Bonavista Energy Corporation: Announcing 2012 Fourth Quarter Results

Bonavista Energy Corporation: Announcing 2012 Fourth Quarter Results 
CALGARY, ALBERTA -- (Marketwire) -- 02/28/13 -- Bonavista Energy
Corporation (TSX:BNP) is pleased to report to shareholders its
results for the fourth quarter ended December 31, 2012. Our audited
consolidated financial statements, Annual Report and other disclosure
documents for 2012 will be available on or before March 28, 2013
through our filings on SEDAR at www.sedar.com or can be obtained from
Bonavista's website at www.bonavistaenergy.com. 


 
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Highlights                                                                  
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                     Three months                                           
                   ended December             Years ended December          
                              31,       %                      31,       %  
                    2012     2011  Change         2012        2011  Change  
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Financial                                                                   
($ thousands,                                                               
 except per                                                                 
 share)                                                                     
Production                                                                  
 revenues        223,021  285,167     (22%)    832,491   1,044,414     (20%)
Funds from                                                                  
 operations(1)   110,015  150,843     (27%)    378,667     553,303     (32%)
 Per share(1)                                                               
  (2)               0.57     0.91     (37%)       2.16        3.44     (37%)
Dividends                                                                   
 declared(3)      63,481   51,850      22%     224,801     200,032      12% 
 Per share          0.36     0.36       -         1.44        1.44       -  
Net income                                                                  
 (loss)           14,442   (3,321)    535%      64,202     137,184     (53%)
 Per share(4)       0.07    (0.02)    450%        0.37        0.85     (56%)
Adjusted net                                                                
 income(5)        16,535   16,994      (3%)     58,049     139,383     (58%)
 Per share(4)       0.09     0.10     (10%)       0.33        0.87     (62%)
Total assets                                 4,062,852   3,924,160       4% 
Long-term debt,                                                             
 net of working                                                             
 capital                                       963,678   1,131,715     (15%)
Long-term debt,                                                             
 net of adjusted                                                            
 working                                                                    
 capital(6)                                    963,500   1,123,001     (14%)
Shareholders'                                                               
 equity                                      2,285,889   2,001,802      14% 
Capital                                                                     
 expenditures:                                                              
 Exploration and                                                            
  development     76,937   81,035      (5%)    402,090     453,550     (11%)
 Acquisitions,                                                              
  net of                                                                    
  dispositions   118,837   57,858     105%     (10,956)    153,160    (107%)
Weighted average outstanding equivalent shares: (thousands)(4)              
 Basic           192,638  165,355      16%     175,581     160,712       9% 
 Diluted         194,322  165,355      18%     176,747     161,787       9% 
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Operating                                                                   
(boe conversion                                                             
 - 6:1 basis)                                                               
Production:                                                                 
 Natural gas                                                                
  (mmcf/day)         269      268       -          253         255      (1%)
 Natural gas                                                                
  liquids                                                                   
  (bbls/day)      14,563   14,628       -       14,074      12,890       9% 
 Oil                                                                        
  (bbls/day)(7)   12,395   14,110     (12%)     12,997      13,868      (6%)
  Total oil                                                                 
   equivalent                                                               
   (boe/day)      71,842   73,373     (2%)      69,250      69,332       -  
Product                                                                     
 prices:(8)                                                                 
 Natural gas                                                                
  ($/mcf)           3.22     3.69     (13%)       2.60        4.06     (36%)
 Natural gas                                                                
  liquids                                                                   
  ($/bbl)          42.60    58.78     (28%)      45.19       55.09     (18%)
 Oil ($/bbl)(7)    75.73    89.36     (15%)      77.30       81.91      (6%)
Operating                                                                   
 expenses                                                                   
 ($/boe)            8.69     9.26      (6%)       9.07        9.05       -  
General and                                                                 
 administrative                                                             
 expenses                                                                   
 ($/boe)            1.07     0.95      13%        1.06        0.95      12% 
Cash costs                                                                  
 ($/boe)(9)        12.67    13.16      (4%)      13.26       13.27       -  
Operating                                                                   
 netback                                                                    
 ($/boe)(10)       19.12    24.75     (23%)      17.70       24.53     (28%)
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                                                      December 31,       %  
Highlights (cont'd)                              2012         2011  Change  
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Drilling (gross wells):                           115          143     (20%)
 Natural gas                                       47           67     (30%)
 Oil                                               67           76     (12%)
  Average success rate                             99%         100%     (1%)
Land:                                                                       
  Undeveloped (net acres)                   1,253,141    1,474,080     (15%)
  Total (net acres)                         2,832,701    3,078,418      (8%)
Reserves: (11)                                                              
 Proved:                                                                    
  Natural gas (bcf)                             921.0        838.5      10% 
  Oil and natural gas liquids (mbbls)          94,914       92,011       3% 
   Total oil equivalent (mboe)                248,409      231,760       7% 
 Proved and probable:                                                       
  Natural gas (bcf)                           1,372.3      1,246.2      10% 
  Oil and natural gas liquids (mbbls)         143,505      133,697       7% 
   Total oil equivalent (mboe)                372,220      341,390       9% 
    % Proved producing                             40%          43%     (3%)
    % Proved                                       67%          68%     (1%)
    % Probable                                     33%          32%      1% 
 Net present value of future cash flow before income taxes ($ millions):    
   0% discount rate                             9,005        9,766      (8%)
   5% discount rate                             5,742        6,184      (7%)
   10% discount rate                            4,126        4,472      (8%)
 Reserve life index (years):                                                
  Proved                                          9.6          8.8       9% 
  Proved and probable                            13.5         12.2      11% 
Finding, development and acquisition costs - proved and probable ($/boe):   
 Including changes in future development                                    
  expenditures                                  11.16        13.98     (20%)
 Excluding changes in future development                                    
  expenditures                                   6.98        11.08     (37%)
Recycle ratio - proved and probable: (12)                                   
 Including changes in future development                                    
  expenditures                                    1.6          1.8     (11%)
 Excluding changes in future development                                    
  expenditures                                    2.5          2.2      14% 
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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    
    December 31, 2012 approximately 1.6 million common shares were issued   
    under the DRIP and SDP with an approximate value of $24.7 million. For  
    the year ended December 31, 2012, approximately 5.0 million common      
    shares were issued under the DRIP and SDP with an approximate value of  
    $82.9 million.                                                          
(4) Basic net income per share calculations include exchangeable shares     
    which are convertible into common shares on certain terms and           
    conditions.                                                             
(5) Amounts have been adjusted to exclude unrealized gains and losses on    
    financial instrument commodity contracts.                               
(6) Amounts have been adjusted to exclude associated assets or liabilities  
    from financial instrument commodity contracts.                          
(7) Oil includes light, medium and heavy oil.                               
(8) Product prices include realized gains and losses on financial instrument
    commodity contracts.                                                    
(9) Cash costs equal the total of operating, transportation, general and    
    administrative, and financing expenses.                                 
(10)Operating netback equals production revenues including realized gains   
    and losses on financial instrument commodity contracts, less royalties, 
    operating and transportation expenses, calculated on a boe basis.       
(11)Working interest reserves are gross reserves prior to deduction of      
    royalties and without including any of our royalty interests.           
(12)Recycle ratio is calculated using operating netback per boe divided by  
    finding, development and acquisition costs per boe.                     
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                                           Three months ended               
                            ------------------------------------------------
                            December 31,   September    June 30,   March 31,
Share Trading Statistics            2012    30, 2012        2012        2012
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($ per share, except volume)                                                
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High                               18.85       19.14       20.15       26.79
Low                                14.05       15.46       13.76       19.77
Close                              14.82       17.44       15.92       20.20
Average Daily Volume -                                                      
 Shares                          626,743     596,502     720,519     593,273
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MESSAGE TO SHAREHOLDERS 
The North American energy sector was challenged by low realized
commodity prices throughout 2012. Persistently high US production
levels and the absence of winter heating demand drove AECO natural
gas prices down to a 14 year low, averaging $2.27 per gigajoule in
2012, a 34% decrease from 2011. In addition, realized propane and
ethane prices fell 41% and 28% respectively in 2012 resulting from a
supply imbalance caused by industry's focus on natural gas liquids
revenue to support the economic development of natural gas resources.
Compounding this compression in North American natural gas prices,
Canadian energy producers were further challenged in 2012 by
discounted pricing for crude oil resulting from steadily increasing
continental supply and regional transportation and infrastructure
bottlenecks. 
Technological advancements continue to add crude oil and natural gas
supply making it increasingly difficult to predict the future pricing
for these commodities. Furthermore, incremental infrastructure and
valuable export opportunities are facing strong opposition leaving
our domestic energy sector challenged in the short term. Nonetheless,
Bonavista remains true to our strategy of focusing on those elements
of our business that we can control to create value in any
environment. The key elements of this strategy include: 


 
--  Delivering an exploration and development program focused on
    profitability and capital efficiency, supported by low risk drilling
    opportunities, disciplined cost control and optimum execution; 
    
--  Delivering an acquisition and divestiture program designed to
    concentrate our asset portfolio in highly prospective, multi-zone areas
    where we can control and enhance operating and capital efficiencies to
    extract incremental value from our assets; 
    
--  Maintaining agility with our capital program to ensure the pursuit of
    our highest return opportunities; and 
    
--  Remaining focused on restoring sustainability and financial flexibility.

 
While declining Canadian natural gas production and fuel switching
demand in the US power generation market enabled natural gas prices
to recover somewhat in the fourth quarter of 2012, the futures market
for natural gas prices weakened again in early 2013, coincident with
a lack of winter heating demand. Accordingly, on January 9, 2013
Bonavista's Board of Directors approved a reduction in the monthly
dividend from $0.12 per share to $0.07 per share. This new level
provides Bonavista the flexibility to capitalize on numerous low risk
drilling and acquisition opportunities, while maintaining a healthy
balance sheet. Given the current commodity price environment,
Bonavista believes this dividend level offers an appropriate balance
between capital reinvestment and dividend allocation resulting in
long term profitability, consistent with our historical track record. 
Specific accomplishments for Bonavista in 2012 include: 


 
--  Completed a successful capital expenditure program, investing $402.1
    million in exploration and development activities drilling 115 wells
    with an overall 99% success rate;  
    
--  Completed an active acquisition and divestiture program, divesting of
    $180.8 million of non-core assets and reinvesting $169.9 million in
    strategic acquisitions within our core regions to increase the focus of
    our asset portfolio 
    
--  Replaced 222% of 2012 annual production;  
    
--  Increased proved and probable reserves by 9% to 372.2 mmboe resulting in
    a finding, development and acquisition cost of $6.98 per boe (excluding
    changes in future development capital) and $11.16 per boe (including
    changes in future development capital); 
    
--  Improved our operating costs on a per boe basis, decreasing 6% for the
    three months ended December 31, 2012 to $8.69 per boe from $9.26 per boe
    in the comparable period in 2011; 
    
--  Increased our drilling inventory by 12% to 1,570 locations (88%
    horizontal), of which 95% are oil and liquids rich natural gas
    opportunities; 
    
--  Managed our exposure to commodity price volatility resulting in
    approximately 52% of our forecasted natural gas production (net of
    royalties) hedged at an average floor price of $3.03 per mcf and 37% of
    our forecasted oil and liquids production (net of royalties) hedged at
    an average floor price of $87.25 per bbl for 2013; 
    
--  Generated funds from operations of $378.7 million ($2.16 per share) for
    the year ended December 31, 2012; 
    
--  Raised $345 million from an equity financing to accommodate our 2012 and
    2013 capital programs and provide flexibility for future growth; and 
    
--  Since 2003, when Bonavista introduced an income component to our total
    shareholder return, Bonavista has delivered cumulative dividends of over
    $2.5 billion or $26.19 per common share. 

 
Accomplishments for Bonavista subsequent to 2012 include: 


 
--  Bonavista closed a $72.5 million agreement on January 9, 2013 to acquire
    2,450 boe per day of low decline production situated on a highly
    synergistic land base and infrastructure footprint further enhancing the
    level of concentration and control within our deep basin core area. 
    
--  Bonavista entered into a strategic business arrangement involving the
    disposition of certain Duvernay rights in exchange for cash proceeds, a
    four year extension to the primary term of 50% of the freehold acreage
    included in the "Hoadley transaction" completed in 2009, a reduced
    lessor royalty applicable to future capital activity on this acreage and
    other miscellaneous considerations. 

 
2012 Reserve Highlights 


 
--  Bonavista replaced 2012 annual production by 222%, adding 56.1 mmboe of
    proved and probable reserves. Proved and probable reserve additions
    included 19.7 mmbbls of oil and liquids and 36.4 mmboe of natural gas
    bringing total year end 2012 reserves to 372.2 mmboe.  
    
--  Bonavista's oil and liquids focused exploration and development activity
    replaced 2012 annual oil and liquids production by 218%, resulting in a
    16% increase in year end 2012 oil and liquids reserves net of
    acquisitions and dispositions. 
    
--  Bonavista's proved and probable reserve life index increased 11% to 13.5
    years based on the GLJ year end reserve report. 
    
--  Bonavista's successful capital expenditure program in 2012 resulted in
    attractive finding, development and acquisition costs, including changes
    in future development expenditures, of $11.16 per boe on a proved and
    probable basis. Despite a compressed commodity price environment
    throughout 2012, these finding, development and acquisition cost metrics
    generated an attractive proved and probable operating netback recycle
    ratio of 1.6:1 based on 2012 operating netbacks and 1.8:1 based on
    forecasted 2013 operating netbacks.  
    
--  Proved and probable future development capital increased by 21% to $1.4
    billion, representing the growth in development potential of our asset
    base while remaining at a manageable level within 3.0 times forward cash
    flow and 3.2 times budgeted 2013 capital expenditures. 

 
The reserve estimates contained in the following tables represent
Bonavista's gross reserves as at December 31, 2012 and are defined
under NI 51-101, as our interest before deduction of royalties and
without including any of our royalty interests.  
A summary of this independent reserves evaluation is presented in the
tables below: 


 
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                                                        Natural             
                                Light and                   Gas       Total 
                  Natural Gas  Medium Oil  Heavy Oil    Liquids  Reserves(2)
Reserves:(1)(4)         (MMcf)     (Mbbls)    (Mbbls)    (Mbbls)      (Mboe)
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Proved:                                                                     
 Proved producing     550,744      22,108      3,650     31,206     148,756 
 Proved non-                                                                
  producing            27,448         817        488      1,189       7,068 
 Proved                                                                     
  undeveloped         342,776       6,000        723     28,733      92,585 
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Total proved          920,968      28,925      4,861     61,128     248,409 
 Probable             451,323      11,048      2,837     34,707     123,812 
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Total proved and                                                            
 probable           1,372,291      39,973      7,698     95,834     372,220 
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Proved reserve life index, years(3)                                     9.6 
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Proved and probable reserve life index, years(3)                       13.5 
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(1) Bonavista's gross reserves are based on the GLJ reserve report dated    
    February 27, 2013, GLJ reserve estimates based on forecast prices and   
    costs as of January 1, 2013.                                            
(2) 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.                          
(3) Calculated based on the amount for the relevant reserve category divided
    by the 2013 production forecast.                                        
(4) Amounts may not add due to rounding.                                    

 
Bonavista's proved and probable reserve life index has consistently
increased since converting to an income trust in 2003 illustrated by
the following table: 


 
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                  2003  2004  2005  2006  2007  2008  2009  2010  2011  2012
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Proved and                                                                  
 probable, RLI                                                              
 (years)           7.3   8.6   8.8   8.9   9.2   9.4  11.5  12.0  12.2  13.5
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The following tables highlight our proved and probable finding and
development ("F&D") costs, our proved and probable finding,
development and acquisition ("FD&A") costs and the associated recycle
ratios: 


 
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                                                 2012       2011       2010 
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Total proved reserves (Mboe):                                               
 Opening balance                              231,760    222,921    193,187 
 Discoveries and extensions                    24,258     18,674     24,124 
 Acquisitions and dispositions                 13,953     12,797     19,099 
 Revisions and economic factors                 3,674      2,431     10,674 
 Production                                   (25,236)   (25,063)   (24,163)
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Closing balance                               248,409    231,760    222,921 
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Total proved and probable reserves (Mboe):                                  
Opening balance                               341,390    310,749    271,913 
 Discoveries and extensions                    36,645     33,667     32,583 
 Acquisitions and dispositions                 20,266     22,402     25,555 
 Revisions and economic factors                  (844)      (365)     4,861 
 Production                                   (25,236)   (25,063)   (24,163)
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Closing balance                               372,220    341,390    310,749 
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Capital Efficiency:                                                         
Operating netback ($/boe) (1)                   17.70      24.53      23.85 
Finding and development costs:                                              
 Total F&D expenditures ($ millions)            402.1      453.6      348.1 
 Total F&D expenditures plus change in                                      
  forecast future development costs ($                                      
  millions)                                     524.7      480.5      474.4 
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 Proved and probable F&D costs ($/boe)                                      
  (2)(3)(5)                                     13.85      14.43      12.67 
 Proved and probable three-year F&D costs                                   
  ($/boe) (2)(3)(5)                             13.89      13.32      14.39 
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 Recycle ratio (4)                                1.4        1.7        1.9 
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Finding, development and acquisition costs:                                 
 Total FD&A expenditures ($ millions)           391.1      617.1      568.6 
 Total FD&A expenditures plus change in                                     
  forecast future development costs ($                                      
  millions)                                     625.8      778.7      836.2 
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 Proved and probable FD&A costs ($/boe)                                     
  (2)(3)(5)(6)                                  11.16      13.98      13.27 
 Proved and probable three-year FD&A costs                                  
  ($/boe) (2)(3)(5)(6)                          12.82      12.86      13.55 
 Recycle ratio (4)                                1.6        1.8        1.8 
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(1) Operating netback is calculated using production revenues including     
    realized gains or losses on financial instruments commodity contracts   
    less royalties, transportation and operating costs calculated on a per  
    barrel of oil equivalent basis.                                         
(2) Amounts are calculated including the change in future development costs.
(3) Both F&D and FD&A costs take into account reserve revisions during the  
    year on a per barrel of oil equivalent basis (6:1).                     
(4) Recycle ratio is defined as operating netback per barrel of oil         
    equivalent divided by either F&D or FD&A costs on a per barrel of oil   
    equivalent.                                                             
(5) BOE's may be misleading, particularly if used in isolation. A BOE       
    conversion 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.                                      
(6) The aggregate of the exploration and development costs incurred in the  
    most recent financial year and the change during that year in estimated 
    future development costs generally will not reflect total finding and   
    development costs related to reserves additions for that year.          

 
Future development costs of $1.4 billion at year end 2012 consist of
636 gross (472 net) future drilling locations which have the
following development schedule: 


 
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                Future Development Costs,                                   
Year            Proved and probable reserves, undiscounted ($ millions)     
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2013            274                                                         
2014            357                                                         
2015            290                                                         
2016            219                                                         
2017            137                                                         
Thereafter      97                                                          
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Total           1,374                                                       
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2012 Acquisition and Divestiture Highlights 
Bonavista completed 24 property transactions in 2012, both
acquisitions and divestitures resulting in net disposition proceeds
of $11.0 million for the year. Acquisition expenditures in 2012 of
$169.9 million added production of 7,300 boe per day and proved and
probable reserves of 29.9 mmboe resulting in acquisition metrics of
$23,000 per boe per day and $10.39 per boe including future
development costs. Divestiture activity in 2012 resulted in proceeds
of $180.8 million involving the sale of certain non-core, higher cost
assets comprising 3,200 boe per day of production and 9.7 mmboe of
proved and probable reserves. The transaction metrics associated with
our 2012 divestiture activity are attractive at $57,000 per boe per
day and $21.68 per boe including changes in future development costs. 
With a specific goal to increase asset quality and concentration,
Bonavista was an active consolidator in the deep basin area of west
central Alberta in 2012. On October 1, 2012 Bonavista closed a $155
million asset acquisition producing 6,700 boe per day, which doubled
Bonavista's land position and greatly enhanced its control of
strategic facility infrastructure. With the second transaction that
Bonavista closed in January 2013, this recent acquisition activity
has significantly expanded our operational presence in the area
increasing production by 150% to approximately 14,000 boe per day,
proved and probable reserves by 160% to 56 mmboe, land position by
140% to 210,000 net acres, processing capacity by 120% to 230 mmcf
per day and inventory levels by 60% to 200 horizontal locations. More
important in today's commodity price environment, the increased scale
of operations offered by this consolidation activity has enabled
operating efficiency gains as evidenced by a 25% decline in area
operating costs. Furthermore, with a larger development program now
in place, Bonavista believes it can drive incremental growth and
capital efficiencies through increasing economies of scale.  
2012 Operational Highlights  
Hoadley Glauconite Liquids Rich Natural Gas 
Bonavista drilled seven horizontal wells in the fourth quarter
bringing total 2012 activity to 34 horizontal wells in a program
focused on continuous optimization of field level economics. Specific
efforts in 2012 consisted of downspacing initiatives, longer lateral
sections and enhancing our understanding of the geological
characteristics of the reservoir.  
Bonavista's 2012 development activities on the Hoadley Glauconite
trend resulted in an efficient exploitation program adding $200.9
million of NPV 10% value and 13.1 mmboe of proved and probable
reserves with attractive metrics of $6,800 per boe per day based on
average initial month production rates and $7.25 per boe. Based on
current production levels and forward commodity pricing, Bonavista's
horizontal Glauconite program is expected to provide sufficient cash
flow in 2013 to support continued growth at the field level while
contributing to improved overall corporate sustainability.   
Despite the active development program in 2012, Bonavista increased
its drilling inventory by 8% to 410 locations through continued land
assembly and the testing of downspacing to four wells per section in
a pilot program that has yielded successful initial results. We will
continue to monitor well performance with these pilots throughout
2013 and with continued positive results, we expect the program to
increase in scope in future years.  
At current natural gas prices, single well economics associated with
this play remain competitive on a North American scale and within our
asset portfolio owing to the predictable results, attractive natural
gas liquids yield, low operating costs and strong capital
efficiencies. Bonavista's Glauconite development program remains a
key growth platform in 2013, with a drilling program of approximately
45 horizontal wells. 
West Central Cardium Light Oil  
Bonavista drilled 12 horizontal wells in the fourth quarter bringing
total 2012 activity to an annual record of 32 horizontal wells in a
program balanced between the proven high productivity trends and the
emerging portions of our land base. Our operated development program
in 2012 focused on the Ferrier/Willesden Green area with 19
horizontal wells drilled. Production results in this area have been
strong delivering average first month production rates of 250 boe per
day in 2012. In a continued effort to de-risk additional acreage,
Bonavista drilled one well at Lochend in the fourth quarter which
confirmed our geological interpretation of the area despite
operational issues that restricted the effective stimulation of the
wellbore to less than 50% of the original program.   
Bonavista's 2012 activity in the Cardium resulted in the addition of
$111.9 million in NPV 10% value and 3.4 mmboe of proved and probable
reserves with efficient metrics of $15,700 per boe per day based on
average initial months production rates and $21.25 per boe.
Importantly, Bonavista was successful in the conversion of 2.7 mmboe
of Proved Undeveloped reserves to Proved Developed Producing reserves
while continuing to grow our inventory of future drilling
opportunities to 140 horizontal locations.  
Bonavista's Cardium development program continues to rank favourably
in our portfolio and we plan to drill approximately 20 horizontal
wells in 2013. 
Deep Basin Multi-zone Liquids Rich Natural Gas  
Bonavista drilled two horizontal wells in the fourth quarter
contributing to a total of eight wells in 2012 targeting low risk
opportunities in the Bluesky formation at Pine Creek. Since entering
the area in 2010 Bonavista's activities in this multi-zone area of
the deep basin involved a focus on low risk opportunities in the
Bluesky and Rock Creek formations. This approach provided an
opportunity to gain operational experience as we continue to evaluate
additional emerging plays including the Montney, Notikewin and
Wilrich.   
Bonavista plans to drill approximately 15 to 20 horizontal wells in
the area including 10 Rock Creek light oil or liquids rich natural
gas wells at Rosevear, two Bluesky liquids rich natural gas wells at
Pine Creek and selective testing of the prolific Wilrich play in
2013. Bonavista's acquisition activity in 2012 provided a solid
platform of inventory and operations in the Wilrich, a play rapidly
emerging with significance in the Deep Basin. 
Additional Emerging Opportunities 
Bonavista continued to de-risk two key emerging plays in the fourth
quarter, drilling six horizontal Viking oil wells at Provost in
eastern Alberta and one horizontal well targeting liquids rich
natural gas in the Ellerslie formation in west central Alberta.
Production results in the Viking formation at Provost have met
expectations throughout 2012. Backed by incremental operational
experience in this play, we are poised to enhance capital
efficiencies with plans to drill 18 to 20 Viking oil wells in 2013.
Similarly, we plan to drill up to seven Ellerslie horizontal wells in
2013 as we progress both the Ellerslie and Viking emerging plays to
scaleable capital programs. 
Bonavista will continue to delineate its liquids rich Montney acreage
at Blueberry in northeast British Columbia in 2013 with one to two
horizontal wells planned. 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. Notwithstanding the near term challenges,
offsetting industry activity in the Montney horizon has accelerated
over the past year driven by technological achievements in well cost
reductions and an increased motivation to secure large scale
resources to support eventual west coast LNG export initiatives.
Bonavista intends to drill four to six wells over the next two years
to verify the scale of the opportunity while monitoring industry
activity to maximize the net present value of the resource situated
on our 55 net section land base.  
In addition to the Montney, Ellerslie and Viking formations, our
technical teams continue to identify and evaluate additional emerging
resource opportunities in 2013 with a focus on light oil or liquids
rich natural gas in numerous formations. 
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 expertise 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 64% 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 progress into our third year as a dividend paying corporation,
Bonavista remains committed to a business model built on maximizing
total shareholder return. Throughout the volatile commodity price
environment of 2012, Bonavista decisively adjusted to the environment
while maintaining sharp attention to our core strengths that have
proven to add shareholder value over the long term. These strengths
include continually exercising cost discipline and a high level of
capital spending efficiency as we pursue low risk, profitable
opportunities.  
In 2013, Bonavista intends to maintain the same strategies we
employed in 2012 in our quest to drive incremental efficiency into
our business through further concentration of our asset base in a
compelling acquisition and divestiture market. We are encouraged by
the number of acquisition opportunities in the market and look
forward to capitalizing on those that provide a synergistic
advantage. Additionally, we are currently in the process of marketing
certain non-strategic assets which, if successful, would enable a
redeployment of capital into our most capital efficient areas of
operation.  
Until conclusion of our current asset divestiture process,
Bonavista's 2013 capital budget remains at approximately $425
million, with a program to drill between 120 and 125 wells within our
core areas. This capital program is expected to result in 2013
production volumes of between 73,500 and 74,500 boe per day. As in
years past, we will be attentive to changes in commodity prices and
the business environment and will maintain flexibility with our
capital expenditure plans in order to maximize shareholder value.  
We would like to thank our employees for their commitment to
Bonavista's proven operating strategies and our shareholders for
their continual support as we strive to weather this latest phase of
the commodity cycle. We have confidence that our strategies are
appropriate for today's environment and we look forward to
continually creating long-term value for our shareholders. Our team
is very committed to this vision. 


 
BONAVISTA ENERGY CORPORATION                                                
Supplemental Financial Information                                          
Consolidated Statements of Financial Position                               
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                 December 31,  December 31, 
(thousands)                                              2012          2011 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(unaudited)                                                                 
Assets:                                                                     
 Current assets:                                                            
  Accounts receivable                            $    102,500  $    133,324 
  Prepaid expenses                                     11,089         9,660 
  Marketable securities                                 2,768             - 
  Other assets                                         12,191         8,655 
  Financial instrument commodity contracts              8,608         5,203 
----------------------------------------------------------------------------
                                                      137,156       156,842 
 Financial instrument commodity contracts               1,224             - 
 Financial instrument contracts                         4,293         3,604 
 Property, plant and equipment                      3,691,572     3,518,847 
 Exploration and evaluation assets                    217,382       233,642 
 Goodwill                                              11,225        11,225 
----------------------------------------------------------------------------
                                                 $  4,062,852  $  3,924,160 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Liabilities and Shareholders' Equity:                                       
 Current liabilities:                                                       
  Accounts payable and accrued liabilities       $    181,674  $    176,743 
  Dividends payable                                    21,303        17,292 
  Financial instrument commodity contracts              8,786        13,917 
----------------------------------------------------------------------------
                                                      211,763       207,952 
----------------------------------------------------------------------------
                                                                            
 Financial instrument commodity contracts               1,550             - 
 Long-term debt                                       889,071     1,080,605 
 Other liabilities                                     13,650             - 
 Decommissioning liabilities                          447,753       444,132 
 Deferred income taxes                                213,176       189,669 
                                                                            
 Shareholders' equity:                                                      
  Shareholders' capital                             2,059,305     1,446,804 
  Exchangeable shares                                 405,183       585,754 
  Contributed surplus                                  44,848        32,092 
  Deficit                                            (223,447)      (62,848)
----------------------------------------------------------------------------
                                                    2,285,889     2,001,802 
----------------------------------------------------------------------------
                                                 $  4,062,852  $  3,924,160 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
BONAVISTA ENERGY CORPORATION                                                
Supplemental Financial Information                                          
Consolidated Statements of Income and Comprehensive Income                  
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                     Three months                     Years 
(thousands, except per         ended December 31,        ended December 31, 
 share amounts)                 2012         2011         2012         2011 
----------------------------------------------------------------------------
(unaudited)                                                                 
                                                                            
Revenues:                                                                   
 Production               $  223,021   $  285,167   $  832,491   $1,044,414 
 Royalties                   (29,650)     (44,902)    (124,300)    (161,742)
----------------------------------------------------------------------------
                             193,371      240,265      708,191      882,672 
----------------------------------------------------------------------------
 Realized gains on                                                          
  financial instrument                                                      
  commodity contracts            204          812        8,581        7,766 
 Unrealized gains                                                           
  (losses) on financial                                                     
  instrument commodity                                                      
  contracts                   (2,793)     (27,109)       8,210       (2,935)
----------------------------------------------------------------------------
                              (2,589)     (26,297)      16,791        4,831 
----------------------------------------------------------------------------
                             190,782      213,968      724,982      887,503 
----------------------------------------------------------------------------
                                                                            
Expenses:                                                                   
 Operating                    57,464       62,486      229,847      229,072 
 Transportation                9,732       11,488       38,367       40,581 
 General and                                                                
  administrative               7,089        6,392       26,967       24,146 
 Transaction costs               960            -          960            - 
 Goodwill impairment               -       20,096            -       20,096 
 Share-based compensation      5,845        6,402       19,450       17,282 
 Gain on disposition of                                                     
  property, plant and                                                       
  equipment                  (21,449)      (4,880)     (59,675)     (11,901)
 Loss on disposition of                                                     
  exploration and                                                           
  evaluation assets              311            -        5,938            - 
 Depletion, depreciation,                                                   
  amortization and                                                          
  impairment                  90,282      100,967      331,023      313,475 
----------------------------------------------------------------------------
                             150,234      202,951      592,877      632,751 
----------------------------------------------------------------------------
                                                                            
Income from operating                                                       
 activities                   40,548       11,017      132,105      254,752 
----------------------------------------------------------------------------
 Finance costs                 9,493       17,307       53,350       86,171 
 Finance income                8,791       (8,415)     (11,739)     (25,752)
----------------------------------------------------------------------------
 Net finance costs            18,284        8,892       41,611       60,419 
----------------------------------------------------------------------------
                                                                            
Income before taxes           22,264        2,125       90,494      194,333 
 Deferred income taxes         7,822        5,446       26,292       57,149 
----------------------------------------------------------------------------
Net income (loss) and                                                       
 comprehensive income     $   14,442   $   (3,321)  $   64,202   $  137,184 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net income (loss) per                                                       
 share - basic            $     0.07   $    (0.02)  $     0.37   $     0.85 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net income (loss) per                                                       
 share - diluted          $     0.07   $    (0.02)  $     0.36   $     0.85 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
BONAVISTA ENERGY CORPORATION                                                
Supplemental Financial Information                                          
Consolidated Statements of Changes in Equity                                
For the years ended December 31                                             
----------------------------------------------------------------------------
                                 Shareholders'   Exchangeable   Contributed 
(thousands)                            capital         shares       surplus 
----------------------------------------------------------------------------
(unaudited)                                                                 
Balance as at December 31, 2011    $ 1,446,804     $  585,754   $    32,092 
Net income                                   -              -             - 
Issuance of equity, net of issue                                            
 costs                                 334,736              -             - 
Issued for cash on exercise of                                              
 common share incentive rights           4,510              -             - 
Exercise of common share                                                    
 incentive rights                        4,609              -        (4,609)
Conversion of restricted share                                              
 awards                                  5,183              -        (5,183)
Share-based compensation expense             -              -        20,070 
Share-based compensation                                                    
 capitalized                                 -              -         2,478 
Issued pursuant to the dividend                                             
 reinvestment and stock dividend                                            
 plans                                  82,892              -             - 
Exchangeable shares exchanged                                               
 for common shares                     180,571       (180,571)            - 
Dividends declared                           -              -             - 
----------------------------------------------------------------------------
                                                                            
Balance as at December 31, 2012    $ 2,059,305     $  405,183   $    44,848 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
BONAVISTA ENERGY CORPORATION                                                
Supplemental Financial Information                                          
Consolidated Statements of Changes in Equity                                
For the years ended December 31                                             
----------------------------------------------------------------------------
                                                       Total shareholders'  
(thousands)                                  Deficit                 equity 
----------------------------------------------------------------------------
(unaudited)                                                                 
Balance as at December 31, 2011          $   (62,848)           $ 2,001,802 
Net income                                    64,202                 64,202 
Issuance of equity, net of issue                                            
 costs                                             -                334,736 
Issued for cash on exercise of                                              
 common share incentive rights                     -                  4,510 
Exercise of common share                                                    
 incentive rights                                  -                      - 
Conversion of restricted share                                              
 awards                                            -                      - 
Share-based compensation expense                   -                 20,070 
Share-based compensation                                                    
 capitalized                                       -                  2,478 
Issued pursuant to the dividend                                             
 reinvestment and stock dividend                                            
 plans                                             -                 82,892 
Exchangeable shares exchanged                                               
 for common shares                                 -                      - 
Dividends declared                          (224,801)              (224,801)
----------------------------------------------------------------------------
                                                                            
Balance as at December 31, 2012          $  (223,447)           $ 2,285,889 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                 Shareholders'   Exchangeable   Contributed 
(thousands)                            capital         shares       surplus 
----------------------------------------------------------------------------
(unaudited)                                                                 
Balance as at December 31, 2010    $ 1,162,680     $  650,668   $    28,074 
Net income                                   -              -             - 
Issuance of equity, net of issue                                            
 costs                                 193,597              -             - 
Issued on business acquisition             939              -             - 
Issued for cash on exercise of                                              
 common share incentive rights          12,521              -             - 
Exercise of common share                                                    
 incentive rights                        7,794              -        (7,794)
Conversion of restricted share                                              
 awards                                  4,359              -        (4,359)
Share-based compensation expense             -              -        13,411 
Share-based compensation                                                    
 capitalized                                 -              -         2,760 
Exchangeable shares exchanged                                               
 for common shares                      64,914        (64,914)            - 
Dividends declared                           -              -             - 
----------------------------------------------------------------------------
                                                                            
Balance as at December 31, 2011    $ 1,446,804     $  585,754   $    32,092 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
----------------------------------------------------------------------------
                                                       Total shareholders'  
(thousands)                                  Deficit                 equity 
----------------------------------------------------------------------------
(unaudited)                                                                 
Balance as at December 31, 2010          $         -            $ 1,841,422 
Net income                                   137,184                137,184 
Issuance of equity, net of issue                                            
 costs                                             -                193,597 
Issued on business acquisition                     -                    939 
Issued for cash on exercise of                                              
 common share incentive rights                     -                 12,521 
Exercise of common share                                                    
 incentive rights                                  -                      - 
Conversion of restricted share                                              
 awards                                            -                      - 
Share-based compensation expense                   -                 13,411 
Share-based compensation                                                    
 capitalized                                       -                  2,760 
Exchangeable shares exchanged                                               
 for common shares                                 -                      - 
Dividends declared                          (200,032)              (200,032)
----------------------------------------------------------------------------
                                                                            
Balance as at December 31, 2011          $   (62,848)           $ 2,001,802 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
BONAVISTA ENERGY CORPORATION                                                
Supplemental Financial Information                                          
Consolidated Statements of Cash Flows                                       
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                      Three months                    Years 
                                ended December 31,       ended December 31, 
(thousands)                      2012         2011         2012        2011 
----------------------------------------------------------------------------
(unaudited)                                                                 
Cash provided by (used                                                      
 in):                                                                       
Operating Activities:                                                       
 Net income                $   14,442   $   (3,321)  $   64,202  $  137,184 
 Adjustments for:                                                           
  Depletion, depreciation,                                                  
   amortization and                                                         
   impairment                  90,282      100,967      331,023     313,475 
  Share-based compensation      7,017        4,988       18,364      15,868 
  Unrealized gains                                                          
   (losses) on financial                                                    
   instrument commodity                                                     
   contracts                    2,793       27,109      (8,210)       2,935 
  Loss (gain) on                                                            
   disposition of                                                           
   property, plant and                                                      
   equipment                  (21,449)      (4,880)    (59,675)     (11,901)
  Loss on disposition of                                                    
   exploration and                                                          
   evaluation assets              311            -        5,938           - 
  Goodwill impairment               -       20,096            -      20,096 
  Net finance costs            18,284        8,892       41,611      60,419 
  Deferred income taxes         7,822        5,446       26,292      57,149 
 Decommissioning                                                            
  expenditures                (11,410)      (5,973)    (25,530)     (21,136)
 Changes in non-cash                                                        
  working capital items        (5,206)      (8,174)      13,466      (6,923)
----------------------------------------------------------------------------
                              102,886      145,150      407,481     567,166 
----------------------------------------------------------------------------
                                                                            
Financing Activities:                                                       
 Issuance of equity, net                                                    
  of issue costs                    -            -      331,188     191,506 
 Issuance of senior notes           -      152,214            -     152,214 
 Proceeds on exercise of                                                    
  common share incentive                                                    
  rights                          355            -        4,510      12,521 
 Dividends paid               (38,323)     (51,824)   (137,898)    (204,176)
 Interest paid                (14,892)     (14,414)    (40,907)     (41,182)
 Proceeds from long-term                                                    
  debt                              -            -            -      88,579 
 Repayment of long-term                                                     
  debt                        127,198      (69,492)   (182,329)    (116,605)
----------------------------------------------------------------------------
                               74,338       18,938     (25,436)      82,857 
----------------------------------------------------------------------------
                                                                            
Investing Activities:                                                       
 Business acquisition        (155,266)     (69,309)   (155,266)    (172,944)
 Exploration and                                                            
  development                 (76,937)     (81,035)   (402,090)    (453,550)
 Property acquisitions         (9,491)      (1,433)    (14,626)     (19,806)
 Property dispositions         45,920       12,884      180,848      30,357 
 Office equipment and                                                       
  leasehold improvements         (704)        (211)     (3,307)     (10,361)
 Changes in non-cash                                                        
  working capital items        19,254      (24,984)      12,396     (23,719)
----------------------------------------------------------------------------
                             (177,224)    (164,088)   (382,045)    (650,023)
----------------------------------------------------------------------------
                                                                            
Change in cash                      -            -            -           - 
                                                                            
Cash, beginning of period           -            -            -           - 
----------------------------------------------------------------------------
Cash, end of period        $        -   $        -   $        -  $        - 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
FORWARD LOOKING INFORMATION 
Forward-Looking Statements - Certain information set forth in this
document, including management's assessment of Bonavista's future
plans and operations, contains forward-looking statements including;
(i) forecasted capital expenditures and plans; (ii) exploration,
drilling and development plans, (iii) prospects and drilling
inventory and locations; (iv) anticipated production rates; (v)
anticipated operating and service costs; (vi) our financial strength;
(vii) incremental development opportunities; (viii) reserve life
index; (ix) total shareholder return; (x) growth prospects; (xi)
asset acquisition and disposition plans; (xii) sources of funding,
which are provided to allow investors to better understand our
business. By their nature, forward-looking statements are subject to
numerous risks and uncertainties; some of which are beyond
Bonavista's control, including the impact of general economic
conditions, industry conditions, volatility of commodity prices,
currency fluctuations, imprecision of reserve estimates,
environmental risks, changes in environmental tax and royalty
legislation, competition from other industry participants, the lack
of availability of qualified personnel or management, stock market
volatility and ability to access sufficient capital from internal and
external sources. Readers are cautioned that the assumptions used in
the preparation of such information, although considered reasonable
at the time of preparation, may prove to be imprecise and, as such,
undue reliance should not be placed on forward-looking statements.
Bonavista's actual results, performance or achievement could differ
materially from those expressed in, or implied by, these
forward-looking statements or if any of them do so, what benefits
that Bonavista will derive there from. Bonavista disclaims any
intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise, except as required by law.  
Non-IFRS Measurements - Within this press release, references are
made to terms commonly used in the oil and natural gas industry.
Management uses "funds from operations" and the "ratio of debt to
funds from operations" to analyze operating performance 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 calculation 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. Basic funds from operations per share is calculated
based on the weighted average number of common shares outstanding in
accordance with International Financial Reporting Standards.
Operating netbacks equal production revenue and realized gains or
losses on financial instrument commodity contracts, less royalties,
transportation and operating expenses calculated on a boe basis.
Total boe is calculated by multiplying the daily production by the
number of days in the period. Management uses these terms to analyze
operating performance and leverage. 
Conversion of Natural Gas to Barrels of Equivalent (BOE) 
To provide a single unit of production for analytical purposes,
natural gas production and reserves volumes are converted
mathematically to equivalent barrels of oil (boe). We use the
industry-accepted standard conversion of six thousand cubic feet of
natural gas to one barrel of oil (6 Mcf = 1 bbl). The 6:1 boe ratio
is based on an energy equivalency conversion method primarily
applicable at the burner tip. It does not represent a value
equivalency at the wellhead and is not based on either energy content
or current prices. While the boe ratio is useful for comparative
measures and observing trends, it does not accurately reflect
individual product values and might be misleading, particularly if
used in isolation. As well, given that the value ratio, based on the
current price of crude oil to natural gas, is significantly different
from the 6:1 energy equivalency ratio, using a 6:1 conversion ratio
may be misleading as an indication of value.
Contacts:
Keith A. MacPhail
Executive Chairman 
Jason E. Skehar
President & CEO 
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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