|
Attention Business/Financial Editors
Twin Butte Energy Reports First Quarter 2008 Results
CALGARY, May 13 /CNW/ - Twin Butte Energy Ltd. ("Twin Butte" or the
"Company") (TSX: TBE) is pleased to announce that it has filed its unaudited
financial statements and related management's discussion and analysis ("MD&A")
for the three months ended March 31, 2008 on the Company's website at
www.twinbutteenergy.com and on SEDAR at www.sedar.com. Certain selected
financial and operational information for the three months ended March 31,
2008 and March 31, 2007 comparatives are set out below and should be read in
conjunction with Twin Butte's unaudited financial statements and related MD&A.
Highlights
Twin Butte Energy is pleased to announce its financial and operational
results for the three months ended March 31, 2008. Twin Butte's results for
the first quarter of 2008 includes only 53 days of operating results from the
acquisition of E4 Energy Inc. ("E4" or "E4 Energy") which closed February 7,
2008.
<<
-------------------------------------------------------------------------
Three months ended
March 31
-------------------------------------------------------------------------
%
2008 2007 Change
-------------------------------------------------------------------------
Financial ($ thousands, except per
share amounts)
-------------------------------------------------------------------------
Petroleum and natural gas sales 13,800 5,981 131%
Cash flow(1) 5,780 2,626 120%
Per share basic & diluted 0.16 0.13 23%
Net loss (2,751) (3,915) (29%)
Per share basic & diluted (0.07) (0.19) (42%)
Capital expenditures (net of
dispositions) 8,514 8,391 1%
Corporate acquisitions(2) 57,252 - -
Net debt(3) (46,297) (9,001) 414%
-------------------------------------------------------------------------
Operating
-------------------------------------------------------------------------
Average daily production
Crude oil (bbl per day) 540 305 77%
Natural gas (Mcf per day) 11,096 5,720 94%
Natural gas liquids (bbl per day) 110 51 116%
Barrels of oil equivalent
(boe per day, 6:1) 2,500 1,309 91%
Average sales price
Crude oil ($ per bbl) 92.17 63.86 44%
Natural gas ($ per Mcf) 8.37 7.74 8%
Natural gas liquids ($ per bbl) 81.69 53.25 53%
Barrels of oil equivalent
($ per boe, 6:1) 60.67 50.76 20%
Operating netback ($ per boe)
Petroleum and natural gas sales 60.67 50.76 20%
Realized loss on financial
instruments (2.71) -
Royalties (10.64) (9.55) 11%
Operating Expenses (11.17) (11.73) (5)%
Transportation Expenses (2.83) (2.69) 5%
Operating netback 33.32 26.79 24%
Wells drilled
Gross 5.0 4.0
Net 5.0 3.1
Success (%) 100% 100%
-------------------------------------------------------------------------
Common Shares
-------------------------------------------------------------------------
Shares outstanding, end of period 43,415,425 22,202,401 96%
Weighted average shares outstanding -
basic & diluted 36,702,699 20,348,635 80%
-------------------------------------------------------------------------
(1) Cash flow means earnings before future taxes, depletion, depreciation
and accretion, stock based compensation, and unrealized loss (gain)
on financial derivative contracts. See Management's Discussion &
Analysis Non-GAAP Measures.
(2) Corporate acquisitions represent total consideration for the
transactions including net working capital deficiency assumed.
(3) Net debt at March 31, 2008 excludes financial derivative contracts
asset and liability in the net amount of $4.7 million (December 31,
2007 - $0.5 million). The net liability relates to an unrealized loss
on financial derivative contracts recognized at the period end.
>>
Report to Shareholders
During the first quarter of 2008, Twin Butte executed another successful
program of drilling and operations. In addition to closing the previously
announced acquisition of E4 Energy, two material resource play farm-in
agreements were signed positioning the Company for reserve and value growth.
It is also important to note that production for the quarter represented only
53 days of combined production from the E4 Energy acquisition which closed on
February 7, 2008.
During the quarter the Company continued to execute its strategic growth
and development plan with highlights as follows:
<<
- Increased average Q1 production by 91 percent to 2,500 boe/d, up from
1,309 boe/d in Q1 of 2007 with current production
(greater than) 3,100 boe/d;
- Increased production per share by 6 percent over Q1 2007;
- Increased cash flow by 120 percent over Q1 2007 to $5.8 million;
- Increased cash flow per share by 23 percent to $0.16 per share over
Q1 2007;
- Increased net asset value per share to $3.73 using current McDaniels
price deck and $ 4.41 per share using strip pricing;
- Forecast 2008 cash flow of $37.8 million utilizing strip pricing of
$9.59/GJ (AECO) and $US 117.75/bbl (WTI) for the balance of the year;
- Drilled and cased 5 gross (5 net) wells with a 100 percent success
rate;
- Closed the previously announced strategic acquisition of E4 Energy
taking advantage of a low commodity price environment and
establishing a new core area in North East British Columbia not
affected by recently announced Alberta royalty changes;
- Drilled and cased two horizontal wells and completed battery and
disposal facilities at the Provost Dina oil pool which commenced
production subsequent to quarter end at a combined rate of
approximately 120 boe/d setting up a potential 10 well program;
- Commenced drilling of the first multi frac horizontal well in Jayar
light oil pool with rig release and commencement of completion and
testing operations subsequent to quarter end and a follow up well
planned for Q3;
- Established a significant North East British Columbia Montney
resource play through a 4 section farm-in representing material
upside from an estimated 256 BCF OGIP; and
- Subsequent to quarter end signed a second farm-in agreement in North
East British Columbia to earn an additional 10 sections prospective
for the Montney resource play and the prolific Doig formation
directly offsetting an 8 mmcf/d Doig producer.
>>
Operational Review
------------------
During the quarter Twin Butte continued to execute our acquire, exploit
and explore business model closing the gas weighted acquisition of E4 Energy,
increasing the depth of our technical team and adding to our undeveloped land
base while at the same time increasing cash flow and maintaining financial
flexibility. The dramatic turnaround in commodity prices during the quarter
has injected new life into the E&P sector and Twin Butte shareholders are
positioned to benefit from the countercyclical acquisitions completed over the
last year.
The acquisition of E4 Energy Inc. which closed on February 7, 2008 was
another key building block in the growth of the Company providing critical
mass in our Plains core area and a new focus area in Fort St. John, British
Columbia, unaffected by recently announced Alberta royalty changes. The
Company has already expanded its presence in North East British Columbia with
the execution of two farm-in agreements targeting the prolific Doig formation
and the exciting new Montney resource play.
The Company has grown its land base to approximately 147,000 net
undeveloped acres not including the recent farm-in lands and has significantly
increased the depth of the Geological and Geophysical ("G&G") technical group.
These strategic moves have positioned the Company to fully exploit our
existing land base and to take advantage of increasing farm-in, exploration
and acquisition opportunities in the current market.
Production and Drilling
-----------------------
The Company's first quarter production averaged 2,500 boe/d comprised of
74 percent natural gas and 26 percent light oil and natural gas liquids,
representing an increase of 91 percent from the first quarter 2007 average of
1,309 boe/d. It is important to note that production for the first quarter
represented only 53 days of combined production from the E4 Energy acquisition
which closed on February 7, 2008. The current field estimated production is
greater than 3,100 boe/d.
The Company completed a net capital program of $8.5 million in Q1,
including the drilling of 2 gross (2.0 net) horizontal wells in the Provost
area, 1 gross (1.0 net) well in Thunder and 2 gross (2.0 net) wells in
Bulwark. The Jayar horizontal well was spud but not rig released at the end of
the quarter.
British Columbia
----------------
In North East British Columbia, the Company has been actively preparing
for a multi well drilling program scheduled for the third quarter and has
simultaneously been pursuing farm-in opportunities with a focus on resource
play projects. To that end the Company has signed 2 farm-in agreements in the
Brassey and Kelly areas of North East British Columbia totaling 14 gross
sections of land, highly prospective for both the Montney and Doig formations.
The first agreement is a 4 section land block in the Brassey area where
Twin Butte will drill a single well in early Q3 that will earn and continue
the petroleum and natural gas rights in the entire 4 section block for a
5 year term. Earning will be from the surface to the base of the Montney
formation and Twin Butte will pay 100 percent of the drilling and completion
on this initial well to earn a 60 percent working interest. Twin Butte is the
operator and all costs after completion of the initial well will be shared
60:40. The Brassey lands directly offset a recent land sale where a bonus
price of $3.9 million was paid for each section. This places an equivalent net
value of $9.4 million on the farm-in lands alone. Montney pay from area offset
wells average 76 meters in thickness with a potential original gas in place
(OGIP) reserve estimate of greater than 64 BCF per section. The lands are
located approximately 3.0 miles from a tie in point which combined with the
large gas resource and favorable farm-in terms gives the potential for a
material impact on the Company.
The second farm-in is on a 10 section block in the Kelly area that is
prospective for both Montney and Doig production and offsets an 8 mmcf/d Doig
producer. The Company will drill and complete one test well in late Q3 at
100 percent working interest to earn a 60 percent working interest in the
entire 10 section block. Again, Twin Butte is the operator and all costs after
completion of the initial well will be shared 60:40.
Jayar Area
----------
At Jayar, the Company initiated drilling of the first multifrac
horizontal well targeting the Dunvegan light oil pool which was rig released
subsequent to the quarter end. This first horizontal well was drilled to a
1,000m horizontal length and the horizontal section was fracture treated
utilizing the "Packers Plus" multi frac technology. The well is currently
being flowed on cleanup and is still recovering fracture treatment fluid.
Based on initial test results the Company has commenced planning for a second
horizontal well to be drilled in late Q3.
The Jayar Dunvegan pool is an 85.5 percent working interest, low
permeability reservoir that had been previously developed utilizing vertical
drilling and completion technology. Testing results to date are encouraging
and under current commodity pricing the project economics remain robust
presenting significant upside potential from this 37.5 mmbbl OOIP light oil
reservoir. Additionally, the Company also believes there is potential for
significant capital efficiencies on future operations and is currently
evaluating the viability of horizontal re-entry work and different fracture
treatment fluids to further improve project economics.
Thunder Area
------------
Twin Butte drilled and cased one well in Thunder in Q1 as a potential gas
well which is currently awaiting completion. The Company has developed
multiple exploration leads in the area and is currently shooting a 3D seismic
program. There is a 2 well drilling program planned for late Q2 targeting both
oil and gas prospects.
Plains Area
-----------
At Bulwark, the Company continued its area development in the first
quarter with a 2 well multi zone program targeting the Viking light oil pool
with secondary exploration targets. The program yielded excellent results with
one well cased as a development well, and the second well cased as a new pool
discovery. Both wells came on production in late March and are currently
producing at a combined rate of approximately 173 boe/d.
The Company also completed construction of the Provost battery facility
and drilled and cased the first 2 horizontal wells in a potential multi-well
development drilling program targeting the Dina RR oil pool. This pool
contains an estimated 10 million bbls of Original Oil in Place ("OOIP") with
only 120,000 bbls recovered to date from vertical production wells. The new
battery and disposal facility will reduce trucking costs and allow well
production to be optimized. The two horizontal wells came on production in
early April and are producing at a combined rate of approximately 120 boe/d.
Both wells have high fluid levels and will be optimized at controlled rates.
These excellent initial results combined with strong commodity prices support
continued development with the potential for up to 10 additional wells on this
property.
Outlook and 2008 Guidance - Low Risk Development and High Impact Resource
-------------------------------------------------------------------------
Plays
-----
The Company has remained bullish on the long term outlook for natural gas
and our countercyclical acquisitions are showing results with a dramatic
turnaround in commodity pricing during the quarter. Management will continue
to execute on strategic acquisitions and farm-in opportunities building on its
core area strategy and assembling a solid foundation for future growth. The
Company's key characteristics are illustrated as follows:
<<
- Stable production base (greater than) 3,100 boe/d;
- Net asset value of $ 4.41 per share utilizing strip pricing;
- Reserves of 9.1 MMboe (P+P);
- A reserve life index of 8.0 years (P+P);
- Tax pools of approximately $193 million;
- Net undeveloped land totaling approximately 147,000 acres;
- Solid balance sheet with current net debt of approximately
$46 million, and total credit facilities of $62.5 million;
- Year end debt range of 1.0 to 1.4 times cash flow;
- Significant oil potential at Jayar and Provost;
- Exciting exploration and resource potential in British Columbia; and
- Significant drilling inventory of (greater than) 80 locations.
>>
In the first quarter we continued to add to our land base and our
inventory of opportunities and the management team and Board of Directors
remained focused on cost effective per share growth in reserves, production
and cash flow following management's "acquire, exploit and explore" business
strategy.
The Company executed its capital program as planned in Q1 and has an
excellent inventory of low risk development, high impact exploration and high
impact resource prospects in the upcoming quarters. Twin Butte remains on
track to achieve its previous guidance for average 2008 production of
3,150 boe/d with exit production greater than 3,350 boe/d representing an
increase in average daily production of approximately 85 percent over 2007.
The capital program is underpinned by the drilling of high impact earning
wells on the large OGIP Montney resource lands in North East British Columbia,
the Jayar light oil pool development and the Provost Dina oil pool development
that all present significant upside potential for the Company. The management
and Board of Directors will continue to monitor the improving commodity price
environment, the Company's continued success and its growing inventory of
opportunities in relation to the cash flow capital budget.
Twin Butte's management continues to position the Company both
operationally and financially with excellent growth potential for 2008 and
beyond. The Company has a solid reserve and production base, a strong balance
sheet and a significant tax pool advantage. This combination will enable Twin
Butte to effectively pursue management's growth strategy and we remain very
excited about the Company's future prospects.
On behalf of the Board of Directors,
Ron Cawston
President and C.E.O.
May 13, 2008
Forward-Looking Information - Certain statements contained in this press
release constitute forward-looking information within the meaning of
securities laws. Forward-looking information may relate to our future outlook
and anticipated events or results and may include statements regarding the
future financial position, business strategy, budgets, projected costs,
capital expenditures, financial results, taxes and plans and objectives of or
involving Twin Butte Energy Ltd. Particularly, statements regarding our future
operating results and economic performance, are forward-looking statements. In
some cases, forward-looking information can be identified by terms such as
"may", "will", "should", "expect", "plan", "anticipate", "believe", "intend",
"estimate", "predict", "potential", "continue" or other similar expressions
concerning matters that are not historical facts.
These statements are based on certain factors and assumptions regarding
expected growth, results of operations, performance and business prospects and
opportunities. While we consider these assumptions to be reasonable based on
information currently available to us, they may prove to be incorrect.
boe Presentation - Barrels of oil equivalent ("boe") may be misleading,
particularly if used in isolation. A boe conversion rate of 6 Mcf: 1 bbl is
based on an energy equivalency conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the wellhead. All boe
conversions in the report are derived by converting gas to oil at the ratio of
six thousand cubic feet of gas to one barrel of oil.
The TSX does not accept responsibility for the adequacy or accuracy of
this news release.
-30-
/For further information: Ron Cawston, President and Chief Executive
Officer, Telephone: (403) 215-2040, Fax: (403) 215-2055; or R. Alan Steele,
Vice President Finance and Chief Financial Officer, Telephone: (403) 215-2692,
Fax: (403) 215-2055; www.twinbutteenergy.com/
|
NEWS RELEASES