Bonterra Energy Corp.
TSX : BNE

Bonterra Energy Corp.

November 12, 2013 08:00 ET

Bonterra Energy Corp. Announces Third Quarter 2013 Results, Dividend Increase and 2014 Guidance

CALGARY, ALBERTA--(Marketwired - Nov. 12, 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 financial and operational results for the three months and nine months ended September 30, 2013. In addition, the Company is pleased to announce its Board of Directors has approved both a 2014 capital expenditure program budgeted at $120 million and an increase to the monthly dividend to $0.29 per share beginning with the November dividend payable December 31, 2013. 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.

Three months ended Nine Months ended
As at and for the periods ended September 30, September 30, September 30, September 30,
($ 000s except for $ per share) 2013 2012 2013 2012
FINANCIAL
Revenue - realized oil and gas sales 78,946 35,204 224,758 103,146
Funds flow (1)(5) 46,874 21,705 138,215 60,633
Per share - basic 1.50 1.10 4.63 3.07
Per share - diluted 1.50 1.09 4.61 3.06
Payout ratio 56 % 71 % 53 % 76 %
Funds flow (2)(5) 46,874 21,705 142,034 60,633
Per share - basic 1.50 1.10 4.76 3.07
Per share - diluted 1.50 1.09 4.74 3.06
Payout ratio 56 % 71 % 52 % 76 %
Cash flow from operations 43,953 16,440 126,124 52,865
Per share - basic 1.41 0.83 4.22 2.68
Per share - diluted 1.40 0.83 4.21 2.67
Payout ratio 60 % 94 % 58 % 87 %
Cash dividends per share 0.84 0.78 2.48 2.34
Net earnings 19,690 7,746 47,504 27,129
Per share - basic 0.63 0.39 1.59 1.37
Per share - diluted 0.63 0.39 1.59 1.37
Capital expenditures and acquisitions,
net of dispositions 34,025 27,360 83,262(4 ) 74,061(3 )
Total assets 1,002,773 412,812
Working capital deficiency 43,681 49,808
Long-term debt 147,189 128,779
Shareholders' equity 671,528 169,839
OPERATIONS
Oil (barrels per day)(1) 7,310 4,108 7,727 3,912
NGLs (barrels per day)(1) 772 461 762 436
Natural gas (MCF per day)(1) 22,274 12,583 21,668 12,200
Total barrels of oil equivalent per day (BOE)(1) 11,794 6,666 12,100 6,381
Total barrels of oil equivalent per day (BOE)(2) 11,794 6,666 12,508 6,381
(1) Nine month figures for 2013 include the results of Spartan Oil Corp. (Spartan) for the period of January 25, 2013 to September 30, 2013. Production includes 249 days for Spartan and 273 days for Bonterra.
(2) Nine month figures for 2013 include the results of Spartan for the period of January 1, 2013 to September 30, 2013. Production includes 273 days for Spartan and Bonterra.
(3) Includes an acquisition that closed on June 7, 2012 for $17,108,000.
(4) Includes the Spartan acquisition that closed on January 25, 2013 that included $10,000,000 of acquired cash that reduced capital expenditures from $61,643,000 excluding dispositions.
(5) 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 and decommissioning expenditures settled.

FINANCIAL AND OPERATIONAL HIGHLIGHTS

In 2013, Bonterra has maintained its focus on providing investors with continued growth on a per share basis, a sustainable pace of development and monthly income through its dividend policy. For the nine month period, Bonterra has achieved record results in net earnings, funds flow, production volumes and the monthly dividend rate despite one time charges with regard to royalties and general and administrative costs totaling approximately $4.3 million. Quarter over quarter financial results were somewhat negatively impacted by a number of factors including planned decreased production volumes, royalty adjustments relating to prior periods, lower natural gas prices, pipeline apportionments which required the Company to shut-in production and an increase in oil inventory. It should be noted the following comparatives use January 25, 2013 as the date when Spartan production commenced. Highlights include:

  • Generated record funds flow in the first nine months of 2013 of $138.2 million ($4.63 per share), as compared to $60.6 million ($3.07 per share) in the same period for 2012, an increase of 128.0 percent. Third quarter funds flow was $46.9 million, a decrease of 7.3 percent over the previous quarter, mainly attributable to a reduction of production volumes of 6.6 percent (partially planned and partially for reason outlined above);

  • Average daily production was 12,100 boe per day during the first nine months of 2013, an increase of 89.6 percent over the first nine months of 2012. In the third quarter of 2013, production averaged 11,794 boe per day, a decrease of 6.6 percent over the second quarter of 2013. The increased production year over year is mainly due to the Spartan acquisition and better results from the Company's 2013 Cardium drill program. The quarter over quarter decrease is mainly due to natural production declines associated with flush production on wells drilled in the first quarter. In addition, approximately 220 boe per day of production was shut-in due to plant turnarounds and other facility maintenance programs or stored in field inventory. Fourth quarter production levels are anticipated to increase as the Company will record a full quarter of production from wells drilled and tied-in during the third quarter as well as new production associated with the fourth quarter drilling program. Full year production guidance is maintained at 12,000 boe per day;

  • Operating costs for the first nine months of the year were $13.00 per boe, a reduction of 18.8 percent over the same period in 2012. Quarter over quarter operating costs per boe increased 28.6 percent mainly as a result of scheduled facility and maintenance programs executed during the quarter and lower production volumes. The Company continues to anticipate annual operating costs to average $13.00 per boe for 2013 as the majority of scheduled seasonal turnarounds and maintenance programs have been completed and production volumes are anticipated to increase;

  • Paid out $0.84 per share in cash dividends to shareholders in Q3 2013 and $2.48 for the nine month period. This represents a payout ratio of 53 percent of funds flow for the nine month period which is on the low end of the Company's payout ratio guidance of 50 to 65 percent of funds flow; and

  • Completed a bought deal financing of 553,725 common shares at a price of $49.85 per common share for gross proceeds of $27.6 million. The funds were used to increase the 2013 capital development budget and to decrease outstanding bank debt. Bonterra's net debt to cash flow ratio at September 30, 2013 is 1.14 to 1 times providing the Company with one of the strongest balance sheets amongst its peers leading to significant financial flexibility. The Company continues to closely monitor this ratio by managing its cash flow, capital expenditure ranges and dividend payments and expects to remain well within its targeted guidance range for 2013.

2014 CORPORATE GUIDANCE

  • The Board of Directors has approved a capital development program of $120 million which will include the drilling of light oil wells, infrastructure and gathering systems but excludes acquisitions. Currently 56 gross (41.05 net) wells are planned with 28 gross (27.6 net) wells targeting the company's Carnwood play in the Pembina Cardium field;

  • Full year production levels are expected to average between 12,400 and 12,700 BOE per day;

  • The corporate production profile is anticipated to be approximately 72 percent light oil and liquids and 28 percent natural gas (mainly solution gas);

  • Operating costs are expected to be approximately $13.00 per BOE;

  • Bonterra anticipates fully funding its capital expenditure program out of cash flow, proceeds from the exercise of employee stock options, sale of investments and, if required, its bank borrowing facility;

  • The dividend payout ratio is estimated to range between 50 and 65 percent of funds flow in 2014. As above, Bonterra will be increasing the dividend to $0.29 per share beginning with the dividend payable on December 31, 2013. Bonterra's Board of Directors and management will continue to take into account production volumes, commodity prices and costs in determining monthly dividend amounts;

  • Bonterra will continue to maintain its balance sheet strength and forecasts its net debt to annualized cash flow from operations to be within a range of 1.0 to 1.5 times; and

  • Bonterra has approximately $578 million in tax pools, extending the company's estimated tax horizon to 2016.

Bonterra's capital development program may be affected by items such as drilling results, commodity prices, and industry, regulatory and economic conditions. The Board of Directors and management will regularly review the capital program during the year and will make any adjustments to the amount and targets if required. The corporate guidance for 2014 is based on estimated future crude oil and natural gas prices and as such, guidance estimates may fluctuate with changes in commodity prices. Capital expenditure guidance excludes potential acquisitions which will be separately considered and evaluated.

WELL POSITIONED FOR CONTINUED GROWTH IN 2014

In 2013, Bonterra's focus to developing its Cardium acreage shifted to main pool development and the optimization of overall recoveries. The Company spent approximately $95.7 million on its capital development program during the nine months of the year and drilled 24 gross (23.8 net) operated Cardium horizontal wells and twelve (2.7 net) non-operated wells. The third quarter was active for the Company's drilling operations following spring break-up and included nine gross (9.0 net) operated wells and 10 gross (2.4 net) non-operated wells. Fourth quarter drilling is expected to include an additional 21 gross (9.9 net) wells which will include six (5.9 net) operated wells in the Carnwood area.

Bonterra's drill program in the second half of the year is concentrated in the Carnwood area in which its land position includes 38 gross (35 net) sections. The Carnwood area was historically underdeveloped with vertical wells and is characterized by high levels of original oil-in-place and low current recoveries. The Carnwood area is expected to be developed at eight horizontal wells per section which represents a drilling inventory of approximately 305 gross (280 net) locations in this one area of the Cardium alone.

Bonterra has delineated the outer edges of the Carnwood area with the 1-10-048-07 well on the western edge and the 03-34-047-05 well on the eastern edge of the area. These wells have recorded some of Bonterra's best production results to date and have produced 36,958 barrels of oil and 57,716 barrels of oil, respectively, over a nine month cumulative period. During Q3 2013, Bonterra drilled three additional wells in Carnwood of which one, the 04-34-047-05 well, is currently on production with the other two expected to be tied-in and on production in Q4 2013. This well is currently performing favourably with a 30 day rate of 300 boe per day, including 260 barrels of oil per day. With the outer edges of the Carnwood area delineated, the Company now intends to target increased well density throughout the area with a targeted pad drilling program in Q4 2013 and into 2014.

Bonterra has successfully reduced costs and improved well performance through the application of new drilling and completion technologies and efficient drill programs. The 2014 capital development program's focus in the Carnwood area signifies Bonterra's move towards a full field development exploitation strategy with four well pad drilling comprising the majority of the program. Bonterra intends to run two rigs in 2014 and will dedicate one rig solely to the Carnwood area where the average number of days to drill a well will be approximately six to nine days (24-32 days to drill a four well pad). In addition, Bonterra will shift to drilling longer horizontal lengths of 1.5 miles (previously one mile) and will increase frac density. As well, the Company has transitioned to a cemented completion method with limited entry sleeves, which provides both better frac placement control and drainage pattern. The focus on full field development along with improvements to drilling and completion methods has served to significantly decrease costs. Bonterra's average well cost is anticipated to be $2.7 million in 2014.

Additional capital spending in 2014 will include reactivating a gas plant at 11-17-49-04 in the first quarter. The reactivation will reduce operating costs as the Company will be able to redirect gas production from the Carnwood area to this plant. As well, it is anticipated that a portion of the 2014 capital development program will be allocated to two enhanced recovery pilot projects, a waterflood and a gas flood on two different pads in the Carnwood area, to examine the potential for secondary recovery methods on Bonterra's Cardium lands. Enhanced recovery methods have the ability to significantly increase reserve recovery and incremental value across a large portion of the Company's asset base and the pilot projects are expected to begin in the first half of 2014.

OUTLOOK

Bonterra is committed to continue to create and deliver outstanding value on behalf of its investors by pursuing the disciplined development of its light oil targets in the Cardium zone to drive future growth. In 2014, the Company will again focus on improving production rates, sustaining a consistent pace of development and increasing project economics. The Company's conservative financial management, strong operational execution and focus on sustainability should allow Bonterra to continue to capitalize on its numerous opportunities, pay a substantial dividend and maximize shareholder value. One issue that is of concern to the Company and to the industry is the differential between WTI oil prices and the realized price received by the Company. During the fourth quarter, the differential has been fluctuating between $6.00 and $20.00 and will have an effect on funds flow. The general industry consensus is that it will not stay at this level for an extended period of time as additional oil is increasingly being delivered by rail or additional pipeline capacity. However, it will have an impact on fourth quarter 2013 results.

Management would like to take this opportunity to thank the Board of Directors for its reliable counsel and investors for their continued support. Bonterra is well-positioned with the capacity to continue delivering strong returns to shareholders and looks forward to capitalizing on its many opportunities in the last quarter of 2013 and into 2014.

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, Chairman and CEO or
    Robb M. Thompson, CFO and Secretary or
    Kirsten Lankester, Manager, Investor Relations
    (403) 265-7488 (FAX)
    Telephone: (403) 262-5307
    info@bonterraenergy.com