Press release from CNW Group
Argent Energy Trust provides first quarter results and exceeds Q1 production guidance
Monday, May 13, 2013
Argent Energy Trust provides first quarter results and exceeds Q1 production guidance08:00 EDT Monday, May 13, 2013
CALGARY, May 13, 2013 /CNW/ - Argent Energy Trust ("Argent" or the "Trust") (TSX: AET.UN) is pleased to provide its financial and operating results for the quarter ended March 31, 2013. Argent is pleased to report that average Q1 production of 5,278 boe/d exceeded Q1 production guidance of 5,200 boe/d, including production from the Buda oil formation in select wells. Current production is approximately 5,300 boe/d of which 61% is oil and NGLs. Argent confirms its 2013 forecast year average production rate of 5,500 to 5,600 boe/d.
The Trust's unaudited interim consolidated financial statements for the three months and period ended March 31, 2013 and related management's discussion and analysis have been filed with the securities regulators and will be available shortly under the Trust's issuer profile on the SEDAR website at www.sedar.com and are available on the Trust's website at www.argentenergytrust.com.
This press release contains statements that are forward looking. Investors should read the Note Regarding Forward- Looking Statements at the end of this press release. In this press release, references to "Argent" or the "Trust" include the Trust and its operating subsidiaries.
Highlights for Q1 2013
- Q1 2013 funds flow from operations of $15.3 million, or $0.32 per Unit, compared to Q4 2012 funds flow from operations of $7.4 million, or $0.21 per Unit.
- Q1 2013 gross revenue increased to $35.0 million, from $18.4 million in Q4 2012.
- Q1 2013 income of $5.3 million, or $0.11 per Unit, compared to Q4 2012 income of $0.27 million, or $0.01 per Unit.
- Average production in Q1 2013 was 5,278 boe/d, consisting of 67% oil & NGLs, compared to 3,169 boe/d in Q4 2012, consisting of 57% of oil and NGL.
- Average realized oil price in Q1 2013 was $106.56 per bbl, representing approximately $11.45 per bbl premium over Q1 2013 average WTI price of $95.11 per bbl.
- Q1 2013 netbacks from production increased to $38.19 per boe, from $34.26 per boe in Q4 2012.
- Adopted a Premium DistributionTM and Distribution Reinvestment Plan ("DRIP"), with 75% participation rate for March 2013. The adoption of the DRIP has provided new capital through the issuance of additional Units on a monthly basis.
- Declared unitholder distributions of $0.2625 per Unit for the quarter ($0.0875 per Unit per month)
- Based on the reserve report and drilling results, the Trust's banking syndicate has committed to increase the credit limit on Argent's credit facilities to US$115 million from US$95 million.
|Production and Oil, NGL and Natural Gas Sales|
|(Amounts in Cdn$)||Q1 2013||Q4 2012|
|Oil volumes (bbl/d)||3,118||1,657|
|NGL volumes (bbl/d)||438||163|
|Natural Gas volumes (mcf/d)||10,331||8,096|
|Total Sales volumes (boe/d)||5,278||3,169|
|% Oil & NGL||67%||57%|
|WTI Crude Oil Spot ($/bbl)||$95.11||$87.25|
|Henry Hub Natural Gas Spot ($/MMBtu)||$3.52||$3.37|
|Realized sales prices:|
|Natural Gas ($/mcf)||$3.07||$2.80|
|Natural Gas Sales||2,858||2,084|
|Total sales revenue||$33,940||$17,337|
|Overriding royalty revenue||1,097||1,026|
|Total revenue, before royalties and risk management loss||$35,037||$18,363|
For Q1 2013, the Oil, NGL and Natural Gas sales and production volume reflect the Trust's first full quarter results from the Q4 2012 acquisitions of oil & gas properties from EnergyQuest ("EQ Assets") and Wapiti ("Wapiti Assets"). Production in Q1 2013 totaled 475,008 boe (an average of 5,278 boe/d) with 67% from oil and NGLs, as compared to 291,533 boe (an average of 3,169 boe/d) with 57% from oil and NGLs in Q4 2012.
The increase in production is mainly a result of the Trust's most recent acquisition of the Wapiti Assets that closed on December 28, 2012, coupled by increased production in the Austin Chalk and Eagle Ford Shale associated with our drilling program. In Q1 2013, the Trust completed two oil wells (one Buda and one Eagle Ford well) that were being drilled during the Q4 2012, in addition to successfully drilling and completing another Buda oil well. As the Trust continues with drilling oil wells, it is expected that the percentage of sales volume related to oil will increase in the near term.
Total revenue before royalties and risk management loss in Q1 2013 was $35.0 million, as compared to $18.4 million in Q4 2012. Oil and NGL sales in Q1 2013 were $31.1 million, or approximately 92% of the total production revenue, as compared to $16.7 million, or approximately 88% of total production revenue in Q4 2012, reflecting the addition of the oil weighted Wapiti Assets.
In Q1 2013, the average realized oil price was $106.56 per bbl as compared to $96.42 per bbl in Q4 2012, an increase of 11%. Oil prices realized in Q1 2013 reflect an uplift of $11.45 per bbl over the average WTI price of $95.11 per bbl. The Trust expects this differential to decrease going forward in 2013, as additional pipeline capacity comes on stream to reduce the capacity issues that the industry has experienced at Cushing. The average realized natural gas price was $3.07 per mcf in Q1 2013, compared to average Henry Hub price of $3.52 per MMBtu. This realized discount primarily reflects the transportation differential.
The Trust is currently producing approximately 5,300 boe/d, of which 61% is oil and NGLs. This rate is over three times the production rate as of Argent's IPO in August 2012. In recognition of the significance and growth of the US operations, as well as their respective roles within the organization, the Board is pleased to announce the change in the titles of Rick Louden and Brian Prokop, to Co-Chief Executive Officer and President.
The Board of Directors has approved a 2013 capital budget of US$41 million (excluding corporate and property acquisitions). This was based on a development plan to drill approximately 10 Austin Chalk/Buda and two Eagle Ford wells in 2013 in Fayette and Gonzales Counties. Management had estimated the Trust had 95 potential development locations on its Eagle Ford acreage, based on 160 acre spacing. In recent months, the industry spacing for development in the surrounding Eagle Ford acreage has been reduced to an average of 80 acre spacing, with some competitors drilling on 40 acre spacing. In light of the positive results from the Trust's first 3 Eagle Ford wells and the downspacing that has occurred in the Fayette and Gonzales Counties for Eagle Ford development, management now estimated that the Trust has over 180 potential development locations.
The Trust forecasts a 2013 year average production rate of approximately 5,500 to 5,600 boe/d (65% oil, 7% NGLs, and 28% natural gas) which includes relatively flat, low-decline, stable production from the legacy assets acquired in 2012. Organic production growth will continue to come from Austin Chalk and Eagle Ford development. In response to the significantly increased Eagle Ford industry activity surrounding its lands and notable encouragement from its drilling results, Argent is reviewing its drilling plans to potentially increase the number of Eagle Ford wells to be drilled in 2013 and slightly reduce the number of Austin Chalk/Buda wells.
Operating costs per boe (including transportation) are expected to average between US$11.00 to US$12.00 per boe, resulting in an average operating cash flow netbacks of between US$38.00 and US$40.00 per boe (assuming US$90 per bbl WTI oil price and US$4.16 per mmBTU Nymex gas price).
The Trust plans to continue to actively hedge to ensure its distribution and its capital program. Oil production is approximately 60% hedged at US$90 per bbl WTI or better for 2013, and approximately 40% hedged at US$90 per bbl WTI or better in 2014. Natural Gas is approximately 35% hedged at an average of US$4.08/mmBTU for 2013 and 30% hedged at an average of US$4.16/mmBTU for 2014.
The Trust adopted a Premium DistributionTM and Distribution Reinvestment Plan in February 2013. With the DRIP participation averaging 75% since its adoption in February 2013, Argent forecasts a payout ratio of approximately 71% of funds flow from operations for the remainder of 2013. Taking into account the value of distribution paid pursuant to the DRIP, the cash payout ratio would be approximately 30%.
Based on current projected commodity prices and planned operating performance, the Trust intends to continue making monthly distributions at a rate of $0.0875 per Unit to Unitholders of record as of the close of business on the last business day of each month which are expected to be paid to Unitholders on or about the 23rd day of the following month or, if not a business day, the next business day thereafter. As results of operations may vary, the distribution of cash is not guaranteed. The Trust intends to make these monthly distributions from a portion of its available cash and use the remainder of its available cash, and advances under its credit facilities, to fund growth through additional acquisitions and capital expenditures.
Non-IFRS Financial Measures
Statements throughout this press release make reference to the terms "netback" and "funds flow from operations" which are non-International Financial Reporting Standards ("IFRS") financial measures that do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. Management believes that "netback" and "funds flow from operations" provide useful information to investors and management since such measures reflect the quality of production, the level of profitability, the ability to drive growth through the funding of future capital expenditures and the sustainability of distributions to unitholders. Funds flow from operations is calculated before changes in non-cash working capital. Netback is equal to oil, natural gas and NGL sales revenue less royalties, transportation costs, production taxes and operating expenses. See the "Non-IFRS measures" section of the MD&A for a reconciliation of funds flow from operations and netback to income for the period, the most directly comparable measure in the Trust's audited annual consolidated financial statements. Other financial data has been prepared in accordance with IFRS.
Note about forward-looking statements
Certain of the statements made and information contained in this press release are forward-looking statements and forward looking information (collectively referred to as "forward-looking statements") within the meaning of Canadian securities laws. All statements other than statements of historic fact are forward-looking statements. The Trust cautions investors that important factors could cause the Trust's actual results to differ materially from those projected, or set out, in any forward-looking statements included in this press release.
In particular, and without limitation, this press release contains forward looking statements pertaining to Argent's capital program, drilling and completion plans, potential development locations, oil, natural gas and NGL production rates, operating costs, production growth, hedging activities, forecast payout ratio, the payment of cash distributions by the Trust, including the amount and timing of payment of cash distributions, source of funding for acquisitions and capital expenditures and the Trust's expectation regarding its average working interest production for the year 2013. With respect to forward-looking statements contained in this press release, assumptions have been made regarding, among other things, future oil and natural gas prices, future currency exchange and interest rates, the regulatory framework governing taxes in the US and Canada and the Trust's status as a "mutual fund trust" and not a "SIFT trust", estimates of anticipated production from the Trust's assets, which estimates are based on the proposed drilling program with a success rate that, in turn, is based upon historical drilling success and an evaluation of the particular wells to be drilled, future recoverability of reserves from the assets, future capital expenditures and the ability of the Trust to obtain financing on acceptable terms for its capital projects and future acquisitions, and the Trust's capital budget (which is subject to change in light of ongoing results, prevailing economic circumstances, commodity prices and industry conditions and regulations).
In addition, statements relating to "reserves" are by their nature forward-looking information, as they involve the implied assessment, based on certain estimates and assumptions that the reserves described can be profitably produced in the future. The recovery and reserve estimates of the Trust's reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. The forward-looking information provided in this press release is based on management's current beliefs, expectations and assumptions, based on currently available information as to the outcome and timing of future events. Argent cautions that its future oil, natural gas and natural gas liquids production, revenues, cash flows, liquidity, plans for future operations, expenses, outlook for oil and natural gas prices, timing and amount of future capital expenditures, and other forward-looking information is subject to all of the risks and uncertainties normally incident to the exploration for and development and production and sale of oil and gas.
The Trust's actual results could differ materially from those anticipated in these forward-looking statements as a result of the volatility of commodity prices, commodity supply and demand, fluctuations in currency and interest rates, inherent risks and changes in costs associated in the drilling and development of petroleum properties, unexpected operational delays and challenges, access to drilling equipment on a timely basis and at reasonable prices, ultimate recoverability of reserves, timing, results and costs of drilling activities and resulting production, availability of financing and capital, and new regulations and legislation that apply to the Trust and the operations of its subsidiaries. Additional risks and uncertainties affecting the Trust are contained in the Trust's Annual Information Form dated March 4, 2013, under the heading "Risk Factors".
The success of Argent's drilling program is a key assumption in the production estimates for the 2013 financial year. The primary risk factors which could lead to Argent not meeting its production targets are: (i) production additions from drilling activity are less than expected; (ii) a lack of access to drilling rigs and related equipment on a timely basis and at reasonable prices due to high industry demand or poor weather; and (iii) unexpected operational delays and challenges. Increases in capital costs from forecast amounts can result from the foregoing reasons as well as general cost inflation in the industry.
Additionally, Argent may choose to decrease capital expenditures from those anticipated in its budget projections, therefore affecting production estimates for the 2013 financial year. There are many factors that could result in production levels being less than anticipated, including greater than anticipated declines in existing production due to poor reservoir performance, the unanticipated encroachment of water or other fluids into the producing formation, mechanical failures or human error or inability to access production facilities, among other factors.
As a result of these risks, actual performance and financial results in 2013 may differ materially from any projections of future performance or results expressed or implied by these forward looking statements. New factors emerge from time to time, and it is not possible for management to predict all of these factors or to assess, in advance, the impact of each such factor on the Trust's business, or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward looking statement. Undue reliance should not be placed on forward-looking statements, which are inherently uncertain, are based on estimates and assumptions, and are subject to known and unknown risks and uncertainties (both general and specific) that contribute to the possibility that the future events or circumstances contemplated by the forward looking statements will not occur. Although Management believes that the expectations conveyed by the forward-looking statements are reasonable based on information available to it on the date the forward-looking statements were made, there can be no assurance that the plans, intentions or expectations upon which forward-looking statements are based will in fact be realized. Actual results will differ, and the difference may be material and adverse to the Trust and its unitholders. The Trust does not undertake any obligation, except as required by applicable securities legislation, to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise.
Note regarding barrel of oil equivalency
This press release contains disclosure expressed as "boe" or "boe/d". All oil and natural gas equivalency volumes have been derived using the conversion ratio of six thousand cubic feet ("Mcf") of natural gas to one barrel ("bbl") of oil. Equivalency measures may be misleading, particularly if used in isolation. A conversion ratio of 6 Mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the well head. In addition, given that the value ratio based on the current price of oil as compared to natural gas is significantly different from the energy equivalent of six to one, utilizing a boe conversion ratio of 6 Mcf: 1 bbl would be misleading as an indication of value.
Argent is a mutual fund trust under the Income Tax Act (Canada) (the "Tax Act"). Argent's objective is to create stable, consistent returns for investors through the acquisition and development of oil and natural gas reserves and production with low risk exploration potential, located primarily in the United States. Material information pertaining to Argent Energy Trust may be found on www.sedar.com or www.argentenergytrust.com
SOURCE: Argent Energy Trust
For further information:
For further information concerning this press release, please contact:
Co-President & Chief Executive Officer
Argent Energy Trust
Chief Financial Officer
Argent Energy Trust