Twin Butte shut down drilling activity in mid-February in response to low oil prices and resumed in early June with one rig active in the Provost area. This rig is scheduled to stay in Provost drilling Dina/Cummings, Sparky and Lithic channel prospects into Q4. Based upon field estimates, per well drill costs have decreased by $125 – $150k down to the $400-425k level (approximately 22%) relative to prior drilling programs due to both efficiency gains and lower service costs. A second drilling rig is scheduled to start-up by mid-July focussed primarily on assessing and developing Twin Butte’s single and multilateral horizontal Lloydminster area opportunities.
On schedule and on budget, the Company’s new Rosenheim North (Provost) oil and water handling facility was brought online in mid-June. This facility is expected to reduce area operating costs thereby maximizing value of this recently developed area. Two additional Provost area facilities at Sounding Lake South and Rosenheim South are scheduled to be on-stream in August and October, respectively, further ensuring the Company has the capacity to maximize value out of these high quality assets.
With the recent contraction in WTI –WCS differentials the Company has been able to start layering in 2016 oil hedges. Currently hedged for 2016 are 1,000 b/d at $C65.00 WCS.
The Company remains on track to complete its $100 million 2015 annual capital plan. If drilling and operational cost savings are maintained, additional projects will be added to planned activity levels.
Credit Facility Renewal:
The Company has completed the annual review of its credit facility with its lending syndicate. The credit facility has been set at $325 million, with an annual revolving period expiring on May 26, 2016. There were no changes to covenants or applicable margins on borrowing costs. Current availability under the credit facility is $275 million, with additional funds available up to the full facility level based on approval of the lending syndicate.
The Company also has $85 million principal amount of unsecured subordinated convertible debentures outstanding that provides additional liquidity to the Company. Net debt, which is comprised of the total amount drawn on the credit facility, plus the principal amount of the unsecured subordinated convertible debentures, and working capital, was $334 million at the end of March 31, 2015 (1.5 times debt/cash flow). This net debt amount is expected to decrease further, to between $315 and $320 million, as at June 30, 2015 providing the Company with the financial liquidity to comfortably complete its planned activities.
About Twin Butte:
Twin Butte Energy Ltd. is a dividend paying value oriented intermediate producer with a significant low risk, high rate of return drilling inventory focused on large original oil in place play types. Twin Butte provides shareholders with a monthly dividend along with growth potential over the long term. Twin Butte is committed to continually enhance its asset quality while focusing on the sustainability of its dividend. The common shares of Twin Butte are listed on the TSX under the symbol “TBE”.
In the interest of providing Twin Butte’s shareholders and readers 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 operational activities, including running two drilling rigs into the fourth quarter and the fulfillment of the Company’s capital budget, the expected on-line dates of certain facilities and the expected benefits that may be derived from such facilities; and the Company’s anticipated net debt as at June 30, 2015.
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; its 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: risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation; loss of markets; volatility of commodity prices and currency fluctuations; inability to retain drilling rigs and other services; unanticipated increased or unforeseen capital expenditure costs, including drilling, completion and facilities costs; unexpected decline rates in wells; delays in projects and/or operations resulting from surface conditions; wells not performing as expected; delays resulting from or inability to obtain the required regulatory approvals and inability to access sufficient capital from internal and external sources; and the other factors described under “Risk Factors” in Twin Butte’s most recently filed Annual Information Form. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements. Readers are cautioned that the forgoing list of factors is not exhaustive. Additional information on these and other factors that could affect Twin Butte’s operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com) and at Twin Butte’s website (www.twinbutteenergy.com).
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.
Readers are cautioned that this news release contains the term net debt, which is not a recognized measure under GAAP and is calculated as bank debt plus unsecured subordinated convertible debentures, and working capital excluding mark-to-market derivative contracts. Working capital excluding mark-to-market derivative contracts is calculated as current assets less current liabilities both of which exclude derivative contracts and current liabilities excludes the current portion of debt. Management uses net debt to assist them in understanding Twin Butte’s liquidity at specific points in time. Mark-to-market derivative contracts are excluded from working capital, in addition to net debt, as management intends to hold each contract through to maturity of the contract’s term as opposed to liquidating each contract’s fair value or less.
SOURCE Twin Butte Energy Ltd.
For further information: Twin Butte Energy Ltd., Rob Wollmann, President and Chief Executive Officer; R. Alan Steele, Vice President Finance, Chief Financial Officer and Corporate Secretary; Jim Saunders, Executive Chairman, Tel: (403) 215-2045, Website: www.twinbutteenergy.com