Based on field estimates for June, average production for Q2 2013 is estimated to be between 16,500 and 16,700 boe per day, falling slightly short of internal expectations of 17,200 boe per day or a 3% variance. Extremely wet weather and prolonged spring breakup conditions severely limited the Company’s ability to access leases and truck produced oil, often forcing wells to be shut-in. Cash flow is estimated to be in the $31 – $32.5 million range or slightly ahead of the first quarter. Capital expenditures were also limited due to the weather and extended road bans with estimated capital for the second quarter of $16 million or approximately $4 million below internal targets. Net debt will decrease to approximately $196 million with an all in payout ratio of approximately 84 percent. With the payout ratio running well below 100 percent year to date the Company expects to be able to increase the third quarter capital plan and bring the year to date payout ratio back closer to 100 percent.
At our Primate property, the Company has had another significant drop in production over the past 10 days resulting in current production levels of 1,400 boe per day as compared to forecast volumes of over 2,000 boe per day as a result of increased water inflow on a number of wells. After the last step change in January we had modelled a 40% decline and the field was performing within that range but with this recent move we are now updating our forecast to show no material volumes beyond 2014 as a result of the challenges with this reservoir. Reservoir modelling of what Twin Butte had believed to be analogous pools has not provided an accurate forecast when compared to actual performance. Forecasting this field’s point forward performance is very difficult in light of the inconsistent and unique performance we have seen this year, and therefore we are forecasting at the low end of our potential scenarios on this field.
Although extremely disappointing and unexpected the Company views the Primate situation as an isolated performance issue. All other properties have been generally tracking forecast volume levels. Twin Butte has and will continue to take a very disciplined approach to running the business. The Company will not risk its balance sheet or deviate from its fundamental principle of maintaining financial flexibility and an all in payout ratio of 100 percent or less.
Corporate production is currently 16,100 boe per day with approximately 400 boe per day of productive capability from recently drilled wells. The Company anticipates the majority of these wells should be on stream by early August. Year to date drilling performance has generated excellent results. A recent focus has been at Wildmere where the Company has drilled 15 horizontal wells, 8 of which are on-stream. Average results have exceeded the Company’s type curve generating in excess of 80 bbls per day per well. Drilling costs have reduced as more drilling experience is gained in the area with all in costs per well coming in at between $900,000 and $950,000, generating excellent capital efficiencies. The area will remain active through the third quarter until horizontal drilling plans commence at Frog Lake early in the fourth quarter.
With the revised production levels the Company now expects 2013 cash flow to be approximately $112 million. Consistent with the Company’s fundamental principle of protecting the balance sheet, 2013 net capital expenditures will be reduced to approximately $70 million or a reduction of $15 million which should provide exit production volumes of approximately 15,500 boe per day and hold the payout ratio at 100 percent
Twin Butte anticipates releasing Q2 2013 financial and operating results on August 14, 2013 after market close.
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: future dividend levels and aggregate payments, including payout ratios.
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; continued productivity issues with respect to certain properties identified in this press release; that audited financial results will not differ materially from the Company’s internally prepared financial information; that preliminary results in regards to the Company’s reserves, as evaluated by the Company’s independent engineers, will not differ materially upon completion of such evaluation; participation in the Company’s DRIP or SDP; 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; production risks; 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.
This press 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. 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 the best estimates and judgments, and represent, to the best of management’s knowledge and opinion.
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