Bonterra Energy Corp.
TSX : BNE

Bonterra Energy Corp.

November 09, 2011 17:30 ET

Bonterra Energy Corp. Announces Third Quarter 2011 Results

CALGARY, ALBERTA--(Marketwire - Nov. 9, 2011) -

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 third quarter ended September 30, 2011. 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.com.

Highlights

As at and for the periods ended Three months Nine months

($ 000s except $ per share)

September 30, 2011
September 30, 2010
Restated (1
) September 30, 2011 September 30, 2010
Restated (1
)
FINANCIAL
Revenue – oil and gas sales 36,535 28,332 119,459 84,771
Funds flow (2) 20,815 19,601 75,987 52,865
Per share – basic 1.08 1.04 3.93 2.82
Per share – diluted 1.06 1.01 3.86 2.74
Payout ratio (3) 72 % 63 % 58 % 66 %
Cash flow from operations 21,730 17,544 71,229 49,249
Per share – basic 1.12 0.93 3.69 2.63
Per share – diluted 1.10 0.91 3.62 2.56
Payout ratio (3) 69 % 71 % 62 % 71 %
Cash dividends per share (3) 0.78 0.66 2.28 1.87
Net earnings 9,384 10,130 37,541 28,116
Per share – basic 0.49 0.54 1.94 1.50
Per share – diluted 0.48 0.52 1.91 1.46
Cash netback (4) 37.35 29.52 42.52 32.40
Capital expenditures and acquisitions net of dispositions 15,941 19,227 42,157 45,362
Total assets 354,549 328,621
Working capital deficiency 43,362 20,653
Long-term debt (6) 72,391 73,901
Shareholders' equity 185,908 182,627
OPERATIONS
Oil
– barrels per day 3,789 3,579 4,069 3,424
– average price ($ per barrel) 88.21 70.99 91.58 73.45
NGLs
– barrels per day 340 311 350 281
– average price ($ per barrel) 63.80 43.52 61.56 46.46
Natural gas
– MCF per day 10,553 10,674 10,698 10,625
– average price ($ per MCF) 3.91 3.74 4.06 4.25
Total barrels of oil equivalent per day (BOE) (5) 5,887 5,669 6,201 5,476

(1) The comparative highlights have been restated with the adoption of International Financial Reporting Standards.

(2) 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, restricted cash and decommissioning expenditures settled.

(3) Cash dividends per share are based on payments made in respect of production months within the period ended.

(4) 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.

(5) BOE is calculated using a conversion ratio of 6 MCF to 1 barrel of oil. The conversion is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead and as such may be misleading if used in isolation.

(6) The unused portion on the Company's revolving credit facility is $47,609,000 as at September 30, 2011 and $46,099,000 as at September 30, 2010.

Operational Highlights

  • Bonterra's average daily production was 6,201 BOE per day for the first nine months of 2011, an increase of approximately 13.2 percent compared to the first nine months of 2010. Production in the third quarter of 2011 decreased quarter over quarter by 7.6 percent due to an unusual number of delays due to weather, down time from non-operated and operated facilities, pipeline issues and production shut-ins for various reasons. Most of these issues have now been resolved and it is expected that Q4 2011 production will be substantially higher.
  • The Company continued to focus on and execute its targeted horizontal Cardium drilling program during the quarter and drilled seven gross (5.4 net) horizontal oil wells with eight wells placed on production (including one well drilled in Q2 2011). However, five of these wells were put on production in mid to late September and thus had a negligible effect on third quarter production volumes.
  • Unseasonably wet weather resulted in three wells that were scheduled to be drilled and completed in the third quarter delayed into the fourth quarter program. Weather delays also significantly slowed the Company's tie-ins during this period. The other major factor which further and negatively impacted Q3 2011 volumes was a number of shut-ins including approximately 1,500 BOE per day shut-in for 21 days during July and August in the 50-12W5M area due to a third party facility shut-down (compressor maintenance) downstream from a Bonterra facility, approximately 50 BOE per day shut-in the Company's Willesden Green area while the Company was drilling in close proximity to an adjacent well and approximately 50 BOE per day shut-in in Saskatchewan for most of the third quarter due to flooding in the area.
  • Capital expenditures for the first nine months of 2011 totaled $42.4 million net of drilling tax credits related mainly to the drilling, completing, tie-in and equipping of 14 gross (11.1 net) operated Pembina and Willesden Green Cardium horizontal wells, two (0.3 net) non-operated main pool Pembina Cardium horizontal wells, compression facilities in the Pembina and Willesden Green areas, gathering pipeline facilities and one gross (0.13 net) non-operated well in southeast Saskatchewan.
  • The Company has increased its 2011 capital development budget to the top end of its guidance to approximately $60 million net of drilling credits which includes the drilling of an additional seven gross (5.61 net) operated Cardium horizontal wells and two gross (0.56 net) non-operated Cardium horizontal wells in the fourth quarter of 2011. Two of these wells have already been drilled and are on production while the remaining five will be drilled with three of these expected to be on production before year end.
  • In addition to the robust fourth quarter drilling program, Bonterra expects additional production increases as a result of resolving current production restrictions at Willesden Green. The Company commenced construction of a permanent tie-in to a low pressure gas gathering system that it has an interest in which should alleviate both downtime and operational issues. The project was expected to be completed in the third quarter of 2011 but again due to weather and regulatory related constraints the project was delayed and is now anticipated to be completed by the end of November, 2011.
  • Bonterra intends to continue focusing on implementing further cost reduction initiatives on its horizontal drill program through new drilling and completion techniques. For example, in the third quarter the Company used foam water fracs on all wells drilled resulting in significant capital cost savings. The Company's average cost to drill, case, complete, equip and tie-in wells during the third quarter has been substantially reduced. In addition, these initiatives are expected to not only decrease costs but also improve well productivity and reserve recovery.
  • Bonterra's full year guidance remains unchanged at 6,200 to 6,500 BOE per day and the Company currently forecasts its 2011 exit rate to range between 6,800 to 6,900 BOE per day.

Financial

  • Oil and natural gas prices decreased quarter over quarter. The Company's average realized price for crude oil in the third quarter was $88.21 per barrel as compared to $101.30 per barrel in the second quarter of the year. Likewise, natural gas prices decreased to $3.91 per MCF as compared to $4.15 MCF in the prior quarter.
  • As a result of the lower prices received during the quarter and reduced production volumes, revenue and cash flow from operations decreased 18.4 percent and 14.7 percent, respectively quarter over quarter. However on a nine month basis, the Company recorded significant growth year over year with a 40.9 percent increase in revenue and a 44.6 percent increase in cash flow from operations mainly due to increased production levels and crude oil prices in the first nine months of 2011 compared to the same period in 2010.
  • The Board of Directors and management have maintained the monthly dividend level to shareholders at $0.26 per share including the recently announced October dividend payable on November 30, 2011. Dividends to shareholders during the first nine months of 2011 totaled $2.28 per share, a 21.9 percent increase from the 2010 level. This represents a payout ratio of 58 percent of funds flow; at the lower end of the Company's guidance of 55 to 70 percent.
  • The Company continues to effectively manage its balance sheet strength with a net debt to annualized cash flow from operations ratio of 1.31 times, well within the Company's forecasted range of 1.0 to 1.5 times.

Outlook

  • The Company's Board and management will continue to take into account production volumes and commodity prices in determining monthly dividend amounts and will consider increasing the dividend level in the near future should crude oil pricing remain strong coupled with anticipated production level increases.
  • Bonterra remains highly optimistic with regard to its large inventory of lower-risk, oil opportunities in the Cardium and anticipates that production levels will again demonstrate significant growth in 2012. The Board of Directors and management are currently assessing the 2012 budget and capital development plans and expect to release details during the fourth quarter of 2011.
  • There continues to be a great deal of instability in the global economy which has negatively impacted credit and commodity markets. As a result, this lower price environment may provide opportunities for the Company to further grow its asset base through land or corporate acquisitions. Bonterra has historically made acquisitions counter‐cyclically and this strategic approach remains a focus for the Company as it continues to look at a number of short, medium and longer term opportunities available.
  • The Company's conservative capital structure, large drilling inventory and above industry average results with its horizontal drilling program positions the Company well to continue paying a high dividend, maintaining the long-term sustainability of its business and providing superior value to its shareholders.

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" 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 to shareholder 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 operation and deficit statement items as determined by IFRS by total production on a barrel of oil equivalent basis.

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