Triangle Petroleum Corporation (TPLM)

TPLM 
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Triangle Petroleum Corporation (TPLM)

Q3 2012 Earnings Conference Call

December 10, 2012 10:30 AM ET

Executives

Jonathan Ryan Samuels – President and Chief Executive Officer

Joseph B. Feiten - Chief Financial Officer, Principal Accounting Officer

Susie Kuntz – Controller

Justin Bliffen – Head of Corporate Finance

Michael Grijalva – Vice President of Capital Markets

Analysts

Will Green – Stephens Inc.

David Snow – Energy Equities

Jason Wangler – Wunderlich Securities

Ron Mills – Johnson Rice & Company

Jack Aydin – KeyBanc Capital Markets

Jared Lewis – Northland Securities

Blaise Angelico – Howard Weil, Inc.

Dan McSpirit – BMO Capital Markets

David Peterson – Shareholder

Adam Fackler – KLR Group

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Q3 2013 Triangle Petroleum Corporation earnings conference call. My name is LeeAnn and I will be your operator for today. At this time all participants are in listen-only mode and we will conduct a question-and-answer session towards the end of the conference. (Operator Instructions) As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Jonathan Samuels, President and CEO. Please go ahead.

Jonathan Samuels

Thank you and good morning everyone. Welcome to the Triangle Petroleum fiscal 2013 third quarter conference call. My name is Jonathan Samuels and I’m joined today by Joseph Feiten and Susie Kuntz from our accounting team and by Justin Bliffen and Michael Grijalva from our finance team.

Today we’d like to cover a number of topics. We’d first like to review the quarter, the operational and financial results for the period ended October 31 2012 which is the first profitable quarter in our company’s history. Second, we’d like to cover some highlights and low lights from current operations which will include some thoughts on overall trends in the Bakken. Third, we’d like to talk about strategic goals on a go-forward basis, particularly as it relates to our vision for Triangle’s low cost Bakken operator differentiated by vertical integration. Fourth, we would like to take questions and answers from those of you listening in on the call.

During the three month period ended October 31 2012, Triangle generated a total of EBITDA of $6.8 million on total revenues of $23.1 million. We produced an average of approximately 1,400 barrels of oil equivalent per day in the quarter, representing about 20% sequential growth quarter over quarter and ahead of our production guidance given to the street. We exited the quarter producing a little over 2,000 barrels a day, which again is about 500 barrels a day ahead of the high point of our previously issued production guidance.

Triangle’s balance sheet remains in great shape. We exited the quarter with approximately 445 million in cash, which does not include our share of cash in Caliber midstream and we had an undrawn E&P credit facility, $52 million which we expect to continue to grow as reserves come online.

At the end of the quarter we also established a total hedge position of approximately 1.4 million total barrels, which has downside protection as we move forward through these uncertain economic times.

Regarding the highlights and lowlights and overall operations which is where we want to spend most of our time, there’s a lot to talk about and interesting period in the Bakken and Triangle’s development. Starting with the lowlights mostly so we can finish on the positives which we’re obviously more excited about and this quarter definitely saw production lower than we thought. I want to explain really the key driver of that is well downtime and one of the things we’re experiencing as we move forward is multi-well pads drive operational and cost efficiencies in the drilling and completion side of bringing wells online. It also results in higher downtime in the early days of a well’s life. And to simply explain that, we have two or three wells on a pad like we do on our Larson pad in McKenzie County, whenever you conduct any sort of operation on one of those wells, whether you’re flow back testing and you want to shut in, whether you’re drilling out plugs, safety pretty much depends that you shut in all wells on that pattern.

So while that does not impact total EUR or the total production that well will have in the first 90 days when it is online, it does affect the current period and you see that reflected in these production numbers. Obviously with an average of 1400 barrels a day in the exit rate, you can see what happens when all these wells are turned online. But it did have a negative impact in the quarter.

Secondly is really on the cost side. A simple way to put it is the trend is positive, going the right direction, meaning costs are coming down, but they do remain high in McKenzie county. This is the deepest part and the hardest part of the basin and that remains a core focus area for us as we move forward.

Third, G&A and LOE, both higher as a percentage of revenue that what we’d like to see. This is a problem that largely solves itself with revenue growth over time. We have to staff up with a certain number of people both in our corporate headquarters in the field to conduct these operations and start our vertical integrated model and the people come before revenue. But you did see that in this quarter and the margin expansion is something we’d like to focus on next year.

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