Bonavista Energy Corporation Announces 2013 Second Quarter Results

Bonavista Energy Corporation Announces 2013 Second Quarter Results 
CALGARY, ALBERTA -- (Marketwired) -- 08/01/13 -- Bonavista Energy
Corporation (TSX:BNP) ("Bonavista") is pleased to report to
shareholders its condensed consolidated interim financial and
operating results for the three and six months ended June 30, 2013.
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 http://www.sedar.com and
on Bonavista's website at www.bonavistaenergy.com. 


 
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Highlights                                                                  
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                        Three months                    Six months          
                      ended June 30,       %        ended June 30,       %  
                      2013      2012  Change        2013      2012  Change  
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Financial                                                                   
($ thousands,                                                               
 except per                                                                 
 share)                                                                     
                                                                            
Production                                                                  
 revenues          244,940   193,826      26%    472,433   420,860      12% 
                                                                            
Funds from                                                                  
 operations(1)     123,074    81,726      51%    233,082   186,361      25% 
  Per share(1)                                                              
   (2)                0.63      0.49      29%       1.19      1.11       7% 
                                                                            
Dividends                                                                   
 declared(3)        38,015    52,721     (28%)    75,685   104,904     (28%)
  Per share           0.21      0.36     (42%)      0.42      0.72     (42%)
                                                                            
Net income          23,107     3,553     550%     19,888    47,276     (58%)
  Per share(4)        0.12      0.02     500%       0.10      0.28     (64%)
                                                                            
Adjusted net                                                                
 income (loss)(5)    9,032   (10,015)    190%     25,646    30,951     (17%)
  Per share(4)        0.05     (0.06)    183%       0.13      0.19     (32%)
                                                                            
Total assets                                   4,192,157 3,877,344       8% 
                                                                            
Long-term debt,                                                             
 net of working                                                             
 capital                                       1,081,191 1,108,488      (2%)
                                                                            
Long-term debt, net of                                                      
 adjusted working                                                           
 capital(6)                                    1,073,180 1,121,314      (4%)
                                                                            
Shareholders'                                                               
 equity                                        2,275,326 1,990,893      14% 
                                                                            
Capital                                                                     
 expenditures:                                                              
  Exploration and                                                           
   development     103,493    81,039      28%    219,295   234,833      (7%)
  Acquisitions,                                                             
   net of                                                                   
   dispositions     (8,633)  (72,584)     88%     27,335  (130,792)    121% 
                                                                            
Weighted average                                                            
 outstanding                                                                
 equivalent                                                                 
 shares:                                                                    
 (thousands)(4)                                                             
  Basic            195,995   167,767      17%    195,451   167,219      17% 
  Diluted          198,295   168,582      18%    197,588   168,080      18% 
                                                                            
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Operating                                                                   
(boe conversion -                                                           
 6:1 basis)                                                                 
                                                                            
Production:                                                                 
  Natural gas                                                               
   (mmcf/day)          271       254       7%        272       253       8% 
  Natural gas                                                               
   liquids                                                                  
   (bbls/day)       15,212    13,689      11%     14,980    14,156       6% 
  Oil                                                                       
   (bbls/day)(7)    12,257    13,426      (9%)    12,171    13,611     (11%)
    Total oil                                                               
     equivalent                                                             
     (boe/day)      72,554    69,506       4%     72,444    69,854       4% 
                                                                            
Product                                                                     
 prices:(8)                                                                 
  Natural gas                                                               
   ($/mcf)            3.64      2.18      67%       3.45      2.28      51% 
  Natural gas                                                               
   liquids                                                                  
   ($/bbl)           43.91     46.58      (6%)     46.23     48.67      (5%)
  Oil ($/bbl)(7)     80.42     74.52       8%      77.77     78.68      (1%)
                                                                            
Operating                                                                   
 expenses ($/boe)     8.92      9.17      (3%)      9.04      9.28      (3%)
                                                                            
General and                                                                 
 administrative                                                             
 expenses ($/boe)     1.15      1.07       7%       1.13      1.01      12% 
                                                                            
Cash costs                                                                  
 ($/boe)(9)          12.98     13.47      (4%)     13.11     13.46      (3%)
                                                                            
Operating netback                                                           
 ($/boe)(10)         21.40     15.77      36%      20.45     17.37      18% 
                                                                            
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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
June 30, 2013 approximately 894,000 common shares were issued under
the DRIP and SDP with an approximate value of $13.0 million. For the
six months ended June 30, 2013, approximately 2.2 million common
shares were issued under the DRIP and SDP with an approximate value
of $30.3 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
                                                                            
                                                                            
                                      June 30, March 31,  December September
                                          2013      2013  31, 2012  30, 2012
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($ per share, except volume)                                                
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High                                     16.77     15.18     18.85     19.14
Low                                      13.33     12.25     14.05     15.46
Close                                    13.65     14.94     14.82     17.44
Average Daily Volume - Shares          428,813   676,012   626,743   596,502
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MESSAGE TO SHAREHOLDERS 
Throughout the second quarter of 2013, we remained focused on our
business plan to provide a combination of growth and income to our
shareholders. We executed a successful development program that was
highlighted by efficient production growth of 4% over the same period
in 2012. In addition, dividends of $0.21 per share for the quarter
were paid providing an annualized dividend yield of approximately 6%. 
The second quarter of 2013 once again was met with significant price
volatility for natural gas, natural gas liquids and crude oil. In
comparison to the same period in 2012, we experienced a 67% increase
in our realized natural gas price, an 8% increase in our realized oil
price and a decrease of 6% in our realized natural gas liquids price.
This coupled with a solid production growth resulted in a 51%
increase in funds from operations when compared to the second quarter
of 2012.
Specific accomplishments for Bonavista in the second quarter of 2013
include: 


 
--  Increased production volumes to 72,554 boe per day representing a 4%
    increase over 69,506 boe per day in the second quarter of 2012. This
    growth rate was achieved despite scheduled and unscheduled plant
    turnarounds that impacted quarterly volumes by 950 boe per day. Current
    production is approximately 73,000 boe per day; 
--  Executed a successful exploration and development program, investing
    $103.5 million, drilling 22 horizontal wells of which 11 were oil and 11
    were liquids rich natural gas wells. By the end of the second quarter,
    10 of these wells were on production with the remainder brought on
    production by August 1,2013 
--  Improved our operating netbacks by 36% to $21.40 per boe compared to
    $15.77 per boe in the comparable period in 2012, due to a 15% increase
    in revenue per boe, net of realized gains (losses) on financial
    instrument commodity contracts, coupled with a 5% reduction per boe in
    our royalty, operating and transportation expenses; 
--  Managed our exposure to commodity price fluctuations resulting in
    approximately 50% of our forecasted natural gas production (net of
    royalties) hedged at an average floor price of $3.00 per mcf and 41% of
    our forecasted oil and liquids production (net of royalties) hedged at
    an average floor price of $88.22 per bbl for 2013. Additionally, we
    continued to extend our hedging activity into 2014 and 2015; 
--  Issued $225 million of senior unsecured notes having a blended coupon
    rate of 3.78% and a weighted average term of 11.1 years. Proceeds of
    these notes were used to reduce a portion of Bonavista's bank debt,
    increasing our bank line availability to approximately $800 million; 
--  Generated funds from operations of $123.1 million ($0.63 per share) for
    the three months ended June 30, 2013 an increase of 51% over the $81.7
    million ($0.49 per share) generated in the same period in 2012; 
--  Declared $38.0 million in dividends for the three months ended June 30,
    2013; and 
--  Since 2003, when Bonavista introduced an income component to our total
    shareholder return, Bonavista has delivered cumulative dividends of
    approximately $2.5 billion or $26.61 per common share. 

 
Accomplishments for Bonavista subsequent to the second quarter of
2013 include: 


 
--  Divested of 150 boe per day of non-core, oil weighted production for
    $14.0 million with attractive metrics of $93,333 per boe per day and
    resulting in year to date divestiture proceeds of $65 million. 

 
Second Quarter 2013 Operational Highlights 
West Central Alberta Core Area 
Hoadley Glauconite Liquids Rich Natural Gas: 
Bonavista drilled 12 horizontal Glauconite wells in the second
quarter, including 11 development wells at Wilson Creek and Willesden
Green and one well at Strachan to further delineate the South West
extent of the reservoir. To date we have completed all 12 wells, 10
of which are currently on stream with initial production results
averaging approximately 560 boe per day per well in their first month
of production. In a continued effort to optimize capital efficiencies
in the play, Bonavista successfully drilled our first extended reach
horizontal well in the second quarter of 2013. A horizontal section
of 2,800 meters was completed including 24 fracture stimulations,
with initial results exceeding our expectations. This well is
currently on production and is expected to average approximately
1,300 boe per day in its first month of production. Given the success
of our initial extended reach well, we will continue to apply this
technique selectively throughout the second half of 2013. The use of
this technique is expected to ultimately result in improved capital
efficiencies throughout the Hoadley trend. 
Bonavista continues to be an industry leader in the development of
the Hoadley Glauconite trend having drilled approximately 170
horizontal wells since entering the play in 2008. With an active land
acquisition program and continued down-spacing initiatives, we have
increased our inventory to approximately 400 locations in the play
and have consistently increased our expectations of recoverable
reserves per well.  
The single well economics of our Hoadley development program rank at
the top of our development opportunities, with an average rate of
return of 50% in the current commodity price environment. Since
having depressed natural gas prices moderate our pace of development
in 2012, we have re-focused our efforts on the play in 2013,
budgeting to drill approximately 40 horizontal wells. 
Cardium Light Oil: 
Bonavista participated in drilling two horizontal Cardium wells in
the second quarter. Both wells were drilled at Strachan which is
considered an emerging Cardium development area for Bonavista.
Initial production test results are encouraging and we will be
monitoring production performance over the next few months in
anticipation of further development in 2014.  
An active and successful Cardium program throughout the first half of
2013, consisting of 13 horizontal wells has resulted in record
Cardium oil production of approximately 6,000 boe per day in the
second quarter, representing a 40% increase since the beginning of
the year. 
We have drilled approximately 100 horizontal Cardium wells since
2009, while maintaining an inventory level of 140 locations as we
delineate our land base and gain a greater understanding of this
reservoir in several emerging areas. Bonavista's current inventory of
Cardium locations represents a profitable, multi-year development
opportunity with single well economics generating an average 40% rate
of return. 
Bonavista plans to drill an additional 10 to 12 horizontal wells in
the second half of 2013, including four to six wells in the emerging
Lochend area. We remain encouraged by the production results on
offsetting acreage in the Lochend area as we further delineate this
exciting opportunity.  
Ellerslie Liquids Rich Natural Gas: 
Bonavista drilled one horizontal Ellerslie well in the second quarter
at Garrington which was recently placed on production at a restricted
rate of 700 boe per day, 50% of which is oil and natural gas liquids.
We anticipate an active Ellerslie program in the third quarter of
2013 with four horizontal wells planned.  
We continued to modify our drilling techniques in the second quarter
as we advance the Ellerslie play towards commercial development.
Single well economics, with an estimated 35% rate of return, are
supported by a strong natural gas liquids yield of approximately 100
bbls per mmcf of which approximately 20% is condensate production. 
At this early stage of development, we have identified 80 horizontal
locations on our land base of approximately 100 sections. We plan to
drill between four to six horizontal wells in 2013 and are optimistic
about the future development of this large, regional resource play.  
Deep Basin Core Area 
We are excited about our Deep Basin program in the second half of
2013 with two rigs scheduled to commence activity in August. We are
planning to drill up to six horizontal Wilrich wells, two Bluesky
wells and two Rock Creek wells.  
Production performance of our first quarter activity has been strong
with our three Bluesky wells averaging 520 boe per day per well in
their first three months of production. Furthermore, our Edson
Wilrich well drilled in the first quarter has performed strongly in
the first month of production at a restricted rate of 5.7 mmcf per
day of natural gas plus 82 bbls per day of natural gas liquids, 25%
of which is condensate. 
Bonavista's Deep basin core area has increased in scale and relevance
over the past two years as we have assembled a land base of
approximately 210,000 net acres and licensed natural gas processing
capacity of 230 mmcf per day. This core area is currently producing
approximately 13,000 boe per day with a prospect inventory of
approximately 200 horizontal locations. The expanded scale of our
Deep Basin core area enables larger drilling programs and improving
capital efficiencies. Furthermore, our consolidation activity and
facility optimization efforts over the past couple of years have
enabled a 14% reduction in area operating costs to approximately
$6.00 per boe since the beginning of 2013.  
Additional Emerging Opportunities 
Bonavista drilled six horizontal Viking oil wells at Provost in the
second quarter of 2013. Initial production test results are
encouraging with the first four wells supporting our type curve
expectations for average first month production of 70 boe per day. We
have experienced modest drilling and completion cost improvements and
look forward to continued success as we drill 10 additional Viking
horizontal wells in the third quarter.  
Subsequent to the second quarter, Bonavista drilled and is currently
completing a horizontal well at Blueberry in northeast British
Columbia targeting liquids rich natural gas in the Montney formation.
Industry activity in the Montney formation remains robust in this
area providing incremental delineation of the resource surrounding
our land base and a greater understanding of the technology being
applied to optimize the recovery of this resource. Bonavista's 55 net
section land base is uniquely positioned having an attractive natural
gas liquids yield of approximately 150 bbls per mmcf. We plan to
further delineate this prospect throughout 2014 and in future years,
proceed with a larger scale development program. 
Supplementing our Montney and Viking activity, Bonavista's technical
teams continue to evaluate numerous resource opportunities with a
focus on light oil and liquids rich natural gas formations. 
Strengths of Bonavista Energy Corporation 
Throughout our 16 year history, with an initial restructuring in 1997
to create a high growth junior exploration company, the energy trust
phase between July 2003 and December 2010, and now operating as a
dividend paying corporation, Bonavista has remained committed to the
same strategies that have resulted in our tremendous success over
this period. We have steadily improved the quality of our projects
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 10% 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 steady pace. Our production base is currently
63% 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 proceed into the second half of 2013, Bonavista remains
committed to maximizing long term shareholder returns through a
balance of growth and income. A moderation in seasonal cooling demand
coupled with strong production levels in North America caused natural
gas price weakness in June which has continued since the end of the
second quarter. Bonavista's disciplined financial management together
with our hedging program for natural gas revenues will assist in
withstanding this recent softening in natural gas prices. While the
Canadian energy sector continues to experience volatile commodity
prices, Bonavista will continue to pursue low cost, repeatable growth
opportunities, maintain a disciplined philosophy with commodity
hedging and demonstrate conservative financial management throughout
our entire business. This strategy provides us the confidence and
ability to remain active throughout the balance of 2013.  
Bonavista expects to spend approximately $430 million in 2013,
drilling approximately 120 wells within our core areas. We expect
this capital program to increase average 2013 production by
approximately 6% over 2012 to 73,500 boe per day. In an effort to
position Bonavista's asset portfolio for long term success, we will
continue to advance the organic development of our key resource plays
while pursuing acquisition and divestiture opportunities as they
present themselves. 
We would like to thank our employees for their commitment to
Bonavista's long term vision and our shareholders for their support
as we navigate the ever changing business environment. We are
confident that our business model and operational strategies are
appropriate in the current environment and we look forward to
delivering on our objectives in the months and years to come. Our
team is very committed to this vision. 
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
Executive Chairman
(403) 213-4300 
Jason E. Skehar
President & CEO
(403) 213-4300 
Glenn A. Hamilton
Senior Vice President & CFO
(403) 213-4300 
Bonavista Energy Corporation
1500, 525 - 8th Avenue SW
Calgary, AB T2P 1G1
www.bonavistaenergy.com
 
 
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