the Company's future plans and operations, the effect on the Company and on shareholders of Twin Butte, production increases and future production levels contain forward-looking statements that involve substantial known and unknown risks and uncertainties. These forward-looking statements are subject to numerous risks and uncertainties, certain of which are beyond Twin Butte's control including, without limitation, the impact of general economic conditions, industry conditions, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, lack of availability of qualified personnel, stock market volatility, 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 there from. Additional information on these and other factors that could affect Twin Butte's results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com), or Twin Butte's website (www.twinbutteenergy.com). Furthermore, the forward-looking statements contained in this joint news release are made as at the date of this joint news release and Twin Butte does not undertake any obligation to update publicly or to revise any of the forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.
In this news release, reserves and production data are commonly stated in barrels of oil equivalent ("boe") using a six to one conversion ratio when converting thousands of cubic feet of natural gas ("Mcf") to barrels of oil ("bbl") and a one to one conversion ratio for natural gas liquids ("NGLs" or "ngls"). Such conversion may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf: 1 bbl is based on energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
The TSX does not accept responsibility for the adequacy or accuracy of this news release.
For further information: For further information: Jim Saunders, President and Chief Executive Officer, Telephone: (403) 215-2040, Fax: (403) 215-2055; or R. Alan Steele, Vice President Finance and Chief Financial Officer, Telephone: (403) 215-2692, Fax: (403) 215-2055; www.twinbutteenergy.com
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