Bonterra Energy Corp.

TSX : BNE


Bonterra Energy Corp.

November 13, 2012 17:45 ET

Bonterra Energy Corp. Announces Third Quarter 2012 Results

CALGARY, ALBERTA--(Marketwire - Nov. 13, 2012) -

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

Bonterra Energy Corp. (TSX:BNE) (Bonterra or the Company) is pleased to announce its operating and financial results for the three months and nine months ended September 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.com

As at and for the periods ended Three months ended Nine months ended
($ 000s except $ per share) September 30, 2012 September 30, 2011 September 30, 2012 September 30, 2011
FINANCIAL
Revenue - oil and gas sales 35,204 36,535 103,146 119,459
Funds flow (1) 21,705 20,815 60,633 75,987
Per share - basic 1.10 1.08 3.07 3.93
Per share - diluted 1.09 1.06 3.06 3.86
Payout ratio 71 % 72 % 76 % 58 %
Cash flow from operations 16,440 21,730 52,865 71,229
Per share - basic 0.83 1.12 2.68 3.69
Per share - diluted 0.83 1.10 2.67 3.62
Payout ratio 94 % 69 % 87 % 62 %
Cash dividends per share (2) 0.78 0.78 2.34 2.28
Net earnings 7,746 9,384 27,129 37,541
Per share - basic 0.39 0.49 1.37 1.94
Per share - diluted 0.39 0.48 1.37 1.91
Cash netback (3) 32.41 37.35 32.93 42.52
Capital expenditures and acquisitions, net of dispositions 27,360 15,941 74,061 (4 ) 42,157
Total assets 412,812 354,549
Working capital deficiency 49,808 43,362
Long-term debt 128,779 72,391
Shareholders' equity 169,839 185,908
OPERATIONS
Oil - barrels per day 4,108 3,789 3,912 4,069
- average price ($ per barrel) 80.54 88.21 83.34 91.58
NGLs - barrels per day 461 340 436 350
- average price ($ per barrel) 46.40 63.80 53.00 61.56
Natural gas - MCF per day 12,583 10,553 12,200 10,698
- average price ($ per MCF) 2.41 3.91 2.24 4.06
Total BOE per day (5) 6,666 5,887 6,381 6,201
(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.

Highlights

Operations

  • Bonterra's operational performance during the third quarter led to improved production levels, however, the Company continued to be hampered by low commodity prices with an average realized price during the period of $80.54 per barrel for oil, $46.40 per barrel for liquids and $2.41 per MCF for natural gas (average realized prices for the first nine months of 2012 averaged $83.34 per barrel for oil, $53.00 per barrel for liquids and $2.24 per MCF for natural gas).
  • The Company's average daily production was 6,666 barrels of oil equivalent (BOE) per day for the third quarter of 2012, an increase of 13.2 percent compared to the third quarter of 2011 and an increase of 10.4 percent quarter over quarter. Production for the first nine months of 2012 was 6,381 BOE per day, an increase of 2.9 percent over the same period in 2011. The October 31, 2012 exit production rate exceeded 8,000 BOE per day.
  • The first nine months of 2012 were challenging for Bonterra and generally for the Canadian energy sector as well. The operating environment was hindered by a number of significant issues including an extended spring break-up, tie-in delays and weak commodity prices, including volatile price differentials between WTI and Bonterra's average realized prices. The company was also impacted by pipeline shipping constraints, third party downtime and above average production shut-ins of approximately 430 BOE per day of production during the first nine months of 2012.
  • During the latter part of the third quarter, the Company mitigated some of the tie-in and production issues and will continue with its field optimization program to redirect its increased natural gas production to help alleviate existing and future pressure pipeline constraints from increased drilling activity in the Pembina field. Most of these issues have now been resolved and the Company is on target to reach its production guidance of 6,700 to 7,000 BOE per day.
  • During the first nine months of 2012, the Company spent approximately $57.0 million on its capital development, drilling and facilities programs. During this period, the company placed two gross (two net) wells on production which were drilled in 2011 and drilled 18 gross (15.4 net) operated Pembina and Willesden Green Cardium horizontal wells of which only three wells were placed on production in the first half of the year. The majority of the remaining wells were placed on production in the third quarter of 2012 (produced for approximately 50 percent of the period) with just two (1.7 net) wells that were drilled prior to September 30, 2012 remaining to be placed on production in the fourth quarter of this year. In addition, four gross (1.3 net) non-operated wells were drilled and all but one (0.5 net) was placed on production during the first nine months of the year.
  • For the remainder of 2012, the Company will continue with its infill drilling program in the main Pembina pool and expects to drill an additional 12 gross (6.24 net) wells and expects that nine gross (3.24 net) of these wells will start producing prior to year end.
  • The company also spent approximately $17.1 million on a tuck-in acquisition in the Willesden Green Cardium zone which closed on June 7, 2012. The acquisition added 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.
  • Bonterra remains highly optimistic with regard to its large inventory of lower-risk, oil opportunities in the Pembina Cardium zone and anticipates that production levels will again demonstrate significant growth in 2013. The Board of Directors and management are currently assessing the 2013 budget and capital development plans and expect to release details during the fourth quarter of 2012.

Financial

  • Oil and natural gas prices exhibited continued weakness in the third quarter of 2012. The Company's average realized price for crude oil during the first nine months of 2012 was $83.34 per barrel, a decrease of approximately nine percent when compared to the same period in 2011. 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 imbalance. The large price differentials have fluctuated substantially and ranged between $5.00 and $25.00 per barrel with an average differential of $12.90 per barrel for the first nine months of 2012 (compared to approximately $4.00 per barrel for the first nine months of 2011).
  • In addition, the average price of natural gas liquids (NGLs) usually tracks the price of oil. However, in the latter part of the second quarter and into the third quarter of 2012, changes in the supply and demand for NGLs negatively affected the relationship between the price of NGLs and the price of oil. Natural gas prices continued to remain extremely weak and decreased 44.8 percent to $2.24 per MCF for the first nine months of the year when compared to the same period in 2011.
  • Mainly as a result of this lower price environment, revenue and cash flow from operations decreased 13.7 percent and 20.2 percent, respectively, on the nine month basis year over year. However, in light of the improved operations and substantial production volumes being added in the second half of the year, Bonterra's Board of Directors and management elected to maintain the monthly dividend level to shareholders at $0.26 per share including the recently announced October dividend payable on November 30, 2012.
  • Dividends to shareholders during the first nine months of 2012 totaled $2.34 per share, a 2.6 percent increase over the 2011 level. This represents a payout ratio of 76 percent of funds flow which currently exceeds the Company's guidance of 50 to 65 percent. Higher production volumes will, subject to commodity prices, assist in reducing this ratio in the fourth quarter of 2012.
  • Bonterra intends to continue focusing on managing its funds flow, capital expenditure ranges and dividend payments. At December 31, 2012, the Company expects it will be in excess of its annual guidance of 1.5 to 1 times net debt to funds flow ratio. The Company expects that this ratio will be higher due to lower than budgeted commodity prices and the Willesden Green Asset acquisition of $17.1 million. The Company will closely monitor this ratio in the future.

Outlook

  • Bonterra remains pleased with its continued controlled growth in production and reserves on a BOE basis and its sustainability. The Company will continue to pursue the aggressive development of its opportunities and is focused on improving production rates, sustaining a consistent pace of development and increasing project economics in the future.
  • 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 remains a strategic approach for the Company.

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 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 Information

Certain 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.

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

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

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