02/01/2013 01:55 EST | Updated 04/03/2013 05:12 EDT

Twin Butte stock drops after oil producer warns well problems will hit cash flow

CALGARY - Stock in Twin Butte Energy Ltd. (TSX:TBE) plunged in heavy trading Friday, dropping nearly 16 per cent after the company warned that operational problems in the first weeks of 2013 will probably have a significant impact on its cash flow.

Its shares were down 40 cents at $2.26 with more than 12 million traded by 2 p.m. on the Toronto Stock Exchange.

Twin Butte announced Thursday that one of its best-performing properties has seen its production drop by 800 to 900 barrels per day since the end of 2012 — roughly a quarter of the peak of 3,400 barrels per day.

The Calgary-based company says it's working to restore its Primate property in Saskatchewan but expects the problem — combined with cold-related down time and low prices for heavy oil — will reduce first quarter cash flow to $30.5 million.

Twin Butte says it probably won't be able to make up the shortfall and will reduce 2013 capital spending by 23 per cent to $85 million to conserve cash. It says the current dividend rate will be maintained.