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Press release from CNW Group

Twin Butte Energy Ltd. Reports Second Quarter 2010 Financial Results

Monday, August 09, 2010

Twin Butte Energy Ltd. Reports Second Quarter 2010 Financial Results18:17 EDT Monday, August 09, 2010CALGARY, Aug. 9 /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 June 30, 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 June 30, 2010 and June 30, 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 and six months ended June 30, 2010. << ------------------------------------------------------------------------- Three months ended June 30 Six months ended June 30 ------------------------------------------------------------------------- 2010 2009 % 2010 2009 % Change Change ------------------------------------------------------------------------- Financial ($ thousands, except per share amounts) ------------------------------------------------------------------------- Petroleum and natural gas sales 23,880 8,359 186% 49,383 17,756 178% Funds flow(1) 8,261 2,691 207% 17,986 7,011 157% Per share basic & diluted 0.06 0.06 0% 0.14 0.15 -7% Net (loss)/ income (1,739) (3,328) -48% 1,338 (8,186) -116% Per share basic & diluted (0.01) (0.07) -86% 0.01 (0.14) -107% Capital expenditures 8,247 793 940% 19,599 6,205 216% Capital dispositions (2,938) (9,815) -70% (8,657) (9,815) -12% Corporate acquisitions - - - - Net debt(2) 74,336 39,889 86% 74,336 39,889 86% ------------------------------------------------------------------------- ------------------------------------------------------------------------- Operating ------------------------------------------------------------------------- ------------------------------------------------------------------------- Average daily production Crude oil (bbl per day) 2,490 696 258% 2,284 692 230% Natural gas (Mcf per day) 22,423 12,302 82% 22,545 12,482 81% Natural gas liquids (bbl per day) 262 118 122% 274 127 116% Barrels of oil equivalent (boe per day, 6:1) 6,489 2,864 127% 6,316 2,899 118% Average sales price Crude oil ($ per bbl) 60.82 63.04 -4% 64.32 54.79 17% Natural gas ($ per Mcf) 4.17 3.46 21% 4.75 4.38 8% Natural gas liquids ($ per bbl) 67.08 45.62 47% 68.66 43.36 58% Barrels of oil equivalent ($ per boe, 6:1) 40.44 32.07 26% 43.20 33.84 28% Operating netback ($ per boe) Petroleum and natural gas sales 40.44 32.07 26% 43.20 33.84 28% Realized gain (loss) on financial derivatives 2.56 1.58 62% 1.55 4.38 -65% Royalties (8.72) (0.55) 1485% (9.10) (2.78) 227% Operating expenses (14.34) (13.70) 5% (13.92) (13.54) 3% Transportation expenses (1.42) (2.32) -39% (1.59) (2.49) -36% Operating netback 18.52 17.08 8% 20.14 19.41 4% Wells drilled Gross 12.0 - 100% 37.0 3.0 1133% Net 7.5 - 100% 22.0 3.0 633% Success (%) 100% 100% 0% 100% 100% 0% Common Shares ------------------------------------------------------------------ ------------------------------------------------------------------ Shares outstanding, end of period 128,184,335 47,128,425 172% 128,184,335 47,128,425 172% Weighted average shares outstanding - diluted 128,153,310 47,128,425 172% 126,137,313 47,128,425 168% ------------------------------------------------------------------------- ------------------------------------------------------------------------- (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 ShareholdersQuarterly momentum continues with increased production and reduced net debt.Corporate:While unseasonably wet weather has hampered industry activity across Western Canada Twin Butte's second quarter performance demonstrates continued operational momentum with a six percent increase in production over the first quarter. This was accomplished even though capital expenditures net of non core dispositions have been 61 percent of cash flow for the last two quarters. Maintaining a strong balance sheet continues to be a priority for Twin Butte with net debt declining over the quarter to $74.3 million while our recently renewed credit facility remains at $120.0 million.Twin Butte's program of disposing of non-core assets remains methodical and successful. Seven dispositions were completed in the second quarter for proceeds of $3.1 million before adjustments. To date in the third quarter we have executed agreements to dispose of an additional three assets for $1.62 million. Since completing the Buffalo acquisition in October 2009 thirteen transactions have been completed which has further focused our asset base while providing incremental capital above our cash flow to fuel our capital plan.During the second half of 2010 Twin Butte will continue to spend cash flow and proceeds of non-core dispositions while remaining committed to keeping net debt below $80 million. This will provide ample capital to meet and exceed our internal growth targets while preserving incremental financial capacity to be opportunistic should opportunities present themselves.Operations:Corporate production averaged 6,489 boe per day in the second quarter of 2010 up substantially from the Q4 2009 average of 5,699 boe per day (post Buffalo acquisition). Liquids production continues to grow with the second quarter production averaging 42 percent. With continued success at our Frog Lake heavy oil and Bruce light oil plays and over 90 percent of the capital plan focused on oil based activities, oil production weighting will grow to in excess of 50 percent by the end of the year.Current production is approximately 6,600 boe per day and is expected to surpass 6,750 boe per day later this month with the start up of our new facility at Bruce. Consistent results from our capital plan has allowed Twin Butte's production to grow even though over 400 boe per day of production has been sold since the Buffalo acquisition.In the second quarter Twin Butte executed a successful capital program of $8.2 million ($5.3 net of dispositions) which included the drilling of 12 gross (7.5 net) wells at a 100 percent success rate. To date in the third quarter an additional 9 gross (7 net) wells have been drilled at an 89 percent success rate. Based on this success and our current financial position the Company now anticipates spending a minimum of $48 million ($38 million net of dispositions) in 2010. With continued success in our disposition program, proceeds will be recycled into an enhanced capital program with a focus on oil projects.At Frog Lake in the Eastern Plains of Alberta, the Company completed a 10 gross (5.5 net) oil well drilling program in the second quarter and to date in the third quarter an additional 4 gross wells have been drilled at a 100 percent success rate. We anticipate drilling up to an additional 50 gross wells on the property before year end. Company production from Frog Lake has increased appreciably to over 1,950 from 1,100 boe per day since Twin Butte acquired the property late in 2009. Twin Butte anticipates its current drilling inventory will allow continued profitable production growth for years to come.A second Frog Lake 3D seismic survey which we anticipate will be complete in the third quarter in combination with our first quarter 3D program will cover the majority of the company's lands. These surveys will not only fine tune our extensive development drilling inventory but will further define potential on our undrilled exploratory acreage. As our production grows at Frog Lake so do our third party operating costs. These trucking, oil processing and water disposal costs were the major portion of our corporate operating cost increase in the second quarter over the first quarter. To reduce the costs we continue to construct fluid processing and water disposal facilities.At Bruce in the Eastern Plains, two 100 percent interest horizontal oil wells were drilled in the second quarter with two additional 100 percent wells being drilled to date in the third quarter. These wells (five horizontal wells to date) continued to delineate a Q4 2009 oil discovery. To handle increased solution gas volumes from the property Twin Butte is currently constructing a gas plant, which should be commissioned before month end. This will allow two cased wells to commence production while minimizing third party processing fees. Based on 3D seismic coverage the opportunity exists for a number of additional wells on the play which we will continue to delineate over the remainder of 2010.At Princess in the Eastern Plains we have now cased our first horizontal Pekisko oil well (100 percent) with results looking promising. Completion operations will commence shortly. Based on completion success a number of follow up wells are planned. Unfortunately a second 100 percent horizontal well targeting the Glauconite formation encountered high pressure water from offset water injection and was subsequently abandoned.In the Ansell area of the Deep Basin of Alberta, the Company has recently cased a horizontal well targeting liquids rich Cardium gas. This well will de-risk the play on our lands which have already been successfully developed by offset competitors. We anticipate completion and production testing to commence before month end. The company has a number of other horizontal gas opportunities (Notikewin and Wilrich) in the area which will be developed when gas pricing dictates.Twin Butte is in an enviable position of having a significant inventory of both oil and gas drilling locations allowing us to prioritize capital to maximize return and minimize payout times. Although the capital plan is almost exclusively oil based, some capital will be spent to de-risk 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.Outlook:Our organic exploration and development program continues to work. We have and continue to establish a number of scalable play types in core areas that will make a meaningful difference to future corporate growth. This growth has been demonstrated over the past three quarters and will continue through 2010. We remain committed to achieving our internal growth targets and anticipate exiting 2010 at 7,200 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 continue to do what we said we would do. This has led to a financially stronger company which continues to demonstrate 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 SaundersPresident and Chief Executive OfficerAugust 9, 2010For 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 June 30, 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