Twin Butte has completed the disposition of a non-core, west central Alberta, gas asset for gross proceeds of $19.5 million effective September 30, 2013. The property was producing approximately 300 boe per day, of which 72 percent was natural gas. Proceeds will initially be used to reduce debt which is now anticipated to be approximately $188 million at the end of Q3 2013. Net capital spending for the third quarter will be approximately $11 million providing a quarterly all-in payout ratio of approximately 76 percent and a year to date all-in payout ratio of 84 percent. The disposition will allow Twin Butte to increase its fourth quarter capital plan to approximately $30 million while remaining within its 100 percent calendar year 2013, total payout ratio. Including this transaction, thus far in 2013, Twin Butte has sold approximately 450 boe’s per day for gross proceeds of approximately $29 million, representing attractive transaction metrics of $64,000 per boe per day.
Twin Butte has completed a very active and successful third quarter drilling program. The Company anticipates spending approximately $31 million on a gross basis (before the dispositions) in the third quarter which included the drilling of 31 wells (31 net) including 10 horizontal wells in the Company’s core Lloydminster heavy oil fairway at an overall success rate of 90 percent . Twin Butte’s commitment to continually enhance and derisk its sizable drilling inventory continued in the third quarter with five exploratory wells being drilled on various new heavy oil prospects.
Current corporate production post the 300 boe per day disposition is approximately 16,200 boe per day. Based on third quarter drilling success as well as an expanded fourth quarter drilling program, the Company anticipates exiting 2013 with production of 16,500 boe per day up from the Company’s most recent forecast of 15,500 boe per day. Year end net debt is anticipated to be just over $200 million on a current credit facility of $280 million providing the Company with substantial financial flexibility. The Company anticipates releasing 2014 operational targets along with its Q3 2013 financial results on November 14, 2013.
At Wildmere, Twin Butte drilled 9 horizontal wells in the third quarter bringing its year to date total to 20 horizontal wells on the property. All of the wells have exceeded Twin Butte’s expected type curve for the area with current average well rates exceeding 70 bbls per day at an average cost of $925,000 per well. Current production at Wildmere exceeds 1,700 boe per day, a material increase from the 420 boe per day the property was producing when it was purchased in October 2012. The Company has a drilling rig active in the area and anticipates drilling another nine wells on the property before year end. Twin Butte estimates that Wildmere’s drilling inventory is at least 35 wells based on the recently expanded undeveloped land base at the property. Expansion of existing area infrastructure at Wildmere is planned for the fourth quarter which will support continued attractive netbacks from the property.
Performance of horizontal wells drilled earlier this year at Frog Lake, Soda Lake and Swimming indicate that future offset wells should meet or exceed the Company’s stringent capital efficiency criteria. At Frog Lake, a 2011 horizontal well has already produced over 28 Mbbls and an April 2013 horizontal well has de-risked additional development lands. The Company continues to expand its horizontal drilling inventory which currently is estimated at exceeding 100 de-risked locations. In the fourth quarter, upward of 21 additional horizontal wells (43 total for 2013) are scheduled to be drilled in proven areas such as Frog Lake, Soda Lake and Wildmere as well as a number of wells on new prospects supporting continued growth in horizontal drilling opportunities for 2014 and beyond. When compared to area type curves results achieved to date in 2013, the Company anticipates continued strong capital efficiencies and potentially higher ultimate reserves and lower decline rates from the 2013 drilling program, as compared to the Company’s earlier expectations.
The Company’s third quarter vertical drilling program of 21 wells was primarily concentrated on exploratory drilling in western Saskatchewan as well as development drilling at the Company’s Celtic, Lashburn, and Swimming properties. Although the Company anticipates that a higher percentage of its future Lloydminster area wells will be horizontal, the Company’s vertical program continues to deliver consistent results with strong capital efficiencies.
Twin Butte continues to have a strong balance sheet, a predictable base production profile and a current inventory of over 700 net heavy oil drilling locations, including over 100 horizontal wells. Twin Butte’s growing horizontal drilling program has the ability to make a meaningful difference to future corporate performance.
The Company will continue to maintain a disciplined capital plan focused on a repeatable drilling program which will maximize capital efficiencies, economic returns and minimize payout times. This is anticipated to provide sustainability to Twin Butte’s dividend and deliver anticipated corporate growth.
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: future dividend levels and aggregate payments, including payout ratios; guidance on the Company’s estimates of year end exit production and year end net debt; Twin Butte’s anticipated timing for the release of its 2014 operational targets along with its third quarter 2013 financial results; future operational activities including at Wildmere, Frog Lake and Soda Lake; future drilling locations on its properties and the anticipation of continued strong capital efficiencies and potentially higher ultimate reserves and lower decline rates as compared to Twin Butte’s earlier expectations.
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; participation in the Company’s DRIP or SDP; Twin Butte’s 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 its 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 inCanada 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 news release, in particular the information in respect of anticipated year end net debt, 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 amount 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