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Palliser Oil & Gas Corp. PSLRF

Energy Oil & Gas E&P

"Palliser Oil & Gas Corp is engaged in the exploration, development and production of petroleum including high netback heavy oil in the greater Lloydminster area of Alberta and Saskatchewan."

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Palliser Oil & Gas Corp.

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Post by Sir_Holleron Feb 27, 2013 7:09pm

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Post# 21051817

TBE

TBE says it has stabilized production and that the property is projected to perform as others now. The property exceeds expections. The company anticipates a potential increase in its capital budget given favorable oil prices.

Twin Butte Energy 2012 Year End Reserve and Operational Update

Twin Butte Energy 2012 Year End Reserve and Operational Update

CALGARY, Feb. 27, 2013 /CNW/ - Twin Butte Energy Ltd. (TSX: TBE) ("Twin Butte" or the "Company") is pleased to provide an operations update and information on its oil and gas reserves as of December 31, 2012. Twin Butte anticipates releasing Q4 and year end 2012 audited financial and operating results after market close on March 21, 2013.

Operations Update

On January 31, 2013, Twin Butte provided an operational update that noted it had encountered reservoir performance issues at its Primate property in western Saskatchewan. At that time, the Company noted that the property's production had declined during the month of January from a peak of 3,400 bbls per day to 2,500 bbls per day due to increased water cuts and reduction of inflow on a number of producing wells. Since that time, the Company has successfully stabilized the property's production at approximately 2,600 bbls per day. Twin Butte will continue to monitor and optimize production at Primate but believes that the property's sharp decline will not continue and that the property's point forward performance will be more analogous to other area properties. Based on analogy work conducted by both Twin Butte and McDaniel, it is believed that the property will continue to produce for a number of years and that the annual property production decline should be approximately 35 percent. Twin Butte's December 31, 2012 reserve analysis includes this assumption. As a result of positive technical revisions for Primate, the property's performance continues to exceed expectations of both our independent evaluators and internally.

Current corporate production is in excess of 18,000 boe per day up from the reported 17,800 boe per day at the end of January. Year to date, the Company has successfully drilled 20 gross (20 net) wells, including two horizontal wells at its Wildmere asset which was acquired in Q4 2012. Based on very encouraging early production data from the Wildmere wells, Twin Butte will be drilling another 2 to 4 horizontal wells on the property late in Q1 or early Q2.

Highlights of Twin Butte's Year End 2012 reserves are as follows:

Completed an organic capital program of $58.4 million including the drilling of 95 gross (77 net) wells at a 96 percent success rate.
Drilling program generated total proved plus probable finding and development ("F&D") costs of $18.18 per boe including changes in future development costs, representing a 1.6 times organic recycle ratio based on average 2012 operating netback of $29.14 per boe.
Completed three corporate and two asset acquisitions as well as two non-core dispositions for a total cost of $455.5 million. The acquisitions materially grew Twin Butte's production, cash flow, and reserves, as well as significantly expanded its undeveloped land position in its core heavy oil operating area at Lloydminster. Excluding the value of the undeveloped land acquired ($57.5 million) the overall proved plus probable acquisition and divestiture costs were $22.61 per boe including changes in future development costs, representing a 1.3 times recycle ratio.
Generated one and three year average total proved plus probable finding, development and acquisition ("FD&A") costs of $24.00 and $21.38 respectively per boe including changes in future development costs.
Grew corporate proved and probable reserves by 58 percent from 35.6 Mboe at December 31, 2011 to 56.2 Mboe at December 31, 2012.
Increased corporate proved plus probable reserves liquids weighting to 73 percent at December 31, 2012 from 55 percent at December 31, 2011.
Primate property performance generated positive reserve revisions after accounting for January production reductions, showing the pool has exceeded our original expectations.

Reserves Summary

The Company's independent reserve engineering firm, McDaniel & Associates Consultants Ltd ("McDaniel") has evaluated 100 percent of Twin Butte's petroleum and natural gas reserves. This evaluation was conducted pursuant to National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities ("NI 51-101") and the Canadian Oil and Gas Evaluation Handbook ("COGEH") reserve definitions.

Forecast Prices and Costs
	Light and Medium Crude Oil		Heavy Oil		Natural Gas Liquids
Reserve Category	Gross ⁽¹⁾	Net ⁽²⁾	Gross ⁽¹⁾	Net ⁽²⁾	Gross ⁽¹⁾	Net ⁽²⁾
	(Mbbl)	(Mbbl)	(Mbbl)	(Mbbl)	(Mbbl)	(Mbbl)
Proved
Developed Producing	815.0	721.0	10,019.9	8,285.6	1,803.4	1,215.6
Developed Non-Producing	48.2	45.9	1,437.8	1,194.9	413.0	278.7
Undeveloped	369.3	313.4	6,067.3	5,123.7	344.7	240.5
Total Proved	1,232.5	1,080.3	17,525.0	14,604.2	2,561.1	1,734.9
Probable	733.9	615.8	17,830.5	14,723.3	1,047.1	717.7
Total Proved Plus Probable	1,966.4	1,696.1	35,355.4	29,327.4	3,608.2	2,452.5
Total Proved Plus Probable Developed Producing	1,043.4	916.2	13,605.7	11,170.1	2,225.4	1,500.5

	Forecast Prices and Costs
	Natural Gas		Oil Equivalent⁽³⁾
Reserve Category	Gross ⁽¹⁾	Net ⁽²⁾	Gross ⁽¹⁾	Net ⁽²⁾
	(MMcf)	(MMcf)	(Mboe)	(Mboe)
Proved
Developed Producing	46,905.3	39,570.8	20,455.8	16,817.3
Developed Non-Producing	7,807.9	6,386.3	3,200.3	2,583.9
Undeveloped	7,427.0	6,221.7	8,019.2	6,714.6
Total Proved	62,140.2	52,178.8	31,675.2	26,115.7
Probable	29,431.0	24,293.4	24,516.6	20,105.6
Total Proved Plus Probable	91,571.2	76,472.2	56,191.8	46,221.3
Total Proved Plus Probable Developed Producing	58,245.7	49,001.5	26,582.1	21,753.8

⁽¹⁾"Gross" reserves means the total working interest share of remaining recoverable reserves owned by Twin Butte before deductions of royalties payable to others.
⁽²⁾"Net" reserves means Twin Butte gross reserves less all royalties payable to others.
⁽³⁾"Oil Equivalent" amounts have been calculated using a conversion of six thousand cubic feet of natural gas to one barrel of oil. BOEs may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6 mcf: 1 bbl, utilizing a conversion ratio of 6 Mcf: 1 bbl may be a misleading indication of value.
⁽⁴⁾Numbers in tables may not add due to rounding

Summary of Net Present Value of Future Net Revenue As at December 31, 2012 Before Income Taxes and Discounted at (%/year)
Reserve Category	0%	5%	10%	15%	20%
	($000s)	($000s)	($000s)	($000s)	($000s)
Proved
Developed Producing	425,314.0	363,152.1	327,629.8	303,425.0	285,129.3
Developed Non-Producing	85,280.5	56,920.9	43,879.7	35,948.2	30,414.3
Undeveloped	159,368.7	123,164.2	97,931.7	79,323.4	65,112.8
Total Proved	669,963.2	543,237.2	469,441.2	418,696.5	380,656.3
Probable	681,826.4	489,439.9	387,158.4	318,138.0	267,379.8
Total Proved Plus Probable	1,351,789.5	1,032,677.1	856,599.6	736,834.5	648,036.1
Total Proved Plus Probable Developed Producing	606,919.2	487,058.0	430,294.0	393,399.8	365,860.2

Reserve Reconciliation

Reconciliation of Gross Company Interest Reserves ^{(1) (2)(4)} By Principal Product Type Forecast Prices and Costs
	Light and Medium Crude Oil			Heavy Oil
	Proved (Mbbl)	Probable (Mbbl)	Proved + Probable (Mbbl)	Proved (Mbbl)	Probable (Mbbl)	Proved + Probable (Mbbl)
December 31, 2011	1,402.7	614.2	2,016.9	6,788.1	8429.9	15,218.0
Discoveries, Extensions
and Improved Recoveries	148.5	307.3	455.8	3191.3	1512.2	4,703.5
Technical Revisions	(43.1)	(163.7)	(206.8)	(316.2)	(574.4)	(890.6)
Technical Rev - Price Change	0	(10.5)	(10.5)	0	0	0
Acquisition and Dispositions	(4.2)	(13.4)	(17.6)	12,013.7	8462.8	20,476.5
Production	(271.4)	0	(271.4)	(4,151.9)	0	(4,151.9)
December 31, 2012	1,232.5	733.9	1,966.4	17,525.0	17,830.5	35,355.5

	Natural Gas Liquids			Natural Gas Including Solution Gas
	Proved (Mbbl)	Probable (Mbbl)	Proved + Probable (Mbbl)	Proved (MMcf)	Probable (MMcf)	Proved + Probable (MMcf)
December 31, 2011	1,556.4	646.1	2,202.5	67,068.6	30,026.1	97,094.7
Discoveries, Extensions
and Improved Recoveries	0	0	0	198.7	526.3	725.0
Technical Revisions	1,079.9	408.9	1,488.8	(721.1)	(1,130.6)	(1,851.7)
Technical Rev - Price Change	0	(11.0)	(11.0)	(996.3)	(1,964.0)	(2,960.3)
Acquisitions and Dispositions	20.2	3.1	23.3	1,717.6	1,973.2	3,690.8
Production	(95.4)	0	(95.4)	(5,127.3)	0	(5,127.3)
December 31, 2012	2,561.1	1047.11	3,608.2	62,140.2	29,431.0	91,571.2

	Oil Equivalent ⁽³⁾
	Proved (Mboe)	Probable (Mboe)	Proved + Probable (Mboe)
December 31, 2011	20,925.3	14,694.5	35,619.9
Discoveries, Extensions
and Improved Recoveries	3,372.9	1,907.2	5,280.1
Technical Revisions	600.4	(517.7)	82.6
Technical Rev - Price Change	(166.1)	(348.8)	(514.9)
Acquisitions and Dispositions	12,316.0	8,871.4	21,097.3
Production	(5,373.3)	0	(5,373.3)
December 31, 2012	31,675.2	24,516.6	56,191.8

⁽¹⁾Gross Company interest reserves include solution gas but do not include royalty
⁽²⁾Reserve information as at December 31, 2010 and 2011 is prepared in accordance with NI 51-101
⁽³⁾Oil equivalent amounts have been calculated using a conversion of six thousand cubic feet of natural gas to one barrel of oil. BOEs may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6 mcf: 1 bbl, utilizing a conversion ratio of 6 Mcf: 1 bbl may be a misleading indication of value.
⁽⁴⁾Numbers in tables may not add due to rounding

Capital Expenditures⁽¹⁾

Type						2012 Capital Expenditures $(000's)

Land						59
Seismic						879
Drilling & Completions						37,291
Equipping & Facilities						14,485
G&A and Other						5,678
Total Development Costs						58,392

Acquisition - Emerge						194,292
Acquisition - Waseca						134,972
Acquisition - Avalon						99,128
Acquisition - Wildmere						20,454
Acquisition - Swimming						14,046
Dispositions						(7,429)
Total A&D						455,463

Total Capital						513,855

⁽¹⁾Capital numbers are unaudited and subject to change

Capital Program Efficiency

	2012	2011	2010	Three Year Average 2010 - 2012
Excluding Future Development Cost

FD&A cost - Proved ($/boe)
Additions and revisions ⁽¹⁾	15.34	51.32	10.63	18.22
Acquisitions & Dispositions	36.98	18.13	4.52	32.78
Total	31.87	73.40	8.62	26.90
FD&A costs - Proved plus probable ($/boe)
Additions and revisions ⁽¹⁾	12.04	34.67	7.04	12.92
Acquisitions & Dispositions	21.59	9.54	3.35	19.85
Total	19.81	61.08	5.91	17.31

Operating netback per boe ⁽²⁾	29.14	25.39	20.81	26.25
Recycle ratio ⁽²⁾
Proved plus probable	1.5	0.4	3.5	1.5


Including Future Development Costs

FD&A costs - Proved ($/boe)⁽³⁾
Additions and revisions ⁽¹⁾	19.52	42.64	13.36	19.96
Acquisitions & Dispositions	39.71	18.13	16.17	37.01
Total	34.94	58.95	14.28	30.10
FD&A costs - Proved plus probable ($/boe)⁽³⁾
Additions and revisions ⁽¹⁾	18.18	32.65	9.68	16.16
Acquisitions & Dispositions	25.33	9.54	12.29	24.43
Total	24.00	56.95	10.48	21.38

Operating netback per boe ⁽²⁾⁽³⁾	29.14	25.39	20.81	26.25

Recycle ratio ⁽²⁾
Proved plus probable	1.2	0.5	2.0	1.2

⁽¹⁾The aggregate of the additions and revisions costs incurred in the most recent financial year and the change during that year in estimated future development costs generally will not reflect total finding and development costs related to reserve additions for that year.
⁽²⁾Recycle ratio is calculated as operating netback divided by FD&A costs (proved plus probable). Operating netback is calculated as revenue (including realized hedging gains and losses) minus royalties, production and operating expenses and transportation expenses.
⁽³⁾Oil equivalent amounts have been calculated using a conversion of six thousand cubic feet of natural gas to one barrel of oil. BOEs may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6 mcf: 1 bbl, utilizing a conversion ratio of 6 Mcf: 1 bbl may be a misleading indication of value.

Under NI 51-101, the methodology to be used to calculate FD&A costs includes incorporating changes in future development capital required to bring the proved undeveloped and probable reserves to proved producing status. For continuity, Twin Butte has presented FD&A costs calculated both excluding and including FDC. Changes in forecast FDC occur annually as a result of development, acquisition and disposition activities and capital cost estimates that reflect the independent evaluators best estimate of what it will cost to bring the proved undeveloped and probable reserves on production.

Reserve Life Index

The following table sets forth Twin Butte's reserve life index based on total proved and proved plus probable reserves and actual Q4 2012 production of 17,531 boe/d.

	Reserve Life Index (years)
	Production	Total Proved	Proved Plus Probable
Oil and NGL (bbl/d)	15,336	3.8	7.3
Natural Gas (mcf/d)	13,173	12.9	19.0
Oil Equivalent (boe/d)	17,531	5.0	8.8

McDaniel December 31, 2012 Forecast Prices

Select Summary Pricing and Inflation Rate Assumptions (Forecast Prices)

Year	WTI Crushing US$	Edmonton Par Price C$/bbl	Alberta Heavy 12^o API C$/bbl	AECO Spot C$/MMbtu	Inflation Rate %/Yr	Exchange Rate $US/$Cdn
2012 act	94.25	85.95	64.45	2.40	2.0	1.000
2013	92.50	87.50	65.60	3.35	2.0	1.000
2014	92.50	90.50	67.90	3.85	2.0	1.000
2015	93.60	92.60	69.50	4.35	2.0	1.000
2016	95.50	94.50	70.90	4.70	2.0	1.000
2017	97.40	96.40	72.30	5.10	2.0	1.000
2018	99.40	98.30	73.70	5.45	2.0	1.000
2019	101.40	100.30	75.20	5.55	2.0	1.000
2020	103.40	102.30	76.70	5.70	2.0	1.000
2021	105.40	104.30	78.20	5.80	2.0	1.000
2022	107.60	106.50	79.90	5.90	2.0	1.000

Future Development Costs (Undiscounted)

Year	Proved Reserves ($000s)	Proved Plus Probable Reserves ($000s)
2013	31,399	65,002
2014	27,935	67,745
2015	33,598	63,362
2016	27,600	56,681
2017	1,833	2,310
Remaining	1,073	6,746

Total (Undiscounted)	123,438	261,846

Net Asset Value

The following net asset value ("NAV") table shows a NAV calculation under which the Company's reserves would be produced at forecast future prices and costs. The value is a snapshot in time and is based on various assumptions, including commodity prices and foreign exchange rates that vary over time. It should not be assumed that the NAV per share represents the fair market value of Twin Butte shares. The calculations below do not reflect the value of the Company's prospect inventory to the extent that the prospects are not recognized within the NI 51-101 compliant reserve assessment.

Using Twin Butte's Reserve Value at December 31, 2012 - Forecast Pricing and Costs (Pre tax)

($MM except as noted)						10% Before Tax
Proved plus Probable Reserve Value						856.6
Undeveloped Land Value ⁽¹⁾						84.0
Net Debt⁽²⁾						(201.1)
Option Proceeds						2.4
Basic Shares Outstanding (MM)						248.3
Estimated Net Asset Value $ per Share - Basic						$2.98
Fully Diluted Shares Outstanding (MM)						253.4
Estimated Net Asset Value $ per Share - Fully Diluted						$2.93

(1) Independent assessment of 441,695 net undeveloped acres at average price of $190/acre.
(2) Net debt unaudited and subject to change

Twin Butte significantly grew all aspects of its business in 2012 through the execution of a focused organic drilling program as well as the completion of five strategic acquisitions. The organic drilling program of $58.4 million, which included the drilling of 95 gross (77 net) locations at a 96 percent success rate, replaced 90 percent of the 5.4 million boe's the Company produced in 2012. This high replacement ratio while only spending 43 percent of Twin Butte's 2012 cash flow demonstrates the Company's strong capital efficiency. This organic drilling and recompletion program generated total proved plus probable finding and development ("F&A") costs of $18.18 per boe including changes in future development costs, representing a 1.6 times organic recycle ratio based on 2012 operating netbacks of $29.14 per boe.

In addition to the organic program, Twin Butte completed three corporate and two asset acquisitions (summarized below) as well as two non-core dispositions for a total cost of $455.5 million. These acquisitions materially grew Twin Butte's production, cash flow, and reserves, as well as significantly expanded its undeveloped land position in its core heavy oil operating area at Lloydminster. Excluding the value of the undeveloped land acquired the overall proved plus probable acquisition and divestiture costs were $22.61 per boe including changes in future development costs, representing a 1.3 times recycle ratio. The Company added approximately 190,000 net undeveloped acres in Lloydminster increasing its undeveloped land from approximately 30,000 net acres at the end of 2011 to approximately 220,000 net undeveloped acres at the end of 2012. These lands will provide Twin Butte with the ability to continually add to its drilling inventory for many years.

TBE 2012 Acquisition Summary - Effective Date and Land Impact


	Dec 31, 2012 (Mboe)		Production from Effective Date (Mboe)	Effective Date	Effective Date (Mboe)		Acqusition Price (MM$)	Undeveloped Land
	TP	2P			TP	2P		Acres	MM$	($/acre)

Emerge	5.0	8.8	-2.1	Jan 9	7.1	10.9	194.3	50,372	12.2	243

Swimming	0.3	0.6	-0.1	Apr 1	0.4	0.7	14.0	12,831	5.1	399

Avalon	1.6	2.7	-0.5	Sep 1	2.0	3.1	99.1	180,378	23.3	129

Wildmere	0.7	1.2	-0.1	Jul 1	0.8	1.2	20.5	5,495	2.2	404

Waseca	2.5	5.2	-0.2	Nov 1	2.7	5.4	135.0	44,274	14.6	329
	10.1	18.4	-2.962		13.1	21.4	462.9	293,350	57.5	196

The overall 2012 capital plan (organic and acquisitions) of $513.9 million generated total proved plus probable finding, development and acquisition ("FD&A") costs of $24.00 per boe including changes in future development costs.

Outlook

Twin Butte's strategy of moderate growth while paying a sustainable dividend has and will continue to work. With year end 2012 debt of approximately $201 million and anticipated 2013 cash flow in excess of $130 million, the Company is well financed to complete its forecast 2013 capital plan of $85 million maintaining an all in payout ratio of under 100 percent. The Company will continue to match its capital plan to forecast cash flow less dividends. Recent positive movement in both oil pricing and the light to heavy oil differentials, combined with the Company's strong hedge position, allows Twin Butte to remain confident in the long term sustainability of the dividend and anticipates a possible expansion to its capital plan.

Twin Butte is a value oriented, intermediate producer with a significant and growing scalable and repeatable inventory focused on large original oil in-place conventional heavy oil exploitation. With a stable low decline production base the Company is well positioned to live within cash flow while providing shareholders with a sustainable dividend and moderate production growth potential over the long term.

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