Bonavista Energy Corporation Announces 2014 Second Quarter Results

Bonavista Energy Corporation Announces 2014 Second Quarter Results 
FOR: Bonavista Energy Corporation 
JULY 31, 2014 
Bonavista Energy Corporation Announces 2014 Second Quarter Results 
CALGARY, ALBERTA--(Marketwired - July 31, 2014) - Bonavista Energy Corporation
("Bonavista") (TSX:BNP) is pleased to report to shareholders its
condensed consolidated interim financial and operating results for the three
and six months ended June 30, 2014. 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 and on Bonavista's website at 
Three months ended June                                    
30,                Six months ended June 30,     
%                               %   
2014     2013   Change        2014        2013  Change  
($ thousands,                                                               
 except per                                                                 
 revenues        287,529  244,940       17%    602,562     472,433      28% 
Funds from                                                                  
 operations(1)   135,392  123,074       10%    296,186     233,082      27% 
  Per share(1)                                                               
(2)              0.67     0.63        6%       1.47        1.19      24% 
 declared(3)      39,813   38,015        5%     79,388      75,685       5% 
  Per share         0.21     0.21        -%       0.42        0.42       -% 
Net income        86,576   23,107      275%     41,639      19,888     109% 
  Per share(4)      0.43     0.12      258%       0.21        0.10     110% 
Adjusted net                                                                
 income (5)       55,706    9,032      517%     76,485      25,646     198% 
  Per share(4)      0.28     0.05      460%       0.38        0.13     192% 
Total assets                                 4,192,020   4,192,157       -% 
Long-term debt,                                                             
 net of working                                                             
 capital                                     1,126,873   1,081,191       4% 
Long-term debt,                                                             
 net of adjusted                                                            
 capital(6)                                  1,050,140   1,073,180      (2)%
 equity                                      2,274,594   2,275,326       -% 
development   121,866  103,493       18%    298,501     219,295      36% 
net of                                                                    
dispositions  (51,701)  (8,633)     499%   (151,169)     27,335    (653)%
Weighted average                                                            
  Basic          202,329  195,995        3%    201,710     195,451       3% 
  Diluted        205,443  198,295        4%    204,598     197,588       4% 
(boe conversion                                                             
 - 6:1 basis)                                                               
  Natural gas                                                                
(mmcf/day)        300      271       11%        293         272       8% 
  Natural gas                                                                
(bbls/day)     15,349   15,212        1%     15,207      14,980       2% 
(bbls/day)(7)   8,960   12,257      (27)%    10,033      12,171     (18)% 
Total oil                                                                
(boe/day)    74,273   72,554        2%     74,105      72,444       2% 
  Natural gas                                                                
($/mcf)          4.29     3.64       18%       4.67        3.45      35% 
  Natural gas                                                                
($/bbl)         52.85    43.91       20%      56.67       46.23      23% 
  Oil ($/bbl)(7)   79.34    80.42       (1)%     79.53       77.77       2% 
 ($/boe)            8.31     8.92       (7)%      8.78        9.04      (3)%
General and                                                                 
 ($/boe)            1.19     1.15        3%       1.18        1.13       4% 
Cash costs                                                                  
 ($/boe)(9)        12.38    12.98       (5)%     12.88       13.11      (2)%
 ($/boe)(10)       22.83    21.40        7%      24.90       20.45      22% 
(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        
(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 June 30, 2014    
approximately 647,000 (June 30, 2013 - 894,000) common shares were issued   
under the DRIP and SDP with an approximate value of $10.3 million (June 30, 
2013 - $13.0 million). For the six months ended June 30, 2014, approximately
1.7 million (June 30, 2013 - 2.2 million) common shares were issued under   
the DRIP and SDP with an approximate value of $26.1 million (June 30, 2013 -
$30.3 million).                                                             
(4) Basic net income per share calculations include exchangeable shares     
which are convertible into common shares on certain terms and conditions.   
(5) Amounts have been adjusted to exclude unrealized gains and losses on    
financial instrument commodity contracts, net of tax.                       
(6) Amounts have been adjusted to exclude associated assets or liabilities  
from financial instrument commodity contracts and decommissioning           
(7) Oil includes light, medium and heavy oil.                               
(8) Product prices include realized gains and losses on financial instrument
commodity contracts.                                                        
(9) Cash costs equal the total of operating, transportation, general and    
administrative, and financing expenses.                                     
(10) Operating netback equals production revenues including realized gains  
and losses on financial instrument commodity contracts, less royalties,     
operating and transportation expenses, calculated on a boe basis.           
Three months ended              
June 30,  March 31,    December  September
Share Trading Statistics              2014       2014    31, 2013   30, 2013
($ per share, except volume)                                                
High                                 17.85      16.22       14.04      14.37
Low                                  15.79      13.46       11.25      12.70
Close                                16.37      16.17       13.92      12.93
Average Daily Volume - Shares      545,585    566,650   1,000,966    620,864
Bonavista has completed another successful quarter in repositioning the
business for efficient growth and maximizing total shareholder return. We
remain committed to progressing as one of the most efficient energy operators
in western Canada as we strive to find better ways to deliver value to our
shareholders, while adapting to an ever-changing commodity price environment. 
In the second quarter of 2014, we completed the disposition of our mature heavy
oil assets, producing approximately 2,350 boe per day for $83 million, while
acquiring approximately 1,000 boe per day of low cost liquids-rich natural gas
production in the heart of our Hoadley Glauconite trend for $23 million.
Additionally, we announced the intention to acquire our partner's interest
in the prolific Wilrich play at Ansell in the Deep Basin Core Area, which
closed on July 7, 2014. Concentrating our asset portfolio through acquisition
and divestiture activities has been a key element of our strategy over the past
few years. 
Our exploration and development ("E&D") program during the second
quarter has been purposefully focused in our core areas spending $121.9
million, drilling 25 (22.5 net) wells and producing 74,273 boe per day for the
quarter. Our strategy to concentrate operations has delivered significant
improvements in operational efficiencies, evidenced by a ten percent reduction
in operating costs and a seven percent reduction in cash costs when compared to
the previous quarter. Current production is approximately 76,500 boe per day,
which is consistent with our 2014 budget, and precisely aligned with our five
year forecast. 
Operational and financial accomplishments in the second quarter of 2014
--  Increased production to 74,273 boe per day, representing a 2% increase 
from second quarter 2013 levels of 72,554 boe per day, despite net 
dispositions of 2,700 boe per day due to divestiture and acquisition 
activity over the past 12 months;   
--  Invested $121.9 million in E&D activities, drilling 25 (22.5 net) wells 
with an overall success rate of 100%. Consistent with our strategy to 
concentrate our asset portfolio, 23 (20.6 net) of the wells were drilled 
within our West Central and Deep Basin Core Areas;  
--  Generated production revenues of $287.5 million, representing a 17% 
increase when compared to the second quarter of 2013;  
--  Realized funds from operations of $135.4 million ($0.67 per share) 
representing a 10% increase from the second quarter of 2013 and a 6% 
increase on a per share basis;  
--  Achieved a 7% reduction in operating costs to $8.31 per boe and a 5% 
reduction in cash costs to $12.38 per boe when compared to the second 
quarter of 2013, resulting in operating netbacks of $22.83 per boe 
representing a 7% improvement from the second quarter of 2013;  
--  Added approximately 90 mmcf per day of compression capacity in our key 
development plays in the first half of 2014 to accommodate our 
forecasted growth over the next 18 months;  
--  Managed our exposure to fluctuating commodity prices resulting in 
approximately 70% of our forecasted natural gas revenues (net of 
royalties) hedged at an average floor price of $3.41 per gj at AECO for 
2014 and approximately 48% at an average floor price of $3.63 per gj for 
2015; and  
--  Delivered cumulative dividends of over $2.6 billion or $27.45 per common 
share since 2003, when Bonavista introduced a dividend component to our 
shareholder return.  
Second quarter acquisition and divestiture highlights: 
--  Divested of our non-core, mature heavy oil assets producing 
approximately 2,350 boe per day for proceeds of $83 million; and  
--  Acquired liquids-rich natural gas assets producing approximately 1,000 
boe per day for $23 million, further concentrating our assets in our 
West Central Core Area and strengthening our position in the Hoadley 
Glauconite play.  
Subsequent to the second quarter: 
--  Acquired the remaining 49% interest being approximately 1,600 boe per 
day in our Wilrich play at Ansell in our Deep Basin Core Area for a 
purchase price of approximately $141 million; and  
--  Completed the bought deal equity financing of 12.1 million common shares 
for net proceeds of approximately $192 million.  
With access to over 1.7 million acres, containing approximately 740 of our
future drilling locations, our West Central Core Area is our largest area of
operations. This core area offers liquids-rich natural gas and light oil
resources in multiple perspective horizons, year round accessibility and
extensive infrastructure including over 2,800 kilometers of operated pipelines
and 37 facilities, the majority of which are operated by Bonavista. 
In 2014, we will spend between $350 and $360 million on E&D activities in
the West Central Core Area drilling between 95 and 100 horizontal wells. During
the first half of 2014, our E&D capital spending in this area totaled
approximately $181 million, involving up to eight rigs, drilling 47 (39.3 net)
wells. This represents a 230% increase in E&D spending relative to the
first half of 2013. Specific to the second quarter, 90% of the wells drilled
were in this core area. 
Our West Central Core Area averaged 45,270 boe per day in the first half of
2014 representing a seven percent increase over the same period in 2013. Our
Hoadley Glauconite play continues to be the engine of growth representing a
forecasted 65% of the total expenditures in this core area for 2014 and
delivering excellent economics at current prices. 
During the quarter, we renegotiated the freehold royalty rate on lands within
our West Central Core Area. This reduced royalty rate applies to all existing
and future production and specific to the Glauconite represents approximately
40% of our remaining horizontal drilling locations, resulting in a material
impact on the value of our future development in the play. 
Hoadley Glauconite Liquids Rich Natural Gas: 
Bonavista drilled an additional 16 (15.0 net) horizontal Glauconite wells in
the second quarter bringing total activity in the first half of 2014 to 30
(27.1 net) horizontal wells. This represents a 25% increase in drilling
activity when compared to 24 (20.4 net) horizontal wells drilled in the first
half of 2013. 
Current horizontal Glauconite production volumes are approximately 22,500 boe
per day, which is modestly ahead of our five year forecast. The continued
growth in our Glauconite play has warranted additional infrastructure including
the commissioning of a transmission line designed for 120 mmcf per day of
natural gas transportation and a 30 mmcf per day compressor station. The final
phase of this compressor station was commissioned late in July with current
throughput of approximately 28 mmcf per day. These infrastructure additions
will provide incremental takeaway capacity from the area, supporting our future
growth plans. 
The average cost reduction of 11% per well realized to date in our extended
reach horizontal program is compelling, when compared to the cost to access the
equivalent reservoir from two separate horizontal wells. Year-to-date,
Bonavista has drilled five extended reach horizontals with three of these wells
drilled in the second quarter. Well performance is meeting our expectations. 
During the quarter we completed the previously announced acquisition of
liquids-rich natural gas assets producing approximately 1,000 boe per day for
$23 million, further concentrating our assets and strengthening our position in
the Hoadley Glauconite play. 
Ellerslie Liquids Rich Natural Gas: 
Bonavista drilled two additional 100% working interest horizontal Ellerslie
wells in the second quarter of 2014. Both wells are in varying stages of
completion and evaluation. We continue to believe in the long-term potential of
this play given the size and quality of the resource. We look forward to
building additional confidence as we work through the operational challenges
we've faced developing this scalable resource. 
Our inventory of 135 sections of land and approximately 200 horizontal drilling
locations make the Ellerslie an exciting component of future upside within the
Cardium Light Oil: 
Bonavista drilled two 100% working interest horizontal Cardium wells in the
Willesden Green area during the second quarter. We are pleased with the results
of these wells with combined average rates of approximately 400 boe per day
during the first 60 days of production. 
At Lochend, our production from our first quarter drilling program of five (3.7
net) wells has been consistent with our expectations delivering average
production rates of approximately 260 boe per day over the first four months of
production. Our Lochend program for 2014 consists of 12 wells, seven of which
will be drilled in the second half of the year. To accommodate this program,
Bonavista has recently constructed and commissioned a 5,000 bbl per day
multi-well oil battery at Lochend. 
Collectively, this brings our Cardium activity in the first half of 2014 to ten
(6.4 net) horizontal wells serving to maintain our corporate Cardium production
at 5,500 boe per day which is consistent with our five year forecast. 
In 2014, we plan to spend between $190 and $200 million on E&D activities
in the Deep Basin, drilling up to 32 wells. Seasonality has limited
Bonavista's accessibility and activity in this area in the second quarter.
Bonavista has spent $96 million on E&D activities drilling 13 (8.8 net)
wells and building our Ansell infrastructure in the first half of 2014. This
has resulted in production rates of 16,300 boe per day on average for the first
six months of 2014 which represents an 18% increase relative to the same period
in 2013. 
Facility projects are responsible for 18% of our total E&D spending in this
core area, as we prepare the infrastructure for future growth. Our focus
throughout the first half of the year has been on compression and
transportation capacity in our Wilrich play at Ansell. This compression and
sales line constructed in the first quarter supports our growing processing
capacity in the Deep Basin Core Area which is approximately 230 mmcf per day. 
Since our expansion into the Deep Basin Core Area in 2010, we have assembled
approximately 295,000 net acres and 300 future horizontal locations. With
compelling production performance, the Wilrich play provides strong economics
at current natural gas pricing, resulting in an attractive recycle ratio and
timely payout. In addition, the natural gas liquids content of our Bluesky play
translates into solid rates of return supported by strong initial production
rates and shallower decline profiles. 
The results of a three dimensional seismic program, completed in the first
quarter, on our Ansell property revealed extensive Falher and Notikewan
channels deposited above the Wilrich reservoir. Consistent with our strategy,
these multi-zone targets will continue to enhance the capital and operational
efficiencies of the area and optimize the utilization of infrastructure being
Wilrich Natural Gas: 
In the Wilrich, seven wells (5.3 net) were drilled during the first half of
2014, five of which were on our Ansell property. Subsequent to the quarter, we
closed an acquisition of the remaining 49% interest in the Bonavista operated
Wilrich play at Ansell. This acquisition brings our Wilrich drilling inventory
to 150 net horizontal wells, 97 of which are on our Ansell property.
Furthermore, this transaction makes Bonavista the sole owner of 120 mmcf per
day of pipeline capacity and 30 mmcf per day of compression capacity in our
Ansell field. 
Second quarter horizontal Wilrich production was approximately 5,900 boe per
day representing an 80% increase from the same period a year ago. Our 2014
drilling program consists of 21 Wilrich wells in Ansell and Marlboro which will
establish a solid foundation for future growth in 2015. 
Bluesky Liquids Rich Natural Gas: 
Our three Bluesky wells drilled in the first quarter continue performing above
expectations at a three month average production rate of 625 boe per day. In
the second quarter, one non-operated well was drilled in the Pine Creek area
and is awaiting tie-in. From a rate of return perspective, the individual well
economics of the Bluesky formation rank among the best of our liquids-rich
natural gas plays. We continue to pursue Bluesky opportunities in our Pine
Creek area. During the quarter, we completed two complementary acquisitions
which will add additional development opportunities in the Bluesky and Falher. 
Following up on a successful Falher horizontal well at Morningside in the first
quarter, Bonavista drilled an additional Falher well during the second quarter
which has averaged 830 boe per day inclusive of 50 bbls per mmcf of natural gas
liquids in the first month. We remain optimistic with our Falher opportunities
and plan to drill an additional four horizontal wells in 2014 to further
delineate the reservoir. To support our Falher drilling program at Morningside,
Bonavista has commenced construction of a 15 mmcf per day compressor station
which is scheduled to be operational in September of 2014. 
In the first half of 2014, we drilled one horizontal well, with an additional
horizontal well drilled subsequent to the second quarter, in our Blueberry
Montney field. On strategy, the purpose of our 2014 Montney program is to
further delineate and retain our 55 section land position for future
development of the substantial resource in place. We plan to complete both of
these wells in August to further enhance our understanding of this extensive
resource. We continue to improve our understanding of the characteristics of
the reservoir and the techniques required to optimize recovery most
efficiently. Our results coupled with the pace of industry development and
future commodity prices will dictate the pace of our development of this play. 
Throughout our seventeen year history, from an initial restructuring in 1997 to
create a high growth junior exploration company, through 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 despite the endless commodity price volatility and uncertainty
inherent in the energy sector. We have consistently maintained a high level of
investment activity on our asset base resulting in an increase in corporate
production by approximately 120% since converting to an energy trust in July
2003. These results stem from the expertise of our people and their
entrepreneurial approach to consistently generating profitable development
projects in an unpredictable commodity price environment. Our experienced
technical teams have a thorough understanding of our assets and the reservoirs
within the Western Canadian Sedimentary Basin as they exercise the discipline
and commitment required to deliver long-term value to our shareholders. The
core operating and financial principles that guide our people have been with
our organization from the beginning and remain solidly intact today. 
Our production is approximately 68% weighted towards natural gas and is
geographically focused in multi-zone regions, primarily in Alberta. We actively
participate in undeveloped land purchases, property acquisitions and farm-in
opportunities, which have all enhanced the quantity and quality of our
extensive drilling inventory. Specifically over the past five years, technology
coupled with North American natural gas supply/demand fundamentals has led to
numerous opportunities to reposition the asset portfolio and drastically
improve the quality of our development projects. These activities have led to
low cost reserve additions and a production base that continues to grow at a
steady pace. Today, the predictable production performance and cost structure
of our asset base ensures operating netbacks that compete favorably in most
operating environments. Furthermore, our assets are predominantly operated by
Bonavista, providing control over the pace of operations and a direct influence
over our operating and capital cost efficiencies. 
Our team brings a successful track record of executing low to medium risk
scalable development programs with consistency and with precision. We
continually strive for balance sheet flexibility and remain focused on prudent
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 underpinned with a set of consistent and reliable
operating and financial principles. Directors, management and employees also
own approximately 11% of the equity of Bonavista, aligning our interests with
those of external shareholders. 
Following a cold winter where natural gas prices strengthened as inventories
declined to lower than normal levels, the North American supply response in the
second quarter of 2014 has exceeded expectations resulting in continued price
volatility. Despite this price uncertainty, we continue to adapt to this
commodity price environment as we remain focused on progressing as one the most
efficient operators in the Western Canadian Sedimentary Basin. We have
demonstrated continued improvements in efficiency over the past six quarters by
repositioning and concentrating our asset portfolio into two core areas. These
core areas are characterized by significant remaining resources in multi-zone
horizons, accessible to existing infrastructure, and currently account for
approximately 86% of our production. Our asset concentration strategy has been
demonstrated by the disposition of 4,850 boe per day of high cost, non-core
assets, while acquiring 2,500 boe per day of low cost, opportunity-rich assets
in the heart of these two core areas. These transactions have complemented our
93% E&D spending year-to-date in these two core areas. The success of this
concentration strategy is evidenced by a 10% reduction in operating costs over
the previous quarter and recent capital efficiency improvements. 
Our goal of maximizing total shareholder return and per share performance was
demonstrated by the suspension of our dividend reinvestment and stock dividend
plans in June 2014. This suspension illustrates our conviction in the quality
of our assets and the confidence in our capital program for 2014, which will
see spending of between $580 and $600 million and the drilling of between 115
and 120 net wells. As a result of our recent Ansell acquisition, capital
spending will be focused on our Wilrich play in the second half of 2014.
Significant scheduled turnaround activity will curtail third quarter production
by approximately 4,000 boe per day, however volumes will be restored in the
fourth quarter with expected exit production growth of approximately 12%,
ranging between 84,000 and 86,000 boe per day. This will translate into annual
production growth of approximately five percent, ranging between 76,000 and
78,000 boe per day for 2014. The revised 2014 capital program is aligned with
our business plan to consistently deliver a balance of profitable growth and
sustainable income to our shareholders. 
We thank our employees for their continued dedication and our shareholders for
their unwavering support. We strongly believe we have the asset base and the
team necessary to continue to create long-term value for our shareholders. 
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. 
Bonavista Energy Corporation
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 
INDUSTRY:  Energy and Utilities - Oil and Gas  
-0- Jul/31/2014 20:45 GMT
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