Twin Butte Energy becomes a medium oil producer
Twin Butte Energy (TBE) reported it's third quarter results on November11,2015 and came out with a follow-up press release on January15,2016.Twin Butte announced that funds flow was down from Q3 in 2014 and at the same time they were using a consultant to examine strategic alternatives for the future of Twin Butte Energy.Funds flow for the quarter were $33 million or $.09 per share;this is down from about $120 million in the same quarter of 2014.Like all junior oil producers it has cut it's capital program;in fact it cut it from $120 million to about $90 million.However unlike many other juniors it will spend on it's capital program more than it's cash flow.Companies like Penn West and Pengrowth are planning to spend only $50 to $70 million which will all be internally paid for.Twin Butte will spend more than many juniors while only generating $33 million from funds flow.This is in line with their plan to restructure the company from a heavy oil producer to a medium oil producer.This blog also believes that TBE has a lot of property in a very rich oilfield in Provost, Alberta and wants to continue drilling because the oil-field economics are encouraging,even at these oil prices.TBE is no more optimistic about the future oil price than any of the other juniors but it's oilfield offers a rare opportunity to increase production while decreasing costs.
Drilling Program
Twin Butte bought a small privately controlled company called Blachshire in 2013.Before this it had been strictly a heavy oil producer but now had acquired a medium oil producer and began transitioning towards producing more medium gravity oil.In Q3 TBE produced 54% of it's total as medium gravity oil;this was up from 42% in Q3 2014.It also brought on 6 new wells at it's Sparky play which was in Provost,Alberta newly acquired from Blackshire.These Sparky wells had production rates of on average 725 barrels per day.This is production ahead of the type curve.They also brought on 5 new wells at their Lloydminster property;it had production of only 480 barrels per day.The difference in the rate is because Twin Butte discovered the properties at Provost have multiple layers of hydrocarbons.So the ordinary rate for a new well should be around 600 barrels per day but TBE was sometimes getting 750 to 800 barrels per day.
Twin Butte drilled 6 new wells in Provost and got 5 new producing wells in the fourth quarter.All are producing better than the type curve.TBE says that "new technology in the oil rich Provost and Llyodminster areas is reducing costs".But this blog believes the new technology is more applicable to the Provost area.Consequently Twin Butte also says that "average well costs continue to fall and average per well productivity has increased."This I feel is the reason that TBE has a capital program of $90 million which is more than that of either Pengrowth or Penn West.
Conclusion
Twin Butte gave guidance in 2014 that it would produce 22,000 to 23,000 barrels per day.But in Q3 2015 it only produced 16,300 barrels per day.That is because of the reduction in oil prices but instead of cutting back all production it decided to focus on its' Provost medium oil deposits.It looks like Twin Butte has discovered multiple layers of oil and gas here.This was mentionned several times in 2014 reports.Consequently the Twin Butte capital program is bigger than that of other junior producers with more resources.
Twin Butte says that "Twin Butte has good cash flow torque to a modest recovery in oil prices".And this blog agrees with that assessment.As the price of oil has recovered from the bottom Twin Butte has moved up significantly and it will continue to do so.In fact, this blog recommends that it even cut it's small dividend and put the extra capital into it's sucessful drilling program.Although the price of oil may fall back temporarily Twin Butte will likely move into the $.30 to $.40 area by the end of the first quarter. use Blogdaleupsome on Blogger.com for analysis of resource stocks; use Blogdaleupsome on Blogger.com for financial analysis
Drilling Program
Twin Butte bought a small privately controlled company called Blachshire in 2013.Before this it had been strictly a heavy oil producer but now had acquired a medium oil producer and began transitioning towards producing more medium gravity oil.In Q3 TBE produced 54% of it's total as medium gravity oil;this was up from 42% in Q3 2014.It also brought on 6 new wells at it's Sparky play which was in Provost,Alberta newly acquired from Blackshire.These Sparky wells had production rates of on average 725 barrels per day.This is production ahead of the type curve.They also brought on 5 new wells at their Lloydminster property;it had production of only 480 barrels per day.The difference in the rate is because Twin Butte discovered the properties at Provost have multiple layers of hydrocarbons.So the ordinary rate for a new well should be around 600 barrels per day but TBE was sometimes getting 750 to 800 barrels per day.
Twin Butte drilled 6 new wells in Provost and got 5 new producing wells in the fourth quarter.All are producing better than the type curve.TBE says that "new technology in the oil rich Provost and Llyodminster areas is reducing costs".But this blog believes the new technology is more applicable to the Provost area.Consequently Twin Butte also says that "average well costs continue to fall and average per well productivity has increased."This I feel is the reason that TBE has a capital program of $90 million which is more than that of either Pengrowth or Penn West.
Conclusion
Twin Butte gave guidance in 2014 that it would produce 22,000 to 23,000 barrels per day.But in Q3 2015 it only produced 16,300 barrels per day.That is because of the reduction in oil prices but instead of cutting back all production it decided to focus on its' Provost medium oil deposits.It looks like Twin Butte has discovered multiple layers of oil and gas here.This was mentionned several times in 2014 reports.Consequently the Twin Butte capital program is bigger than that of other junior producers with more resources.
Twin Butte says that "Twin Butte has good cash flow torque to a modest recovery in oil prices".And this blog agrees with that assessment.As the price of oil has recovered from the bottom Twin Butte has moved up significantly and it will continue to do so.In fact, this blog recommends that it even cut it's small dividend and put the extra capital into it's sucessful drilling program.Although the price of oil may fall back temporarily Twin Butte will likely move into the $.30 to $.40 area by the end of the first quarter. use Blogdaleupsome on Blogger.com for analysis of resource stocks; use Blogdaleupsome on Blogger.com for financial analysis
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