Twin Butte Announces Third Quarter 2012 Operational and Financial Results
Nov 14, 2012
CALGARY, Nov. 14, 2012 /CNW/ - Twin Butte Energy Ltd. ("Twin Butte" or the "Company") (TSX: TBE) is pleased to announce its financial and operational results for the three months ended September 30, 2012.
Highlights of Twin Butte's highly successful third quarter of 2012 are as follows:
Recorded quarterly production of 13,752 boe per day, an increase of 81
percent over Q3 2011 and a 21 percent increase in production per share
from the same period of 2011.
Increased quarterly liquids production weighting to 86 percent from 63
percent in Q3 2011.
Generated record quarterly funds flow of $38.1 million, a 171 percent
increase over Q2 2011. On a per share basis, funds flow increased by
86 percent year over year to $0.19 for the quarter.
Executed a capital program of $17.2 million which included the drilling
of 24 gross (18 net) oil wells at a 100 percent success rate.
Completed the strategic $89.1 million acquisition of private heavy oil
producer Avalon Exploration Ltd. The acquisition included approximately
1,900 bbls per day of oil production as well as over 85,000 net
undeveloped acres of prospective acreage within Twin Butte's
Lloydminster heavy oil area.
Announced the strategic $126 million acquisition of private heavy oil
producer Waseca Energy Inc. which closed on November 1st. The
Acquisition included approximately 3,500 bbls per day of oil production
as well as over 46,000 net undeveloped acres of prospective acreage
within Twin Butte's Lloydminster heavy oil area.
Paid $9.4 million in dividends ($0.015/share/month) reflecting a yield
of 7.4% based on Twin Butte's September 30 closing price of $2.42 .
Announced an increase in the monthly dividend of 6.7 percent effective
with the December 2012 dividend to $0.016/share/month.
- Maintained a strong balance sheet with quarter end net debt of $146.8 million (0.95 years of annualized cash flow) on a credit facility of $240 million. Achieved an all in payout ratio of 70 percent (77 percent year to date) with free funds flow (funds flow less cash dividend and capital) of $11.4 million for the quarter which was utilized to reduce debt.
Certain selected financial and operations information for the three months ended September 30, 2012 and 2011 comparatives are outlined below and should be read in conjunction with Twin Butte's audited annual Consolidated Financial Statements and accompanying Management Discussion and Analysis ("MDA"). Full versions of the statements and accompanying notes along with the Company's Annual Information Form ("AIF") have been filed on SEDAR and also on the Company website.
Three months ended
Nine months ended
Financial ($ thousands, except per
|Petroleum and natural gas sales||73,386||34,885||110%||216,056||105,361|
|Funds flow (1)||38,119||14,042||171%||98,281||44,588|
|Per share basic||0.19||0.10||89%||0.51||0.32|
|Per share diluted||0.19||0.10||89%||0.51||0.32|
|Net income (loss)||(7,411)||7,522||-199%||36,912||18,026|
|Per share basic||(0.04)||0.06||-161%||0.19||0.14|
|Per share diluted||(0.04)||0.05||-174%||0.19||0.13|
|Dividends paid in total||9,404||-||-||26,674||-|
|Dividends paid in cash||8,861||-||-||26,131||-|
|Capital expenditures including E&E||17,827||22,079||-19%||49,797||47,564|
|Corporate acquisitions (2)||89,128||-||-||290,411||-|
|Net debt (3)||146,843||83,857||75%||146,843||83,857|
|Average daily production|
|Crude oil (bbl per day)||11,589||4,507||157%||11,066||4,303|
|Natural gas (Mcf per day)||11,695||16,803||-30%||14,289||18,024|
|Natural gas liquids (bbl per day)||213||291||-27%||277||281|
|Barrels of oil equivalent (boe per day, 6:1)||13,752||7,599||81%||13,724||7,588|
|% Oil and NGL's||86||63||37%||83||60|
|Average sales price|
|Crude oil ($ per bbl)||64.97||64.10||1%||66.21||67.33|
|Natural gas ($ per Mcf)||2.42||4.00||-40%||2.28||4.08|
|Natural gas liquids ($ per bbl)||76.97||78.63||-2%||84.48||80.51|
|Barrels of oil equivalent ($ per boe, 6:1)||58.01||49.90||16%||57.46||50.86|
|Operating netback ($ per boe) (4)|
|Petroleum and natural gas sales||58.01||49.90||16%||57.46||50.86|
|Realized (loss) gain on derivative instruments||8.02||2.65||203%||5.75||1.21|
|Shares outstanding, end of period||217,224,921||135,408,937||60%||217,224,921||135,408,937|
|Weighted average shares outstanding - diluted||201,321,327||137,551,262||46%||194,178,075||136,219,131|
Funds flow from operations and funds flow from operations netback are
non-IFRS measures that represent
the total and the average per boe, respectively, of cash provided by operating activities, before adjusting
for changes in non-cash working capital items and expenditures on decommissioning liabilities. This includes
one time transaction costs of $3 million.
|(2)||Corporate acquisitions include total consideration plus working capital deficiency acquired|
Net debt is a non-IFRS measure representing the total of bank
indebtedness, accounts payables and
accrued liabilities, cash dividend payable, less accounts receivables, deposits and prepaids.
Operating netback is a non-IFRS measure calculated as the average per
boe of the Company's oil and gas
sales, realized gains on derivatives, less royalties, operating and transportation expenses.
Twin Butte's third quarter financial and operating results continue to demonstrate the Company's ability to pay a sustainable dividend and maintain a strong balance sheet while completing a disciplined efficient capital plan. Our strategy of delivering shareholders long term returns comprised of both income and moderate production growth while maintaining conservative payout ratios is sustainable.
On August 29, Twin Butte closed the strategic acquisition of a private company, Avalon Exploration for approximately $89.1 million. Avalon produced 1,900 bbls per day of conventional heavy oil and added over 85,000 net undeveloped acres in the Lloydminster area, effectively doubling Twin Butte's undeveloped heavy oil lands in this area. Twin Butte received a significant seismic data base of 556 km of proprietary data and 2,271 km of trade data. Reflected in the Company's September 30 net debt, is the assumption of approximately $34 million of net debt including transaction costs associated with the Avalon purchase. The Company issued 24.6 million shares to Avalon shareholders in consideration for the transaction.
On September 3, Twin Butte announced the strategic acquisition of a private company, Waseca Energy Inc. for approximately $126 million. The acquisition subsequently closed on November 1. Waseca has current production of 3,200 bbls per day of conventional heavy oil and added over 46,000 net of undeveloped acres in the Lloydminster area, further enhancing our undeveloped land position in the area to over 220,000 net acres. Twin Butte also received a significant seismic data base of 2,500 km of 2D data and 16 km2 of 3D data. At closing the Company assumed approximately $46 million of net debt including transaction costs associated with the Waseca transaction. The Company issued 30.2 million shares to Waseca shareholders plus $56.7 million in consideration for the transaction.
On October 10, Twin Butte closed an acquisition of assets at Wildmere in the Company's Lloydminster heavy oil area. The transaction valued at approximately $20 million was financed with the Company's current credit facility. The property produced approximately 450 boe per day of which 80 percent was conventional heavy oil. The acquisition further strengthens the Company's extensive drilling inventory by adding upward of 20 horizontal drilling locations targeting the Lloydminster sands. Offsetting operators have been successfully developing the play for the last few years.
The noted acquisitions materially increase the size, scope, and diversity of heavy oil lands and opportunities for Twin Butte, and firmly establishes Twin Butte as a significant operator in the area. Twin Butte management has a successful history of operating and growing heavy oil production and has extensive operational experience within the Lloydminster heavy oil fairway which will ensure a seamless transition and ultimately generate numerous operational efficiencies.
As a larger, stronger company, Twin Butte will use its financial flexibility to capitalize on its expanded low risk drilling inventory. In addition the Company's credit facility was increased to $280 million upon the closing of the Waseca transaction. It is anticipated that net debt following the closing of the Waseca and asset transactions will be approximately $212 million.
Subsequent to closing the Waseca transaction Twin Butte will increase its monthly dividend by 6.7 percent effective with the November 2012 dividend (paid December 17) to $0.016/share/month. The increase reflects the Company's belief that the noted acquisitions have created accretive growth for Twin Butte and further strengthened the Company's ability to pay a sustainable dividend while maintaining a disciplined capital program. The Board of Directors has approved the payment of the Q1 2013 dividend at these values.
The Board of Directors approved a Dividend reinvestment plan ("DRIP") effective August 31, 2012, allowing eligible shareholders to receive shares of Twin Butte at a 5 percent discount to market in lieu of the cash distribution. Over the first three months participation has been growing from an initial 6 percent participation to current levels of approximately 16 percent. The Company intends to use the funds saved through the DRIP to strengthen the balance sheet and potentially increase the capital plan, allowing for expanded development of our significant undeveloped land position.
Consistent with the Company's expanded production base and increased liquids weighting, quarterly funds flow from operations reached a record $38.1 million in the quarter ($152.4 million annualized). This level of funds flow should provide shareholders comfort that our yearly dividend and our capital plan is sustainable long term within our funds flow. After deducting Q3 capital and cash dividends of $17.8 and $8.9 million respectfully the excess cash of $11.4 million was used for debt reduction. Year to date the Company's cash dividend and capital (excluding corporate transactions) has underspent cash flow by $24.7 million representing an all in payout ratio of 77 percent net of the DRIP. The excess cash flow has positioned the Company's balance sheet to allow maintaince of the Company's organic capital plan as well as to quickly close on opportunistic cash acquisitions. Twin Butte's philosophy remains that balance sheet strength is paramount and will ensure the long term sustainability of the dividend. Quarter-end net debt of $146.8 million represented 0.95 times third quarter annualized cash flow.
Twin Butte remains active on the hedging front to protect cash flow against the continued volatility in both oil and gas reference prices as well as price differential from WTI to the WCS Canadian heavy index. Twin Butte's remaining 2012 and 2013 cash flow forecast is well protected with our hedging program. Approximately 84 percent of our current gas production is hedged at $4.21/GJ at AECO for the remainder of 2012 and 65 percent of our anticipated 2013 gas production is hedged at $4.50/GJ at AECO.
Approximately 56 percent of our estimated oil production is hedged for the last quarter of 2012 at a WCS equivalent of approximately $80 Cdn per bbl. With the majority of the Company's oil production being heavy oil priced off of the WCS benchmark we endeavor to align our hedges to this reference price.
For 2013 approximately 32 percent (39 percent for first half) of our estimated oil production is hedged at a WCS equivalent of approximately $76 Cdn per bbl. In addition 8 (10 percent for first half) percent of our estimated oil production is hedged at a WTI above $98.
During the third quarter of 2012 Twin Butte drilled 24 gross (18 net) wells with a 100 percent success rate. All wells were drilled within the Company's core heavy oil fairway where Twin Butte anticipates spending one hundred percent of its remaining 2012 and 2013 capital.
At Frog Lake, the Company's most active area for the past two years, drilling continued in Q3 with 17 gross (11 net) wells drilled successfully. The focus at Frog Lake in 2012 has been on the Rex formation which has provided very consistent results for the past two years. Step out or pool extension wells drilled over the past two quarters have provided some positive but inconsistent results. The Company plans to focus on drilling on our recently acquired lands for the next few quarters while we monitor results of our 2012 drilling program.
The majority of the remaining Q3 wells were drilled at Silverdale in Saskatchewan which continues to provide consistent drilling and production performance. Additional pool extension wells were drilled successfully at Primate in Q3 and early Q4.
Late in Q3 and early Q4 four vertical and one horizontal well was drilled on the Company's new Swimming property which was acquired in Q2. Drilling and production optimization results have been positive which will lead to additional drilling in 2013.
With the recent closing of the Avalon, Waseca, and Wildmere transactions, drilling focus will shift to the exploitation of our newly acquired undeveloped land base. It is important to note that after the recent transactions, the Company's undeveloped lands and drilling inventory has not only been significantly increased, but now provides a greater diversity of heavy oil play types which should reduce concentration risk and ultimately enhance corporate profitability. The Company's drilling inventory which currently is estimated to be over 700 net conventional vertical and horizontal heavy oil wells should provide predictable and repeatable drilling results for a number of years.
Twenty vertical wells are planned for Q4 on a variety of play types. In addition in 2013 the Company will test at least 10 exploratory prospects on the new land position. Late in Q4 Twin Butte will commence a multi-well horizontal program at the newly acquired Wildmere lands as well as at Soda Lake and Swimming. Although more expensive than the Company's historic vertical programs the expected type curves suggest similar payout times and significantly enhanced profitability from such wells.
Third quarter production was reduced from the second quarter due to wet weather conditions delaying completion and facility construction operations. Drilling results from the Q3 drilling program will largely be recognized in Q4 as wet operating conditions early in Q3 prevented timely completion of some of the new wells. As noted in our press release of August 14th our Q3 production was impacted by a major plant outage at Pincher Creek which kept approximately 525 boe per day offline for the entire quarter. Production at the property is just recommencing and should be optimized by late November.
The Company's capital (excluding corporate acquisitions) plan for 2012 will increase to approximately $94.5 million including the Wildmere assets. Based on year to date and forecast cash flow total payout ratio for 2012 (cash dividend and capital before corporate acquisitions) will be approximately 95 percent, providing a sustainable level of spending.
Production continues to grow post the closing of the recent transactions with current rates exceeding 19,000 boe per day with Pincher Creek not optimized. The Company has approved a preliminary 2013 capital and operating plan which will see approximately 110 vertical and 20 horizontal development heavy oil wells drilled in the Lloydminster area. To ensure continued growth in its drilling inventory and undeveloped lands the anticipated $110 million capital plan includes $10 million directed to land; seismic and exploratory drilling activities. Production is expected to average between 19,100 and 19,500 boe per day (90 percent oil and NGL's). Assuming a $3.00/GJ Aeco gas price; $90 WTI and $69 WCS oil pricing Twin Butte anticipates 2013 cash flow to be approximately $158 million which will be finance the capital plan and the approximate $40.3 million cash dividend, while maintaining a total payout ratio including DRIP participation under 100 percent.
Twin Butte is in an enviable position in that it has a strong balance sheet, a predictable production profile and a current inventory of over 700 net heavy oil drilling locations. These wells generate return on investment in the top 10 percentile of all plays in North America and the Company believes its current sizable drilling inventory has the ability to fuel the Company's dividend and moderate growth strategy for years to come.
This will allow a sustained pace of repeatable development drilling and disciplined capital spending to maximize capital efficiencies, economic returns and minimize payout times, providing visible sustainability to Twin Butte's dividend and anticipated Company growth.
Twin Butte anticipates future quarters will show similar levels of capital efficiency, dividend sustainability and a very disciplined approach as the Company progresses its business plan. We are confident that the combination of a sustainable dividend and moderate per share growth will continue to attract investor interest. Management remains committed to continually enhancing the Company's asset base through a combination of organic growth and strategic acquisitions.
Twin Butte is a value oriented, intermediate producer with a significant and growing scalable and repeatable drilling inventory focused on large original oil in-place conventional heavy oil exploitation. With a stable low decline production base the Company is well positioned to live within cash flow while providing shareholders with a sustainable dividend and moderate per share production growth potential over the long term.
President and C.E.O.
November 14, 2012
In the interest of providing Twin Butte's shareholders and potential investors with information regarding Twin Butte and Avalon, including management's assessment of the future plans and operations of Twin Butte, certain statements contained in this news release constitute forward-looking statements or information (collectively "forward-looking statements") within the meaning of applicable securities legislation. Forward-looking statements are typically identified by words such as "anticipate", "continue", "estimate", "expect", "forecast", "may", "will", "project", "could", "plan", "intend", "should", "believe", "outlook", "potential", "target" and similar words suggesting future events or future performance. In particular but without limiting the foregoing, this news release contains forward-looking statements pertaining to the following: future dividend levels; the volumes and estimated value of Twin Butte's oil and natural gas reserves; the life of Twin Butte's reserves; the volume and product mix of Twin Butte's oil and natural gas production; future oil and natural gas prices; future operational activities; and future results from operations and operating metrics, including future production growth and net debt. 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; results from operations including 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 news release, and the assumptions on which such forward-looking statements are made, are reasonable, there can be no assurance that such expectations will prove to be correct. Readers are cautioned not to place undue reliance on forward-looking statements included in this news release, as there can be no assurance that the plans, intentions or expectations upon which the forward-looking statements are based will occur. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur, which may cause Twin Butte's actual performance and financial results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things, the following: 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 equivalents (boe) may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf: 1 bbl (barrel) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. In addition, as the value ratio between natural gas and crude oil based on the current prices of natural gas and crude oil is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indicated value.
SOURCE: Twin Butte Energy Ltd.
For further information:
Twin Butte Energy Ltd.
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