Twin Butte- wait for second quarter
A couple of weeks ago Twin Butte released it's 2013 annual and Q4 results.Results were mixed as it is trying to digest it's last acquisition.It bought a private company called Black Shire for $23.95 a b.o.e.per day or $356 million.This is a good price given the present price of oil.Twin Butte was producing mostly heavy gravity oil from Eastern Alberta and Sakatchewan.In November they acquired a medium gravity oil producer in Alberta.Now they have diversified their resources.They are not solely dependent on heavy oil and the Western Select oil price.The medium gravity oil sells for close to the WTI oil price;this produces higher netbacks for T.B.
Production in 2014
Total production was 14,681 b.o.e. per day on average for 2012.But that changed with the acquisition of Black Shire which had production of about 7000 barrels per day.Production for 2013 moved up to 17,505 barrels per day but Black Shire production was counted only since November.However in March total production was 23,000 barrels as predicted when they bought Black Shire.For the full year 2014 production should be around 24,000.
Twin Butte did a lot of drilling in 2013 in a variety of areas they have been exploring.They did drilling in Wildmere(Alta.)and Frog Lake(Alta.),Swimming (Alta.) as well as the Celtic field in Saskatchewan.The new field they acquired is in Provost, Alberta.Thye intend to do a lot more horizontal drilling (75 to 80%) in 2014 primarily in their new Provost field.In 2013 capital spending was $106 million with $29 million coming from asset dispositions.
Financials
Twin Butte did not put any debt measurements in so I cannot look at debt nor interest coverage but they do have a $252 credit facility left on their bank debt.However they have $362 million net debt including their debentures.They also got a issue of unsecured convertible debentures and a $70 equity issue to help finance the purchase of Black Shire.So debt does not seem to be too onerous.Maybe there will be enough credit left in the second or third quarter for another small acquisition.
The problem is that Twin Butte showed an annual net loss and a fourth quarter loss.They had funds flow of $140 million in 2013 but still had a big net loss.The net loss insures that taxes were minimal and interest charges on new debt would not be too large since November.And not large changes in depreciation and amortization from 2012.So in order for Twin Butte to have such a large net loss it means that Twin Butte probably took a large write-off on the acquisition of Black Shire.Perhaps $100 to $150 million to go from $140 million funds flow to a $116 million net loss.Twin Butte expects positive funds flow of $210 million for 2014 and this will produce positive earnings with only a moderate write-off.Twin Butte expects positive funds flow of $46 to $47 million in the first quarter.This could be enough to produce positive earnings in the first quarter but it depends on the write-off they take.Nevertheless Twin Butte should be showing positive earnings by the second quarter.This counts on annual production of 24,000 barrels per day for 2014 but T.B may get unexpected production from new fields they drilled in 2013.In particular,Frog Lake Alberta,Swimming and Celtic Saskatchewan may exceed T.B's present accounting of them .This may put annual production closer to 25,500 barrels per day.I guess we'll know by the second quarter but I am thinking T.B."s guidance to date is going to be low according to their operational update.
Production in 2014
Total production was 14,681 b.o.e. per day on average for 2012.But that changed with the acquisition of Black Shire which had production of about 7000 barrels per day.Production for 2013 moved up to 17,505 barrels per day but Black Shire production was counted only since November.However in March total production was 23,000 barrels as predicted when they bought Black Shire.For the full year 2014 production should be around 24,000.
Twin Butte did a lot of drilling in 2013 in a variety of areas they have been exploring.They did drilling in Wildmere(Alta.)and Frog Lake(Alta.),Swimming (Alta.) as well as the Celtic field in Saskatchewan.The new field they acquired is in Provost, Alberta.Thye intend to do a lot more horizontal drilling (75 to 80%) in 2014 primarily in their new Provost field.In 2013 capital spending was $106 million with $29 million coming from asset dispositions.
Financials
Twin Butte did not put any debt measurements in so I cannot look at debt nor interest coverage but they do have a $252 credit facility left on their bank debt.However they have $362 million net debt including their debentures.They also got a issue of unsecured convertible debentures and a $70 equity issue to help finance the purchase of Black Shire.So debt does not seem to be too onerous.Maybe there will be enough credit left in the second or third quarter for another small acquisition.
The problem is that Twin Butte showed an annual net loss and a fourth quarter loss.They had funds flow of $140 million in 2013 but still had a big net loss.The net loss insures that taxes were minimal and interest charges on new debt would not be too large since November.And not large changes in depreciation and amortization from 2012.So in order for Twin Butte to have such a large net loss it means that Twin Butte probably took a large write-off on the acquisition of Black Shire.Perhaps $100 to $150 million to go from $140 million funds flow to a $116 million net loss.Twin Butte expects positive funds flow of $210 million for 2014 and this will produce positive earnings with only a moderate write-off.Twin Butte expects positive funds flow of $46 to $47 million in the first quarter.This could be enough to produce positive earnings in the first quarter but it depends on the write-off they take.Nevertheless Twin Butte should be showing positive earnings by the second quarter.This counts on annual production of 24,000 barrels per day for 2014 but T.B may get unexpected production from new fields they drilled in 2013.In particular,Frog Lake Alberta,Swimming and Celtic Saskatchewan may exceed T.B's present accounting of them .This may put annual production closer to 25,500 barrels per day.I guess we'll know by the second quarter but I am thinking T.B."s guidance to date is going to be low according to their operational update.
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