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Press release from CNW Group

Twin Butte Energy Ltd. Reports First Quarter 2010 Financial Results

Tuesday, May 11, 2010

Twin Butte Energy Ltd. Reports First Quarter 2010 Financial Results17:24 EDT Tuesday, May 11, 2010CALGARY, May 11 /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, 2010 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, 2010 and March 31, 2009 comparatives are set out below and should be read in conjunction with Twin Butte's unaudited financial statements and related MD&A.HighlightsTwin Butte Energy Ltd. ("Twin Butte" or the "Company") (TSX: TBE) is pleased to announce its financial and operational results for the three month period ended March 31, 2010. << ------------------------------------------------------------------------- Three months ended March 31 ------------------------------------------------------------------------- 2010 2009 % Change ------------------------------------------------------------------------- Financial ($ thousands, except per share amounts) ------------------------------------------------------------------------- Petroleum and natural gas sales 25,503 9,396 171% Funds flow(1) 9,726 4,319 125% Per share basic & diluted 0.08 0.09 (11%) Net income (loss) 3,077 (4,858) - Per share basic & diluted 0.03 (0.10) - Capital expenditures 11,352 5,412 110% Capital dispositions (5,719) - - Net debt(2) 77,212 51,390 50% ------------------------------------------------------------------------- Operating ------------------------------------------------------------------------- Average daily production Crude oil (bbl per day) 2,075 688 202% Natural gas (Mcf per day) 22,670 12,664 79% Natural gas liquids (bbl per day) 287 137 109% Barrels of oil equivalent (boe per day, 6:1) 6,140 2,936 109% Average sales price Crude oil ($ per bbl) 68.58 46.35 48% Natural gas ($ per Mcf) 5.33 5.28 1% Natural gas liquids ($ per bbl) 70.11 41.40 69% Barrels of oil equivalent ($ per boe, 6:1) 46.14 35.58 30% Operating netback ($ per boe) Petroleum and natural gas sales 46.14 35.58 30% Realized gain on financial derivatives 0.48 7.14 (93%) Royalties (9.51) (4.99) 91% ------------------------------------------------------------------------- Operating expenses (13.47) (13.39) 1% Transportation expenses (1.77) (2.66) (33%) Operating netback(3) 21.87 21.68 1% Wells drilled Gross 25.0 3.0 733% Net 14.5 3.0 383% Success (%) 100% 100% - ------------------------------------------------------------------------- Common Shares ------------------------------------------------------------------------- Shares outstanding, end of period 128,114,335 47,128,425 172% Weighted average shares outstanding - diluted 122,800,508 47,128,425 161% ------------------------------------------------------------------------- (1) Funds flow means cash flow from operating activities before changes in non-cash working capital and expenditures on asset retirement obligations. See Management's Discussion & Analysis Non-GAAP Measures. (2) Net debt is defined as the sum of working capital deficiency and other liabilities excluding financial derivative assets or liabilities. Net debt is a Non-GAAP Measure. (3) Operating netback is a Non-GAAP Measure and is the net of revenue, realized gain on financial derivatives, royalties, operating and transportation expenses. >> Report to ShareholdersMomentum is growing for Twin Butte, both operationally and financiallyCorporate:Balance sheet enhancement has been a key priority for Twin Butte post the Buffalo transaction in October 2009. In February we completed the issuance of 18.4 million shares for gross proceeds of $23.0 million. Proceeds of the financing as well as six noncore asset dispositions over the past two quarters has significantly strengthened the Company's balance sheet with net debt at the end of the first quarter of $77.2 million versus a recently renewed credit facility of $120.0 million.Twin Butte's methodical program of disposing of noncore assets has proved very successful. Four transactions were completed in Q4 2009 for net proceeds of $9.8 million before adjustments. Two dispositions valued at $6.0 million before adjustments were completed in the first quarter of 2010 and an additional three dispositions valued at $1.7 million are anticipated to be closed in the second quarter. The Company has been able to realize excellent value ($48,700 per boe per day) from its asset sales in an extremely competitive disposition market.Ongoing noncore asset dispositions will further focus the Company's operations and generate cash to supplement and enhance the planned capital program in our core growth areas.Operations:Corporate production averaged 6,140 boe per day in the first quarter of 2010 up from the Q4 2009 average of 5,699 boe per day. Current production has grown to 6,500 boe per day even though approximately 325 boe per day was sold in the last two quarters, including the disposition of 140 boe per day in the first quarter of 2010.In the first quarter Twin Butte executed a successful capital program of $11.4 million which included the drilling of 25 gross (14.5 net) wells at a 100 percent success rate and the completion of an extensive 3D seismic survey at Frog Lake. Based on this success the Company now anticipates spending a minimum of $44 million ($38 million net of dispositions) in 2010, financed entirely from cash flow. With over 90 percent of the capital plan focused on oil based activities, oil production weighting will grow to 50 percent by the end of the year. With continued success in our disposition program, proceeds will be recycled into an enhanced capital program with a focus on oil projects.Twin Butte is in an enviable position of having a significant inventory of both oil and gas drilling locations (300 net oil and 280 net gas) allowing us to prioritize capital to maximize return and minimize payout times. Although the capital plan is primarily oil based, capital will be spent to de-risk three different scalable gas plays in the Eastern Plains and the Deep Basin of Alberta. This derisking will ensure the Company's significant resource style gas growth opportunities are ready to be executed upon when gas pricing improves.At Frog Lake in the Eastern Plains of Alberta, the Company completed a 23 gross (12.5 net) oil well drilling program in the first quarter and to date in the second quarter an additional 6 gross wells have been drilled with a 100 percent success rate. Production from Frog Lake has increased appreciably since the Company acquired the property late in 2009 and the Company anticipates this profitable production growth to continue throughout 2010. Our extensive drilling program since October 2009 and the results of a recent 15 square km 3D seismic survey has significantly enhanced our estimate of original oil in place on our lands as well as our drilling inventory. We currently estimate over 500 million barrels of oil in place, up from earlier estimates of 350 million barrels. With only 2 percent of this oil expected to be recovered from existing wells the Company can foresee drilling an additional 500 plus wells to increase oil recoveries to approximately 7.5 percent. Even this recovery factor is low based on analog accumulations suggesting opportunities for further drilling, recompletion, or enhanced recovery techniques. Significant upside potential remains at Frog Lake for years to come.Over the remainder of 2010 we anticipate drilling an additional 60 (30 net) wells at Frog Lake. A second 3D seismic survey covering the remainder of Twin Butte's lands is planned for late third quarter. This survey will not only fine tune our extensive development drilling inventory but will define potential on our undrilled exploratory acreage. With current netbacks exceeding $35 per bbl the Company is generating recycle ratios in excess of 4 times and payouts of less than 10 months.At Bruce in the Eastern Plains, two 100 percent interest horizontal wells were drilled in the first quarter. The first delineation well to a Q4 2009 oil discovery has been producing over 100 boe per day for the past month. Two additional delineation wells will be drilled in the second quarter. Based on 3D seismic coverage the opportunity exists for an additional 10 wells on the play.The second horizontal well targeted gas in the Viking formation and was completed with 8 multistage fracs. Early production testing remains positive and the Company anticipates an additional derisking well will be drilled later in 2010. The Company has amassed a significant land position of over forty five, 100 percent working interest sections on the play. This fit for purpose scalable play type is exactly the direction our exploration efforts have been focused. Assuming our technical assumptions are correct, over 100 net horizontal wells could be drilled on existing lands.In the Deep Basin of Alberta, the Company plans to drill a minimum of two horizontal wells in the third quarter, targeting liquids rich Cardium and Notikewin gas. These wells will de-risk the plays which have already been successfully developed by offset competitors. Each of these plays could lead to scalable multiwell programs when gas prices improve.Outlook:Our organic exploration and development program is working. We have established a number of scalable play types in core areas that can make a meaningful difference to future corporate growth. This growth will continue through 2010 with our first quarter's results being only an early indication of the growth potential of our established drilling inventory. We now anticipate exiting 2010 at 7,200 boe per day, an increase from earlier estimates of 6,800 boe per day.Our new strategy and corporate direction was set in 2009. We have been and will remain disciplined in pursuing this strategy. We have done what we said we would do. This has led to a financially stronger company that is now demonstrating its growth potential. Our strategy is working and will continue to unfold in 2010.Twin Butte is a value oriented junior producer with a significant repeatable and scalable drilling inventory focused on large original oil in place and large original gas in place play types. With a stable low decline production base the Company is well positioned to live within cash flow while providing shareholders with sustainable growth potential over both the short and long term. The 2010 capital plan is highly focused in two core areas (Alberta Plains and West Central Alberta/Deep Basin) while providing the flexibility to quickly be accelerated should economic conditions allow. Twin Butte is committed to continually enhance its asset quality while focusing on per share growth. << On behalf of the Board of Directors, Jim Saunders President and Chief Executive Officer May 11, 2010 >> For further information regarding Twin Butte Energy Ltd., the reader is invited to visit the Company's website at www.twinbutteenergy.com.Twin Butte Energy Ltd. is a publicly traded Canadian energy company involved in the exploration, development and production of natural gas and crude oil in western Canada.As referred to above, to view Twin Butte's unaudited financial statements and related MD&A for the three months ended March 31, 2010 please visit www.twinbutteenergy.com or www.sedar.com. To the extent investors do not have access to the internet, copies of the audited financials and related MD&A can be obtained on request without charge by contacting Investor Relations at (403) 215-2045 or at 410, 396 - 11th Avenue SW, Calgary, Alberta, T2R 0C5.Reader AdvisoryCertain information regarding Twin Butte set forth in this news release including management's assessment of the Company's future plans and operations, the effect on the Company and on shareholders of Twin Butte, production increases and future production levels contain forward-looking statements that involve substantial known and unknown risks and uncertainties. These forward-looking statements are subject to numerous risks and uncertainties, certain of which are beyond Twin Butte's control including, without limitation, the impact of general economic conditions, industry conditions, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, lack of availability of qualified personnel, stock market volatility, and ability to access sufficient capital from internal and external sources. Twin Butte's actual results, performance or achievements may differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits that Twin Butte will derive there from. Additional information on these and other factors that could affect Twin Butte's results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com), or Twin Butte's website (www.twinbutteenergy.com). Furthermore, the forward-looking statements contained in this joint news release are made as at the date of this joint news release and Twin Butte does not undertake any obligation to update publicly or to revise any of the forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.In this news release, reserves and production data are commonly stated in barrels of oil equivalent ("boe") using a six to one conversion ratio when converting thousands of cubic feet of natural gas ("Mcf") to barrels of oil ("bbl") and a one to one conversion ratio for natural gas liquids ("NGLs" or "ngls"). Such conversion may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf: 1 bbl is based on energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.The TSX does not accept responsibility for the adequacy or accuracy of this news release.%SEDAR: 00001562EFor further information: Jim Saunders, 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