Bonterra Energy Corp.

TSX : BNE


Bonterra Energy Corp.

March 21, 2013 19:15 ET

Bonterra Energy Corp. Announces Fourth Quarter and Year End 2012 Results

CALGARY, ALBERTA--(Marketwire - March 21, 2013) -

NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR DISSEMINATION IN THE UNITED STATES.

Bonterra Energy Corp. (Bonterra or the Company) (TSX:BNE) is pleased to announce its operating and financial results for the fourth quarter and year ended December 31, 2012. The related financial statements and notes, as well as management's discussion and analysis (MD&A) for the year ended December 31, 2012, are available on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com and on Bonterra's website at www.bonterraenergy.com

Highlights


As at and for the year ended
($ 000s except $ per share)

December 31, 2012

December 31, 2011

December 31, 2010
FINANCIAL
Revenue - realized oil and gas sales 142,770 162,277 118,980
Funds flow (1) 80,429 101,988 74,385
Per share - basic 4.07 5.27 3.95
Per share - diluted 4.06 5.22 3.84
Payout ratio (2) 77 % 58 % 64 %
Cash flow from operations 74,325 97,409 66,238
Per share - basic 3.75 5.04 3.52
Per share - diluted 3.75 4.98 3.42
Payout ratio (2) 83 % 61 % 72 %
Cash dividends per share (2) 3.12 3.06 2.55
Net earnings 33,211 43,608 39,954
Per share - basic 1.68 2.25 2.12
Per share - diluted 1.68 2.23 2.06
Capital expenditures and acquisitions net of dispositions 98,130(3 ) 62,686 70,680
Total assets 419,933 364,176 347,825
Working capital deficiency 29,876 51,576 17,905
Long-term debt 166,808 69,916 85,386
Shareholders' equity 163,277 181,640 190,173
OPERATIONS
Oil - barrels per day 4,035 4,075 3,585
- average price ($ per barrel) 82.04 92.76 74.76
NGLs - barrels per day 476 386 290
- average price ($ per barrel) 52.18 60.89 47.11
Natural gas - MCF per day 13,157 11,163 10,521
- average price ($ per MCF) 2.60 3.86 4.14
Total barrels of oil equivalent per day (BOE) (4) 6,703 6,322 5,628
(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 working capital items, decommissioning expenditures settled and restricted cash.
(2) Cash dividends per share are based on payments made in respect of production months within the quarter.
(3) Includes an acquisition that closed on June 7, 2012 for $17,108,000.
(4) 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.

Year in Review

It was a challenging year for the Canadian energy sector, including Bonterra, as the operating environment was hampered by a number of significant issues including an extended spring break-up, weak commodity prices, including volatile price differentials between WTI and average realized prices, lengthy plant turnarounds and pipeline issues. Despite these hurdles, Bonterra continued to create value for its shareholders through the successful execution of its long-term business strategy which is focused on:

  • providing shareholders with income in the form of a monthly dividend;
  • potential share price appreciation by growing production and reserves on both a total and per share basis through the execution of a sustainable development program and the efficient management of its high-quality, low risk asset base; and
  • preserving balance sheet strength.

2012 highlights include:

  • Paid $3.12 per share ($0.26 per share monthly) in dividends to shareholders that has been increased to $0.28 per share monthly effective March 31, 2013;
  • Executed an $81.0 million capital program before acquisitions comprised of 34 gross (22.9 net) Cardium horizontal wells drilled with a 100 percent success rate;
  • New production records set with average daily production of 6,703 barrels of oil equivalent (BOE) per day (67 percent oil and liquids) for the full year 2012 and 7,663 BOE per day in the fourth quarter, an increase of 6.0 percent and 14.8 percent over the same periods in 2011;
  • Production per share was 0.124 BOE per share, an increase of 4.2 percent over 2011;
  • Proved plus Probable (P+P) reserves of 45.0 million BOE (approximately 75 percent oil and liquids), a 9.4 percent increase over December 2011 reserves of 41.1 million BOE;
  • Added a total of 6.3 million BOE (P+P) reserves which equates to 2.5 times 2012 production;
  • Reserves per share (P+P) increased 7.0 percent to 2.28 BOE per share compared to 2.13 BOE per share in the prior year; and
  • The Company was successful in strengthening its Cardium core area with two key acquisitions.

2012 challenges include:

  • The debt to funds flow ratio at December 31, 2012 was in excess of the Company's guidance of 1.5 to 1 times. (This has been rectified in 2013);
  • A reduction of $11.11 in corporate netbacks per BOE from $42.47 in 2011 to $31.36 in 2012 due to: the average annual oil differential between the price of WTI and the Company's realized price of $12.07 in 2012 compared to $2.42 in 2011; the reduction of natural gas prices from $3.86 per MCF in 2011 to $2.60 per MCF in 2012; and the reduction of natural gas liquids from $60.89 per barrel in 2011 to $52.18 per barrel in 2012. The decrease in corporate netbacks using 2012 average production reduced cash flow by $27.2 million; and
  • The Company exceeded its capital expenditure budget by approximately $30 million in 2012 due to an unbudgeted $17 million acquisition and additional drilling in Q4 2012. Bonterra had considered issuing shares from treasury in December 2012 to finance this increase in capital spending and the negative effect on the debt to funds flow ratio but did not need to proceed with this after the Spartan Oil Corp. acquisition which closed on January 25, 2013.

Operations

  • Bonterra holds an enviable suite of light oil properties in its core area in the Cardium pools located in the Pembina and Willesden Green fields in west central Alberta. Horizontal drilling has revitalized this mature basin and the Company has been at the forefront of increased development having drilled the first horizontal well in the halo of the Pembina field that commenced production in February 2009. The Company's high level of concentration and experience in the area provides Bonterra with the knowledge to efficiently exploit the Cardium formation and the Company has pursued land and corporate acquisitions to continue to acquire further interests in this key resource play.
  • During the second quarter of 2012, Bonterra completed a tuck-in acquisition in the Willesden Green area adding 52.3 gross (10.5 net) sections of land and 250 BOE per day of production, net to the Company. These lands are considered underdeveloped and provide Bonterra with an additional 191 gross (37 net) potential Cardium drilling locations.
  • In late 2012, Bonterra announced its most significant acquisition to date of a Cardium-focused producer Spartan Oil Corp. (Spartan) which closed on January 25, 2013. The Spartan assets further solidified Bonterra's position as one of the predominant sustaining light-oil dividend paying companies in the Canadian energy sector, augmented Bonterra's large asset base in the Cardium formation which now totals 250.3 (193.7 net) sections and increased production to approximately 13,500 BOE per day of production at the date of acquisition. The Spartan assets are expected to increase Bonterra's liquids weighting and the corporate production profile in 2013 is anticipated to be approximately 75 percent light oil and natural gas liquids which should result in increased netbacks.
  • The Company currently estimates that it has a greater than 10 year drilling inventory (using four wells per section) and remains well-positioned to continue delivering strong operational performance in 2013 through the continued development of its significant portfolio of organic growth opportunities. Bonterra will focus its efforts on improving production rates, sustaining a consistent pace of development and increasing project economics across its operations.

Financial Results and Commodity Price Environment

  • Oil and natural gas prices exhibited continued weakness in 2012 and price differentials between Bonterra's average realized price and WTI widened substantially from prices received in 2011, due in most part to pipeline capacity constraints, refinery outages, seasonal turnarounds and quality adjustments. The price differential slightly decreased during the fourth quarter of 2012 due to a combination of increased rail shipments, decreased production of Alberta synthetic crude and increased demand from U.S. and Canadian refineries. However, continued European and North American economic concerns and pipeline capacity constraints continued to negatively affect the realized price for oil in Canada.
  • The Company's average realized price for crude oil was $82.04 per barrel, a decrease of approximately 11.6 percent when compared to 2011. In addition, natural gas prices continued to remain extremely weak and Bonterra's average realized price decreased 32.6 percent to $2.60 per MCF in 2012 when compared to $3.86 per MCF in 2011.
  • Mainly as a result of this lower price environment, revenue and cash flow from operations decreased 12.0 percent and 23.7 percent, respectively, year over year. However, Bonterra's strong operating results in 2012 along with the substantial increase in production volumes allowed the Company to maintain the dividend level to shareholders at $0.26 per share monthly, representing a payout ratio of 77 percent of funds flow. Higher production volumes will, subject to commodity prices, assist in reducing this payout ratio further in 2013.
  • A number of pipeline expansions and reversals of flow direction currently underway could alleviate pipeline capacity issues later in 2013 and 2014. In addition, there are a number of pipeline initiatives under review including the Keystone XL pipeline in the United States and the Northern Gateway pipeline in Canada. However, neither of these has received government or regulatory approval at this time and Bonterra will continue to focus on managing its funds flow, capital expenditure ranges and dividend payments within the current commodity environment.
  • A conservative approach to the Company's capital structures has been a key factor in building financial strength and flexibility. Bonterra retains its strong financial position by maintaining a sustainable growth strategy and minimizing the amount and cost of debt. The Company's current net debt to funds flow ratio is less than 1.5 times (after the closing of the Spartan acquisition) and Bonterra is well funded to execute the 2013 capital program and to pursue any additional acquisition opportunities that may become available.
  • Bonterra currently has approximately $600.0 million in tax pools, $27.7 million in investment tax credits and $135.7 million of capital loss carry forwards (which can only be claimed against taxable capital gains). The Company anticipates that these pools move Bonterra's tax horizon beyond 2015.

2013 Outlook

Bonterra's 2013 capital development program is focused on sustaining its current business model offering both solid growth and yield to its shareholders. The Board of Directors has approved a capital development program of $90.0 million which mainly targets light oil prospects through its Cardium horizontal drill program. The program plan in 2013 is to:

  • Maintain a steady pace of development and manage annual decline levels. Bonterra anticipates allowing current production levels to reduce to an average daily production rate of approximately 12,000 BOE per day;
  • Drill 29 gross (28.1 net) operated horizontal wells and participate in drilling 13 gross (4.3 net) non-operated wells;
  • Seek out additional operating efficiencies and control costs. Operating expenditures are expected to average approximately $13.00 per BOE on an annualized basis;
  • Ensure sustainability by managing the dividend payout ratio to range between 50 and 65 percent of funds flow in 2013;
  • Manage risk by maintaining balance sheet strength. Bonterra anticipates maintaining its net debt to cash flow ratio at less than 1.5 times in 2013; and
  • Continue to provide increased value to shareholders. Bonterra increased the monthly dividend to $0.28 per share beginning in March 2013. Bonterra's Board of Directors and management will continue to take into account production volumes and commodity prices in determining monthly dividend amounts and will consider increasing the dividend should crude oil pricing remain favourable coupled with anticipated production increases.

Cautionary Statement

This 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 Measures

Throughout this press release, the Company uses the terms "payout ratio", "cash netback" and "net debt" 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 used 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.

Frequently recurring terms

Bonterra uses the following frequently recurring terms in this press release: "bbl" refers to barrel, "NGL" refers to Natural gas liquids, "MCF" refers to thousand cubic feet and "BOE" refers to barrels of oil equivalent. Disclosure provided herein in respect of a BOE may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 MCF: 1 bbl is based on an energy conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Numerical Amounts

The reporting and the functional currency of the Company is the Canadian dollar.

Forward-Looking Information

Certain statements contained in this press 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 press 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.

The TSX does not accept responsibility for the accuracy of this release.

Contact Information

  • Bonterra Energy Corp.
    George F. Fink
    CEO and Chairman of the Board
    (403) 262-5307
    (403) 265-7488 (FAX)

    Bonterra Energy Corp.
    Robb D. Thompson
    CFO and Secretary
    (403) 262-5307
    (403) 265-7488 (FAX)

    Bonterra Energy Corp.
    Kirsten Lankester
    Manager, Investor Relations
    (403) 262-5307
    (403) 265-7488 (FAX)
    info@bonterraenergy.com
    www.bonterraenergy.com