Twin Butte Energy Reports 2007 Second Quarter Results



    CALGARY, Aug. 9 /CNW/ -

    Highlights

    Twin Butte Energy Ltd. ("Twin Butte" or the "Company") (TSX: TBE) is
pleased to announce its financial and operational results for the three and
six month periods ended June 30, 2007.
    Twin Butte's second quarter results include only three days of operating
results contributed from the $28 million property acquisition that closed
June 28, 2007. Net debt and working capital deficiency at June 30, 2007 does
not include gross proceeds of $16,650,000 from a bought deal private placement
of Common Shares that closed subsequent to quarter end on July 17, 2007.

    
    -------------------------------------------------------------------------
                      Three months ended June 30    Six months ended June 30
    -------------------------------------------------------------------------
                          2007          2006          2007          2006
    -------------------------------------------------------------------------
    Financial ($'s,
     except per
     share amounts)
    -------------------------------------------------------------------------
      Petroleum and
       natural gas
       sales             6,755,179     1,719,009    12,735,851     1,725,154
      Cash flow(1)       3,090,696       744,519     5,716,266       589,511
        Per share basic
         & diluted            0.14          0.07          0.27          0.09
      Net income
       (loss)(3)         3,482,964      (778,255)     (432,493)     (934,210)
        Per share basic
         & diluted            0.16         (0.08)        (0.02)        (0.14)
      Capital
       expenditures
       (net of
       dispositions)    31,981,080       456,991    40,372,565       456,991
      Corporate
       acquisitions              -     8,252,364             -     8,252,364
      Net debt and
       working capital
       deficiency(2)   (38,042,456)   (8,357,900)  (38,042,456)   (8,357,900)
    -------------------------------------------------------------------------
    Operating
    -------------------------------------------------------------------------
    Average daily
     production
      Crude oil (bbl
       per day)                327           130           316            66
      Natural gas
       (Mcf per day)         6,347         1,430         6,035           719
      Natural gas
       liquids (bbl
       per day)                 60             8            56             4
      Barrels of oil
       equivalent (boe
       per day, 6:1)         1,445           375         1,377           189
    Average sales price
      Crude oil
       ($ per bbl)           70.12         73.84         67.12         73.78
      Natural gas
       ($ per Mcf)            7.46          6.16          7.59          6.16
      Natural gas
       liquids
       ($ per bbl)           65.20         68.90         59.87         68.90
      Barrels of oil
       equivalent ($
       per boe, 6:1)         51.38         50.32         51.08         50.36
    Operating netback
     ($ per boe)             27.59         28.41         27.21         28.52
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Common Shares
    Shares outstanding,
     end of period      22,202,398    17,226,506    22,202,398    17,226,506
    Weighted average
     shares outstanding 22,202,398    10,004,024    21,280,636     6,883,365
    -------------------------------------------------------------------------
    (1) Cash flow means earnings before future taxes, depletion, depreciation
        and accretion, stock based compensation, and unrealized loss (gain)
        on financial derivative contracts. See Management's Discussion &
        Analysis Non-GAAP Measures

    (2) Net debt and working capital deficiency at June 30, 2007 excludes
        financial derivative contracts liability in the amount of $120,973
        included in current liabilities. The liability relates to an
        unrealized loss on financial derivative contracts recognized at
        June 30, 2007. Net debt and working capital deficiency also excludes
        gross proceeds of $16,650,000 from a bought deal private placement of
        5,550,000 Common Shares that closed July 17, 2007.

    (3) Net income for the three month period ended June 30, 2007 includes a
        future tax recovery of $4,056,515.

    Report to Shareholders

    The Company's achievements in the second quarter include the following:

    -   Established a significant new growth area for the Company and
        executed on the corporate acquisition strategy acquiring 600 boe/d of
        long reserve life, operated production with undeveloped land, and
        infrastructure in the Leaman/Thunder area of West Central Alberta;

    -   Acquisition completed for approximately $28.4 million representing
        acquisition metrics of $42,000/boe/d and $12.39/boe (2P) net of land;

    -   Closed a bought deal private placement of Common Shares post quarter
        end for aggregate proceeds of $16,650,000 positioning the Company
        with a strong balance sheet and significant financial flexibility;

    -   Realized average production of 1,445 boe/d in the second quarter
        representing an increase of 10% from 1,309 boe/d in Q1;

    -   Remain on track to exceed our 2007 exit production rate of
        2,100 boe/d providing solid production and cash flow to facilitate
        future growth;

    -   Cash flow totalled $3.1 million or $0.14 per share in the second
        quarter representing an increase of 19% over first quarter cash flow
        of $2.6 million or $0.13 per share;

    -   Drilled and cased five (4.4 net) wells in the quarter for a
        100 percent success rate;

    -   Finalized EUB downspacing application to facilitate infill drilling
        in the 37.5 MMbbl original oil in place Jayar light oil pool;

    -   Increased undeveloped land holdings to 50,300 net acres at quarter
        end through property and land acquisitions in our core areas of
        operation;

    -   Completed the previously approved 1:5 share consolidation.
    

    Operations Review

    Production for the second quarter averaged 1,445 boe/d comprised of
73 percent natural gas and 27 percent light oil and natural gas liquids
representing an increase of 10% from an average 1,309 boe/d in the first
quarter of 2007. Excluding the Thunder property acquisition, the Company
completed a Q2 net capital program of $3.6 million drilling three (3.0 net)
wells in the Oyen core area and two (1.4 net) well in the Bulwark core area.
As a result of weather delays Q2 production was not impacted by the Q2
drilling program with production additions anticipated early in the third
quarter. The Company also completed certain well optimization projects and
rental compression buyouts in the quarter to improve production and operating
costs and additional projects are anticipated in Q3. The Company closed the
purchase of the Leaman/Thunder assets on June 28 and as a result the
acquisition had a minimal effect on Q2 operations or results.
    During the first quarter the Company commenced the EUB notification
process for reduced spacing drilling at Jayar and the consultation and
notification process was completed in Q2. The application was submitted in
July and the Company hopes to execute a down space drilling program in late Q4
2007 or early Q1 2008 subject to EUB approval. The Jayar light oil pool (40
degree API) has 37.5MMbbl of original oil in place (OOIP) and has a low
historical production decline with only 1.8MMbbl, or 4.8% of OOIP recovered
to-date. The EUB-estimated ultimate recovery at current well spacing is 7%.
However, an offsetting analogous Dunvegan pool has been successfully
downspaced with a current EUB projected recovery of 14% representing a
significant opportunity to the Company in terms of increased reserves and net
asset value.

    Outlook and 2007 Guidance

    2007 continues to be a challenging year for the junior oil and gas sector
as some small E & P companies struggle to find direction in the changing
environment. Throughout this transition Twin Butte has remained focused on
building a financially sound company looking for accretive acquisitions and
lower risk exploitation and exploration opportunities. In following this
approach we believe that our shareholders are part of a company that will
continue to be positioned to grow and positioned to take advantage of future
opportunities. While the Company has not been immune to market volatility
enhanced by our gas weighted production we continue to believe in the long
term outlook for natural gas and that an element of countercyclical thinking
is required to position the Company for the future. Management remains
committed to building a solid foundation from which the Company will thrive as
it moves forward in this changing industry which is illustrated by the
Company's attributes as follows:

    
    -   A 2007 exit production rate of over 2,100 boe/d;
    -   Reserves of 5.8 MMboe (P+P);
    -   A reserve life index of 7.6 years (P+P);
    -   Tax pools of approximately $159 million;
    -   Net undeveloped land totaling 50,300 acres;
    -   Low net debt of approximately $22 million (pro forma equity financing
        closed July 17) and total credit facilities of $40 million;
    -   Significantly enhanced operational, exploitation and exploration
        upside.
    

    The Company has commenced activities in its new Thunder/Leaman core area
and has identified multiple opportunities to exploit the acquired assets.
Opportunities range from simple well optimization and exploitation to medium
risk exploration. Lands have year round access with opportunities at shallow
depths to a maximum of 1500m. The combined attributes of predictable low
decline production, operated infrastructure, shallow depth operations and year
round access contribute to the attractiveness of the new core area and bode
well for future value additions to company shareholders.
    The Company continues to be actively engaged in Crown land sales in both
the Company's core areas and new growth areas, adding to the existing land
base and additionally, the Company continues to evaluate numerous farm-in
opportunities with industry partners. The management team and Board of
Directors remains focused on cost effective per share growth in reserves,
production and cash flow which will be achieved through exploitation of the
existing asset base and the integration of accretive acquisitions following
management's "acquire and exploit" business strategy.

    On behalf of the Board of Directors,


    Ron Cawston
    President and C.E.O.
    August 9, 2007


    Certain information regarding the Company contained herein may constitute
forward-looking statements within the meaning of applicable securities laws.
Forward-looking statements may include estimates, plans, anticipations,
expectations, intentions, opinions, forecasts, projections, guidance or other
similar statements that are not statements of fact. Although the Company
believes that the expectations reflected in such forward-looking statements
are reasonable, it can give no assurance that such expectations will prove to
be correct. These statements are subject to certain risks and uncertainties
and may be based on assumptions that could cause actual results to differ
materially from those anticipated or implied in the forward-looking
statements. The Company's forward-looking statements are expressly qualified
in their entirety by this cautionary statement.

    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.


    Management's Discussion and Analysis

    Dated as of August 9, 2007

    The following discussion and analysis as provided by the management of
Twin Butte Energy Ltd. ("Twin Butte" or the "Company") should be read in
conjunction with the unaudited financial statements for the period ended
June 30, 2007 and the audited financial statements and management discussion
and analysis for the year ended December 31, 2006. Other audited and unaudited
interim financial statements, current annual information form and other
disclosure documents are filed on SEDAR at www.sedar.com. Other corporate
documentation can be obtained from our website at www.twinbutteenergy.com.

    Basis of Presentation - The reporting and measurement currency is the
Canadian dollar.

    Non-GAAP Measures - The Management's Discussion and Analysis ("MD&A")
contains the term cash flow from operations or cash flow which should not be
considered an alternative to, or more meaningful than, cash flow from
operating activities as determined in accordance with Canadian generally
accepted accounting principles ("GAAP") as an indicator of the Company's
performance. The Company also presents cash flow from operations per share
whereby per share amounts are calculated using weighted average shares
outstanding consistent with the calculation of earnings per share. These
measures may not be comparable to other companies.

    boe Presentation - Barrels of oil equivalent ("boe") may be misleading,
particularly if used in isolation. A boe conversion rate of 6 Mcf: 1 bbl is
based on an energy equivalency conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the wellhead. All boe
conversions in the report are derived by converting gas to oil at the ratio of
six thousand cubic feet of gas to one barrel of oil.

    Forward-Looking Information - Certain information regarding the Company
presented in this document, including management's assessment of the Company's
future plans and operations, may constitute forward-looking statements under
applicable securities law and necessarily involve risk associated with oil and
gas exploration, production, marketing, and transportation such as loss of
market, volatility of commodity prices, currency fluctuations, imprecision of
reserve estimates, environmental risk, competition from other producers and
ability to access sufficient capital from internal and external resources; as
a consequence, actual results may differ materially from those anticipated in
the forward-looking statements.

    Petroleum and Natural Gas Sales

    Twin Butte realized the following production volumes, commodity prices
and revenues, which reflect only three days of production from the property
acquisition that closed on June 28, 2007:

    
                      Three months ended June 30    Six months ended June 30
    -------------------------------------------------------------------------
                          2007          2006          2007          2006
    -------------------------------------------------------------------------
    Average Realized
     Commodity Prices
    -------------------------------------------------------------------------
    Crude oil ($ per bbl)    70.12         73.84         67.12         73.78
    Natural gas
     ($ per Mcf)              7.46          6.16          7.59          6.16
    Natural gas
     liquids ($ per bbl)     65.20         68.90         59.87         68.90

    $'s
    Crude oil            2,088,800       870,178     3,839,251       876,323
    Natural gas          4,310,701       800,892     8,294,620       800,892
    Natural gas liquids    355,678        47,939       601,980        47,939
    -------------------------------------------------------------------------
    Total petroleum and
     natural gas sales   6,755,179     1,719,009    12,735,851     1,725,154
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average Daily
     Production
    -------------------------------------------------------------------------
    Crude oil & natural
     gas liquids (bbl/day)     387           138           372            70
    Natural gas (Mcf/day)    6,347         1,430         6,035           719
    -------------------------------------------------------------------------
    Total (boe/d)            1,445           375         1,377           189
    -------------------------------------------------------------------------
    

    For the three month period ended June 30, 2007, Twin Butte recorded
$6.8 million in petroleum and natural gas sales and $12.7 million for the six
month period ended June 30, 2007.
    The Company's production for the second quarter averaged 1,445 boe/d,
representing an increase of 10% from the first quarter average of 1,309 boe/d.
The production increase is attributed to wells that were brought on production
from the drilling program in the first quarter. Production for the second
quarter consists of 577,572 Mcf of gas, 29,790 bbl of oil and 5,430 bbl of
natural gas liquids. The Company's sales volumes were 73% natural gas for the
second quarter and the prior quarter.

    Royalties

    For the three months ended June 30, 2007 total royalties were
$1.4 million or $10.52 per boe resulting in an average royalty rate of 20%.
For the six month period ended June 30, 2007, total royalties were $2.5
million or $10.06 per boe resulting in an average royalty rate for the period
of 20%.

    Operating Expenses

    For the three months ended June 30, 2007 operating expenses were
$1.4 million representing a reduction to $10.96 per boe, compared to operating
expenses of $1.4 million, or $11.73 per boe, for the three months ended
March 31, 2007.
    During the quarter, the Company increased production volumes and
completed the purchase of several compressors that were previously being
rented. These factors contributed to the reduction in operating costs on a boe
basis. Management is continuing an examination of the current operational
efficiency of the Company's assets and undertaking steps to further reduce the
operating costs.

    Transportation Expenses

    For the three months ended June 30, 2007 transportation expenses were
$0.3 million or $2.31 per boe compared to $0.3 million, or $2.69 per boe for
the three months ended March 31, 2007. Transportation costs are expected to
remain fairly consistent on a per boe basis throughout 2007.

    
    General and Administrative Expenses

                      Three months ended June 30    Six months ended June 30
    -------------------------------------------------------------------------
                          2007          2006          2007          2006
    -------------------------------------------------------------------------
    General and
     administrative
     expenses
    -------------------------------------------------------------------------
    General and
     administrative
     expenses              791,997       249,816     1,584,980       297,853
    Recoveries             (46,913)      (11,085)     (186,627)      (11,085)
    Capitalized general
     and administrative
     expenses             (186,723)      (16,767)     (365,522)      (16,767)
    -------------------------------------------------------------------------
    Total net general
     and administrative
     expenses              558,361       221,964     1,032,831       270,001
    -------------------------------------------------------------------------
    

    General and administrative expenses for the second quarter were
$0.6 million, or $4.25 per boe after recoveries and capitalized costs. For the
six months ended June 30, 2007, general and administrative expenses were
$1.0 million or $4.14 per boe after recoveries and capitalized costs.
    With the exception of minor changes, the Company believes that it is
adequately staffed to execute the currently planned 2007 capital program and
expects to realize a reduction in general and administrative expenses on a per
boe basis going forward.

    Stock Based Compensation Expense

    During the three month period ended June 30, 2007, the Company expensed
$0.1 million in stock based compensation and $0.3 million for the six months
period ended June 30, 2007. Stock based compensation expense in 2007 relates
to the outstanding stock options.

    Interest Expense

    Interest expense for the three month period ended June 30, 2007 in the
amount of $0.1 million and for the six month period ended June 30, 2007 in the
amount of $0.2 million related to interest on bank indebtedness.

    Unrealized Loss on Financial Derivative Contracts

    On January 1, 2007, the Company adopted new accounting standards for
financial instruments and hedging. Accordingly, realized and unrealized gains
on commodity derivative contracts are recognized in the current period. See
note 1 of the financial statements for a description of the new accounting
policies.
    In the first two quarters of 2007, the Company entered into fixed price
swap contracts for natural gas and oil. As part of our financial management
strategy, Twin Butte has adopted a disciplined commodity price risk management
program. The purpose of the program is to reduce volatility in the financial
results and to stabilize and hedge future cash flow against the unpredictable
commodity price environment.
    The following is a summary of natural gas sales price derivative
contracts in effect as at June 30, 2007, that have fixed future sales prices:

    
                                                              Fixed price
    Daily quantity      Remaining term of contract           per GJ (AECO)
    -------------------------------------------------------------------------

       1,500 GJ        July 1, 2007 to October 31, 2007          $6.80
       1,500 GJ        July 1, 2007 to October 31, 2007          $7.04
         500 GJ        July 1, 2007 to October 31, 2007          $7.40

    -------------------------------------------------------------------------

    The following is a summary of oil sales price derivative contracts in
effect as at June 30, 2007, that have fixed future sales prices:

                                                            Fixed price
    Daily quantity     Remaining term of contract          per bbl (WTI)
    -------------------------------------------------------------------------

        100 bbl       July 1, 2007 to December 31, 2007      US $68.50
         50 bbl       July 1, 2007 to December 31, 2007      US $68.75
        100 bbl    January 1, 2008 to December 31, 2008      US $70.65

    -------------------------------------------------------------------------
    

    In accordance with the new accounting standards for financial instruments
and hedging, the Company has calculated the fair value of the above contracts
and recorded an unrealized future liability on financial derivative contracts
in the amount of $120,973 as at June 30, 2007.

    Depletion, Depreciation and Accretion Expense

    For the three month period ended June 30, 2007, depletion and
depreciation of capital assets and the accretion of the asset retirement
obligations was $4.1 million. Depletion of capital assets amounts to $31.14
per boe for the quarter, compared to $31.51 for the six months ended June 30,
2007. The cost of undeveloped properties excluded from the depletion base as
at June 30, 2007 was $7.5 million.

    Income Taxes

    Future income tax recovery amounted to $4.1 million for the three month
period ended June 30, 2007 compared to a future tax recovery of $2.2 million
for the six month period ended June 30, 2007. The Company has existing tax
losses and pools of approximately $159.7 million of which $72.3 million are
non-capital losses. The Company has no current tax expense and based on
current reserve forecasts will be able to realize the benefit of the majority
of the non-capital losses and is forecasted to be non-taxable beyond 2011.

    Cash Flow from Operations and Net Income (Loss) and Comprehensive
    Income (Loss)

    Cash flow from operations for the three month period ended June 30, 2007
was $3.1 million equating to basic and diluted cash flow from operations of
$0.14 per share, representing an increase of 19% compared to the prior quarter
cash flow of $2.6 million. Cash flow from operations for the six months ended
June 30, 2007 was $5.7 million equating to basic and diluted cash flow from
operations of $0.27 per share.
    The Company posted a net income and comprehensive income of $3.5 million
for the three month period ended June 30, 2007, equating to a basic and
diluted net income per share of $0.16, compared to a net loss and
comprehensive loss of $0.4 million for the six months ended June 30, 2007,
equating to basic and diluted net loss per share of $0.02. The net loss and
comprehensive loss of $0.4 million for the six month period ended June 30,
2007 includes non cash items including depletion, depreciation and accretion
expense of $7.9 million, future income tax recovery of $2.2 million,
unrealized loss on financial derivative contracts of $0.1 million, and stock
based compensation expense of $0.3 million.
    The following table summarizes netbacks for the past four quarters on a
barrel of oil equivalent basis:

    
                           Q2 2007        Q1 2007      Q4 2006       Q3 2006
    -------------------------------------------------------------------------
    ($ per boe)
    -------------------------------------------------------------------------
    Petroleum and
     natural gas sales       51.38         50.76         48.48         47.45
    Royalties               (10.52)        (9.55)        (7.21)        (7.91)
    -------------------------------------------------------------------------
                             40.86         41.21         41.27         39.54
    Operating expenses      (10.96)       (11.73)       (11.38)       (11.76)
    Transportation
     expenses                (2.31)        (2.69)        (2.77)        (2.40)
    -------------------------------------------------------------------------
    Operating netback        27.59         26.79         27.12         25.38
    General and
     administrative
     expenses                (4.25)        (4.03)        (5.19)        (4.30)
    Interest expense         (0.77)        (0.47)        (1.42)        (1.76)
    -------------------------------------------------------------------------
    Cash flow from
     operations              22.57         22.29         20.51         19.32
    -------------------------------------------------------------------------

    Quarterly Financial Summary

    The following table highlights Twin Butte's performance for the past four
quarters:

                         June 30,    March 31,       Dec 31,       Sep 30,
                          2007          2007          2006          2006
    -------------------------------------------------------------------------
    ($ thousands, except per share
     amounts)
    -------------------------------------------------------------------------
    Average production
     (boe/d)                 1,445         1,309         1,089         1,047
    Petroleum and
     natural gas sales       6,755         5,981         4,855         4,569
    Operating netback
     (per boe)               27.59         26.79         27.12         25.38

    Cash flow from
     operations              3,091         2,626         2,054         1,861
      Per share basic
       & diluted              0.14          0.13          0.16          0.10

    Net earnings (loss)      3,483        (3,915)         (881)       (2,267)
      Per share
       basic & diluted        0.16         (0.19)        (0.07)        (0.13)
    Capital expenditures
     (net of
     dispositions)          31,981         8,391         9,580         4,666
    Total assets           116,389        81,899        78,697        67,060
    Net debt and working
     capital surplus
     (deficiency)
     excluding financial
     derivative contracts
     liability             (38,042)       (9,001)      (14,578)       (7,517)
    -------------------------------------------------------------------------

    Capital Expenditures

    During the second quarter of 2007, the Company incurred $32.0 million of
capital expenditures. Capital expenditures for the prior quarter were $8.4
million for a total of $40.4 million in capital expenditures for the six month
period ended June 30, 2007.

                                                  Three months    Six months
                                                         ended         ended
                                                       June 30,      June 30,
                                                          2007          2007
    -------------------------------------------------------------------------
    Land acquisition                                   715,385       956,966
    Geological and geophysical                         121,907       397,202
    Drilling and completions                         1,302,450     6,768,217
    Equipping and facilities                         1,242,261     3,936,117
    Property acquisitions                           28,403,761    28,403,761
    Property dispositions                                    -      (465,721)
    Other                                              195,316       376,023
    -------------------------------------------------------------------------
    Total capital expenditures                      31,981,080    40,372,565
    -------------------------------------------------------------------------
    

    During the quarter the Company closed a property acquisition on June 28,
2007 for approximately $28.4 million. The acquisition consists of producing
assets, undeveloped land, and infrastructure in the Leaman/Thunder area of
West Central Alberta. This represents a new core growth area to the Company.
    The Company drilled three successful (3.0 net) wells in the Oyen corea
area and and two successful (1.4 net) wells in the Bulwark core area with the
majority of these drills completed late in the second quarter. The Company
also continued to be active at crown land sales and completed the purchase of
several rental compressors mid way in the quarter.

    Liquidity and Capital Resources

    At June 30, 2007, the Company had a net debt and working capital
deficiency of $38.0 million, excluding financial derivative contracts
liability in the amount of $0.1 million included in current liabilities
relating to an unrealized loss on financial derivative contracts recognized at
June 30, 2007. The increase in working capital deficiency from the prior
quarter balance of $9.0 million is attributed to the property acquisition in
the amount of $28.4 million that closed on June 28, 2007.
    In relation to the above mentioned property acquisition, the Company
increased its total credit facility with a Canadian chartered bank to a total
of $40.0 million. The renewed credit facility is composed of a $32.5 million
demand revolving operating credit facility and a $7.5 million acquisition and
development credit facility. In addition, the Company secured a $5.5 million
bridge facility with the bank to facilitate the financing of the property
acquisition.
    Subsequent to the quarter end on July 17, 2007, the Company closed a
bought deal private placement of 5,550,000 Common Shares at a price of $3.00
per share, for aggregate proceeds of $16,650,000. The proceeds were used to
repay and cancel the bridge facility and to reduce the amount of credit
facility that had previously been drawn. Current net debt is approximately
$22.6 million.

    Share Capital

    On May 31, 2007, the Company consolidated its share capital on a 1:5
basis. All share and per share amounts have been restated to reflect this
share consolidation.
    Subsequent to the closing of the bought deal private placement of
5,550,000 Common Shares on July 17, 2007, the Company has 27,752,398 Common
Shares and 1,600,000 stock options outstanding.

    Contractual Obligations

    The issuance of flow through shares in February 2007 for proceeds of
$12.0 million will require the Company to spend $12.0 million of flow-through
share eligible Canadian Exploration Expenditures, as defined in the Canadian
Income Tax Act, by December 31, 2008. As at June 30, 2007 the Company has
incurred approximately $1.2 million of this commitment.
    The Company has other commitments and guarantees in the normal course of
business, consisting of an office space lease and equipment rentals which are
not considered material.

    Related Party Transactions

    During the quarter the Company expensed and capitalized legal fees
totaling $55,907 for services rendered by a professional firm related to a
director of the Company. The fees were incurred in the normal course of
business and recorded at the exchange amount.

    Disclosure Controls and Procedures and Internal Control Over Financial
    Reporting

    Twin Butte has implemented a system of internal controls that it believes
adequately protects the assets of the Company and is appropriate for the
nature of its business and the size of its operations. These internal controls
include disclosure controls and procedures designed to ensure that information
required to be disclosed by the Company is accumulated and communicated to
management as appropriate to allow timely decisions regarding required
disclosure. The Company's Chief Executive Officer (CEO) and Chief Financial
Officer (CFO) have concluded, based on their evaluation, that Twin Butte's
disclosure controls and procedures are effective to provide reasonable
assurance that material information related to the Company is made known to
them and have been operating effectively. It should be noted that while the
Company's CEO and CFO believe that Twin Butte's disclosure controls and
procedures provide a reasonable level of assurance that the system of internal
controls are effective, they do not guarantee that the disclosure controls and
procedures will prevent all errors and fraud. A control system, no matter how
well conceived or operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met.
    In addition, in accordance with Multilateral Instrument 52-109, the
Company has, under the supervision of its CEO and CFO, designed a process of
internal control over financial reporting, which has been affected by the
Company's board of directors and management. The process was designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in
accordance with Canadian generally accepted accounting principles ("GAAP").
    Based on the CEO and the CFO's review of the design of internal controls
over financial reporting, the CEO and CFO have concluded that the design of
internal controls is adequate for the nature of the Corporation's business and
size of its operations. As a small organization, and similar to other small
organizations, the Company's management is composed of a small number of key
individuals, resulting in a situation where limitations on the segregation of
duties as well as expertise in such areas as complex calculations and
estimations do not exist, as such these risks are compensated by more
effective supervision and monitoring by the CEO and CFO as well as reliance on
third party expertise where appropriate. It is important to note that in order
to eliminate the potential risk associated with these issues the Company would
be required to hire additional staff in order to provide greater segregation
of duties and expertise in certain areas. Since the increased costs of such
hiring would be financially constrictive to Twin Butte, the Corporation has
chosen to disclose the potential risk in its annual filings and proceed with
increased staffing as the Company's growth supports such overhead expansion.


    
    TWIN BUTTE ENERGY LTD
    Balance Sheets

    -------------------------------------------------------------------------
                                                       June 30   December 31
                                                          2007          2006
    -------------------------------------------------------------------------
                                                    (Unaudited)     (Audited)
    Assets

    Current Assets
      Accounts receivable                         $  3,221,754  $  4,554,362
      Deposits and prepaid expenses                  1,044,412       606,175
    -------------------------------------------------------------------------
                                                     4,266,166     5,160,537

    Future income taxes                              4,465,666     2,029,400

    Property and equipment (note 2)                107,657,023    71,506,633

    -------------------------------------------------------------------------
                                                  $116,388,855  $ 78,696,570
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity

    Current Liabilities
      Accounts payable and accrued liabilities    $  5,807,992  $ 13,399,101
      Bank indebtedness (note 3 & note 9)           36,500,630     6,318,985
      Financial derivative contracts (note 8)          120,973             -
    -------------------------------------------------------------------------
                                                    42,429,595    19,718,086

    Asset retirement obligation (note 4)             6,799,693     3,073,325

    -------------------------------------------------------------------------
                                                    49,229,288    22,791,411

    Shareholders' Equity
      Share capital (note 5 & note 9)               77,820,311    66,397,721
      Contributed surplus (note 5)                     680,024       415,713
      Deficit                                      (11,340,768)  (10,908,275)
    -------------------------------------------------------------------------
                                                    67,159,567    55,905,159

    -------------------------------------------------------------------------
                                                  $116,388,855  $ 78,696,570
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Commitments (note 7)

    See accompanying notes to financial statements


    TWIN BUTTE ENERGY LTD
    Statements of Income (Loss), Comprehensive Income (Loss) and Deficit
    (unaudited)

    -------------------------------------------------------------------------
                      Three Months Ended June 30    Six Months Ended June 30
                          2007          2006          2007          2006
    -------------------------------------------------------------------------
    Revenue:
      Petroleum and
       natural gas
       sales          $  6,755,179  $  1,719,009  $ 12,735,851  $  1,725,154
      Royalties         (1,382,602)     (328,952)   (2,508,433)     (329,231)
      Realized gain
       on financial
       derivatives         122,456             -       122,456             -
      Unrealized gain
       (loss) on
       financial
       derivative
       contracts
       (note 8)            552,432             -      (120,973)            -
    -------------------------------------------------------------------------
                         6,047,465     1,390,057    10,228,901     1,395,923

    Expenses:
      Operating          1,441,260       339,333     2,823,762       339,908
      Transportation       303,576        81,469       620,158        81,469
      General and
       administrative      558,361       221,964     1,032,831       270,001
      Stock based
       compensation         87,675       544,507       264,311       544,507
      Interest             101,140         2,772       156,857       115,034
      Depletion,
       depreciation
       and accretion     4,129,004     1,153,267     7,948,544     1,154,214
    -------------------------------------------------------------------------
                         6,621,016     2,343,312    12,846,463     2,505,133

    -------------------------------------------------------------------------
    Loss before
     income taxes         (573,551)     (953,255)   (2,617,562)   (1,109,210)

    Income taxes
      Future tax
       expense
       (recovery)       (4,056,515)     (175,000)   (2,185,069)     (175,000)
    -------------------------------------------------------------------------
                        (4,056,515)     (175,000)   (2,185,069)     (175,000)

    -------------------------------------------------------------------------
    Net income (loss)
     and comprehensive
     income (loss)       3,482,964      (778,255)     (432,493)     (934,210)
    Deficit, beginning
     of period         (14,823,732)   (6,982,359)  (10,908,275)   (6,826,404)

    -------------------------------------------------------------------------
    Deficit, end
     of period        $(11,340,768) $ (7,760,614) $(11,340,768) $ (7,760,614)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Basic & diluted
     income (loss)
     per share        $       0.16  $      (0.08) $      (0.02) $      (0.14)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Weighted average
     common shares
     outstanding
      Basic             22,202,398    10,004,024    21,280,636     6,883,365
      Diluted           22,202,398    10,647,683    21,280,636     7,113,666

    See accompanying notes to financial statements


    TWIN BUTTE ENERGY LTD
    Statements of Cash Flows (unaudited)


    -------------------------------------------------------------------------
                      Three Months Ended June 30    Six Months Ended June 30
                          2007          2006          2007          2006
    -------------------------------------------------------------------------
    Cash provided by
     (used in):

    Operations:
      Net income
       (loss)         $  3,482,964  $   (778,255) $   (432,493) $   (934,210)
      Items not
       involving cash:
        Depletion,
         depreciation
         and
         accretion       4,129,004     1,153,267     7,948,544     1,154,214
        Future
         income
         taxes          (4,056,515)    (175,000)    (2,185,069)     (175,000)
        Unrealized
         loss (gain)
         on financial
         derivative
         contracts        (552,432)           -        120,973             -
        Stock based
         compensation       87,675      544,507        264,311       544,507
    -------------------------------------------------------------------------
                         3,090,696      744,519      5,716,266       589,511
      Changes in
       non-cash
       working
       capital           1,968,437      922,156      1,868,983       962,029
    -------------------------------------------------------------------------
                         5,059,133    1,666,675      7,585,249     1,551,540
    Financing:
      Change in bank
       debt             36,468,290    (5,918,841)   30,181,645    (5,918,841)
      Issuance of
       share capital,
       net of share
       issue costs        (151,340)    8,890,255    11,171,392     8,890,255
      Changes in
       non-cash
       working
       capital             (15,000)         (280)            -          (280)
    -------------------------------------------------------------------------
                        36,301,950     2,971,134    41,353,037     2,971,134

    Investing:
      Expenditures
       on property
       and equipment   (31,981,080)     (456,991)  (40,838,286)     (456,991)
      Acquisition
       expenditures              -    (8,252,364)            -    (8,252,364)
      Proceeds on
       disposition of
       property and
       equipment                 -             -       465,721             -
      Changes in
       non-cash working
       capital          (9,380,003)      561,094    (8,565,721)      561,094
    -------------------------------------------------------------------------
                       (41,361,083)   (8,148,261)  (48,938,286)   (8,148,261)

    -------------------------------------------------------------------------
    Decrease in cash
     and cash
     equivalents                 0    (3,510,452)            0    (3,625,587)

    Cash and cash
     equivalents,
     beginning of
     period                      -     3,510,452             -     3,625,587
    -------------------------------------------------------------------------

    Cash and cash
     equivalents,
     end of period    $          0  $          -  $          0  $          -
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash interest
     paid             $     76,702        28,229  $    133,018  $    147,177


    See accompanying notes to financial statements



    Notes to Financial Statements (Unaudited) - June 30, 2007

    The interim financial statements of Twin Butte Energy Ltd. ("Twin Butte"
    or the "Company") have been prepared by management in accordance with
    accounting principles generally accepted in Canada. The interim financial
    statements have been prepared following the same accounting policies and
    methods of computation as the audited financial statements for the year
    ended December 31, 2006 except as noted below. The disclosures provided
    below are incremental to those included in the audited annual financial
    statements. These interim financial statements should be read in
    conjunction with the financial statements and notes thereto in the
    Company's audited annual financial statements. Certain of the comparative
    amounts have been reclassified to conform to the presentation adopted in
    the current period.

    Twin Butte is engaged in the acquisition of, exploration for, and
    development of petroleum and natural gas properties in Western Canada.

    1.  SIGNIFICANT ACCOUNTING POLICIES

    Management is required to make estimates and assumptions that affect the
    reported amounts of assets and liabilities and the disclosure of
    contingent assets and liabilities as at the date of the financial
    statements and the reported amounts of revenue and expenses. The amounts
    recorded for depletion and amortization of petroleum and natural gas
    properties and equipment and the provision for future asset retirement
    obligation costs are based on estimates. The ceiling test is based on
    estimates of proved reserves, production rates, future oil and gas
    prices, future costs and other relevant assumptions. The amounts recorded
    for future taxes are based on estimates of future taxable income and
    anticipated income tax rates. The fair value of stock options is based on
    estimates using the Black-Scholes option pricing model and is recorded as
    stock-based compensation expense in the financial statements. By their
    nature, these estimates are subject to measurement uncertainty and the
    effect on the financial statements of changes in such estimates in future
    periods could be significant.

    Newly Adopted Accounting Policies

    On January 1, 2007, the Company adopted the new CICA Handbook sections
    3855 - Financial Instruments - Recognition and Measurement, 3861 -
    Financial Instruments - Disclosure and Presentation, 3865 - Hedges, and
    1530 - Comprehensive Income. The financial instruments standard
    establishes the recognition and measurement criteria of financial assets,
    financial liabilities and derivatives. All financial instruments are
    required to be measured at fair value on initial recognition of the
    instrument, except for certain related party transactions. Measurement in
    subsequent periods depends on whether the financial instrument has been
    classified as held-for-trading, available-for-sale, held-to-maturity,
    loans and receivables, or other financial liabilities as defined by the
    standard.

    Financial assets and financial liabilities held-for-trading are measured
    at fair value with changes in those fair values recognized in net
    earnings (loss). Financial assets available-for-sale are measured at fair
    value, with changes in those fair values recognized in other
    comprehensive income (loss). Financial assets held-to-maturity, loans and
    receivables and other financial liabilities are measured at amortized
    cost using the effective interest method of amortization.

    The Company has no financial instruments or activities that give rise to
    other comprehensive income (loss). The Company's cash and cash
    equivalents are designated as held-for-trading and are measured at
    carrying value, which approximates fair value due to the short-term
    nature of these instruments. Accounts receivable are designated as loans
    and receivables. Accounts payable and accrued liabilities and bank
    indebtedness are designated as other liabilities. The adoption of these
    new standards had no effect on the Company's financial statements.

    2.  PROPERTY AND EQUIPMENT

                      -------------------------------------------------------
                                                       June 30,  December 31,
                                                          2007          2006
                                     Accumulated           Net           Net
                                     Depletion &          Book          Book
                              Cost  Depreciation         Value         Value
                      -------------------------------------------------------
    Petroleum and
     natural gas
     properties       $123,285,460  $ 15,668,653  $107,616,807  $ 71,468,938
    Office and
     computer
     equipment              55,302        15,086        40,216        37,695
                      -------------------------------------------------------
    Total             $123,340,762  $ 15,683,739  $107,657,023  $ 71,506,633
                      -------------------------------------------------------
                      -------------------------------------------------------

    The Company has capitalized $365,522 of general and administrative
    expenses directly related to exploration and development activities for
    the six months ended June 30, 2007 ($379,609 - year ended December 31,
    2006).

    The cost of undeveloped property excluded from the depletion base as at
    June 30, 2007 was $7,482,415 (December 31, 2006 - $5,630,449). Future
    development costs on proved reserves of $5,835,700 as at June 30, 2007
    are included in the calculation of depletion and depreciation
    (December 31, 2006 - $5,785,700).

    3.  BANK INDEBTEDNESS

    As at June 30, 2007, the Company had a $40.0 million credit facility with
    a Canadian chartered bank. The credit facility is composed of a
    $32.5 million demand revolving operating credit facility and a
    $7.5 million acquisition and development credit facility. Interest rates
    on the demand revolving operating credit facility fluctuate based on a
    pricing grid and range from bank prime to bank prime plus 2.0%, depending
    upon the Company's then current debt to cash flow ratio of between less
    than one times to greater than three times. A debt to cash flow ratio of
    less than one times has interest payable at the bank's prime lending
    rate. A debt to cash flow ratio greater than three times has interest
    payable at the bank's prime lending rate plus 2.0%. Advances on the
    acquisition and development credit facility bear interest at the bank's
    prime lending rate plus 0.25%. The credit facility is secured by a demand
    debenture and a general security agreement covering all assets of the
    Company.

    In addition the Company had secured a $5.5 million bridge loan. Interest
    on the loan is payable at the bank's prime lending rate plus 1.00%. As at
    June 30, 2007, the full balance of the bridge loan had been drawn.
    Subsequent to June 30, 2007 the bridge loan was repaid and cancelled
    (note 9).

    4.  ASSET RETIREMENT OBLIGATIONS

    Asset retirement obligations are based on the Company's net ownership in
    wells and facilities, and management's estimate of future costs to
    abandon and reclaim those wells and facilities as well as an estimate of
    the future timing of the costs to be incurred.

    The Company has estimated the present value of its total asset retirement
    obligation to be $6,799,693 at June 30, 2007, based on a total future
    liability of $10,380,350. Payments to settle asset retirement obligations
    occur over the operating lives of the underlying assets, estimated to be
    from 1 year to 19 years with the majority of the costs to be incurred
    between 2008 and 2016. A credit-adjusted risk free rate of eight percent
    and an inflation rate of two percent were used to calculate the present
    value of the asset retirement obligation.

    Changes to the asset retirement obligation are as follows:

                                                    Six Months    Year Ended
                                                 Ended June 30   December 31
                                                          2007          2006
                      -------------------------------------------------------
    Carrying amount, beginning of year            $  3,073,325  $          -

    Liabilities incurred                               181,323        76,481
    Acquisitions                                     3,521,095     2,062,312
    Liabilities related to property dispositions       (35,940)            -
    Revisions in estimated cash outflows               (25,656)      876,988
    Accretion of asset retirement obligation            85,546        57,544
                      -------------------------------------------------------

    Asset retirement obligation, end of period    $  6,799,693  $  3,073,325
                      -------------------------------------------------------

    5. SHARE CAPITAL

    Authorized

    An unlimited number of voting Common Shares and an unlimited number of
    Preferred Shares.

    Issued

                      -------------------------------------------------------
                                                     Number of
                                                        shares        Amount
                      -------------------------------------------------------
    Common Shares
    Balance, December 31, 2006                      19,275,398  $ 66,397,721
    Issued pursuant to private placement of
     of flow-through shares                          2,927,000    12,000,700
    Share issue and financing costs net of tax               -      (578,110)
                      -------------------------------------------------------

    Balance, June 30, 2007                          22,202,398  $ 77,820,311
    -------------------------------------------------------------------------

    Common Share Consolidation

    On May 31, 2007, the Company consolidated its share capital on a 1:5
    basis. All Common Share, stock options, and per share amounts have been
    restated to reflect this share consolidation.

    Issue of Common Shares

    On February 27, 2007 the Company closed a bought deal private placement
    of 2,927,000 flow-through Common Shares at a price of $4.10 per share,
    for aggregate proceeds of $12,000,700.

    Stock Options

    The following table sets forth a reconciliation of stock option plan
    activity through to June 30, 2007:

                                                                    Weighted
                                                                     Average
                                                     Number of      Exercise
                                                       Options         Price
                      -------------------------------------------------------
    Outstanding at December 31, 2006                 1,465,000  $       4.00
    Granted                                            380,000          3.27
    Forfeited                                         (450,000)         4.00
                      -------------------------------------------------------
    Outstanding at June 30, 2007                     1,395,000  $       3.80
                      -------------------------------------------------------
                      -------------------------------------------------------

    There were 273,333 options exercisable as at June 30, 2007.

    Stock Based Compensation

    The Company accounts for its stock based compensation plan using the fair
    value method. Under this method, a compensation cost is charged over the
    vesting period for options or warrants granted to employees, consultants,
    officers, and directors with a corresponding increase to contributed
    surplus.

    The following table reconciles the Company's contributed surplus balance.

                                                    Six Months    Year Ended
                                                 Ended June 30,  December 31,
                                                          2007          2006
    -------------------------------------------------------------------------
    Contributed surplus balance at beginning of
     year                                         $    415,713  $          -

    Stock based compensation charged for
     stock options                                     264,311       415,713
    Stock based compensation charged for
     management warrants                                     -     3,403,950
    Transfer to share capital on exercise of
     management warrants                                     -    (3,403,950)
    -------------------------------------------------------------------------

    Contributed surplus balance at end of period  $    680,024  $    415,713
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The fair value of each option granted is estimated on the date of grant
    using the Black-Scholes option pricing model with weighted average
    assumptions and resulting values for grants for the six month period
    ended June 30, 2007 as follows:

                      -------------------------------------------------------
    Expected volatility                                                  50%
    Risk free rate of return                                            4.5%
    Expected stock option life                                       3 years
    Dividend yield rate                                                 0.0%
                      -------------------------------------------------------

    The weighted average fair value of stock options granted during 2007 was
    $1.24 per option.

    Earnings Per Share

    The following table sets forth the details of the denominator used for
    the computation of basic and diluted earnings per share:

                              Three months ended           Six months ended
    -------------------------------------------------------------------------
                          2007          2006          2007          2006
    -------------------------------------------------------------------------
    Weighted average
     number of basic
     shares             22,202,398    10,004,024    21,280,636     6,883,365
    Effect of
     dilutive
     securities:
      Employee stock
       options                   -        87,956             -             -
      Management
       warrants                  -       327,033             -       137,017
      Flow-through
       warrants                  -       228,670             -        93,284
    -------------------------------------------------------------------------
    Weighted average
     number of
     diluted shares     22,202,398    10,647,683    21,280,636     7,113,666
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    6.  RELATED PARTY TRANSACTIONS

    During the six month period ended June 30, 2007 the Company expensed and
    capitalized legal fees totaling $55,907 (2006 - $433,102) for services
    rendered by a professional firm related to a director of the Company. As
    at June 30, 2007, $10,000 is included in accounts payable and accrued
    liabilities related to these transactions. These fees were incurred in
    the normal course of business and recorded at the exchange amount.

    7.  COMMITMENTS

    The Company is committed to incur $12.0 million of flow-through share
    eligible Canadian Exploration Expenditures, as defined in the Canadian
    Income Tax Act, by December 31, 2008. As at June 30, 2007 the Company has
    incurred approximately $1.2 million of this commitment.

    8.  FINANCIAL INSTRUMENTS

    Fixed Price Swap Natural Gas Contracts

    The following is a summary of natural gas sales price derivative
    contracts in effect as at June 30, 2007, that have fixed future sales
    prices:

                                                             Fixed price
    Daily quantity          Remaining term of contract      per GJ (AECO)
    -------------------------------------------------------------------------
      1,500 GJ           July 1, 2007 to October 31, 2007       $6.80
      1,500 GJ           July 1, 2007 to October 31, 2007       $7.04
        500 GJ           July 1, 2007 to October 31, 2007       $7.40
    -------------------------------------------------------------------------

    The fair value of the above natural gas contracts, mark-to-market at June
    30, 2007, is an unrealized loss of $120,170.

    Fixed Price Swap Oil Contracts

    The following is a summary of oil sales price derivative contracts in
    effect as at June 30, 2007, that have fixed future sales prices:

                                                                Fixed price
    Daily quantity          Remaining term of contract         per bbl (WTI)
    -------------------------------------------------------------------------
      100 bbl            July 1, 2007 to December 31, 2007      US $68.50
       50 bbl            July 1, 2007 to December 31, 2007      US $68.75
      100 bbl         January 1, 2008 to December 31, 2008      US $70.65
    -------------------------------------------------------------------------

    The fair value of the above oil contracts, mark-to-market at June 30,
    2007, is an unrealized loss of $803.

    9.  SUBSEQUENT EVENTS

    Private Placement Financing

    On July 17, 2007 the Company closed a bought deal private placement of
    5,550,000 Common Shares at a price of $3.00 per share, for aggregate
    proceeds of $16,650,000.

    Bank Indebtedness - Repayment of Bridge Loan

    On July 17, 2007 the Company repaid the bridge loan balance of
    $5.5 million. The bridge loan has subsequently been cancelled.

    The TSX does not accept responsibility for the adequacy or accuracy of
    this news release.

    

    %SEDAR: 00001562E




For further information:

For further information: Ron Cawston, President and Chief Executive
Officer, Twin Butte Energy Ltd., Telephone: (403) 215-2040, Fax: (403)
215-2055

Organization Profile

Twin Butte Energy Ltd.

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