Bonterra Energy Corp. (Bonterra) (www.bonterraenergy.com) (BNE.TO) is pleased to provide an operational update including 2012 highlights, the results of its independent reserve report prepared by Sproule Associates Limited with an effective date of December 31, 2012 and its 2013 budget and guidance.
In 2012, Bonterra maintained its focus on providing investors with a sustainable pace of development, continued growth on a per share basis and stable monthly income through its dividend policy paying out $3.12 per share during the year. The company will maintain this corporate strategy in 2013 by continuing to pursue the development of its lower risk, high return opportunities; predominantly through its horizontal drilling program on its significant Cardium light oil play.
In addition, Bonterra recently completed the acquisition of Spartan Oil Corp. (Spartan), increasing its current production to approximately 13,500 BOE per day that due to a present flush production will reduce to an average of approximately 12,000 BOE per day from the January 25, 2013 acquisition date to December 31, 2013. The company”s large, concentrated asset base in the Cardium now totals 250.3 gross (193.7 net) sections, positioning Bonterra as one of the most dominant light-oil, dividend paying companies in the Canadian energy sector. The company currently estimates that it has a greater than 10 year drilling inventory (using four wells per section) that will allow Bonterra to sustain its current business model offering both solid growth and yield to its shareholders.
2012 Operational Highlights
- Record average daily production for the full year of 6,727 barrels of oil equivalent (BOE) per day (67 percent oil and liquids), an increase of 6.0 percent over the same period in 2011.
- Record average daily production of 7,728 BOE per day in the fourth quarter, an increase of 14.8 percent when compared to the fourth quarter of 2011.
- Production per share increased to 0.124 BOE per share, an increase of 4.2 percent over 2011.
- Proved plus Probable (P+P) reserves of 45.0 million BOE (approximately 75 percent oil and liquids), a 9.4 percent increase over December 2011 reserves of 41.1 million BOE.
- Added a total of 6.3 million BOE (P+P) reserves which equates to 2.5 times 2012 production.
- Reserves per share (P+P) increased 7.0 percent to 2.28 BOE per share compared to 2.13 BOE per share in the prior year.
- Reserve life index of 18.0 years on P+P basis and 13.7 years on a proved basis continues to remain above industry average.
The Company has not released its audited 2012 financial results therefore the numbers provided above are currently estimates and unaudited.
2013 Corporate Guidance
Bonterra closed the acquisition of Spartan in January, 2013 and the following guidance is based on the combined entity.
- The Board of Directors has approved a capital development program of $90.0 million which mainly targets light oil prospects through its Cardium horizontal drill program.
- Currently 29 gross (28.1 net) operated wells are planned. Bonterra will also participate in drilling 13 gross (4.3 net) non-operated wells during 2013.
- Bonterra”s full year production levels are expected to average between 12,000 and 12,200 BOE per day.
- Operating costs are expected to average approximately $15.00 per BOE on an annualized basis.
- The dividend payout ratio is estimated to range between 50 and 65 percent of funds flow in 2013. As previously announced, Bonterra will be increasing the dividend to $0.28 per share beginning with the dividend that will be paid on March 31, 2013. Bonterra”s Board of Directors and management will continue to take into account production volumes and commodity prices in determining monthly dividend amounts and will consider increasing the dividend should crude oil pricing remain favourable coupled with anticipated production increases.
- Bonterra”s present net debt to cash flow from operations on a pro forma basis is approximately 1.0:1.0.
- Bonterra has approximately $570 million in tax pools, extending the company”s estimated tax horizon to 2016.
Bonterra”s capital development program may be affected by items such as drilling results, commodity prices, and industry, regulatory and economic conditions. The Board of Directors and management will regularly review the capital program during the year and will make any adjustments to the amount and targets if required. The corporate guidance for 2013 is based on estimated future crude oil and natural gas prices and as such, guidance estimates may fluctuate with changes in commodity prices. Capital expenditure guidance excludes potential acquisitions which will be separately considered and evaluated.
Well Positioned for Continued Growth in 2013
In 2012, Bonterra”s focus to developing its Cardium acreage shifted to main pool development. The company drilled 32 gross (22.6 net) horizontal wells during the year. Bonterra has identified 600 gross (464 net) possible horizontal locations within its acreage. 105 gross (80.8 net) horizontal proved undeveloped locations are reflected in Bonterra”s 2012 reserve report constituting a three-year drilling program. Bonterra intends to focus the majority of its $90 million 2013 capital program on realizing value from its Cardium assets through a sustainably paced horizontal drill program.
Bonterra closed the acquisition of Spartan on January 25, 2013. The acquisition advances Bonterra”s strategic objective to maintain and consolidate its position in the Cardium while continuing to exploit this large resource play. The Spartan properties are a strong geographical fit to Bonterra”s asset base, have significant operational synergies and provide additional drilling inventory over the long-term. Bonterra has completed extensive geological mapping of the Spartan land base and have fully integrated the assets into its capital program. The Spartan assets are expected to increase the company”s liquids weighting and the corporate production profile in 2013 is anticipated to be approximately 75 percent light oil and natural gas liquids which should result in increased netbacks for the combined entity.
Bonterra has continued to improve and refine its development of the Cardium to both increase well performance and reserve recoveries while minimizing costs. In 2012, the company transitioned to water-based fracs which has significantly reduced overall well costs and increased per well production results. In 2013, Bonterra is currently targeting drilling, completion, equipping and tie-in costs to average approximately $2.7 million per well.
Full year production levels in 2013 are expected to average in a range of 12,000 to 12,200 BOE per day. Bonterra intends to manage its corporate decline through the prudent use of capital and selective timing of its drilling program over the course of the year to deliver sustainable and consistent growth to its shareholders while continuing to provide income in the form of its monthly dividend.
Corporate Reserves Information (Prior to the Acquisition of Spartan Oil Corp.)
Bonterra engaged the services of Sproule Associates Limited to prepare a reserve evaluation with an effective date of December 31, 2012. The gross reserve figures from the following tables represent Bonterra”s ownership interest before royalties and before consideration of the Company”s royalty interests. Tables may not add due to rounding.
Summary of Gross Oil and Gas Reserves as of December 31, 2012
|Light and Medium Oil (Mbbl)||Natural
|Natural Gas Liquids (Mbbl)||BOE(1)
|TOTAL PROVED PLUS PROBABLE||30,946.7||68,221||2,715.0||45,031.9|
Reconciliation of Company Gross Reserves by Principal Product Type as of December 31, 2012
|Light and Medium Oil and Natural Gas Liquids||
|Proved plus Probable (Mbbl)||
|Proved plus Probable (Mmcf)||
|Proved Plus Probable (MBOE)|
|December 31, 2011||21,160.1||30,492.4||41,822||63,941||28,130.4||41,149.2|
|December 31, 2012||24,924.6||33,661.7||49,258||68,221||33,134.3||45,031.9|
Summary of Net Present Values of Future Net Revenue as of December 31, 2012
|Net Present Value Before Income Taxes
Discounted at (% per Year)
|TOTAL PROVED PLUS PROBABLE||1,876,362||986,902||632,909|
Finding, Development and Acquisition (FD&A) Costs
The Company has historically been active in its capital development program. Over three years, Bonterra has incurred the following FD&A (3) costs excluding Future Development Costs:
Costs per BOE(1)(2)(3)
|2011 FD&A Costs per BOE(1)(2)(3)||2010 FD&A Costs per BOE(1)(2)(3)||Three Year Average(4)|
|Proved Reserve Net Additions||$||16.05||$||33.22||$||13.89||$||16.22|
|Proved plus Probable Reserve Net Additions||$||13.64||$||15.38||$||13.02||$||14.79|
Over three years, Bonterra has incurred the following FD&A (3) costs including Future Development Costs:
Costs per BOE(1)(2)(3)
|2011 FD&A Costs per BOE(1)(2)(3)||2010 FD&A Costs per BOE(1)(2)(3)||Three Year Average(5)|
|Proved Reserve Net Additions||$||20.91||$||57.53||$||21.98||$||19.47|
|Proved plus Probable Reserve Net Additions||$||21.62||$||35.40||$||19.19||$||17.92|
(1) Barrels of Oil Equivalent may be misleading, particularly if used in isolation. A BOE conversion ratio 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.
(2) The aggregate of the exploration and development costs incurred in the most recent financial year and the change during that year in estimated future development costs generally will not reflect total finding and development costs related to reserve additions for that year.
(3) FD&A costs are net of proceeds of disposal and the FD&A costs per BOE are based on reserves acquired net of reserves disposed of.
(4) Three year average is calculated using three year total capital costs and reserve additions on both a Proved and Proved plus Probable basis.
(5) Three year average is calculated using three year total capital costs and reserves additions on both a Proved and Proved plus Probable basis plus the average change in future capital costs over the three year period.
Certain financial and operating information, such as production information, finding and development costs and net asset values, included in this press release for the quarter and year ended December 31, 2012 are based on estimated unaudited financial results for the year and are subject to the same limitations as discussed under Forward Looking Statements set out below. These estimated amounts may change upon the completion of audited financial statements for the year ended December 31, 2012 and changes could be material. All reserve numbers provided above are Bonterra”s interest before royalties.
It should not be assumed that the estimates of future net revenue presented in the above tables represent the fair market value of the reserves. There is no assurance that the forecast prices and costs assumptions will be attained and variances could be material. Estimates of reserves and future net revenues for individual properties may not reflect the same confidence level as estimates of reserves and future net revenues for all properties due to the effects of aggregation.
Caution Regarding Engineering Terms:
Disclosure provided herein in respect of barrels of oil equivalent (BOE) may be misleading, particularly if used in isolation. In accordance with NI 51-101, a BOE conversion ratio of 6 MCF to 1 barrel has been used in all cases in this disclosure. This BOE conversion ratio is based on an energy equivalency conversion method primarily available at the burner tip and does not represent a value equivalency at the wellhead.
Caution Regarding Forward Looking Information:
Certain information set forth in this press release, including management”s assessment of Bonterra”s future plans and operations, contains forward-looking statements. By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond Bonterra”s control, including the impact of general economic conditions, industry conditions, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other industry participants, the lack of availability of qualified personnel or management, stock market volatility and ability to access sufficient capital from internal and external sources. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. Bonterra”s actual results, performance or achievement could differ materially from those expressed in, or implied by these forward-looking statements, and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits that Bonterra will derive therefrom. Bonterra disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.