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Bonavista Energy Corporation Announces 2012 Third Quarter

Bonavista Energy Corporation Announces 2012 Third Quarter Results 
CALGARY, ALBERTA -- (Marketwire) -- 11/01/12 -- Bonavista Energy
Corporation (TSX:BNP) is pleased to report to shareholders its
interim consolidated financial and operating results for the three
and nine months ended September 30, 2012. 


 
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Highlights                                                                  
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                          Three months                  Nine months         
                   ended September 30,      %   ended September 30,      %  
                        2012      2011 Change       2012       2011 Change  
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Financial                                                                   
($ thousands,                                                               
 except per share)                                                          
                                                                            
Production                                                                  
 revenues            188,610   264,349    (29%)  609,470    759,247    (20%)
                                                                            
Funds from                                                                  
 operations(1)        82,291   134,772    (39%)  268,652    402,460    (33%)
 Per share(1) (2)       0.48      0.84    (43%)     1.59       2.53    (37%)
                                                                            
Dividends                                                                   
 declared(3)          56,416    50,834     11%   161,320    148,182      9% 
 Per share              0.36      0.36      -       1.08       1.08      -  
                                                                            
 
Net income             2,484    31,166    (92%)   49,760    140,505    (65%)
 Per share(4)           0.01      0.19    (95%)     0.29       0.88    (67%)
                                                                            
Adjusted net                                                                
 income(5)            10,563    16,358    (35%)   41,514    122,389    (66%)
 Per share(4)           0.06      0.11    (45%)     0.25       0.77    (68%)
                                                                            
Total assets                                   3,898,043  3,771,975      3% 
                                                                            
Long-term debt,                                                             
 net of working                                                             
 capital                                         815,322  1,057,875    (23%)
                                                                            
Long-term debt,                                                             
 net of adjusted                                                            
 working                                                                    
 capital(6)                                      818,487  1,066,748    (23%)
                                                                            
Shareholders'                                                               
 equity                                        2,300,294  2,051,230     12% 
                                                                            
Capital                                                                     
 expenditures:                                                              
 Exploration and                                                            
  development         90,320   123,756    (27%)  325,153    372,515    (13%)
 Acquisitions/(dis                                                          
  positions), net        999    99,477    (99%) (129,793)    96,400   (235%)
                                                                            
Weighted average                                                            
 outstanding                                                                
 equivalent                                                                 
 shares:                                                                    
 (thousands)(4)                                                             
 Basic               172,735   161,321      7%   169,388    158,828      7% 
 Diluted             174,423   162,457      7%   170,375    159,968      7% 
                                                                            
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Operating                                                                   
(boe conversion -                                                           
 6:1 basis)                                                                 
                                                                            
Production:                                                                 
 Natural gas                                                                
  (mmcf/day)             238       266    (11%)      248        251     (1%)
 Natural gas                                                                
  liquids                                                                   
  (bbls/day)          13,424    13,319      1%    13,910     12,305     13% 
 Oil (bbls/day)(7)    12,383    13,941    (11%)   13,198     13,786     (4%)
  Total oil                                                                 
   equivalent                                                               
   (boe/day)          65,464    71,636     (9%)   68,380     67,971      1% 
                                                                            
Product prices:(8)                                                          
 Natural gas                                                                
  ($/mcf)               2.56      4.13    (38%)     2.37       4.19    (43%)
 Natural gas                                                                
  liquids ($/bbl)      40.76     55.08    (26%)    46.11      53.61    (14%)
 Oil ($/bbl)(7)        75.88     77.95     (3%)    77.80      79.34     (2%)
                                                                            
Operating expenses                                                          
 ($/boe)                9.04      9.60     (6%)     9.20       8.98      2% 
                                                                            
General and                                                                 
 administrative                                                             
 expenses ($/boe)       1.16      0.95     22%      1.06       0.96     10% 
                                                                            
Cash costs                                                     
             
 ($/boe)(9)            13.47     13.86     (3%)    13.47      13.31      1% 
                                                                            
Operating netback                                                           
 ($/boe)(10)           16.83     23.18    (27%)    17.20      24.45    (30%)
                                                                            
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NOTES: 


 
(1)  Management uses funds from operations to analyze operating performance,
     dividend coverage and leverage. Funds from operations as presented does
     not have any standardized meaning prescribed by IFRS and therefore it  
     may not be comparable with the calculations of similar measures for    
     other entities. Funds from operations as presented is not intended to  
     represent operating cash flow or operating profits for the period nor  
     should it be viewed as an alternative to cash flow from operating      
     activities, net income or other measures of financial performance      
     calculated in accordance with IFRS. All references to funds from       
     operations throughout this report are based on cash flow from operating
     activities before changes in non-cash working capital, decommissioning 
     expenditures and interest expense. Funds from operations per share is  
     calculated based on the weighted average number of shares outstanding  
     consistent with the calculation of net income per share.               
(2)  Basic funds from operations per share calculations include exchangeable
     shares which are convertible into common shares on certain terms and   
     conditions.                                                            
(3)  Dividends declared includes both cash dividends and common shares      
     issued pursuant to Bonavista's dividend reinvestment plan (DRIP) and   
     Bonavista's stock dividend program (SDP). For the three months ended   
     September 30, 2012 approximately 1.4 million common shares were issued 
     under the DRIP and SDP with an approximate value of $22.1 million. For 
     the nine months ended September 30, 2012, approximately 3.4 million    
     common shares were issued under the DRIP and SDP with an approximate   
     value of $58.2 million.                                                
(4)  Basic net income per share calculations include exchangeable shares    
     which are convertible into common shares on certain terms and          
     conditions.                                                            
(5)  Amounts have been adjusted to exclude unrealized gains and losses on   
     financial instrument commodity contracts.                              
(6)  Amounts have been adjusted to exclude associated assets or liabilities 
     from financial instrument commodity contracts.                         
(7)  Oil includes light, medium and heavy oil.                              
(8)  Product prices include realized gains and losses on financial          
     instrument commodity contracts.                                        
(9)  Cash costs equal the total of operating, transportation, general and   
     administrative, and financing expenses.                                
(10) Operating netback equals production revenues including realized gains  
     and losses on financial instrument commodity contracts, less royalties,
     operating and transportation expenses, calculated on a boe basis.      
                                                                            
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Share Trading Statistics                                                    
                                                                            
                                           Three months ended               
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                           September 30,    June 30,  March 31, December 31,
                                    2012        2012        2012        2011
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($ per share, except                                                        
 volume)                                                                    
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High                               19.14       20.15       26.79       27.48
Low                                15.46       13.76       19.77       19.88
Close                              17.44       15.92       20.20       26.07
Average Daily Volume -                                                      
 Shares                          596,502     720,519     593,273     392,532
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MESSAGE TO SHAREHOLDERS  
Bonavista Energy Corporation ("Bonavista") is pleased to report to
shareholders its financial and operating results for the three and
nine months ended September 30, 2012. The unaudited 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 Bonavista's
website at www.bonavistaenergy.com.  
During the quarter, we witnessed continued volatility in commodity
prices with a modest strengthening in both crude oil and natural gas
prices. Despite a 17% increase in our realized third quarter natural
gas price over the second quarter of 2012, the average year to date
price in 2012 reflects its lowest level in over a decade. Compounding
the challenged cash flow environment, equity valuations in our
industry remain compressed owing to uncertain forward commodity
prices and renewed concerns over the global economy. This environment
created a counter-cyclical opportunity for Bonavista in the third
quarter of 2012 in the form of a synergistic, complementary deep
basin asset acquisition, negotiated at transaction metrics comparable
to the capital efficiency of our organic program.   
On August 28 2012, Bonavista announced the acquisition of certain
natural gas weighted assets (the "Acquired Properties") located
within its deep basin core area in west central Alberta. The
acquisition which closed on October 1, 2012 for a cash purchase price
of approximately $155 million is consistent with Bonavista's strategy
of acquiring high quality, long reserve life assets with significant
low-risk development potential. The Acquired Properties offer
numerous development opportunities with a predictable, low cost
production base consisting of 6,700 boe per day (94% natural gas
weighted) that is well positioned for a gradual improvement in
natural gas prices. To accommodate the acquisition and to fund
organic growth opportunities in 2013 and beyond, Bonavista
concurrently announced a bought deal equity financing of 20.9 million
common shares for net proceeds of approxi
mately $331 million.   
Bonavista's key business objectives include the employment of an
efficient capital program, a disciplined approach to cost control and
a focus on full cycle profitability within a sustainable model
incorporating both growth and income. In response to the dramatic
decrease in natural gas prices over the past year, Bonavista employed
a strategy to preserve its balance sheet and its current dividend
level by deferring exploration and development spending, implementing
a dividend reinvestment plan and a stock dividend program and
divesting of certain non-core assets. While we are pleased with the
successful efforts undertaken to enhance our sustainability year to
date, we are committed to maintaining this flexibility for the
balance of 2012 and throughout 2013 being mindful of the continuing
volatility.  
Despite weak natural gas fundamentals, Bonavista experienced another
successful quarter resulting from the consistent application of our
business strategies. Other accomplishments for Bonavista in the third
quarter of 2012 include: 


 
--  Achieved average production volumes of 65,464 boe per day which were
    negatively impacted over the second quarter average by non-core asset
    divestitures of 1,900 boe per day that closed at the end of the second
    quarter and an incremental 1,000 boe per of unscheduled third party
    volume curtailments. Current production is approximately 74,000 boe per
    day after consideration of the above noted asset acquisition; 
--  Invested $91.3 million in the third quarter of 2012 consisting of: 
    --  $77.8 million in drilling, completion and equipping expenditures; 
    --  $4.0 million in facility and pipeline infrastructure; 
    --  $3.9 million in workovers and recompletions; 
    --  $4.6 million in land and seismic acquisitions; and 
    --  $1.0 million in net acquisition and divestitures. 
--  Drilled 30 wells with a 100% success rate with 19 wells targeting light
    oil prospects and the remainder targeting liquids rich natural gas;  
--  Managed our exposure to forward commodity price fluctuations by adding
    to our hedge portfolio resulting in the protection of 34% of forecasted
    2013 oil and natural gas liquids production (net of royalty) with an
    average floor price of $87.71 per bbl and average ceiling price of
    $101.05 per bbl and approximately 55% of forecasted 2013 natural gas
    production (net of royalty) with an average floor price of $2.76 per gj
    and average ceiling price of $3.18 per gj; 
--  Generated funds from operations of $82.3 million ($0.48 per share) for
    the three months ended September 30, 2012. Bonavista distributed 42% of
    these funds to shareholders net of participation levels in our dividend
    reinvestment and stock dividend plans, with the remainder reinvested to
    continue growing our production and reserves base; 
--  Attracted additional shareholder interest in our dividend reinvestment
    and stock dividend plans contributing to a current participation rate of
    40%; and 
--  Since 2003, when Bonavista introduced an income component to our total
    shareholder return, Bonavista has delivered cumulative dividends of over
    $2.3 billion or $25.83 per common share.  

 
Accomplishments for Bonavista subsequent to the third quarter of 2012
include: 


 
--  Negotiated the divestment of 600 boe per day of non-core, oil weighted,
    and high cost assets for proceeds of $46.0 million resulting in
    transaction metrics of $76,700 per boe per day. With an expected closing
    date of November 7, 2012, this asset sale will contribute to total 2012
    divestiture proceeds of approximately $181 million which have
    collectively served to consolidate and concentrate our asset base. 

 
Third quarter 2012 Operational Highlights  
Hoadley Glauconite Liquids Rich Natural Gas  
Bonavista drilled eight horizontal wells in the third quarter of 2012
continuing to take advantage of available processing capacity in our
Wilson Creek and Willesden Green areas. Our initial pilot program
with four wells per section continues to deliver production rates
that meet or exceed our type curve expectations. Furthermore, the
pilot wells have not, to this point, created any inter-well
communication or production interference with offsetting horizontal
wells. With the positive results experienced to date, Bonavista added
a third down-spacing project in the third quarter of 2012 and is
currently developing a fourth pilot to test the concept across a
wider area of the trend.   
In the third quarter of 2012, Bonavista entered into a long-term,
fee-for-service processing agreement with a major midstream company
that provides for long-term processing certainty and profitable
volume growth in the Glauconite trend. This agreement reduces the
cost of service on our collective production through the Rimbey
facility and will increase our natural gas liquid recoveries when the
planned process expansion is completed in 2014.  
Since entering the play in 2008, Bonavista has taken an industry
leading role in the development of the Hoadley Glauconite trend
drilling 137 horizontal wells. During this timeframe, Bonavista
increased its Glauconite drilling inventory from a modest 25
locations to the current level of 410 through property and land
acquisitions, and a greater understanding of reservoir
characteristics. Our current drilling inventory now represents
approximately 10 years of development at our current pace of
drilling.  
With the attractive natural gas liquids yield, low operating costs
and efficient production addition costs, Bonavista's Glauconite
development program will remain a cornerstone of our organic
development program. For 2013 we plan to spend approximately $120
million, drilling 43 horizontal wells.  
West Central Cardium Light Oil  
Bonavista drilled six horizontal wells in the third quarter of 2012
focusing our efforts on prospective acreage at Willesden Green in
west central Alberta. Three of the six wells were non-operated and
have been on production for one month at expected rates. Of the
remaining three wells, two encountered mechanical problems while the
third operated well is producing above our expectations. Our third
quarter activities have increased our confidence of future
prospectivity in the Willesden Green area by de-risking additional
offsetting acreage. 
Bonavista has drilled 75 wells since commencing our horizontal
Cardium development program in 2009 as we delineate and de-risk our
300 net section Cardium land base. A greater understanding of the
geology and a continual refinement in our drilling and completion
techniques has aided in the identification of high productivity sweet
spots and has increased our confidence in the economics of the play.
Bonavista's successful drilling activity to date has enabled us to
increase our inventory by 17% to 140 locations.  
Bonavista has allocated approximately $60 million in its preliminary
2013 capital budget to drill 21 horiz
ontal Cardium wells in the
Willesden Green, Lochend and Harmattan strike areas. 
Deep Basin Multi-zone Liquids Rich Natural Gas  
Bonavista drilled one horizontal well in the third quarter of 2012
targeting liquids rich natural gas in the Bluesky formation at Pine
Creek. Since entering this area of the deep basin in 2010, Bonavista
has drilled nine Bluesky and 10 Rock Creek horizontal liquids rich
natural gas wells while concurrently expanding the processing options
for this development.   
The results of our organic development program in the deep basin area
to date provided the confidence to purchase the aforementioned
Acquired Properties. Integration of the Acquired Properties has
doubled Bonavista's operational presence and expanded our multi-zone
development opportunities in the area which will lead to enhanced
overall efficiencies for future development. Since our original
evaluation of the Acquired Properties in August 2012, we have doubled
our inventory levels to 60 high impact horizontal drilling locations
targeting the Bluesky, Wilrich and Notikewin formations. While
pursuing these immediate opportunities on the Acquired Properties,
Bonavista continues to evaluate other productive horizons on the
assets including the Rock Creek, Gething, Cadomin and Second White
Specs.   
Bonavista will allocate approximately $65 million of its preliminary
2013 capital budget to drill 15 horizontal wells in the Bluesky, Rock
Creek, Wilrich and Montney formations. 
Other Opportunities  
In the third quarter, Bonavista successfully de-risked two of our
emerging resource plays: a Viking light oil play at Provost in
eastern Alberta and a liquids rich natural gas play in the Ellerslie
formation in west central Alberta. Bonavista completed four
horizontal Viking oil wells at Provost in the quarter for a total of
six horizontal wells drilled to date. Average first month production
results of 60 boe per day per well are in line with type curve
estimates. Importantly, Bonavista has gained cost efficiencies
through certain drilling and completion enhancements which improve
the economics of future development. Bonavista expects to spend
approximately $25 million in 2013, drilling 20 horizontal Viking
wells. Similarly, Bonavista drilled two horizontal Ellerslie wells in
west central Alberta in the third quarter doubling our total wells
drilled to date in this liquids rich formation. First month
production results are encouraging with an estimated average initial
production rate of 650 boe per day per well and a natural gas liquids
yield of 140 bbls per mmcf of which 25% is condensate and butane.
Bonavista will allocate approximately $25 million in 2013, drilling 5
horizontal wells as we continue to delineate our Ellerslie land base
of approximately 90 net sections.  
Bonavista's Montney program at Blueberry in northeast British
Columbia remains in a delineation phase. Bonavista intends to drill
four to six wells over the next two years to quantify the resource
opportunity across our 55 net section land base. While encouraged by
the high natural gas liquids yield exhibited by the six horizontal
wells drilled to date, development economics are challenged in the
current low natural gas price environment. Bonavista plans to pursue
a two well drilling program in 2013 focused on capital cost and well
performance optimization.   
Bonavista's 2013 capital program also incorporates the pursuit and
observation of several other emerging resource play opportunities
including the Banff, Fahler, Notikewin, Wabamun, Pekisko, Charlie
Lake, Second White Specs and the Duvernay as we unlock opportunities
across our land base in the Western Canadian Sedimentary Basin. 
Strengths of Bonavista Energy Corporation  
Beginning in 1997, with an initial restructuring to create a high
growth junior exploration company, throughout the energy trust phase
between July 2003 and December 2010, and now operating as a dividend
paying corporation, Bonavista remains committed to the same
strategies that have resulted in our tremendous success over the past
15 years. We have steadily improved the quality and maintained a high
level of investment activity on our asset base, increasing production
by approximately 110% since converting to an energy trust in July
2003 and a further 8% since converting back to a corporation at the
end of 2010. These results stem from the operational, technical and
financial focus of our people with their entrepreneurial approach to
generating low risk, highly profitable projects within the Western
Canadian Sedimentary Basin. Our experienced technical teams have a
solid understanding of our assets as they exercise the discipline and
commitment required to deliver long-term value to our shareholders.
We actively participate in undeveloped land acquisitions, property
purchases and farm-in opportunities, which have all enhanced the
quality and quantity of our extensive drilling inventory. These
activities have led to low cost reserve additions, and a predictable
production base that continues to grow at a healthy pace. Our
production base is currently 62% weighted towards natural gas and is
geographically focused within select, multi-zone regions primarily in
Alberta and British Columbia. The low cost structure of our asset
base ensures positive operating netbacks in most operating
environments. Furthermore, our assets are predominantly operated by
Bonavista, providing control over the pace of operations and optimum
influence over our operating and capital cost efficiencies.  
Our team brings a successful track record of executing low to medium
risk development programs, including both asset and corporate
acquisitions, along with sound financial management. Our Board of
Directors and management team possess extensive experience in the oil
and natural gas business. They have successfully guided our
organization through many different economic cycles utilizing a
proven strategy consisting of disciplined cost controls and prudent
financial management. Directors, management and employees also own
approximately 13% of the equity of Bonavista, resulting in the
alignment of interests with all shareholders. 
Outlook  
As we approach the final months of 2012, Bonavista will remain
focused on completing its organic development program and the
successful integration of the deep basin assets acquired at the
beginning of the fourth quarter of 2012. Considering the continued
success of our divestiture activities, Bonavista's 2012 capital
budget has been reduced to approximately $390 million. This budget is
comprised of an exploration and development program of $400 million,
and acquisition spending, net of divestiture proceeds, of $10
million. After accounting for production volumes divested year to
date and approximately 1,000 boe per day of shut-in dry natural gas
production throughout the year, we expect average 2012 production
volumes of approximately 69,600 boe per day.   
Current natural gas prices have nearly doubled from the lows
experienced in the spring of 2012, which has led to a more favourable
pricing outlook for 2013. While natural gas production levels in the
US remain elevated, overall supply has remained flat for the past 12
months unlike the growth trends witnessed over the previous five
years. Importantly, strong demand for natural gas from power
generation and other industrial sources reduced surplus storage
levels as we approach the higher demand winter months.
Notwithstanding this degree of optimism, downside commodity pricing
risks remain present, causing us to continue with our active hedging
program for both oil and natural gas production thereby reducing
future cash flow volatility and preserving our capital program.   
Bonavista's Board of Directors has approved a preliminary 2013
capital budget of between $400 and $450 million, an increase in our
exploration and development spending of approximately 13% over 2012.
We have currently identified up to $50 million of non-core assets for
disposition in 2013 which, if successful, would result in net
spending at the lower end of the aforementioned range. This program
forecasts the drilling of between 125 and 135 wells and 2013
production averaging between 72,500 and 74,500 boe per day,
representing approximately 6% year over year growth using the
mid-point of the range. As in years past, we will continue to monitor
the economic landscape, commodity prices and our drilling results and
adjust our capital spending levels as conditions warrant. Although we
have not budgeted for any acquisition spending, we remain attentive
to a growing number of acquisition opportunities within our core
regions which complement our operational efficiency and enhance our
drilling inventory. Overall, our long term business strategy remains
intact with a commitment to deliver a balance of corporate growth and
income through our monthly dividend.  
Bonavista's inventory of approximately 1,500 drilling locations
represent about 12 years of organic growth opportunities based on our
201
3 drilling forecast. Approximately 90% of these locations target
high impact, repeatable resource prospects and approximately 65%
generate attractive economics that exceed a 2:1 recycle ratio at
current commodity prices.  
We would like to thank our employees for their commitment to
organizational success in the third quarter of 2012 and our
shareholders for their continual support. Since our inception in
1997, we have consistently applied the same core strategies that have
enabled Bonavista to weather many changes in our business environment
and have proven to add shareholder value over the long-term. Our core
philosophy and key operating strategies have proven to work well
throughout all phases of the business cycle and we look forward to
continually creating long-term value for our shareholders. Our team
is very committed to this vision. 
Bonavista will be hosting an Analyst Day November 21, 2012 at 8:30 am
Mountain Time (10:30 am Eastern Time) to provide an update on its
activities. We invite all interested parties to listen to the live
webcast of the presentation which may be accessed directly on the
Bonavista website at www.bonavistaenergy.com or at the following URL:
www.gowebcasting.com/3955 
FORWARD LOOKING INFORMATION  
Corporate information provided herein contains forward-looking
information. The reader is cautioned that assumptions used in the
preparation of such information, particularly those pertaining to
cash dividends, production volumes, commodity prices, operating costs
and drilling results, which are considered reasonable by Bonavista at
the time of preparation, may be proven to be incorrect. Actual
results achieved during the forecast period will vary from the
information provided herein and the variations may be material. There
is no representation by Bonavista that actual results achieved during
the forecast period will be the same in whole or in part as those
forecast. 
Bonavista is a mid-sized energy corporation committed to maintaining
its emphasis on operating high quality oil and natural gas
properties, providing moderate growth and delivering consistent
dividends to its shareholders and ensuring financial strength and
sustainability.
Contacts:
Keith A. MacPhail
Chairman & CEO 
Jason E. Skehar
President & COO 
Glenn A. Hamilton
Senior Vice President & CFO 
Bonavista Energy Corporation
1500, 525 - 8th Avenue SW
Calgary, AB T2P 1G1
(403) 213-4300
www.bonavistaenergy.com
 
 
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