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Press release from CNW Group


Wednesday, February 09, 2011

TWIN BUTTE ENERGY ANNOUNCES 2010 YEAR END RESERVES AND FINDING, DEVELOPMENT AND ACQUISITION COSTS19:18 EST Wednesday, February 09, 2011CALGARY, Feb. 9 /CNW/ - Twin Butte Energy Ltd. ("Twin Butte") or (" Company") is pleased to provide information on its oil and gas reserves as of December 31, 2010, as evaluated by the Company's independent reserve engineering firm, McDaniel & Associates Consultants Ltd ("McDaniel"). The evaluation of Twin Butte's petroleum and natural gas reserves was conducted pursuant to National Instrument 51-101 - Standards of Disclosure for oil and Gas Activities ("NI 51-101") and the Canadian Oil and Gas Evaluation Handbook ("COGEH") reserves definitions.Highlights of the Twin Butte 2010 capital program and year end reserves are as follows:Executed a capital program of $45.7 million ($35.2 million net of dispositions) which included the drilling of 88 gross (51.0 net) wells with a 99 percent success ratio.Completed a strategic asset acquisition valued at $20 million which further enhances the Company's oil exposure, drilling inventory and overall asset quality.Completed 14 non-core asset dispositions to enhance balance sheet flexibility, supplement the capital program, and further focus the Company asset base.A 23 percent increase in total proved plus probable oil and gas reserves, increasing by 6.9 million barrels of oil equivalent ("boe") to 37.5 million boe, replacing corporate 2010 production 3.9 times.Finding, development and acquisition ("FD&A") including future development costs ("FDC") of $10.48 per boe on a proved plus probable basis and $14.28 per boe on a proved basis.A capital recycle ratio of 2.5 times on proved plus probable FD&A including FDC.Current reserve life index of 13.3 years based on proved plus probable reserves and estimated December 2010 production level of 7,700 boe/d, and 8.2 years based on proved reserves.Increased liquid reserves as a percentage of total reserves from 35 percent to 51 percent.Net asset value per share based on proved plus probable (PV 10%) reserves of $3.56 ($3.42 fully diluted)Corporate Reserves SummaryDecember 31, 2010 Summary Reserves (Company interest before royalties)McDaniel - December 31, 2010  forecast pricingLight /MedCrude Oil & NGL'sHeavy OilNatural GasOil Equivalent% Total(Columns may not add due to rounding)(Mbbls)(Mbbls)(BCF)(Mboe) (6:1) Proved Developed Producing2,3422,25463.415,17140.5Proved Developed Non-Producing1195362.81,1183.0Proved Undeveloped5154,6588.86,63417.7Total Proved2,9767,44775.022,92361.2Total Probable1,5817,11935.014,53738.8Total Proved Plus Probable4,55714,566110.037,459100Total Proved Plus Probable Developed Producing2,8832,93977.818,79650.2Net Present Value of Future Net Revenue December 31, 2010 Net present Values ("NPV") Summary($ MM)Before Income Taxes Discounted At (%/year)Reserves Category (columnsmay not add due to rounding)0%5%10%15%20%Proved Developed Producing382.3257.8202.9171.8151.3Proved Developed Non-Producing23.219.015.813.311.3Proved Undeveloped145.8112.891.475.863.9Total Proved551.3389.5310.1260.9226.5Total Probable418.6275.0207.0164.6134.9Total Proved Plus Probable969.9664.5517.1425.6361.5Select Summary Pricing and Inflation Rate Assumptions (Forecast Prices)YearWTI Crude Oil ($US/bbl)Edmonton LightCrude Oil($C/bbl)Alberta Heavy Crude Oil ($C/bbl)AlbertaNatural Gas AECO -Spot ($C/MMbtu)Edmonton NGL Mix ($C/bbl)Inflation rate %/YearExchange rate ($US/$Cdn)201185.0084.2066.704.2561.402.00.975201287.7088.4068.704.9064.502.00.975201390.5091.8068.605.4067.302.00.975201493.4094.8070.805.9069.802.00.975201596.3097.7073.006.3572.302.00.975201699.40100.9075.406.7574.902.00.9752017101.40102.9076.907.1076.502.00.9752018103.40104.9078.407.4078.202.00.9752019105.40107.0080.007.6079.802.00.9752020107.60109.2081.607.7581.502.00.975thereafter+2%+2%+2%+2%+2%2.00.975Corporate Working Interest Reserves Reconciliation (Forecast Prices and Costs)Oil Equivalent (Mboe)Total ProvedTotal Proved plusProbableOpening Balance18,92330,527Extensions/ Discoveries3,9136,134Technical Revisions383356Acquisitions2,5453,824Dispositions(443)(984)Production(2,398)(2,398)Closing Balance22,92337,459Twin Butte is pleased to note that this is the third consecutive year of positive reserve revisions which highlights the quality and consistency of the Company's annual independent evaluation.Capital Efficiency  - Finding, Development and Acquisition Costs  ($000's) except as notedExploration and Development  ProvedProved plusProbable2010 Capital Expenditures (1)45,66445,664Future development capital ("FDC") opening balance -12/31/2009 (2)49,042114,397FDC closing balance - 12/31/2010 (2)60,785131,572Total Change in FDC (2)11,74317,175Total Capital Expenditures with FDC (1)57,40762,839Reserve additions and revisions from exploration & development (mboe)4,2966,491Finding & development costs before FDC ($/boe)10.637.04Finding & development costs including FDC ($/boe)13.369.68Acquisition less Disposition ProvedProved plusProbable2010 Net Capital  (3)9,5029,502FDC opening balance 12/31/2009 (2)00FDC closing year 12/31/2010 (2)24,48225,416Total Change in FDC (2)24,48225,416Total Capital Expenditures with FDC (3)33,98434,918Reserve Additions  (mboe)2,1022,840Acquisition costs before FDC ($/boe)4.523.35Acquisition costs including FDC ($/boe)16.1712.29Total FD&AProvedProved plusProbable2010 Total Capital Expenditures (4)55,16655,166FDC opening balance - 12/31/2008 (2)49,042114,397FDC closing balance - 12/31/2009 (2)85,267156,987Total Change in FDC (2)36,22642,590Total Capital Expenditures with FDC (4)91,39297,757Total Reserve Additions  (mboe)6,3989,331FD&A costs before FDC ($/boe)8.625.91FD&A costs including FDC ($/boe)14.2810.48   (1) Capital expenditures for fiscal 2010 are estimated and unaudited and include drilling credits of $3,9MM   (2) Future capital expenditures required to convert proved non-producing and probable reserves into proved producing  which do not include drilling credits   (3)Based on cash and share consideration plus assumed net debt   (4)Total capital expenditures are estimated and unaudited and are net of the capital proceeds associated with the Company's 2010 non-core property disposition program. Total capital expenditures exclude non-cash ARO and future tax allocationsUnder NI - 51-101, the methodology to be used to calculate FD&A costs includes incorporating changes in future development capital required to bring the proved undeveloped and probable reserves to proved producing status. For continuity, Twin Butte has presented FD&A costs calculated both excluding and including FDC. Changes in forecast FDC occur annually as a result of development, acquisition and disposition activities and capital cost estimates that reflect the independent evaluators best estimate of what it will cost to bring the proved undeveloped and probable reserves on production.Reserve Life Index (RLI)The reserve life index has been calculated based on year end reserves divided by estimated December 2010 production rates. ProvedProved plusProbableTotal Company Interest Reserves (mboe)22,92337,459Estimated December 2010 production (boe/d)7,7007,700RLI based on estimated December 2010 production (years)8.213.3Net Asset Value The following net asset value ("NAV") table shows NAV calculation under which the Company's reserves would be produced at forecast future prices and costs. The value is a snapshot in time and is based on various assumptions, including commodity prices and foreign exchange rates that vary over time. It should not be assumed that the NAV represents the fair market value of Twin Butte shares. The calculations below do not reflect the value of the Company's prospect inventory to the extent that the prospects are not recognized within the NI-51-101 compliant reserve assessment.Using Reserve Value at December 31, 2010 - Forecast Pricing and Costs (Pre tax)($MM except as noted)10% Before Tax15% Before TaxProved plus Probable Reserve Value517.1425.6Undeveloped Land Value (1)35.535.5Estimated Net Debt(96.0)(96.0)Option Proceeds11.311.3Basic Shares Outstanding128.2128.2Estimated Net Asset Value $ per Share - Basic $3.56$2.85Fully Diluted Shares Outstanding (2)136.7136.7Estimated Net Asset Value $ per Share - Fully Diluted$3.42$2.75   (1)Independent assessment of 250,468 net undeveloped acres at average price of $142/acre   (2)Not including 7.7MM warrants exercisable at $2.14 as these were out of money at year end based on closing share price of $2.04Twin Butte anticipates releasing its audited financial statements for the year ended December 31, 2010, on or about March 22, 2011As highlighted by the Company's year end reserve report, 2010 was another year of positive growth and transition.  Over the past two years the new management team at Twin Butte has successfully transitioned the company from a conventional junior gas producer to a liquid weighted producer with a multiyear, low risk oil drilling inventory, ensuring reserve and production growth for years. Since year end 2008 proved and probable reserves have grown 353 percent while liquid weighting has grown from 32 percent to in excess of 50 percent.Twin Butte has previously released 2011 guidance in our November 25,2010 and January 12,2011 press releases. As noted the strong operational momentum established in 2010 will continue in 2011. A base capital plan of $60.5 million ($50.1 million net of a previously announced January disposition) will underspend anticipated cash flow and will focus on drilling a 110 gross (67.3 net) moderate risk oil wells. Based on continued success, the Company's strong financial position, and significant oil well drilling inventory this base program may be expanded later in 2011.Director ChangeTwin Butte announces the resignation of Murray Sinclair as a Director of the Company. Mr. Sinclair has been a Director of Twin Butte since the amalgamation with Buffalo Resources in October 2009 and has consistently provided valuable insight to the strategic direction of the Company. The Board of Directors and Management of Twin Butte sincerely thank Mr. Sinclair for his support.Twin Butte is a value oriented emerging intermediate 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. The 2011 capital plan is highly focused to two core areas of Frog Lake and Eastern Plains 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.Forward-Looking StatementsIn the interest of providing Twin Butte's shareholders and potential investors with information regarding Twin Butte and Buffalo, including management's assessment of the future plans and operations of Twin Butte, certain statements contained in this news release constitute forward-looking statements or information (collectively "forward-looking statements") within the meaning of applicable securities legislation.  Forward-looking statements are typically identified by words such as "anticipate", "continue", "estimate", "expect", "forecast", "may", "will", "project", "could", "plan", "intend", "should", "believe", "outlook", "potential", "target" and similar words suggesting future events or future performance. In addition, statements relating to "reserves" are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described exist in the quantities predicted or estimated and can be profitably produced in the future. With respect to forward-looking statements contained in this news release, we have made assumptions regarding, among other things: future capital expenditure levels; future oil and natural gas prices and differentials between light, medium and heavy oil prices; future oil and natural gas production levels; future exchange rates and interest rates; our ability to obtain equipment in a timely manner to carry out development activities; our ability to market our oil and natural gas successfully to current and new customers; the impact of increasing competition; our ability to obtain financing on acceptable terms; and our ability to add production and reserves through our development and exploitation activities. Although Twin Butte believes that the expectations reflected in the forward looking statements contained in this document, and the assumptions on which such forward-looking statements are made, are reasonable, there can be no assurance that such expectations will prove to be correct. Readers are cautioned not to place undue reliance on forward-looking statements included in this document, as there can be no assurance that the plans, intentions or expectations upon which the forward-looking statements are based will occur. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur, which may cause Twin Butte's actual performance and financial results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things, the following:  volatility in market prices for oil and natural gas; general economic conditions in Canada, the U.S. and globally; and the other factors described under "Risk Factors" in Twin Butte's most recently filed Annual Information Form available in Canada at Readers are cautioned that this list of risk factors should not be construed as exhaustive.The forward-looking statements contained in this news release speak only as of the date of this news release. Except as expressly required by applicable securities laws, Twin Butte does not undertake any obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this news release are expressly qualified by this cautionary statement.Barrels of Oil EquivalentBarrels of oil equivalent (boe) are calculated using the conversion factor of 6 Mcf (thousand cubic feet) of natural gas being equivalent to one barrel of oil. Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf: 1 bbl (barrel) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.   For further information: Twin Butte Energy Ltd.  Jim Saunders President and Chief Executive Officer Tel: (403) 215-2040 Fax: (403) 215-2055  R. Alan Steele Vice President, Finance, Chief Financial Officer and Corporate Secretary Tel: (403) 215-2692 Fax: (403) 215-2055  Website: