Message from the CEO
Rob Wollmann - President & CEO
Arrangement Agreement Update
The Company encourages securityholders to vote FOR the proposed arrangement agreement with Reignwood Resources (the “Arrangement”) at the rescheduled annual and special meeting of security holders on August 29, 2016. Twin Butte’s Board of Directors and management remain convinced that voting FOR the Arrangement is in the best interests of ALL Twin Butte security holders and that the consideration to be received pursuant to the Arrangement is fair to the Twin Butte securityholders.
Independent Fairness Opinions
Peters & Co. Limited, in respect of the common shares of Twin Butte, and Canaccord Genuity Corp., in respect of the debentures of Twin Butte, have provided their independent opinions to the board of directors of Twin Butte that based upon all of the information available to them, including information not publicly released due to confidentiality agreements, that the consideration to be received pursuant to the Arrangement is FAIR, from a financial point of view, to the respective security holders.
Independent Advisory Firms Support Agreement
In addition both Glass Lewis & Co. and Institutional Shareholder Services Inc. (“ISS”) have recommended that Twin Butte shareholders vote FOR the Arrangement. Glass Lewis & Co. is widely recognized as a leading independent proxy voting and corporate governance advisory firm, whose analyses and recommendations are relied upon by many major institutional investment firms, mutual funds and fiduciaries throughout North America. ISS is a leading independent provider of corporate governance and proxy voting analysis, whose recommendations are relied on by many major institutions and securityholders to assist in making informed proxy voting decisions that are in the best interest of shareholders.
Approval of Arrangement Removes Risk of Receivership
The arrangement agreement removes the risk of a receivership filing which in the Company’s view, in the current commodity price environment and current level of secured bank debt, would result in both debenture holders and equity holders receiving no consideration. Oil prices, which peaked in Q2, have retreated through July and August to levels seen in Q1 when the Company reported negative cash flow. Net debt to annualized funds flow was 10.4 times for Q2, and 36.2 times for the six months ended June 30, 2016.
Further Production Declines Inevitable if Arrangement is Not Approved
Due to lack of available liquidity Twin Butte has not been able to invest in new development projects on its asset base. This along with the shut-in of uneconomic gas production has resulted in corporate production declining from 13,944 boepd (88% liquids) in Q1 2016 to 12,728 boepd (89% liquids) in Q2 and current production of ~11,500 boepd (93% liquids). Without access to capital, despite the excellent well results achieved in both the Company’s Provost and Lloydminster core areas in 2014 and 2015, further production declines are inevitable.
The proposed arrangement is in the Company’s opinion, having run an extensive strategic review process, having received independent fairness opinions in respect of the common shares and the debentures, having reviewed all possible avenues, having access to all information both publicly available and that which is subject to confidentiality agreements, the best solution for all stakeholders given the current circumstances.
About Twin Butte:
Twin Butte Energy Ltd. is a value oriented intermediate producer with a deep, low risk, drilling inventory focused on medium and heavy oil reservoirs. The common shares of Twin Butte are listed on the TSX under the symbol “TBE” and the debentures are listed on the TSX under the symbol “TBE.DB”.
President & C.E.O.
August 11, 2016