Seeking Alpha on TBE - High Yield Twin Butte Energy
Twin Butte Energy (OTCPK:TBTEF) operates mostly in Eastern Alberta and Western Saskatchewan. It is heavily weighted to liquids with 91% of current production being oil. The company is making a transformation from heavy to medium oil. In its Q1 report, it claimed the company can fetch $15 to $20 bbl better premium for medium. 53% of production right now is heavy and 38% is medium, which should change in the near future, weighted much more to medium.
In the first quarter, the company completed its acquisition of Black Shire Energy, obtaining substantial land in the Provost area, which is mainly medium oil. Currently production in this area is about 7,000 boe/d with expectations of 9,500+ by year-end. In total, the company anticipates the drilling of 50 new wells on the Provost land in 2014.
(Source: Twin Butte website)
In 2014, the whole drilling plan calls for 63 medium oil wells and 40 heavy oil wells. The majority of the heavy oil production comes from the company's Lloydminster lands, which it has increased from no production at all in 2009 to over 12,000 boe/d today.
Since 2012 production has increased 50%, with liquids production changing from 84% of production to 91% of production.
Overall current production is about 22,000 boe/d, with a planned exit rate of just 22,500 due to higher decline rates than expected. Something positive, though, is that the company has about 60% of production hedged for 2014, so there are no immediate concerns over commodity pricing.
Twin Butte has a yield of about 12%, which is also very attractive, but for obvious reasons not the safest. Revenue for the year is estimated to be around $525 million, a 30% increase versus last year, and EPS for the year are estimated at 5 cents a share. The company is set to report its second quarter results on August 13th.
Analysts remain relatively bullish Twin Butte. 3 analysts have buy ratings, 8 outperform ratings, and 9 hold ratings. The average price target is $2.45, which would point to a 50% upside.