Bonterra reported its operating and financial results for the three months ended March 31, 2010. During the first quarter of the year, Bonterra continued to focus on the accelerated development of its horizontal drilling program targeting the Pembina Cardium, improving its financial performance and providing superior value to its shareholders.
Production in the first quarter of 2010 averaged 5,018 BOE per day, an increase of approximately three percent quarter over quarter. This modest increase is mainly attributable to additional production associated with the fourth quarter 2009 drill program and was offset by the Company's disposition of approximately 235 BOE per day of production in non-core areas during the fourth quarter of 2009 and first quarter of 2010. These sales reduced the quarter over quarter production increase from eight percent to three percent.
Bonterra's 2010 capital development program is focused on its Pembina Cardium horizontal drilling program and capital expenditures for the year are estimated at $50 million, net of drilling credits (increased from an initial budget of $37 million). The majority of the planned 20 to 30 wells will be located within the Halo area of its property. However, the Company also plans to conduct some drilling in the main portion of the pool with the objective of converting some potential vertical locations to horizontal locations.
To date, the Company is pleased and excited with its development of this area. Bonterra is constantly increasing its knowledge and understanding of the Cardium development and the ability to extract a larger percentage of the original-oil-in-place in both the Halo area and main part of the Pembina Cardium pool.
During the first quarter, Bonterra spent approximately $20.7 million primarily on the drilling of nine gross (eight net) Pembina Cardium horizontal wells. Of these wells, only one was on production prior to quarter-end and thus had little impact on first quarter production numbers. Currently, eight of these wells have now been placed on production with the last well expected to be completed and tied-in as soon as spring break-up is complete and road bans are lifted. The summer drill program will recommence at this time as well.
The Company believes that the development of this play is important for future growth and for generating long-term value for shareholders. Bonterra continues to forecast 2010 production levels between 5,700 and 6,000 BOE per day.
Financial results during the first quarter substantially improved due to increased production levels and strengthening commodity prices, most notably in crude oil. Revenue and cash flow from operations increased 63 percent and 128 percent, respectively when compared to the same period in 2009. Crude oil prices improved approximately 64 percent while natural gas prices decreased approximately two percent over the same time frame. Quarter over quarter saw continued improvements, again due mainly to the healthier commodity pricing environment which included a modest gain in natural gas prices.
Bonterra's netbacks have also shown improvements with a 13 percent increase to $34.38 per BOE in the first quarter of 2010 compared with $29.57 per BOE in the fourth quarter of 2010. Netbacks have been positively impacted by commodity prices. In addition, Bonterra has decreased both field operating costs and general and administrative costs quarter over quarter which has also contributed to these enhanced levels.
As a result of the Company's improved financial results, Bonterra was able to increase the dividend to shareholders beginning with an increase to $0.18 per share for the January 29, 2010 dividend payment from $0.16 per share previously. Bonterra has subsequently increased the dividend once again to its current level of $0.21 per share beginning with the April 30, 2010 dividend payment.
Dividend payments to shareholders in respect of first quarter 2010 operations totaled $0.57 per share with a payout ratio of 50 percent of funds flow. Management and the Board of Directors monitor production volumes, commodity prices, operating costs, payout ratios and capital expenditures on a monthly basis to determine the dividend amount. Bonterra currently intends to pay out between 60 to 75 percent of its cash flow while retaining the remainder for capital expenditure requirements. Considering the Company's aggressive capital expenditures for 2010, it is anticipated that production volumes may increase in subsequent quarters. Monthly dividends will continue to be influenced by production volumes and commodity prices.
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