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January 2015
January,
Balance Sheet Strength
Fiscal Discipline
Accelerating Transition
TSX: TBE
www.twinbutteenergy.com
Corporate Snapshot
Deliver 10%+ average annual return (income and growth)
• Basic shares
352 MM
•
Oil leveraged production (90% liquids)
• Fully diluted
362 MM
•
Current production ~ 20,400 boe/d
(48% heavy oil*, 42% medium oil* &
NGL’s, 10% gas)
•
Base decline of 30-32 percent
•
Top quartile
T
til capital
it l efficiency
ffi i
(12
month) $20-25,000/boe/d
•
Strong hedging position
• Insiders own - Basic / FD
• Share price
3 2 /4
3.2
/4.5%
5%
$0.70
(as at Jan 19th)
•
Market cap
$246 MM
•
Enterprise value (1)
$602 MM
•
Annual dividend/yield
•
Average daily trading vol(2)
$0.12/ 17.1%
3.4MM
((1)) Net debt at September
p
30 $356MM includes $85MM 6.25%
Convertible Debentures
(2) 4 month average # of share trades
2
* Twin Butte differentiates between medium and heavy production
based on pricing.
pricing Medium barrels on average receive WCS
pricing while Heavy receives WCS less $5-10 Cdn to account for
diluent requirements
TSX: TBE
Focused with Fiscal Discipline
• Balance sheet supported by strong hedge book
- Approximately 50% of oil volumes hedged for 2015
• Expanding Inventory in Provost
- New Sparky & Lithic Channel plays
• Dividend
Di id d Payment
P
t (~17.1%
( 17 1% currentt yield)
i ld)
- $0.12 per share annually
3
TSX: TBE
Hedge Book Support
Oil Hedging Reduces Cash Flow Volatility
12,000
12 000
bbl/d hedge
ed
10,000
82 00
82.00
65%
80.00
67%
8 000
8,000
78 00
78.00
6,000
76.00
35%
35%
4 000
4,000
74 00
74.00
2,000
72.00
‐
70 00
70.00
Q1 2015
Q2 2015
Oil Volumes
4
84.00
$/bbl WCSS
14,000
Q3 2015
Q4 2015
$/bbl WCS
•
33% (4,000 gj/d) of 2015 gas volumes hedged at $3.77 per GJ ($3.95/mcf)
•
TBE is optimizing 35-40% of heavy oil volumes by accessing alternate markets via rail
•
Mark to market value of hedge book is $110 million as at Dec 31, 2014 based on average forward strip
TSX: TBE
2015 WTI of $US57.00/bbl
Financial & Operational Performance
2013 Actual
2014
Forecast*
2015**
Forecast
17,585
21,400
19,100
Liquids Production (%)
88
90
91
Capital expenditures (net
$MM)
77
139
120
Cash Dividend ($MM net of
DRIP)
47
60
42
$0.192
$0.192
$0.12
137
203
171
$0.52
$0.58
$0.48
Net Debt ($MM)
362
356
348
Payout ratio (%)
90
98
95
Average Production (boe/d)
Dividend per share
Cash Flow ($MM)
Cash Flow ($/share)
*Average
g 2014 p
pricing
g – ($
($US93.00 WTI ($
($C102.00),
), $
$78.50 WCS,, AECO $
$4.00/GJ,, 1.09 US/C))
** 2015 pricing - $US 60.00WTI, $50.25 WCS, AECO $3.40/gj. Cash flow estimates incl hedges
5
TSX: TBE
Focused Asset Base
Alberta
Saskatchewan
• 91% of Corporate production
• Shallow
– <850m TVD (2800 feet)
• Inexpensive
– DCE costs of $550-$1,500k
• Quick spud to on-stream times
Heavy
Provost
– Less than 45 days
• Multi-zone – oil rich area
• Repeatable
R
t bl prospects
t
6
TSX: TBE
Improving Barrel Quality
Average Per
Well Estimates
Provost
Dina/
Cummings
Provost
Sparky
Provost
Lithic
Heavy
Horizontals
Heavy
Verticals
D,C,E Capital
($k)
$900
$1,300
$1,300
$1,100
$550
IP365
(boed)
53
66
66
57
34
Capital Efficiency
(DCET / IP365)
$17,000
$19,700
$19,700
$19,300
$16,200
2P Reserves
(mboe)
65
80
80
65
30
F&D
($/boe)
$14
$16
$16
$17
$17
*Revenue per bbl
$69
$69
$69
$62
$62
Netback
($/boe)*
$50
$50
$50
$40
$23
Potential
Inventory
130+
100+
50+
50+
100+
IIndividual
di id l wellll economics
i
st
IP365 = 1 year average production
*$69/bbl WCS flat with offsets
7
TSX: TBE
Capital Allocation Transition
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2012
8
Accelerating focus on more
predictable, higher value barrels
2013
2014
2015
2016
2017
Vertical Convetional Heavy
Provost Dina/Cummings
Provost Sparky/Lithic Channels
Heavy Horizontals
2018
TSX: TBE
Capital Program Breakdown
•
Estimated 2015 Capital
($120 MM)
$21
$10
–
Select extensions and infills
–
Expand water handling
capacity – decline
management
–
Expand footprint on satellite
opportunities
$65
•
$24
•
9
Provost Dina Cummings
Provost Dina Cummings
Provost Dina Cummings
Provost Sparky
Provost Sparky
Provost Sparky‐Lithic
Heavy
Provost Sparky & Lithic
–
Select assessment and
development
–
Consolidate and expand
Heavy
–
Select horizontal single and
multileg development
TSX: TBE
Transition Grows Cash Flow
Cash Flow Growth as Medium Oil Weighting Increases
250.00
200.00
Cash FFlow $MM
150.00
100 00
100.00
50.00
0.00
$40
10
$50
$60
$70
$75
$80
41% M di
41% Medium
WCS pricing $/BBL 41% Hedge Adjusted
41%
H d Adj
d 45% Medium
45% M di
45% H d
45% Hedge adjusted
dj
d
50% Medium
50% Hedge Adjusted
55% Hedge Adjusted
55% Medium
TSX: TBE
Provost Oil Core Area
• Multi-zone potential
• Expanding land position
• >100 HZ wells drilled since 2010
• 2014 Netbacks >$50/boe
• @US$60 WTI forecasted 2015 netback
>$30/boe
Viking
~500m
Joli Fou Shale
Upper Mannville
Waseca
Sparky
Oil p
prone
intervals
GP
Rex
Lloydminster
2014 Activity ----
Cummings
Dina
11
Paleozoic
~850m
TSX: TBE
Provost Production History
10,000
- Predictable legacy base
Boed
- Material horizontal growth
Total Production
Pre‐2010 RR Wells
10% Decline
12
2016‐01
2015‐01
2014‐01
2013‐01
2012‐01
2011‐01
2010‐01
2009‐01
2008‐01
2007‐01
2006‐01
2005‐01
2004‐01
2003‐01
2002‐01
2001‐01
2000‐01
1,000
TSX: TBE
Provost Dina-Cummings
•
Extensive well and seismic
control
•
Large oil in place with high
recovery factors - “natural”
natural
water flood
•
2015
- Select extensions and infills
- Expand water handling
- Expand footprint
R3W4
D
I
A
E
LSD 16-5-40-3W4
E
EA
EA
A
EE
EA
G
J
AI
I
E
A
J
D
EA
E
J
EA
A
J
I
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E
EA
EA
EA
EA
2014 Activity
y ----
A
EE
J
I
A
S
A
E
A
J
AS
13
I
A
J
I
TSX: TBE
E
R3W4
Provost Dina-Cummings HZ Production
120
100
Oill Rate (bopd)
- Predictable average results
80
- Potential
P t ti l ffor positive
iti reserve provisions
i i
60
40
20
0
1
3
5
7
9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59
Months on Production
o t so
oduct o
2010 (10 wells)
2014 (47 wells)
14
2011 (13 wells)
55 mbbl
2012 (37 wells)
110 mbbl
2013 (15 wells)
TSX: TBE
Provost Sparky
• 7 wells drilled through 2014
• Strong initial results
• Decreasing DCE costs
• Expanding footprint
• Focused 1H 2015 development
• Long
L
tterm water
t flood
fl d potential
t ti l
Sparky Hz Production
120
Oil Rate (bopd)
100
80
60
40
20
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Months on Production
2014 (6 Wells)
15
2014 Activity ----
Type Well
TSX: TBE
Provost Lithic Channel Play
• Multiple, thick (>10m) oil charged
prospective channel siltstones intervals
crisscross TBE land base
• 3 wells drilled in 2014
• Encouraging initial productivity
• 2015
– Select 1H development
– Expanding footprint
TBE Lithic Channels Field Production
160
140
Oil Rate (bopd)
120
100
80
60
40
20
0
0
50
100
150
200
Days on production
Type Well
TSX: TBE
16
2014 Activity ----
Heavy Oil Core Area
25 km
Frog Lake
• Focus on low recovery predictable
reservoirs
Tangleflags
• 2015 1H focus
Swimming
Celtic
Heavy
- Improving cost structure
- Select single and multileg horizontals
Silverdale
• Water flood potential
Wildmere
• 35
35-40%
40% off production
d i moving
i on rail,
il
providing increased market access
Provost
Ear Lake
Primate
17
TSX: TBE
Conservative, Disciplined Business Model
• Debt/ cash flow forecasted to be ~2x for 2015 with US$60.0 WTI
• Long term focus on delivering total returns to shareholders via dividend
and moderate growth (target 10% combined yield plus growth)
• Monthly dividend at an annual rate of $0.12/year, with a conservative all
in payout ratio of 100%
• Total payout (dividend and capital) will not exceed cash flow
• Accelerating transition to higher netback, predictable, medium gravity oil
18
TSX: TBE
Appendix
19
TSX: TBE
Heavy Development
C
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Development
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A
• Existing
g horizontal and vertical
producers
• Asset acquired in October 2012
producing 420 boe/d, currently
producing ~ 1,800 boe/d
• Sparky redevelopment focus
• Nearing full primary development
(2015)
• Development plan combines
h i
horizontals
t l and
d verticals
ti l
TSX: TBE
Financial Sensitivity
2015 Payout Ratio adjusted for WCS and AECO Price Changes
AECO Price
($CAD/GJ)
$40 WCS
($CAD/bbl)
$50 WCS
($CAD/bbl)
$60 WCS
($CAD/bbl)
$70 WCS
($CAD/bbl)
$2.00
111%
97%
86%
77%
$2.50
110%
96%
85%
77%
$3.00
109%
96%
85%
77%
The above chart displays the changes in the Total Payout Ratio in the event of variations in the WCS and AECO
benchmarks, as denominated in $CAD. Other inputs the the payout ratio, including dividends ($0.01/share,
monthly) and capital spending ($120MM), were held flat during this sensitivity.
2015 Annualized Cash Flow Sensitivity and Assumptions
Input
Base Assumption
Sensitivity
CF Impact ($000)
Before hedging ($CAD)
CF Impact ($000)
After Hedging ($CAD)
Oil price - WTI ($US)
$60.00
+/- $1.00
6,330
2,480
WCS differential to WTI ($US)
$17 00
$17.00
+/- $1.00
+/
$1 00
6 260
6,260
1 980
1,980
Production (boe/d)
19,100
+/- 100
1,650
1,650
Exchange Rate
1.169
+/- 0.02
4,670
1,960
Due to the nature of our hedging program, the cash flow impact of changes in the WTI Benchmark, WCS benchmark, and the
$CDN/US exchange
h
rate
t is
i minimized
i i i d on an after-hedging
ft h d i basis.
b i The
Th annualized
li d sensitivities
iti iti above
b
are calculated
l l t db
based
d on
forecasts for 2015 and the hedging impacts are based on hedging currently in place for that time period.
21
TSX: TBE
Twin Butte Strategy
Deliver 10%+ average annual return (income and growth)
• Maintain
•
Production Base
•
Fi
Financial
i l Discipline
Di i li (P
(Payoutt ratio
ti <100%)
•
Debt/CF <1.8x
• Sustain
•
Dividend
•
Drilling Inventory (3-4 years)
•
O
Operational
Performance
f
Improvements
• Grow
22
•
Cash Flow
•
Production
TSX: TBE
Analyst Coverage
23
Company
Analyst
Target
Action
Acumen
Trevor Reynolds
y
$2.35
Spec Buyy
BMO Capital
Gordon Tait
$2.00
Market Perform
CIBC Capital
Jeremy Kaliel
$1.00
Sector Perform
GMP Securities
Stacey McDonald
$1.75
Buy
National Bank
Dan Payne
$1.75
Outperform
Octagon Capital
Nav Malik
$2.35
Buy
Paradigm Capital
Ken Lin
$1.00
Buy
Peters & Co
Dale Lewko
$1.25
Sector Outperform
RBC Capital
C it l
M kF
Mark
Friesen
i
$1 50
$1.50
S t Perform
Sector
P f
Scotia Capital
William Lee
$1.75
Sector Perform
TD Securities
Aaron Bilkoski
$0.90
Hold
TSX: TBE
Heavy Oil Differential
WCS USD Heavy Crude Oil Monthly Basis
$$(5)
USSD per Bbl
$(10)
$(15)
$(20)
Avg ‐ $20.66
$(25)
$(30)
$(35)
$(40)
•
•
Oct-14
Jul-14
Apr-14
Jan-14
Oct-13
Jul-13
Apr-13
Jan-13
Oct-12
Jul-12
Apr-12
Jan-12
Oct-11
Jul-11
Apr-11
Jan-11
$(45)
High medium & heavy oil IRRs and short payout periods will be enhanced from the longer term structural shift to
quality
y differentials from:
lower q
–
Increased refining capacity
–
Declining heavy oil production from Venezuela and Mexico
–
The differential volatility will be managed through an active hedging strategy
Rail car shipments and sales will help offset future pipeline restrictions and higher differentials
* WCS is the grade of oil best correlated to our heavy oil sales. Our heavy wellhead price is approximately $10 off of WCS to account for blending costs.
* WCS is the grade of oil best correlated to our medium oil sales. Our wellhead price is slightly higher that WCS.
24
TSX: TBE
Management and Board
• Jim Saunders
Chief Executive Officer (CEO)
• Rob Wollmann
President
• Alan Steele
Vice President, Finance & CFO
• David Middleton
Chief Operating Officer
• Claude Gamache
Vice President, Geosciences
• Gord Howe
Vice President, Land
• Preston Kraft
Vice President, Engineering
• Board of Directors
25
–
David Fitzpatrick, “Chairman”
–
Jim Brown
- Warren Steckley
–
John Brussa
- Bill Trickett
–
Tom Greschner
- Jim Saunders
TSX: TBE
Forward-Looking Statements
This presentation contains forward-looking statements under
applicable securities laws, including, in particular, statements
about Twin Butte Energy’s plans, strategies and prospects.
Although the Company believes that the expectations reflected in
these forward-looking statements are reasonable, such statements
are subject to known or unknown risks and uncertainties that may
cause actual results to differ materially from those anticipated or
achieved in the forward-looking statements.
26
TSX: TBE
“A Long Term Sustainable Model”
Jim Saunders - CEO
jsaunders@twinbutteenergy.com
Rob Wollmann – President
rwollmann@twinbutteenergy.com
Alan Steele – CFO
asteele@twinbutteenergy.com
TSX TBE
TSX:
www twinbutteenergy com
www.twinbutteenergy.com
410, 396 – 11th Avenue SW Calgary, Alberta T2R 0C5 Tel: 403-215-2045