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Press release from CNW Group

Twin Butte Energy Ltd. Reports Year End - 2010 Financial Results

Tuesday, March 22, 2011

Twin Butte Energy Ltd. Reports Year End - 2010 Financial Results16:06 EDT Tuesday, March 22, 2011Certain selected financial and operational information for the three months and year ended December 31, 2010 and December 31, 2009 comparatives are set out below and should be read in conjunction with Twin Butte's audited financial statements complete with the notes to the financial statements and related MD&A.CALGARY, March 22 /CNW/ -HighlightsTwin Butte Energy Ltd. ("Twin Butte" or the "Company") (TSX: TBE) is pleased to announce its financial and operational results for the three months and year ended December 31, 2010.  For further information on year end reserves please refer to the February 9, 2011 press release.Financial and operational results for the three and twelve months ended December 31, 2010.      Three months endedDecember  31 Twelve months endedDecember 31  20102009% Change20102009% ChangeFinancial ($ thousands, except per share amounts)      Petroleum and natural gas sales         29,111           22,15031%       101,876         48,425110%Funds flow (1)         12,887             7,71467%         40,941         17,631132%Per share basic & diluted            0.10               0.0826%             0.32             0.2816%Net loss          (1,351)              (961)41%          (1,148)       (12,688)-91%Per share basic & diluted           (0.01)             (0.01)5%            (0.01)           (0.20)100%Capital expenditures          13,930             8,06173%         46,913         16,309188%Capital dispositions          (1,590)           (9,499)-83%        (12,272)       (19,313)-36%Corporate and asset acquisitions         20,109          120,539-83%         20,525       131,178-84%Net debt (2)         96,026          102,911-7%         96,026       102,911-7%Operating      Average daily production      Crude oil (bbl per day)           3,338             1,81084%           2,623              971170%Natural gas (Mcf per day)         21,085           21,664-3%         22,033         14,74349%Natural gas liquids (bbl per day)             310                27911%              276              17657%Barrels of oil equivalent (boe per day, 6:1)           7,161             5,69926%           6,571           3,60482%Average sales price      Crude oil ($ per bbl)           64.49             66.22-3%           63.56           62.422%Natural gas ($ per Mcf)            3.83               4.78-20%             4.27             4.260%Natural gas liquids ($ per bbl)           66.10             62.076%           66.35           52.5426%Barrels of oil equivalent ($ per boe, 6:1)           44.18             42.245%           42.48           36.8215%Operating netback ($ per boe) (3)      Petroleum and natural gas sales           44.18             42.245%           42.48           36.8215%Realized gain on financial derivatives            2.51               0.38561%             2.22             2.49-11%Royalties           (8.47)             (7.27)17%            (8.65)           (4.73)83%Operating expenses          (13.79)           (12.94)7%          (13.64)         (13.19)3%Transportation expenses           (1.65)             (1.58)4%            (1.60)           (2.11)-24%Operating netback           22.78             20.839%           20.81           19.288%Wells drilled       Gross            28.0               13.0115%             88.0             18.0389%Net            15.1                 6.4136%             51.1             11.5344%Success (%)1001000%98918%       Common Shares      Shares outstanding, end of period128,197,668109,714,33517%128,197,668109,714,33517%Weighted average shares outstanding - diluted128,185,784100,261,12828%126,546,45462,392,250103% (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 ShareholdersHighlights of Twin Butte's highly successful 2010 year are as follows:Increased annual corporate production by 82 percent from 2009 to average 6,571 boe per day in 2010.  Q4 2010 production averaged 7,161 boe per day a 26 percent increase from Q4 2009 after selling approximately 485 boe per day.Executed an exploration and development capital program of $46.9 million which included the drilling of 88 gross (51.1 net) wells at a 98 percent success rate.Increased total proved plus probable oil and gas reserves by 23 percent or 6.9 million barrels of oil equivalent ("boe") to 37.5 million boe, replacing corporate 2010 production 3.9 times. At December 31, 2010, 51 percent of the Twin Butte's reserves were either oil or ngl's and over 50 percent of total reserves were producing.Generated superior finding and development ("F&D") costs of $9.87 per boe as well as finding, development and acquisition ("FD&A") costs of $10.48 per boe on a proved plus probable basis including change in future development costs ("FDC").Generated a capital recycle ratio of 2.5 times on proved plus probable FD&A including FDC.Maintained a reserve life index of 13.3 years based on proved plus probable reserves and 8.2 years based on proved reserves.Established a net asset value per share based on proved plus probable reserves of $3.56 based on PV 10 ($3.42 fully diluted).Completed a strategic Frog Lake oil acquisition, on non-reserve lands, valued at $20 million which further enhanced the Company's oil exposure, drilling inventory and overall asset quality.Completed fourteen non-core asset dispositions valued at $12.3 million to enhance balance sheet strength and flexibility and further focus the Company's asset base. An additional two dispositions valued at $11.5 million are anticipated to be closed in Q1. Net debt at the end of 2010 was $96 million which will be reduced to approximately $83 million by the end of Q1 2011.Corporate:As highlighted by the Company's year end financial and operating results, 2010 was another year of positive growth and transition.  Over the past two years the 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.Year to date, the Company's operational momentum continues with 24 net oil wells already drilled. In addition the Company's balance sheet remains solid. In January the Company closed the sale of a noncore asset for $10.4 million and a second asset sale valued at $1.1 million is anticipated to close by the end of Q1. To date in 2011 approximately $7.0 million of proceeds has been realized from the exercise of existing warrants. The original 7.7 million warrants which expire in early May of 2011 have an exercise price of $2.14. Beyond what has already been exercised remaining potential net proceeds of $9.0 million are anticipated before May.The Company is pleased to announce that Mr. John Brussa has joined the Board of Directors complementing the strength of the Company's current independent Directors. Mr. Brussa is a senior partner of Burnet, Duckworth & Palmer LLP, specializing in taxation, and sits on a number of energy and energy related boards, most notably as Chairman of Penn West Exploration and Crew Energy.Operations:During 2010 Twin Butte drilled 88 gross (51.1 net) wells with a 98 percent success rate leading to significant production and reserve growth and demonstrating the repeatable potential of the Company's drilling inventory.Activity levels remain brisk in our core growth areas of Frog Lake and Princess. The Company anticipates spending approximately $18 million in these areas in Q1. With significant snow cover in most of our operating areas it is anticipated that breakup conditions in Q2 may be more prolonged, therefore some Q2 capital is being accelerated into Q1. Liquid production continues to grow and liquid weighting is now anticipated to be close to 70 percent by the end of the year. Twin Butte is in an enviable position in that it has a current inventory of over 350 net oil drilling locations allowing prioritized capital spending to maximize return and minimize payout times.At Frog Lake in the Eastern Plains of Alberta the Company drilled 78 gross (41 net) wells in 2010 at a 100 percent success rate. To date in Q1 an additional 32 gross (21 net) wells have been drilled including the Company's first horizontal well in the area. Production from Frog Lake has increased appreciably since the Company acquired the property late in 2009 and the Company anticipates this profitable growth to continue for a number of years based on our current sizable drilling inventory of over 545 gross (320 net) locations. Over the remainder of 2011 we anticipate drilling an additional 109 (71.5 net) wells at Frog Lake. This figure could grow with early success from our horizontal well program. With current netbacks exceeding $35 per bbl the Company is generating recycle ratios of greater than 4 times and payouts of less than 10 months. With over 900 million barrels of oil in place and a low recovery factor to date of less than two percent, significant recoverable reserve upside potential remains at Frog Lake. Twin Butte is committed to evaluating and testing various methodologies to ensure maximum reserve recovery is ultimately realized at Frog Lake.At Princess in South Eastern Alberta the Company recently announced an agreement with a senior oil and gas producer 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 is currently producing in excess of 220 bbls of oil per day after being on-stream for nearly six months. In Q1 the Company drilled an offset well which encountered oil but too high a water cut to currently produce the well economically. Planned facility expansion later this year will allow production to commence from the well. The first commitment well under the farm in agreement has been cased and will shortly commence production testing.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 provides the scalability Twin Butte wants to achieve in the area. The farm out block is entirely covered with proprietary 3D seismic, which Twin Butte will earn rights to as part of the agreement. The Company has identified over 50 horizontal Pekisko oil locations on the lands.Outlook:The Company's organic exploration and development program provided substantial growth in production and reserves in 2010. With over 350 net oil drilling locations the stage is set for continued profitable growth in the Company's asset value through the drill bit. Twin Butte has positioned itself in scalable and repeatable play types in core areas that can make a meaningful difference to future corporate growth.In light of Twin Butte's strong balance sheet and continued success of our ongoing oil drilling program the Company has decided to expand its 2011 base capital plan from our originally budgeted $55 million to $65 million. Previous production guidance for 2011 of 8,000 and 8,500 boe per day average and exit respectively will increase under the new capital plan to 8,250 and 9,200 boe per day average and exit respectively. The capital program will be funded entirely by corporate cash flow therefore preserving balance sheet flexibility. Potential proceeds from the exercise of remaining warrants or noncore asset sales post Q1 may be directed to increasing the base capital program. It is anticipated that 2011 year end debt will be approximately $ 72 million representing less than 1.0 times expected Q4 2011 annualized cash flow. The 2011 capital plan which is 100 percent oil weighted includes the drilling 152 gross (103 net) wells.Twin Butte's employees, executive, and Board have worked very diligently throughout 2010 to achieve the Company's success. The Team remains extremely motivated to meet and exceed the expectations it has set.Twin Butte is a value oriented emerging intermediate producer with a significant and growing scalable and repeatable 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 in Alberta 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 C.E.O.March 22, 2011Financial StatementsThe Company's audited financial statements and associated Management's Discussion and Analysis ("MD&A") for the year ended December 31, 2010 will be available on Twin Butte's website at www.twinbutteenergy.com located within "Investor Info" under "Financial Documents". Additionally, these documents will be filed, in due course, on the System for Electronic Document Analysis and Retrieval ("SEDAR"). These documents can be retrieved electronically from the SEDAR system by accessing Twin Butte's public filings under "Search for Public Company Documents" within the "Search Database" module at 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 - 11 Avenue SW, Calgary, Alberta, T2R 0C5.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 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.  For 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