News Out-Twin Butte cuts 2015 budget, drops dividend to one Twin Butte cuts 2015 budget, drops dividend to one cent
Ticker Symbol: C:TBE
Twin Butte cuts 2015 budget, drops dividend to one cent
Twin Butte Energy Ltd (2) (C:TBE)
Shares Issued 349,991,291
Last Close 12/17/2014 $0.90
Thursday December 18 2014 - News Release
Mr. Jim Saunders reports
TWIN BUTTE ANNOUNCES REVISED 2015 CAPITAL PLAN AND DIVIDEND REDUCTION
The industry has seen a significant drop in oil pricing over the last seven weeks, which even with Twin Butte Energy Ltd.'s strong hedge position could negatively impact the company's cash flow for 2015. To ensure the viability of the Company's business plan and to position for potential business opportunities a market downturn may bring, a reduction in both the 2015 capital plan and the dividend is being implemented. The Company's Board of Directors has approved a $40 million (22%) reduction in the 2015 capital budget and a 37.5% reduction to the monthly dividend. Beginning with the January 2015 dividend payable in February 2015, the modified dividend will be $0.01 per share ($0.12 per share annualized). Twin Butte will also be suspending both the DRIP and SDP plans at the same time. These changes will reduce the Company's annual cash outlay by $58.7 million while also reducing the issuance of approximately $6.8 million worth of equity from the suspension of the DRIP and SDP plans. Twin Butte's long term business plan of providing shareholders with total returns comprised of both income and moderate growth is and will remain the Company's focus. Twin Butte has always committed to maintain a payout ratio of 100% or less, matching its capital plan and dividends to anticipated cash flow, which provides long term corporate sustainability. Since converting to a dividend paying corporation in January 2012, Twin Butte has been financially disciplined to protect the company's balance sheet and provided financial flexibility, having demonstrated this through maintaining a total payout ratio of 92.5%.
In November as part of Twin Butte's press release announcing third quarter 2014 financial results, the Company set its 2015 capital plan at $160 million. This plan was predicated on the assumption that commodity prices would average $US 80 WTI for calendar 2015. Because of the unpredicted decline in oil prices since that time, Twin Butte's amended plans are now based on a budgeted $US 60 WTI per bbl in 2015. Therefore Twin Butte now anticipates a capital program of $120 million ($40 million reduction) in 2015. Under the reduced capital plan, the Company's focus on increasing production from the higher value, more predictable decline, medium barrel Provost area assets will accelerate, ensuring corporate netbacks are maximized even under the current low commodity prices. The first half 2015 capital plan ($55 million) will focus on following up successful second half 2014 Sparky, Dina-Cummings and Lithic channel drilling results. The program includes the drilling of 26 total wells (21 at Provost, 5 on Heavy oil asset) and the construction of 3 new facilities at Provost to enhance oil processing and water handling capacity, and decrease long term decline. These investments will position the company to accelerate activity and increase production when commodity prices improve.
The Company's current hedge position for 2015 is providing significant protection for 2015 cash flow with 11,750 bbls per day hedged for the first half at over $80 WCS (based on WTI of approximately $100 per bbl) and 6,000 bbls per day for the second half of 2015 at $79.67 WCS. At a $60 WTI price, approximately 1000 bbls per day of Twin Butte's historic higher operating cost heavy oil production will not generate positive cash flow and is selectively being shut-in during this period of low oil prices.Based on anticipated 2015 average production of 19,100 boe per day, the Company anticipates a cash flow of $170 million leading to an all-in payout ratio of 95%. This cash flow is based on the $US 60 WTI, a WTI to WCS differential of $US $17.00, and a 0.855 CDN/US dollar exchange rate. The Company will continually monitor industry conditions and should conditions dictate, make further adjustments to the Company's capital plan. Twin Butte has recently completed a review of the Company's asset lending base with its syndicate of lenders who have reconfirmed its current $365 million facility until its next review date in May 2015. Twin Butte anticipates its year end 2014 net debt will be approximately $360 million comprised of its $85 million convertible debenture and approximately $280 million of its term facility. This provides the Company with approximately $85 million of liquidity on the bank facility.
Although Twin Butte remains optimistic on the recovery of oil prices the capital and dividend changes being instituted will ensure the protection of the Company's balance sheet and business plan, providing maximum financial flexibility. Should oil prices increase above these budget levels the Company will initially apply free cash flow to reduce bank debt and subsequently allocate to a higher capital plan or dividend increase.
We seek Safe Harbor.