News Releases

Bonterra Energy Corp. Announces First Quarter 2012 Results

May 10, 2012 - 05:30 ET

CALGARY, ALBERTA--(Marketwire - May 10, 2012) -

NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR DISSEMINATION IN THE UNITED STATES.

Bonterra Energy Corp. (Bonterra or the Company) (TSX:BNE) is pleased to announce its operating and financial results for the first quarter ended March 31, 2012. The related unaudited condensed consolidated financial statements and notes, as well as management's discussion and analysis, are available on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com and on Bonterra's website at www.bonterraenergy.com.

Highlights
As at and for the three months ended ($ 000s except $ per share)
March 31, 2012
December 31, 2011 March 31, 2011
FINANCIAL
Revenue - realized oil and gas sales 36,893 42,818 38,170
Funds flow (1) 22,307 26,001 27,266
Per share - basic 1.13 1.34 1.42
Per share - diluted 1.13 1.32 1.39
Payout ratio 69 % 58 % 51 %
Cash flow from operations 21,698 26,180 24,034
Per share - basic 1.10 1.35 1.25
Per share - diluted 1.10 1.33 1.22
Payout ratio 71 % 58 % 58 %
Cash dividends per share (2) 0.78 0.78 0.72
Net earnings 10,182 6,067 13,624
Per share - basic 0.52 0.31 0.71
Per share - diluted 0.51 0.31 0.69
Cash netback (3) 35.98 42.31 41.75
Capital expenditures and acquisitions net of dispositions 21,413 20,529 20,344
Total assets 371,757 364,176 357,000
Working capital deficiency 57,889 51,576 39,777
Long-term debt 75,543 69,916 70,568
Shareholders' equity 181,008 181,640 192,054
OPERATIONS
Oil - barrels per day 3,975 4,096 4,258
- average price ($ per barrel) 88.48 96.25 85.02
NGLs - barrels per day 419 493 338
- average price ($ per barrel) 60.29 59.46 55.23
Natural gas - MCF per day 12,260 12,541 10,517
- average price ($ per MCF) 2.32 3.34 4.12
Total BOE per day (4) 6,438 6,679 6,350
(1) Funds flow is not a recognized measure under IFRS. For these purposes, the Company defines funds flow as funds provided by operations including proceeds from sale of investments and investment income received excluding the effects of changes in non-cash operating working capital items and decommissioning expenditures settled.
(2) Cash dividends per share are based on payments made in respect of production months within the period ended.
(3) Cash netback is not a recognized measure under IFRS. Cash netback is oil and gas sales less royalties, production costs, general and administrative costs, interest and other expense on a per BOE basis.
(4) Barrels of oil equivalent (BOE) may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 MCF: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
Operational Highlights
  • Production in the first quarter of 2012 averaged 6,438 BOE per day. Production remained relatively flat when compared with the first quarter of 2011 and decreased approximately 3.6 percent quarter over quarter.
  • Production was negatively impacted by a number of shut-ins which included approximately 140 BOE per day due to multi-well pad drilling (existing producing wells on a pad must be shut-in when additional wells are drilled on that pad), completions and workovers and 75 BOE per day due to gas plant turnarounds for the quarter. The Company also felt the effects of gathering system pressure constraints due to increased industry activity straining infrastructure in Pembina causing the Company to restrict production. The issues are currently being addressed and their impact has been minimized. Bonterra will continue to focus on infrastructure optimization in the future to maximize production. In addition, Bonterra has continued to shut-in approximately 130 BOE per day of natural gas due to sustained weakness in natural gas prices.
  • Capital expenditures for the quarter were approximately $21.4 million related mainly to the Company's drilling program with five gross (five net) operated wells drilled, including two 100 percent wells in the main Pembina Cardium pool and three in the halo area of the pool. Due to multi-well pad drilling and spring breakup, three gross (three net) wells drilled in the first quarter, including the two main pool wells, were not frac'd and on production prior to quarter-end. These wells will be completed as soon as road-bans end, typically in late May each year.
  • Bonterra participated in drilling two gross (0.3 net) non-operated main pool Pembina Cardium wells in the Berrymoor Unit during the first quarter of 2012. The wells came on production subsequent to quarter-end and are producing at favorable rates.
  • The Company's full year capital expenditure guidance remains at $65 million. The majority of the additional 28 gross (18.83 net) wells planned will be located within the main pool of its Pembina Cardium field. The offset horizontal development of the main pool by industry peers has de-risked a large portion of Bonterra's acreage in this area and positive results to date suggest that a significant recoverable resource remains.
  • The Company engaged a third party engineering company in the first quarter of 2012 to conduct a reservoir simulation study to assess different development schemes and to further optimize Bonterra's ability to recover a larger percent of the original oil in place. The summer drilling program will commence once spring break-up ends and the Company will once again have two rigs employed full-time to carry out its drilling program.
  • The Company continues to forecast 2012 production levels between 6,700 and 7,000 BOE per day.
Financial
  • Oil and natural gas prices decreased significantly quarter over quarter. The Company's average realized price for crude oil in the first quarter of 2012 was $88.48 per BOE compared with $96.25 per BOE in the fourth quarter of 2011, an eight percent decrease.
  • Oil prices were negatively impacted by a widening of the Canadian crude oil differential. Bonterra receives the Edmonton Par price for its oil sales which has experienced extreme volatility in 2012 and at times it traded up to $25.00 less than the Western Texas Intermediate (WTI) price. The large price differentials are a result of increasing North American production volumes and inadequate pipeline capacity caused by pipeline outages and refinery turnarounds restricting the increased crude oil production from reaching markets.
  • The Company has sought to minimize the effects of the pricing differential by maximizing its crude oil tank inventory levels and minimizing production interruption costs. The differential has tightened considerably in the second quarter and the Company now anticipates selling its increased inventory for more favourable prices during this period.
  • During the first quarter, natural gas prices continued to decline averaging $2.32 per MCF versus $3.34 per MCF in the prior quarter; a decrease of 30.5 percent. This is due to high North American production rates and high storage levels compared to previous years.
  • As a result of the lower prices received during the quarter and reduced production volumes, quarter over quarter revenue and cash flow from operations decreased 13.8 and 17.1 percent, respectively.
  • Despite these lower levels, the Board of Directors and management have maintained the monthly dividend to shareholders at $0.26 per share, including the recently announced April dividend payable on May 31, 2012. This represents a payout ratio of 69 percent of funds flow which is slightly higher than the Company's guidance of 50 to 65 percent. The Company anticipates that the payout ratio will be in line with guidance in subsequent quarters as production volumes, production costs and the pricing differentials improve.
  • The Company's Board and management will continue to assess the dividend on a monthly basis and will continue to be influenced by production volumes and commodity prices.
  • The Company continues to effectively manage its balance sheet strength with a net debt to annualized funds flow ratio of 1.37 times, well within the Company's forecasted range of 1.0 to 1.5 times.
Outlook
  • The Company intends to continue with its sustainable, strategic approach to developing its asset base through the allocation of capital to its high return Cardium horizontal drilling program, the active pursuit of improved reserve recovery and continued improvements in ongoing operations. The Company intends to aggressively develop its Pembina Cardium main pool opportunities to continue to add value for shareholders.
  • In addition, the lower price environment may continue to provide opportunities for the Company to further grow its asset base through land or corporate acquisitions. Bonterra has been actively assessing the marketplace and will continue to look at a number of short, medium and longer term opportunities to add further value.
  • Subsequent to quarter-end, President and Chief Operating Officer Randy Jarock gave notice of his retirement effective June 30, 2012. He will continue his association with the Company by becoming a member of its Board of Directors. Bonterra is now actively recruiting a replacement. Bonterra and its Board of Directors wish to take this opportunity to thank Mr. Jarock for his many years of service and the significant contributions he made to the Company's success and look forward to his contribution in the future as a member of the Board.

Cautionary Statement

This summarized news release should not be considered a suitable source of information for readers who are unfamiliar with Bonterra Energy Corp. and should not be considered in any way as a substitute for reading the full report.

For the full report, please go to www.bonterraenergy.com

Use of Non-IFRS Financial Measures

Throughout this release the Company uses the terms "payout ratio" and "cash netback" to analyze operating performance, which are not standardized measures recognized under IFRS and do not have a standardized meaning prescribed by IFRS. These measures are commonly utilized in the oil and gas industry and are considered informative by management, shareholders and analysts. These measures may differ from those made by other companies and accordingly may not be comparable to such measures as reported by other companies.

The Company calculates payout ratio by dividing cash dividends paid to shareholders by cash flow from operating activities, both of which are measures prescribed by IFRS which appear on our statements of cash flows. We calculate cash netback by dividing various financial statement items as determined by IFRS by total production for the period on a barrel of oil equivalent basis.

Forward-Looking Information

Certain statements contained in this release include statements which contain words such as "anticipate", "could", "should", "expect", "seek", "may", "intend", "likely", "will", "believe" and similar expressions, relating to matters that are not historical facts, and such statements of our beliefs, intentions and expectations about development, results and events which will or may occur in the future, constitute "forward-looking information" within the meaning of applicable Canadian securities legislation and are based on certain assumptions and analysis made by us derived from our experience and perceptions. Forward-looking information in this RELEASE includes, but is not limited to: expected cash provided by continuing operations; cash dividends; future capital expenditures, including the amount and nature thereof; oil and natural gas prices and demand; expansion and other development trends of the oil and gas industry; business strategy and outlook; expansion and growth of our business and operations; and maintenance of existing customer, supplier and partner relationships; supply channels; accounting policies; credit risks; and other such matters.

All such forward-looking information is based on certain assumptions and analyses made by us in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate in the circumstances. The risks, uncertainties, and assumptions are difficult to predict and may affect operations, and may include, without limitation: foreign exchange fluctuations; equipment and labour shortages and inflationary costs; general economic conditions; industry conditions; changes in applicable environmental, taxation and other laws and regulations as well as how such laws and regulations are interpreted and enforced; the ability of oil and natural gas companies to raise capital; the effect of weather conditions on operations and facilities; the existence of operating risks; volatility of oil and natural gas prices; oil and gas product supply and demand; risks inherent in the ability to generate sufficient cash flow from operations to meet current and future obligations; increased competition; stock market volatility; opportunities available to or pursued by us; and other factors, many of which are beyond our control.

Actual results, performance or achievements could differ materially from those expressed in, or implied by, this forward-looking information and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking information will transpire or occur, or if any of them do, what benefits will be derived there from. Except as required by law, Bonterra disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

The forward-looking information contained herein is expressly qualified by this cautionary statement.

The TSX does not accept responsibility for the accuracy of this release.



FOR FURTHER INFORMATION PLEASE CONTACT:

Bonterra Energy Corp.
George F. Fink
CEO and Chairman of the Board
(403) 262-5307
(403) 265-7488 (FAX)

Bonterra Energy Corp.
Robb D. Thompson
CFO and Secretary
(403) 262-5307
(403) 265-7488 (FAX)

Bonterra Energy Corp.
Kirsten Lankester
Manager, Investor Relations
(403) 262-5307
(403) 265-7488 (FAX)
info@bonterraenergy.com
www.bonterraenergy.com