Bonavista Energy Corporation Announces 2013 Third Quarter Results

Bonavista Energy Corporation Announces 2013 Third Quarter Results 
CALGARY, ALBERTA -- (Marketwired) -- 11/07/13 -- Bonavista Energy
Corporation ("Bonavista") (TSX:BNP) is pleased to report to
shareholders its condensed consolidated interim financial and
operating results for the three and nine months ended September 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                  Nine months           
                 ended September 30,        % ended September 30,         % 
                     2013       2012  Change       2013      2012   Change  
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Financial                                                                   
($ thousands,                                                               
 except per                                                                 
 share)                                                                     
Production                                                                  
 revenues         246,413    188,610      31%   718,846   609,470       18% 
Funds from                                                                  
 operations(1)    120,142     82,291      46%   353,224   268,652       31% 
 Per share(1)                                                               
  (2)                0.61       0.48      27%      1.80      1.59       13% 
Dividends                                                                   
 declared(3)       38,379     56,416     (32%)  114,064   161,320      (29%)
 Per share           0.21       0.36     (42%)     0.63      1.08      (42%)
Net income         22,950      2,484     824%    42,838    49,760      (14%)
 Per share(4)        0.12       0.01    1100%      0.22      0.29      (24%)
Adjusted net                                                                
 income (5)        25,949     10,563     146%    51,595    41,514       24% 
 Per share(4)        0.13       0.06     117%      0.26      0.25        4% 
Total assets                                  4,203,569 3,898,043        8% 
Long-term debt,                                                             
 net of working                                                             
 capital                                      1,080,355   815,322       33% 
Long-term debt,                                                             
 net of adjusted                                                            
 working                                                                    
 capital(6)                                   1,069,295   818,487       31% 
Shareholders'                                                               
 equity                                       2,281,476 2,300,294       (1%)
Capital                                                                     
 expenditures:                                                              
 Exploration and                                                            
  development     112,938     90,320      25%   332,233   325,153        2% 
 Acquisitions,                                                              
  net of                                                                    
  dispositions    (11,620)       999   (1263%)   15,715  (129,793)     112% 
Weighted average                                                            
 outstanding equivalent                                                     
 shares: (thousands)(4)                                                     
 Basic            197,725    172,735      14%   196,381   169,388       16% 
 Diluted          200,211    174,423      15%   198,354   170,375       16% 
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Operating                                                                   
(boe conversion                                                             
 - 6:1 basis)                                                               
Production:                                                                 
 Natural gas                                                                
  (mmcf/day)          280        238      18%       275       248       11% 
 Natural gas                                                                
  liquids                                                                   
  (bbls/day)       15,305     13,424      14%    15,090    13,910        8% 
 Oil                                                                        
  (bbls/day)(7)    11,608     12,383      (6%)   11,982    13,198       (9%)
  Total oil                                                                 
   equivalent                                                               
   (boe/day)       73,632     65,464      12%    72,844    68,380        7% 
Product                                                                     
 prices:(8)                                                                 
 Natural gas                                                                
  ($/mcf)            2.97       2.56      16%      3.29      2.37       39% 
 Natural gas                                                                
  liquids                                                                   
  ($/bbl)           48.53      40.76      19%     47.02     46.11        2% 
 Oil ($/bbl)(7)     89.46      75.88      18%     81.59     77.80        5% 
Operating                                                                   
 expenses                                                                   
 ($/boe)             8.87       9.04      (2%)     8.98      9.20       (2%)
General and                                                                 
 administrative                                                             
 expenses                                                                   
 ($/boe)             1.13       1.16      (3%)     1.12      1.06        6% 
Cash costs                                                                  
 ($/boe)(9)         12.87      13.47      (4%)    13.03     13.47       (3%)
Operating                                                                   
 netback                                                                    
 ($/boe)(10)        20.44      16.83      21%     20.45     17.20       19% 
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     NOTES:                                                                 
(1)  Management uses funds from operations to analyze operating performance,
     dividend coverage and leverage. Funds from operations as presented do  
     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 include both cash dividends and common shares issued
     pursuant to Bonavista's dividend reinvestment plan (DRIP) and          
     Bonavista's stock dividend program (SDP). For the three months ended   
     September 30, 2013 approximately 1.2 million common shares were issued 
     under the DRIP and SDP with an approximate value of $14.7 million. For 
     the nine months ended September 30, 2013, approximately 3.4 million    
     common shares were issued under the DRIP and SDP with an approximate   
     value of $45.0 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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                                             Three months ended             
                        ----------------------------------------------------
                        September 30,     June 30,    March 31, December 31,
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Share Trading Statistics         2013         2013         2013         2012
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($ per share, except                                                        
 volume)                                                                    
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High                            14.37        16.77        15.18        18.85
Low                             12.70        13.33        12.25        14.05
Close                           12.93        13.65        14.94        14.82
Average Daily Volume -                                                      
 Shares                       620,864      428,813      676,012      626,743
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MESSAGE TO SHAREHOLDERS 
The third quarter of 2013, was characterized by a determined effort
to enhance the capital efficiency of our development program as we
continued to pursue growth and value creation opportunities within
our Glauconite and Cardium development programs. In addition to these
cornerstone plays, we experienced impressive drilling results within
the Wilrich and Ellerslie which ultimately, will serve as growth
engines in years to come. During the quarter, we executed a
successful development program that contributed to production growth
of 12% over the same period in 2012. This production performance was
a significant improvement over the same period in 2012 and was
achieved while spending only 83% of our anticipated capital budget
for the quarter and only 85% of funds from operations generated for
the quarter. In addition, dividends of $0.21 per share for the
quarter were paid, providing an annualized dividend yield of
approximately 6%. These results are consistent with our strategy of
balancing growth and income with the goal of generating maximum
returns for our shareholders. 
The third quarter of 2013 once again saw significant price volatility
for all commodities. While we experienced a 16% increase in our
natural gas price over the same period in 2012, the AECO basis price
differential was more than double that of the first half of 2013,
creating incremental uncertainty in the Canadian natural gas market.
Fortunately, we have witnessed this differential return to historic
levels subsequent to the quarter, where we expect it to remain in the
near term. In addition, we saw an 18% increase in our realized oil
price and a 19% increase in our realized natural gas liquids price.
These price increases coupled with our production growth, resulted in
an increase in funds from operations of 46% when compared to the
third quarter of 2012. 
Specific accomplishments in the third quarter of 2013 include: 


 
--  Increased production volumes to 73,632 boe per day, a 12% increase over
    65,464 boe per day in the third quarter of 2012. This growth rate was
    achieved while spending $20.9 million less than our third quarter
    capital budget. Exit 2013 production is anticipated to be between 76,000
    and 77,000 boe per day; 
    
--  Executed an efficient exploration and development program, investing
    $112.9 million and drilling 48 wells, of which 33 were oil wells, 13
    were liquids rich natural gas wells and two were abandoned. The third
    quarter marks a record in "quarterly operated meters drilled" by
    Bonavista since converting back to a corporation in 2011. This signifies
    our confidence in our asset portfolio and our execution capability; 
    
--  Improved our operating netbacks by 21% to $20.44 per boe compared to
    $16.83 per boe in the comparable period in 2012, due to an 11% increase
    in revenue per boe, coupled with a 4% reduction in our cash costs per
    boe; 
    
--  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. Based upon current
    forward prices, we have approximately 55% of our 2014 production
    revenue, net of royalties, hedged. Furthermore, in our effort to
    optimize netbacks and diversify markets, we have incorporated sales by
    rail when beneficial from a price or logistics standpoint; 
    
--  Generated funds from operations of $120.1 million ($0.61 per share) for
    the three months ended September 30, 2013, an increase of 46% over the
    $82.3 million ($0.48 per share) generated in the same period in 2012; 
    
--  Elected to reduce the commitment amount under our bank credit facility
    to $600 million. The $400 million reduction in the commitment results in
    annual savings of approximately $1.7 million in standby fees or 6 cents
    per boe on our cash costs. With the reduction, we still have committed
    bank credit availability of approximately $400 million; and 
    
--  Declared $38.4 million in dividends for the three months ended September
    30, 2013. Since 2003, when Bonavista introduced an income component to
    our total shareholder return, Bonavista has delivered cumulative
    dividends of approximately $2.5 billion or $26.82 per common share. 

 
Third Quarter 2013 Operational Highlights 
West Central Alberta Core Area 
Hoadley Glauconite Liquids Rich Natural Gas: 
Bonavista drilled six horizontal Glauconite wells in the third
quarter, totaling 30 wells drilled to the end of the third quarter of
2013. We have completed all six wells, four of which are on-stream
with production results averaging between 500 and 600 boe per day per
well in their first month. In a continued effort to optimize capital
efficiencies in the play, Bonavista successfully drilled and
completed our second extended reach horizontal well with 2,900 meters
of horizontal length and 24 fracture stimulations. Given the success
of our first two wells, a third extended reach well is being drilled
at Strachan. The use of this development technique is expected to
result in improved capital efficiencies throughout the entire
Glauconite trend. 
With a revised royalty structure in place, we revived our drilling
program in the northeast portion of the Glauconite trend by drilling
two horizontal wells at Westerose. Both wells have exceeded our
expectations of production with restricted test rates of
approximately 900 boe per day for each well and 12% lower well costs
than estimated. 
Bonavista continues to be an industry leader in the development of
the Hoadley Glauconite trend having drilled 174 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 are
consistently increasing our expectations of recoverable reserves per
well. 
Given the attractive development economics, the predictability of
well performance, and our continued success with execution
efficiency, we plan to drill 55 to 60 wells in this play in 2014.
Once complete, this program will represent a record year of activity
for Bonavista within the Hoadley Glauconite trend. This will result
in record production volumes for Bonavista at the Rimbey Deep Cut
facility which is scheduled for commissioning in the fourth quarter
of 2014. Ultimately, this new facility will result in natural gas
liquid recoveries expanding from 70 bbls per mmcf to approximately
100 bbls per mmcf. 
Cardium Light Oil: 
Bonavista drilled six Cardium horizontal wells and participated in
drilling another six non-operated Cardium horizontal wells in the
third quarter. In the emerging area of Lochend, we drilled four wells
and participated in drilling two non- operated wells. Five of these
six wells have been completed and tested at combined rates of
approximately 3,500 bbls per day of oil. In the fourth quarter of
2013, we have drilled one additional Cardium horizontal well at
Lochend. The success of the Cardium development in this area has
resulted in the existing infrastructure in Lochend reaching full
capacity. In the fourth quarter, Bonavista plans to invest
approximately $7 million in infrastructure which will create an
unrestricted flow path for these wells by January, 2014 and will
accommodate our planned 2014 drilling program. 
We have participated in drilling 25 wells to date in 2013, totaling
111 horizontal Cardium wells drilled since 2009. Although we have
been active over the years, we have maintained an inventory level of
approximately 100 locations as we delineate our land base and gain a
greater understanding of this reservoir in several areas. Our current
inventory of Cardium locations represents a profitable, multi-year
development opportunity with single well economics improving with
time and technology. 
Initial plans for 2014 include drilling approximately 21 Cardium
horizontal wells. Similar to previous years, we will adjust our
development program in the Cardium as we continue to execute and
evaluate the success of this program. 
Ellerslie Liquids Rich Natural Gas: 
In the third quarter Bonavista drilled three Ellerslie wells. Our
first horizontal Ellerslie well, drilled at Westerose, exceeded our
expectations with first month production of 900 boe per day (31%
liquids). At Caroline we drilled two Ellerslie horizontal wells,
however, due to mechanical issues, the first well was abandoned and
the second well was rig released with only 50% of the targeted
horizontal section drilled. Production from this well has exceeded
our expectations with a first month rate of 420 boe per day and
increasing, despite having only drilled 50% of our projected
reservoir accessibility. 
At Garrington, an Ellerslie well which we drilled in the second
quarter and placed on production in July at a restricted rate of 600
boe per day, is now producing at a rate of 780 boe per day, 40% of
which is oil and natural gas liquids. We plan to drill a follow-up
well at Garrington in the fourth quarter. 
During the third quarter we continued to modify our drilling
techniques as we advanced the Ellerslie play towards commercial
development. Single well economics, are supported by a strong natural
gas liquids yield of approximately 100 bbls per mmcf, of which
approximately 20% is condensate production. 
Our goal over the past three years has been to strengthen our land
position, delineate the resource opportunity, and gain valuable
horizontal operational experience in this play. After drilling nine
horizontal wells, and acquiring 23,000 acres of incremental land, we
are ready for the next phase of development. With growth in our
drilling inventory of approximately 200 locations, we plan to spend
$44 million in 2014 by drilling 11 horizontal wells, crystalizing the
value of this play. 
Deep Basin Core Area 
Bonavista drilled four wells in our Deep Basin core area in the third
quarter, consisting of three Wilrich horizontal wells and one Bluesky
horizontal well. Two of the Wilrich wells were drilled at Marlboro,
which were brought on production at average rates of 800 boe per day
per well. Our third Wilrich horizontal well was drilled at Ansell in
the quarter and completed in October with production test rates
exceeding 15 mmcf per day. Production for this well will be
restricted through a third-party gathering system until we can
install our own compressor station and pipeline infrastructure which
is scheduled for early 2014. 
In the third quarter, one Bluesky well was drilled at Pine Creek with
seven additional Bluesky locations scheduled for the fourth quarter
of 2013. Subsequent to September 30, 2013, Bonavista completed an
acquisition of approximately 725 boe per day of production for $28.7
million, taking another step in our asset concentration strategy in
the Deep Basin area. This transaction is highlighted by the addition
of 26 Bluesky horizontal locations, a liquid rich natural gas play
delivering amongst the strongest returns of all natural gas plays in
western Canada. 
The Deep Basin core area continues to meet or exceed our
expectations. Hence, our capital allocation in 2014 will involve
exploration and development spending of approximately $121 million.
Of this, $84 million will be allocated to drill 22 horizontal wells,
and $29 million to expand our existing infrastructure. This
represents nearly a 40% increase in exploration and development
spending over 2013, demonstrating our continued commitment to this
core area. 
Additional Emerging Opportunities 
Bonavista drilled six horizontal Viking oil wells in the Provost area
in the third quarter of 2013, totaling 12 wells year to date. Ten
wells have been completed, with production rates averaging 60 boe per
day in their first month, which is consistent with our expectations
for this area. 
In the third quarter, Bonavista drilled and completed a horizontal
well at Blueberry in northeast British Columbia, targeting liquids
rich natural gas in the Montney formation. The first month production
levels averaged 700 boe per day, of which 260 boe per day was free
condensate. Through our focused effort on cost efficiency with this
well, we achieved a substantial reduction in capital costs with total
drill, completion and tie-in costs amounting to $6.3 million, a 25%
improvement from the previous wells drilled in this formation.
Industry activity in the Montney formation remains robust in this
area providing incremental delineation of the resource surrounding
our land base. In addition, we continue to improve our understanding
of the technology required 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 resource throughout 2014 and,
in future years, proceed with a larger scale development program. 
Bonavista drilled and completed a Falher horizontal well in the third
quarter with a restricted initial production rate of 730 boe per day,
which included 60 bbls per mmcf of natural gas liquids. With the
success of this well, we plan to test this play further in 2014 by
drilling five additional wells. 
Strengths of Bonavista Energy Corporation 
Throughout our 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 since January 2011 as
a dividend paying corporation, Bonavista has remained committed to
the same operating philosophies that have resulted in our tremendous
success over this 16 year period. We have steadily improved the
quality of our projects and have maintained a high level of
investment activity on our asset base. This has resulted in an
increase in corporate production by approximately 110% since
converting to an energy trust in July 2003 and a further 10% since
converting back to a corporation nearly three years ago. These
results stem from the expertise of our people and their
entrepreneurial approach to generating, profitable development
projects in a volatile commodity price environment 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 purchases, producing
property acquisitions and farm-in opportunities, which have all
enhanced the quality 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% natural gas weighted and is
geographically focused in multi-zone regions primarily in central
Alberta and northeast British Columbia. The low cost structure of our
asset base ensures favourable operating netbacks in most operating
environments. Furthermore, our assets are predominantly operated by
Bonavista, providing control over the pace of operations and direct
influence over our operating and capital cost efficiencies. 
Our team brings a successful track record of executing low to medium
risk development programs, while incorporating 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, aligning our interests with external
shareholders. 
Outlook 
Bonavista remains committed to maximizing shareholder returns through
a balance of growth and income. While the Canadian energy sector
continues to experience volatile commodity prices, Bonavista will
manage this business risk through a disciplined commodity hedging
program, while developing low cost, repeatable growth opportunities.
This strategy provides us with the confidence to remain active
throughout the balance of 2013 and establish a solid production and
reserve foundation for 2014. 
Bonavista expects to spend approximately $460 million in 2013,
drilling approximately 126 wells within our core areas. We expect
this capital program to increase average 2013 production by
approximately 6% over 2012 to 73,600 boe per day. In an effort to
position Bonavista's asset portfolio for success, we will continue to
advance the organic development of our key resource plays, while
pursuing acquisition and divestiture opportunities to further enhance
efficiencies from asset concentration. 
Bonavista's Board of Directors has approved a 2014 capital budget of
between $500 and $550 million, which will result in drilling between
140 and 150 wells and production between 77,000 and 79,000 boe per
day. This represents production growth of approximately 6% year over
year, using the mid-point of this range. Although we have not
budgeted for any acquisitions or divestitures, we remain committed to
our asset concentration strategy where we can complement our
operational efficiency and enhance our drilling inventory in our core
areas. We have currently identified up to $50 million of non-core
assets for disposition in 2014 which, if successful, would result in
net spending at the lower end of the aforementioned range. Our
business plan remains intact with a commitment to deliver a balance
of profitable growth from our quality asset base and steady income
through our dividend. 
We thank our employees for their commitment to Bonavista's long-term
purpose and vision and our shareholders for their trust and support
as we navigate the ever changing business environment. We are
confident in our stewardship of shareholder capital and that our
business model and operational strategies are appropriate in the
current environment. 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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