CALGARY , March 21, 2013 /CNW/ – (TBE.TO) – Twin Butte Energy Ltd. (“Twin Butte” or the “Company“) is pleased to report financial and operational results for the three and twelve months ended December 31, 2012 . Twin Butte previously released 2012 year end reserves on February 27, 2013 .
Highlights of Twin Butte’s highly successful 2012 are as follows:
- Demonstrated a sustainable dividend paying model with a payout ratio of 91 percent and a payout ratio net of the DRIP, of 89 percent in 2012
- Record annual and quarterly production of 14,681 boe per day (an increase of 93% over 2011; or 28% on a per share basis) and 17,531 boe per day (an increase of 128% over Q4 2011).
- Increased annual and quarterly liquids production weightings to 84% (increased from 61% in 2011) and 87% (increased from 64% in Q4 2011), respectively.
- Generated record annual and quarterly funds flow of $136.0 million (122% increase over 2011) and $37.8 million (increase of 126% over Q4 2011). On a per share basis, funds flow increased by 49% year over year to $0.67 , and by 31% when comparing fourth quarter 2012 to 2011, or $0.16 vs. $0.12 per share.
- Executed a net organic capital program of $58.4 million which included the drilling of 95 gross (77.2 net) wells at a 96 percent success rate. Additionally closed two complementary asset transactions valued at $34.5 million ; three noncore asset dispositions valued at $6.9 million ; and three strategic corporate transactions valued at $428 million .
- Grew undeveloped lands in the Company’s Lloydminster core heavy oil area from 30,000 to 222,500 net undeveloped acres with drilling inventory growing to in excess of 700 locations.
- Maintained a solid balance sheet with year end 2012 net debt of $201.7 million compared to an existing credit facility of $280 million .
Certain selected financial and operations information for the three and twelve months ended December 31, 2012 and 2011 comparatives are outlined below and should be read in conjunction with Twin Butte’s audited annual 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”) will be filed on SEDAR and also on the Company website.
|Three months ended
|Twelve months ended
|2012||2011||% Change||2012||2011||% Change|
|Financial ( $ 000 ‘s, except per share amounts)|
|Petroleum and natural gas sales||88,673||41,216||115%||304,729||146,577||108%|
|Funds flow (1)||37,754||16,686||126%||136,034||61,272||122%|
|Per share basic||0.16||0.12||31%||0.67||0.45||49%|
|Per share diluted||0.16||0.12||31%||0.66||0.45||47%|
|Net income (loss)||(5,381)||(37,047)||85%||31,530||(19,021)||266%|
|Per share basic||(0.02)||(0.27)||92%||0.15||(0.14)||207%|
|Per share diluted||(0.02)||(0.27)||92%||0.15||(0.14)||207%|
|Dividends declared, Post DRIP||9,443||–||–||35,573||–||–|
|Capital expenditures (2)||37,307||10,056||271%||86,023||69,272||24%|
|Corporate acquisitions (2)||134,972||–||–||428,392||–||–|
|Net debt (3)||201,703||77,168||161%||201,703||77,168||161%|
|Average daily production|
|Crude oil (bbl per day)||15,122||4,620||227%||12,085||4,382||176%|
|Natural gas (Mcf per day)||13,174||16,628||-21%||14,009||17,673||-21%|
|Natural gas liquids (bbl per day)||213||304||-30%||261||287||-9%|
|Barrels of oil equivalent (boe per day, 6:1)||17,531||7,695||128%||14,681||7,615||93%|
|% Oil and NGL’s||87%||64%||37%||84%||61%||37%|
|Average sales price|
|Crude oil ($ per bbl)||59.60||78.36||-24%||64.13||70.26||-9%|
|Natural gas ($ per Mcf)||3.52||3.51||0%||2.57||3.95||-35%|
|Natural gas liquids ($ per bbl)||76.01||91.12||-17%||82.74||83.34||-1%|
|Barrels of oil equivalent ($ per boe, 6:1)||54.98||58.22||-6%||56.71||52.74||8%|
|Operating netback ($ per boe) (4)|
|Petroleum and natural gas sales||54.98||58.22||-6%||56.71||52.74||8%|
|Realized (loss) gain on derivative instruments||4.83||(1.16)||516%||5.47||0.61||797%|
|Shares outstanding, end of period||248,311,634||135,418,937||83%||248,311,634||135,418,937||83%|
|Weighted average shares outstanding – diluted||239,331,527||137,313,978||74%||205,581,356||136,507,998||51%|
(1) Funds flow from operations and funds flow from operations netback are non-GAAP 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 $4.2 million for the year.
(2) Corporate acquisitions are a non-GAAP measure and include total consideration plus working capital deficiency acquired in a corporate acquisition. Capital expenditures is a non-GAAP measure calculated as the purchase or sale price of an asset, plus development capital expenditures added to PP&E. Corporate acquisitions are excluded from this measure.
(3) Net debt is a non-GAAP measure representing the total of bank indebtedness, accounts payables and accrued liabilities, cash dividend payable, less accounts receivables, deposits and prepaids.
(4) Operating netback is a non-GAAP measure calculated as the average per boe of the Company’s oil and gas sales plus realized gains on derivatives, less royalties, operating and transportation expenses.
As highlighted in the Company’s year-end financial and operating results, 2012 was another year of positive growth and transition including the increase of our oil and liquids ratio to 84 percent from 61 percent in 2011. In January 2012 Twin Butte commenced paying a dividend of $0.18 per year or $0.015 per month. In November, largely based on the success of three accretive corporate transactions completed in 2012 the Company increased the dividend by 6.7 percent to $0.192 per year.
Twin Butte completed three strategic corporate transactions valued at $428 million as well as two complementary asset transactions valued at $34.5 million . These transactions significantly increased the size, scope, and diversity of heavy oil lands and opportunities for Twin Butte, and firmly established Twin Butte as a significant operator in the area. Drilling to date on all transactions has proved very positive. Twin Butte remains very committed to dividend sustainability and moderate growth through its organic capital plan but strongly believes accretive acquisitions will continue to boost the Company’s undeveloped land and drilling inventory and potentially add more significant per share growth.
Consistent with the Company’s increasing production volumes and liquids weighting, quarterly funds flow from operations continue to increase, the fourth quarter $37.8 million being the highest quarter ever achieved. Yearly funds flow hit a record of $136.0 million , a 122 percent increase from 2011 and a 49 percent increase in funds flow per share from 2011.
Twin Butte’s fourth quarter and full year 2012 financial and operating results demonstrate the Company’s ability to pay a sustainable dividend and maintain a strong balance sheet while completing a disciplined efficient capital plan. The Company paid $37.3 million in dividends ( $35.6 million post DRIP) in 2012 which when combined with its organic capital expenditures of $58.4 million and two complementary assets acquisitions of $34.5 million as well as three noncore asset dispositions valued at $6.9 million generated one of the industry’s lowest total payout ratios of 89 percent. The previously announced change to Twin Butte’s capital spending demonstrates our commitment to preserving our dividend payments through a disciplined approach to capital spending. Cash flow generated from operations will preserve the Company’s balance sheet and pay the monthly dividend with remaining dollars being directed into the capital plan. By remaining disciplined and true to form Twin Butte will continue to protect the long term sustainability of the dividend.
The Company’s balance sheet remains very strong. Year-end net debt of $201.7 million represented 1.3 times Q4 annualized cash flow with our existing credit facility currently at $280 million . It is anticipated the Company’s cash flow in the first quarter of 2013 will exceed dividend payments and net capital expenditures (net of dispositions) thereby providing further reduction in net debt.
Even with the volatility of price differentials from WTI to the WCS Canadian heavy index Twin Butte’s 2013 cash flow forecast of $130 million is protected with our hedging program. Currently the Company has approximately 52 percent of its heavy oil volumes for 2013 hedged at an average WCS price of $75.78 , and an additional 9 percent of oil volumes hedged at an average WTI price of $96.59 . On the natural gas side Twin Butte has approximately 65 percent of expected 2013 volumes hedged at a price of $4.50 /gj, therefore the hedging program continues to provide good downside support for commodity pricing. At the current annual dividend rate of $0.192 per share this cash flow forecast suggests an all-in (dividend and capital expenditure) payout ratio of less than 100 percent of cash flow, one of the lowest of the dividend paying E&P companies.
During 2012 Twin Butte drilled 95 gross (77.2 net) wells with a 96 percent success rate demonstrating the predictable and repeatable potential of the Company’s drilling inventory which currently is estimated to be over 700 net conventional heavy oil wells. All wells drilled in 2012, were within the Company’s core heavy oil fairway. It is anticipated one hundred percent of Twin Butte’s 2013 capital will be spent in this area representing approximately 90 net wells.
At Frog Lake, the Company’s most active area in 2012, 46 gross (28.7 net) wells were drilled at an 86 percent success rate. The Rex formation was the primary focus in 2012 which has provided very consistent results for the past two years. Twin Butte’s plans for the next round of drilling at Frog Lake will focus on drilling the GP formation horizontally. In late 2011, the Company drilled a horizontal GP well which after 16 months of production has proved the economic viability of a larger scale program. It is anticipated upward of 10 additional horizontal wells will be drilled at Frog Lake before year end.
At Primate in Western Saskatchewan, the Company’s second most active area in 2012, 14 gross (14 net) successful wells were drilled in 2012. This drilling in combination with the installation of water disposal facilities allowed Twin Butte to materially grow production from 1,100 bbls per day in early 2012 to 3,400 bbls per day. Over 2012 this property produced 1 MMbbls of oil generating in excess of $32 million of cash flow. Unfortunately Twin Butte encountered some reservoir performance issues in late December and early January that reduced property production to approximately 2,500 bbls per day. Even though the property had suffered a drop in production the Company’s yearend independent reserve evaluation increased property reserves from December 31, 2011 to December 31, 2012 by 350 MBBls after production of 1 MMbbls. The years drilling and positive property performance had enhanced reserves year on year by 1.4 MMbbls. Since the announcement in late January the property has stabilized and production has increased slightly with current rates of approximately 2,700 bbls per day. Twin Butte will continue to monitor and optimize the property’s production to ensure continued long term reserve and cash flow optimization.
Outside of Frog Lake and Primate, the Company was very active in Western Saskatchewan, drilling on the acquired properties from Emerge, Avalon, and Waseca. This activity has continued through early 2013 with 22 successful wells drilled to date in this area. A series of exploratory wells will be drilled this summer on the acquired lands to continue with the derisking of the lands and the long term enhancement of the Company’s drilling inventory.
At Swimming in Alberta, a property acquired in April 2012 , through a combination of well optimization and the drilling of 6 gross (6 net) wells, production has more than doubled from just over 300 bbls per day to approximately 650 bbls per day. Plans are to remain active on this property through 2013, with a number of vertical and horizontal development and extension wells planned.
The greater Silverdale area was also an active area in 2012 with 10 gross (10 net) successful wells being drilled.
As part of the planned 2013 horizontal program, Twin Butte has recently drilled four horizontal test wells in various strategic areas in the greater Lloydminster area. Testing of these wells continues but early positive results from drilling in the first quarter at Wildmere, has led to the initiation of a second round of drilling on the property. Twin Butte has recently commenced a two to three well program at Wildmere which is anticipated to lead to a minimum 8 well program post breakup.
To optimize the Company’s heavy oil pricing approximately 15 to 20 percent of its heavy barrels are being transported via rail car. This marketing operation has generated an increase of approximately $4.00 per barrel net to the Company on these volumes. Early in the second quarter of 2013, Twin Butte will complete construction of a cleaning/staging facility at Lashburn which should allow a potential doubling of its rail car shipments. Twin Butte will also continue with its hedging program, looking to lock in cash flow levels that will provide sustained positive corporate netbacks.
Twin Butte will continue to execute its business plan in 2013. We believe the combination of a sustainable dividend and moderate per share growth will continue to attract investor interest. We remain committed to continually enhance the Company’s asset quality through organic growth and strategic acquisitions.
Twin Butte remains 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’s employees, executive, and Board have continued to work very diligently throughout 2012 to achieve the Company’s success. The team remains extremely motivated to meet and exceed the expectations it has set and to deliver strong returns to the shareholders. Our thanks go out to all who have contributed in our success.
About Twin Butte
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.
In the interest of providing Twin Butte’s shareholders and potential investors with information regarding Twin Butte, 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: the Company’s expectations on well declines; future dividend levels; cash flow forecasts; 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; future results from operations and operating metrics, including future production growth and other matters set forth under the heading “Outlook” herein, including estimated budget levels and targeted pay-out ratio in respect of the payment of dividends. 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, Twin Butte has 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; Twin Butte’s ability to obtain equipment in a timely manner to carry out development activities; decline rates based on analogous information; our ability to market its oil and natural gas successfully to current and new customers; the impact of increasing competition; Twin Butte’s ability to obtain financing on acceptable terms; and Twin Butte’s 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: further instability in the production volumes at the Company’s Primate property; the risks associated with the oil and gas industry; commodity prices; operational risks in exploration; development and production; delays or changes in plans; risks associated with the uncertainty of reserve estimates; health and safety risks, and; the uncertainty of estimates and projections of production, costs and expenses. 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. The recovery and reserve estimates of Twin Butte’s reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. 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.
Reserve Life Index
The reader is also cautioned that this news release contains the term reserve life index (“RLI”), which is not a recognized measure under generally accepted accounting principles (“GAAP”). Management believes that this measure is a useful supplemental measure of the length of time the reserves would be produced over at the rate used in the calculation. Readers are cautioned, however, that this measure should not be construed as an alternative to other terms determined in accordance with GAAP as a measure of performance. Twin Butte’s method of calculating this measure may differ from other companies, and accordingly, they may not be comparable to measures used by other companies.
The reader is also cautioned that this news release contains the term operating netback, which is not a recognized measure under GAAP and is calculated as a period’s sales of petroleum and natural gas, net of royalties less net production and operating expenses as divided by the period’s sales volumes. Management uses this measure to assist them in understanding Twin Butte’s profitability relative to current commodity prices and it provides an analysis tool to benchmark changes in operational performance against prior periods and to peers on a comparable basis. Readers are cautioned, however, that this measure should not be construed as an alternative to other terms such as net income determined in accordance with GAAP as a measure of performance. Twin Butte’s method of calculating this measure may differ from other companies, and accordingly, they may not be comparable to measures used by other companies.
In this news release, Twin Butte has provided certain information on the production profile and estimates of decline rates on its Primate property which is “analogous information” as defined by applicable securities laws. This analogous information is derived from publicly available information sources which the Company believes are predominantly independent in nature. Some of this data may not have been prepared by qualified reserves evaluators or auditors and the preparation of any estimates may not be in strict accordance with Canadian Oil & Gas Evaluation Handbook. Regardless, estimates by engineering and geo-technical practitioners may vary and the differences may be significant. Twin Butte believes that the provision of this analogous information is relevant to Twin Butte’s activities and forecasting, given its property ownership in the area; however, readers are cautioned that there is no certainty that the forecasts provided herein based on analogous information will be accurate.
Future Oriented Financial Information
This news release, in particular the information in respect of anticipated cash flows, may contain Future Oriented Financial Information (“FOFI”) within the meaning of applicable securities laws. The FOFI has been prepared by management of the Company to provide an outlook of the Company’s activities and results and may not be appropriate for other purposes. The FOFI has been prepared based on a number of assumptions including the assumptions discussed under the heading “Forward-Looking Statements” and assumptions with respect to production rates and commodity prices. The actual results of operations of the Company and the resulting financial results may vary from the amounts set forth herein, and such variation may be material. The Company and its management believe that the FOFI has been prepared on a reasonable basis, reflecting management’s best estimates and judgments.
President and C.E.O.
March 21, 2013
SOURCE: Twin Butte Energy Ltd.
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