The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Globe Investor

News Sources

Take control of your investments with the latest investing news and analysis

Press release from CNW Group

Twin Butte Energy Ltd. Provides Corporate and Operational Update

Wednesday, January 12, 2011

Twin Butte Energy Ltd. Provides Corporate and Operational Update18:34 EST Wednesday, January 12, 2011CALGARY, Jan. 12 /CNW/ - Twin Butte Energy Ltd. (TSX: TBE) ("Twin Butte" or the "Company") is pleased to provide an update on various corporate activities.During 2010 Twin Butte drilled 88 gross (51.1 net) wells with a 99 percent success rate leading to significant production growth. The Company averaged over 7,700 boe per day (55 percent liquids) in December meeting year end exit guidance (7,200 boe per day before Frog Lake acquisition). This represents 35 percent production growth from the Company's Q4 2009 average even though 485 boe per day of production has been sold since then. This production growth was also achieved while under spending the 2010 base capital plan by an estimated $2 million ($36 vs. $38 million net of dispositions and Frog Lake $19.5 million acquisition) further demonstrating the potential of the Company's repeatable drilling inventory and its very efficient capital spending in combination with its equally successful noncore disposition program. Entering 2011 Twin Butte is well positioned with sizeable multi-year oil drilling inventory and strong operational momentum.It is anticipated that this high level of drilling activity and production growth will continue in 2011 with 110 gross (67.3 net) moderate risk oil wells planned. Production for 2011 is anticipated to average 8,000 boe per day (60 percent liquids), up 22 percent from our 2010 average of 6,550 boe per day. Drilling operations are currently underway at both Frog Lake where 90 gross (50 net) oil wells are planned and at Princess in Southern Alberta.At Princess the Company has signed a farmout agreement with a senior oil and gas producer (farmor) whereby Twin Butte can earn up to 30 sections of land prospective for Pekisko oil. The lands are directly adjacent to Twin Butte's current Princess operations where Twin Butte drilled its first Pekisko horizontal oil well in the third quarter of 2010. The well has been producing in excess of 165 bbls of oil per day for the last three months and the Company is currently drilling an offset to this well. Under the terms of the farmout agreement, Twin Butte has committed to drill 3 horizontal Pekisko oil wells for which it will earn 100 percent working interest in the wells until payout, reverting to a 65 percent interest post payout. For each earning well drilled the Company will earn a 65 percent interest in the entire section drilled together with one adjacent section. Following the drilling of the initial three wells Twin Butte will have the continuing option to drill additional wells to earn the remaining unearned sections under the same terms and conditions. Twin Butte will have access to the farmors substantial area infrastructure to handle produced fluids from the earned lands which will minimize capitalization of the project for both parties.The Pekisko play in the Princess area meets the Company's economic criteria in regard to payout and recycle ratio, consistent with the Company's other oil opportunities and importantly provides the scalability Twin Butte had wanted to achieve in the area. The farmout block is entirely covered with proprietary 3D seismic, which Twin Butte will earn rights to as part of the agreement. Preliminary technical work has identified a minimum of 20 horizontal Pekisko oil locations on the lands. Twin Butte anticipates the first three wells will be drilled in the first half of 2011.This transaction demonstrates Twin Butte's ability to diversify and continue to build upon its already sizable oil drilling inventory ensuring predicable oil growth for years to come. The Company's sizable gas inventory will stay in suspense until natural gas prices improve and dictate comparative economics with Twin Butte oil projects.Consistent with the Company's ongoing program of noncore asset dispositions, Twin Butte recently closed (January 1, 2011 effective date) the sale of an Eastern Plains noncore asset for $10.4 million. The asset was producing approximately 150 boe per day (50 percent natural gas) and generated extremely attractive transaction metrics of $69,300 per flowing boe per day. This compares to the transaction metrics of our November Frog Lake acquisition which added approximately 500 bbls of oil per day for $19.5 million ($39,000 per flowing boe per day).Pro-forma the subject disposition, corporate production is currently 7,550 boe per day (56 percent liquids) and net debt is approximately $86 million on a proforma credit facility of $128 million, which remains unchanged. This recent disposition further consolidates Twin Butte's operations and provides additional financial flexibility to continue to grow our core operations. Previous production guidance for 2011 of 8,000 and 8,500 boe per day average and exit respectively remain unchanged as a result of this disposition.The Company is also pleased to announce the appointment of Mr. Bruce Hall to the position of Chief Operating Officer. Bruce has been with Twin Butte for the past 18 months in the role of Senior Vice President Engineering and has played a key role in the successful growth and repositioning of the Company.Twin Butte is a value-oriented junior producer with a significant and growing 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. Twin Butte is committed to continually enhance its asset quality while focusing on per share growth.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.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 of the acquisition on the Company, production increases, future debt levels, future cash flows, anticipated drilling plans 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, including, but not limited to, increasing Twin Butte's credit facility.  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 news release are made as at the date of this 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.For further information: Jim SaundersAlan SteelePresident and Chief Executive Officer          Vice President, Finance, Chief Financial Officer and Corporate Secretary  Twin Butte Energy Ltd. Suite 410, 396 - 11th Avenue S.W. Calgary, Alberta  T2R 0C5   Phone: (403) 215-2045 Fax: (403) 215-2055 Website:  www.twinbutteenergy.com