Twin Butte closes buy of PE-backed Black Shire Energy for $358 mln

Calgary-based Twin Butte Energy Ltd (TSX: TBE) has closed its previously announced acquisition of oil and gas producing company Black Shire Energy Inc for $358 million, which includes the assumption of $108 million in debt. Calgary’s Black Shire, which is focused on its Provost oil field project in eastern Alberta, was formed in 2010 with the backing of U.S. energy-focused private equity firm Lime Rock Partners. With the closing of the transaction, Lime Rock holds a minority investment stake in Twin Butte.


Twin Butte Energy completes acquisition of private oil producer

CALGARY, Nov. 5, 2013 /CNW/ – Twin Butte Energy Ltd. (TSX: TBE) (“Twin Butte” or the “Company”) is pleased to announce that the acquisition of Black Shire Energy Inc. (“Black Shire”) pursuant to a plan of arrangement under the Business Corporations Act (Alberta) was completed today (the “Acquisition”) for total consideration of approximately $358.0 million, including the assumption of approximately $107.6 million of net debt. Total cash of $138 million was allocated to former Black Shire shareholders along with the issuance of approximately 54.0 million common shares to acquire all of the outstanding securities of Black Shire. After giving effect to the Acquisition and the conversion of all of the subscription receipts discussed below, approximately 342.1 million common shares of Twin Butte are outstanding.

Black Shire, which was amalgamated with Twin Butte following the completion of the Acquisition, was a private company with a focused asset base in the greater Provost area, producing approximately 7,000 boe per day (93 percent medium gravity oil). The greater Provost area is directly adjacent to Twin Butte’s core Lloydminster heavy oil area. Black Shire was an attractive acquisition for Twin Butte in that it has demonstrated its ability to generate substantial free cash flow while developing its large and low risk horizontal drilling inventory, providing growth in production and reserves. Twin Butte believes that the Acquisition strategically supports Twin Butte’s dividend model and enhances the Company’s long term dividend sustainability.

The Acquisition is accretive to Twin Butte on all key metrics, especially cash flow per share. The Acquisition is consistent with Twin Butte’s historic strategy of acquiring quality long life assets, with large resource potential within focus areas where Twin Butte has expertise. Twin Butte’s strategy of providing shareholders with long term total returns comprised of both income and moderate growth is expected to be strengthened through the Acquisition by:

— Reducing Twin Butte’s anticipated annual production decline rate from 29 percent to 26 percent;

— Enhancing Twin Butte’s netback from current levels of $22 to $27 per boe; and

— Increasing Twin Butte’s liquids production weighting from 88 to 91 percent.

The Acquisition was partially funded through a bought deal public financing (the “Offering”) through a syndicate of underwriters led by Peters & Co. Limited. Pursuant to the Offering, Twin Butte issued 35,989,000 subscription receipts (“Subscription Receipts”) at a price of $1.95 per Subscription Receipt for gross proceeds of approximately $70 million. In accordance with their terms, each Subscription Receipt was exchanged for one common share of the Company upon the closing of the Acquisition and the proceeds from the sale of the Subscription Receipts were released from escrow. Holders of Subscription Receipts are not required to take any action in order to receive the common shares to which they are entitled.

Twin Butte is also pleased to announce that the Company’s combined production is now approximately 23,200 boe per day (91 percent oil and liquids), with net debt estimated at $367 million or approximately 1.7 times Twin Butte’s estimated 2014 cash flow, on an increased $400 million credit facility.

The Company will be releasing its third quarter financial and operating results after market close on November 14, 2013. An updated copy of the Company’s investor presentation has been posted on the Company’s website.

About Twin Butte

Twin Butte is a growing, value oriented intermediate producer with a significant low risk, high rate of return drilling inventory focused on large original oil in place medium and heavy oil pool exploitation. With a stable low decline production base, Twin Butte is well positioned to live within cash flow while providing shareholders a sustainable dividend and moderate per share production growth potential over both the short and long term. Twin Butte is committed to continually enhance its asset quality while focusing on the sustainability of its dividend. The Twin Butte Shares are listed on the TSX under the symbol “TBE”.

Reader Advisory

Forward-Looking Statements

In the interest of providing Twin Butte’s shareholders and potential investors with information regarding Twin Butte, including management’s assessment of the future plans and operations of Twin Butte, certain statements contained in this news release constitute forward-looking statements or information (collectively “forward-looking statements”) within the meaning of applicable securities legislation. Forward-looking statements are typically identified by words such as “anticipate”, “continue”, “estimate”, “expect”, “forecast”, “may”, “will”, “project”, “could”, “plan”, “intend”, “should”, “believe”, “outlook”, “potential”, “target” and similar words suggesting future events or future performance. In particular, this news release contains, without limitation, forward-looking statements pertaining to the following: expectations of management regarding the proposed Acquisition, Twin Butte’s expectation to develop a new core operating area as a result of the Acquisition, the expected effects of the cash-flow associated with Black Shire’s assets and the effect of the same on Twin Butte’s business, including its growth plans, its dividend and the sustainability of the same, potential synergies resulting from the Acquisition, the effect of the Acquisition on Twin Butte’s production, reserves, decline rate, netback and liquids production weighting.

With respect to forward-looking statements contained in this news release, Twin Butte has made assumptions regarding, among other things: the ability of Twin Butte to execute and realize on the anticipated benefits of the Acquisition; expectations and assumptions concerning prevailing commodity prices, exchange rates, interest rates, applicable royalty rates and tax laws; future production rates and estimates of operating costs; performance of existing and future wells; reserve and resource volumes; anticipated timing and results of capital expenditures; the success obtained in drilling new wells; the sufficiency of budgeted capital expenditures in carrying out planned activities; the timing, location and extent of future drilling operations; the state of the economy and the exploration and production business; results of operations; performance; business prospects and opportunities; the availability and cost of financing, labor and services; the impact of increasing competition; Twin Butte’s ability to market oil and natural gas successfully; Twin Butte’s ability to access capital; and certain regulatory approvals and procedures.

Although Twin Butte believes that the expectations reflected in the forward looking statements contained in this news release, and the assumptions on which such forward-looking statements are made, are reasonable, there can be no assurance that such expectations will prove to be correct. Readers are cautioned not to place undue reliance on forward-looking statements included in this news release, as there can be no assurance that the plans, intentions or expectations upon which the forward-looking statements are based will occur. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur, which may cause Twin Butte’s actual performance and financial results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things, the following: failure to realize the anticipated benefits and synergies of the Acquisition and/or previous acquisitions; the general economic conditions in Canada, the U.S. and globally; and the other factors described under “Risk Factors” in Twin Butte’s most recently filed Annual Information Form available in Canada at Readers are cautioned that this list of risk factors should not be construed as exhaustive.

The forward-looking statements contained in this news release speak only as of the date of this news release. Except as expressly required by applicable securities laws, Twin Butte does not undertake any obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this news release are expressly qualified by this cautionary statement.

Barrels of Oil Equivalent

Barrels of oil equivalent (boe) are calculated using the conversion factor of 6 Mcf (thousand cubic feet) of natural gas being equivalent to one barrel of oil. Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf: 1 bbl (barrel) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.

Future Oriented Financial Information

This news release, in particular the information in respect of Twin Butte’s estimated 2014 cash flow, contains Future Oriented Financial Information (“FOFI”) within the meaning of applicable securities laws. The FOFI has been prepared by management of the Company to provide an outlook of the Company’s activities and results. The FOFI has been prepared based on a number of assumptions including the assumptions discussed under the heading “Forward-Looking Statements” and assumptions with respect to production rates, operating costs, royalties and commodity prices. The actual results of operations of the Company and the resulting financial results may vary from the amounts set forth herein, and such variation may be material. The Company and its management believe that the FOFI has been prepared on a reasonable basis, reflecting management’s best estimates and judgments.

Non–GAAP Measures

This news release contains the terms “net debt” and “netback” which do not have a standardized meaning prescribed by Canadian generally accepted accounting principles (“GAAP”) and therefore may not be comparable with the calculation of similar measures by other companies. These measures have been described and presented in this news release in order to provide shareholders and potential investors with additional information regarding the Company’s liquidity and its ability to generate funds to finance its operations and dividends. Net debt in this news release, as it relates to Black Shire, means Black Shire’s current assets (not including derivative assets or oil inventory) less current liabilities (not including derivative liabilities), long term debt and cash taxes payable by Black Shire but does not include any proceeds from the exercise of any stock options or performance warrants of Black Shire, in each case calculated in accordance with GAAP. Netback is calculated as the average per boe of the Company’s oil and gas sales, realized gains (losses) on derivatives, less royalties, operating and transportation expenses.

SOURCE Twin Butte Energy Ltd.

CONTACT: Twin Butte Energy Ltd.

Jim Saunders

President and Chief Executive Officer

Tel: (403) 215-2040

Fax: (403) 215-2055

R. Alan Steele

Vice President, Finance, Chief Financial Officer and Corporate Secretary

Tel: (403) 215-2692

Fax: (403) 215-2055


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