CALGARY, May 12, 2016 /CNW/ – (TSX: TBE) – Twin Butte Energy Ltd. (“Twin Butte” or the “Company“) reports its financial and operational results for the three months ended March 31, 2016.
Highlights of Twin Butte’s first quarter 2016 are as follows:
- Focused on moving the strategic alternatives process forward.
- Reduced per boe operating and transportation costs by 11% relative to Q4 2015 to $17.95 per boe.
- Reduced gross G & A expenses 23% relative to Q1 2015 despite higher legal and advisory costs associated with the revised credit facility.
- Generated negative funds flow of $3.0 million ($0.01/share).
- Produced an average of 13,944 boe/d, 88% liquids.
- Executed a limited capital program of $2.8 million focused on field maintenance and operating cost reduction opportunities. No new wells were drilled in the quarter.
- Exited with net debt of $294 million, $40 million lower than Q1 2015, $70 million lower than Q1 2014.
- Twin Butte’s current LMR in Alberta is 2.2, the LLR in Saskatchewan is 2.5 and the LMR in British Columbia is 1.0. The Company currently has a Letter of Credit with the Province of B.C. of $1.5 million to maintain that LMR. The total LMR/LLR liability exposure is allocated by province as 86% in Alberta, 13% in Saskatchewan and 1% in British Columbia.
Certain selected financial and operational information for the three months ended March 31, 2016 and 2015 is outlined below and should be read in conjunction with Twin Butte’s condensed interim financial statements for the three months ended March 31, 2016 and 2015 and accompanying management discussion and analysis filed with the Canadian securities regulatory authorities which may be accessed through the SEDAR website (www.sedar.com) and also on the Company’s website.
Three months ended March 31 |
|||
2016 |
2015 |
% Change |
|
Financial ($ 000’s, except per share amounts) |
|||
Petroleum and natural gas sales |
27,847 |
61,713 |
-55% |
Funds flow (1) |
(2,980) |
55,367 |
-105% |
Per share basic |
(0.01) |
0.16 |
-106% |
Per share diluted |
(0.01) |
0.16 |
-106% |
Net income (loss) |
(28,440) |
(22,447) |
-27% |
Per share basic |
(0.08) |
(0.06) |
-33% |
Per share diluted |
(0.08) |
(0.06) |
-33% |
Dividends declared |
– |
10,698 |
-100% |
Capital expenditures(1) |
2,763 |
25,042 |
-89% |
Net debt (1) |
293,987 |
333,916 |
-12% |
Operating |
|||
Average daily production |
|||
Medium & light crude oil (bbl per day) |
7,105 |
8,480 |
-16% |
Heavy crude oil (bbl per day) |
5,006 |
8,480 |
-41% |
Natural gas (Mcf per day) |
10,075 |
12,141 |
-17% |
Natural gas liquids (bbl per day) |
154 |
174 |
11% |
Barrels of oil equivalent (boe per day, 6:1) |
13,944 |
19,158 |
-27% |
% Oil and NGLs |
88% |
89% |
-2% |
Average sales price |
|||
Medium & light crude oil ($ per bbl) |
26.19 |
40.91 |
-36% |
Heavy crude oil ($ per bbl) |
19.63 |
35.29 |
-44% |
Natural gas ($ per Mcf) |
1.76 |
2.71 |
-35% |
Natural gas liquids ($ per bbl) |
25.49 |
37.82 |
-33% |
Barrels of oil equivalent ($ per boe, 6:1) |
21.95 |
35.79 |
-39% |
Field netback ($ per boe) (1) |
|||
Petroleum and natural gas sales |
21.95 |
35.79 |
-39% |
Royalties |
(2.34) |
(4.31) |
-46% |
Operating expenses |
(16.95) |
(18.87) |
-10% |
Transportation expenses |
(1.00) |
(0.96) |
4% |
Field netback (1) |
1.66 |
11.65 |
-86% |
Cash gain (loss) on financial derivatives |
3.17 |
24.81 |
-87% |
Operating netback (1) |
4.83 |
36.46 |
-87% |
Wells drilled |
|||
Gross |
– |
17.0 |
-100% |
Net |
– |
17.0 |
-100% |
Success (%) |
n/a |
94 |
|
Common Shares |
|||
Shares outstanding, end of period |
354,727,864 |
353,326,551 |
0% |
Weighted average shares outstanding – diluted |
354,523,901 |
352,979,775 |
0% |
(1) Funds flow, Capital expenditures, Net debt and Field netback are non-GAAP measures. Refer to “Reader Advisory” in this news release or the MD&A for the three months ended March 31, 2016 for further discussion and reconciliation to GAAP measures, if applicable.
Corporate:
The industry faced in the first quarter, and continues to face, one of the most challenging periods in recent memory with WTI oil prices dropping below $27US per barrel, natural gas prices declining, and sources of liquidity being severely constrained.
Twin Butte’s focus remains two fold. First, effectively managing the base operations in a safe and efficient manner, and second, moving the strategic alternatives process, announced on December 9, 2015, forward. The Company continues to look at options in the best interests of all stakeholders to recapitalize and satisfy the requirements of our bank loan repayment terms.
Due to the low realized commodity prices, the resulting impact on cash flow and liquidity restrictions, Twin Butte reduced capital expenditures to minimum levels and did not drill any wells in the first quarter.
General and administrative costs were reduced due to lower salaries and benefits, and decreased staffing levels relative to previous quarters. These reductions align with the objective of supporting the strategic process.
Financial:
Twin Butte realized negative funds flow of $3 million in the first quarter as compared to positive funds flow of $55.4 million one year ago. The major factors impacting the decrease in funds flow were the reduction in hedge gains from $43 million in Q1 2015 down to $4 million in Q1 2016 and a 39% reduction in the average realized price per boe.
In spite of lowering net debt by $40 million from the first quarter of 2015 ($70 million lower than Q1 2014) the Company’s interest expense and bank charges increased by $2.1 million as a result of additional fees and significantly higher interest rates charged on the bank debt.
Operations:
With no new wells drilled in the first quarter of 2016 and incremental legacy vertical heavy oil shut-ins, Twin Butte saw sales volumes decrease to 13,944 boe/d. Despite lower production volumes the Company reduced operating and transportation costs by 10% as compared to Q1 2015 due to the ongoing impact of the transition of the asset base to a lower cost horizontal oil focus, along with the impact of operating cost reduction initiatives started 12 months ago. The decline rate on oil volumes is decreasing as expected due to the performance of our horizontal wells and the reduction of high decline, vertical heavy oil production.
Horizontal wells drilled in 2014 and 2015 continue on average to meet or beat our type curve production estimates, providing additional confidence in the large inventory of horizontal wells available to drill.
Due to the low price of natural gas the Company began a systematic shut in of uneconomic gas volumes in Q1. If gas prices remain low through the second quarter this program will reduce Q2 corporate gas volumes by approximately 4 million cubic per day but marginally improve cash flow.
Outlook
Twin Butte is focused on finding the best solution for all stakeholders to satisfy the repayment terms of its non-revolving credit facility. As announced on May 2, 2016, the Company received a one month extension for the repayment of the $85 million non-revolving credit facility to May 31, 2016, enabling the Company to continue with its strategic alternatives process. The Company cautions that there are no assurances or guarantees that the process will result in a transaction or, if a transaction is undertaken, the terms or timing of such a transaction.
Within the context of the ongoing strategic alternatives process, the current low oil price environment and the May 31, 2016 debt repayment milestone, there is uncertainty surrounding the Company’s ability to continue as a going concern. While the Company is in discussions with its lenders, failure to repay the non-revolving facility when due (unless otherwise extended) will constitute an event of default and entitle the syndicate to exercise its remedies under the credit facility, including acceleration of the credit facility and realization over the assets of the Company.
About Twin Butte:
Twin Butte Energy Ltd. is a value oriented intermediate producer with a deep, low risk, drilling inventory focused on medium and heavy oil reservoirs. The common shares of Twin Butte are listed on the TSX under the symbol “TBE”.