Press release from Marketwire
Bonterra Energy Corp. Announces Second Quarter 2012 Results
Tuesday, August 14, 2012
Bonterra Energy Corp. Announces Second Quarter 2012 Results17:30 EDT Tuesday, August 14, 2012CALGARY, ALBERTA--(Marketwire - Aug. 14, 2012) -NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR DISSEMINATION IN THE UNITED STATESBonterra Energy Corp. (Bonterra or the Company) (TSX:BNE) is pleased to announce its operating and financial results for the three months and six months ended June 30, 2012. The related unaudited condensed consolidated financial statements and notes, as well as management's discussion and analysis, are available on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com and on Bonterra's website at www.bonterraenergy.comHighlightsAs at and for the periods endedThree months endedSix months ended($ 000s except $ per share)June 30, 2012June 30, 2011June 30, 2012June 30, 2011FINANCIALRevenue - oil and gas sales31,04944,75467,94282,924Funds flow(1)16,62127,90638,92855,172Per share - basic0.841.441.972.86Per share - diluted0.841.421.972.80Payout ratio93%54%79%52%Cash flow from operations14,72725,46536,42549,499Per share - basic0.741.321.852.57Per share - diluted0.741.291.842.52Payout ratio105%59%84%58%Cash dividends per share (2)0.780.781.561.50Net earnings9,20114,53319,38328,157Per share - basic0.470.750.981.46Per share - diluted0.460.740.981.43Cash netback (3)30.2448.1133.2044.96Capital expenditures and acquisitions, net of dispositions25,288 (4)5,87246,701 (4)26,216Total assets393,772348,097Working capital deficiency42,08230,823Long-term debt114,74772,608Shareholders' equity176,292192,297OPERATIONSOil- barrels perday3,6504,1643,8134,211- average price ($ per barrel)80.93101.3084.8793.11NGLs- barrels per day428372424355- average price ($ per barrel)53.0265.1956.6260.47Natural gas- MCF per day11,75311,02412,00610,772- average price ($ per MCF)1.922.214.171.124Total BOE per day (5)6,0376,3736,2376,361(1)Funds flow is not a recognized measure under IFRS. For these purposes, the Company defines funds flow as funds provided by operations including proceeds from sale of investments and investment income received excluding the effects of changes in non-cash operating working capital items and decommissioning expenditures settled.(2)Cash dividends per share are based on payments made in respect of production months within the period ended.(3)Cash netback is not a recognized measure under IFRS. Cash netback is oil and gas sales less royalties, production costs, general and administrative costs, interest and other expense on a per BOE basis.(4)Includes an acquisition that closed on June 7, 2012 for $17,108,000.(5)Barrels of oil equivalent (BOE) may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 MCF: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. HighlightsThe second quarter of this year was characterized by a number of significant challenges and both operating and financial results were below expectations. However, the Company also had some positive activities that will assist in increasing production in the last half of the year and in the future. As explained below, Bonterra is still well-positioned to attain its average daily production guidance of 6,700 to 7,000 BOE per day for full year 2012, maintain its $0.26 monthly dividend to shareholders and continue to preserve a strong balance sheet. Many energy companies operating in the Western Canadian Sedimentary Basin, including Bonterra, were negatively affected by both an extended spring break-up and weak crude oil and natural gas prices, which included volatile price differentials between WTI and the average realized price for the Company. In addition, Bonterra experienced pipeline shipping constraints, third party downtime and above average production shut-ins which further impacted results. Despite these setbacks, Bonterra continued to execute its high-impact Cardium drilling program (with the majority of wells to be completed and on production in the third quarter) and completed or are in the process of completing infrastructure and facility upgrades which should substantially improve results over the second half of the year. OperationsProduction in the second quarter of 2012 was 6,037 BOE per day, a six percent decrease compared to the prior quarter and a five percent decrease compared to the same period in 2011. Production for the first six months of 2012 was 6,237 BOE per day, a two percent decrease over the first six months of 2011. Extended wet weather during the second quarter led to considerably lower field activities for the Company and delayed production coming on stream due to the inability to access leases for drilling and tieing-in new wells during spring break-up. During the first half of the year, Bonterra drilled eight operated wells (7.6 net) with only three wells being placed on production prior to quarter end. The remaining five wells will be completed and placed on production in the third quarter. The Company's active drilling program has resumed post-breakup and Bonterra anticipates drilling and completing a further 26 wells (12.9 net) prior to year end of which nine wells (6.4 net) are operated. In addition, production levels were reduced by high amounts of shut-in production. Third-party downtime, multi-well pad drilling (during drilling, existing producers on the pad must be shut-it) and low natural gas prices resulted in shut-in production of approximately 330 BOE per day during the first half of the year. The Company continues to anticipate that approximately 130 BOE per day of natural gas production will remain shut-in until natural gas prices recover. Production losses associated with infrastructure and facilities were largely due to isolated circumstances and have been or are in the process of being resolved. Improvements and modifications to infrastructure, such as better use of gas plant and gathering facilities, have also significantly improved production levels from existing wells. Despite these lower production levels in the first half of the year, with less infrastructure issues and new production from main pool infill horizontal drilling, Bonterra still anticipates meeting its full year guidance. The Company has begun to focus its horizontal drilling program in the main Pembina Cardium pool and drilled its first three operated wells during the first half of the year. These wells came on production at the beginning of Q3 2012 and over the first 20 days of production produced approximately 650 BOE per day at 05-33-046-09W5 (100 percent working interest; 64 percent oil), 470 BOE per day at 01-28-046-09W5 (100 percent working interest; 71 percent oil) and 670 BOE per day at 01-10-047-08W6 (87.5 percent working interest; 87 percent oil). These results are significant as Bonterra is currently evaluating its 350 main pool drilling locations and anticipates that the majority of its future drilling in the Cardium will be main pool horizontals. During the quarter, Bonterra also completed an acquisition in the Willesden Green Cardium zone for $17.1 million which closed June 7, 2012. The acquisition adds approximately 250 BOE per day of production net to the Company, 52.3 gross (10.5 net) sections of land and 191 gross (37 net) potential Cardium drilling locations. This acquisition was financed with bank debt. The Company's current production level is exceeding 6,900 BOE per day. The successful execution of the Company's remaining approximately $36 million of the $65 million capital development program will provide significant production increases and improved operational performance in the last six months of 2012. FinancialBonterra's financial results were negatively impacted by the lower production volumes and continued commodity price weakness. Oil and natural gas prices continued to decrease in the first half of the year and the Company's average realized prices declined 8.9 percent and 48.2 percent, respectively, versus the same period in 2011. WTI oil prices were approximately 9.2 percent lower quarter over quarter and the Company was further impacted by a wide Canadian crude oil differential between WTI and the price realized by the Company due in part to refinery outages, seasonal turnarounds and transportation capacity issues that created a supply/demand inbalance. Bonterra's average realized price was on average 9.9 percent less than WTI prices during the quarter and at times traded at a discount of up to $25.00. Natural gas prices have continued to exhibit sustained weakness due to high North American production rates and storage levels compared to previous years. This current commodity price environment has led to historically low netbacks for Bonterra, which along with lower production volumes, reduced quarter over quarter revenue and funds flow by 30.6 and 40.4 percent, respectively. As production issues during the quarter were isolated and new wells have been placed on production (increasing production volumes), commodity prices increased and the differential improved, the Board of Directors and management elected to maintain the monthly dividend to shareholders at $0.26 per share. The Company anticipates that the payout ratio for the year will be in line and meet full year 2012 guidance of 50 to 65 percent of funds flow. Bonterra continues to effectively manage its balance sheet strength with a net debt to annualized funds flow ratio of 1.86 times which is slightly above its target range of 1.0 to 1.5 times. Debt includes the one-time acquisition cost of $17,108,000 and the Company anticipates that the debt ratio will be within its forecasted range prior to year-end. OutlookThe first half of the year was indeed challenging and Bonterra has weathered the storm. The Company is now well-positioned for improved operational performance and better results across the second half of the year. There may be continued volatility in the Canadian crude market as a result of U.S. based supply growth and short-term pipeline outages, however pricing has improved and differentials have narrowed of late. The Company's capital development program will be extremely active in the second half of the year and drilling results in the main Pembina Cardium pool are expected to continue to be favourable. This was a demanding start to the year for Bonterra's management Board of Directors and staff. The hard work and dedication of Bonterra's team to increase performance and position the Company for future success was appreciated. As well, the Company was able to further strengthen management during the quarter with the addition of Adrian Neumann as Vice President, Engineering and Operations and additional hires of technical and administrative people. The Company will maintain its focus on the long-term development of our extensive and high-quality Cardium assets and in the near-term will execute on its highest economic return opportunities to maximize returns and enhance shareholder value. Cautionary StatementThis summarized news release should not be considered a suitable source of information for readers who are unfamiliar with Bonterra Energy Corp. and should not be considered in any way as a substitute for reading the full report. For the full report, please go to www.bonterraenergy.com.Use of Non-IFRS Financial MeasuresThroughout this release the Company uses the terms "payout ratio" and "cash netback" to analyze operating performance, which are not standardized measures recognized under IFRS and do not have a standardized meaning prescribed by IFRS. These measures are commonly utilized in the oil and gas industry and are considered informative by management, shareholders and analysts. These measures may differ from those made by other companies and accordingly may not be comparable to such measures as reported by other companies. The Company calculates payout ratio by dividing cash dividends paid to shareholders by cash flow from operating activities, both of which are measures prescribed by IFRS which appear on our statements of cash flows. We calculate cash netback by dividing various financial statement items as determined by IFRS by total production for the period on a barrel of oil equivalent basis.Forward-Looking InformationCertain statements contained in this release include statements which contain words such as "anticipate", "could", "should", "expect", "seek", "may", "intend", "likely", "will", "believe" and similar expressions, relating to matters that are not historical facts, and such statements of our beliefs, intentions and expectations about development, results and events which will or may occur in the future, constitute "forward-looking information" within the meaning of applicable Canadian securities legislation and are based on certain assumptions and analysis made by us derived from our experience and perceptions. Forward-looking information in this RELEASE includes, but is not limited to: expected cash provided by continuing operations; cash dividends; future capital expenditures, including the amount and nature thereof; oil and natural gas prices and demand; expansion and other development trends of the oil and gas industry; business strategy and outlook; expansion and growth of our business and operations; and maintenance of existing customer, supplier and partner relationships; supply channels; accounting policies; credit risks; and other such matters.All such forward-looking information is based on certain assumptions and analyses made by us in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate in the circumstances. The risks, uncertainties, and assumptions are difficult to predict and may affect operations, and may include, without limitation: foreign exchange fluctuations; equipment and labour shortages and inflationary costs; general economic conditions; industry conditions; changes in applicable environmental, taxation and other laws and regulations as well as how such laws and regulations are interpreted and enforced; the ability of oil and natural gas companies to raise capital; the effect of weather conditions on operations and facilities; the existence of operating risks; volatility of oil and natural gas prices; oil and gas product supply and demand; risks inherent in the ability to generate sufficient cash flow from operations to meet current and future obligations; increased competition; stock market volatility; opportunities available to or pursued by us; and other factors, many of which are beyond our control. Actual results, performance or achievements could differ materially from those expressed in, or implied by, this forward-looking information and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking information will transpire or occur, or if any of them do, what benefits will be derived there from. Except as required by law, Bonterra disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise. The forward-looking information contained herein is expressly qualified by this cautionary statement. FOR FURTHER INFORMATION PLEASE CONTACT: George F. FinkBonterra Energy Corp.CEO and Chairman of the Board(403) 262-5307(403) 265-7488 (FAX)ORRobb D. ThompsonBonterra Energy Corp.CFO and Secretary(403) 262-5307(403) 265-7488 (FAX)ORKirsten LankesterBonterra Energy Corp.Manager, Investor Relations(403) 262-5307(403) 265-7488 (FAX)firstname.lastname@example.orgThe TSX does not accept responsibility for the accuracy of this release.