Argent Energy Trust announces closing of acquisition of oil producing assets and an increase in its credit facility
/NOT FOR DISTRIBUTION IN THE UNITED STATES OR OVER UNITED STATES WIRE SERVICES/
CALGARY, Oct. 25, 2013 /CNW/ - Argent Energy Trust ("Argent" or the "Trust") (TSX: AET.UN) is pleased to announce the closing of the previously announced acquisition of certain oil producing assets and an increase in its credit facility.
Argent Energy (US) Holdings Inc., a wholly-owned subsidiary of the Trust, has completed the acquisition to acquire producing petroleum properties in Wyoming (the "Wyoming Assets") from a private company, for a purchase price of approximately US$102 million (net of closing adjustments) (the "Acquisition"). Argent funded the Acquisition with its credit facility (the "Credit Facility"). The Wyoming Assets are principally oil properties in Campbell, Johnson, Crook, Weston and Niobrara counties in Wyoming. Wyoming borders on Colorado where the Trust also has producing assets, thus providing a contiguous corridor down to Texas.
The Wyoming Assets are characterized by long-lived, low decline production and are expected to generate significant free cash flow. The Acquisition is consistent with the Trust's business plan of building a high netback, low decline production base.
Key Acquisition attributes:
- Working interest oil production from the Wyoming Assets currently exceeds 1,000 barrels of oil equivalent per day ("boe/d") (95% oil & NGLs). Argent expects to maintain production levels of at least 1,000 boe/d through 2014 with minimal operational activity or capital investment.
- The majority of the Wyoming Assets will be operated by Argent.
- Estimated working interest proved plus probable reserves of 7.5 million boe, evaluated by Cawley, Gillespie & Associates, Inc. ("CG&A"), of which proved developed producing reserves account for 55%.
- Low base decline rate on historical production of approximately 13%.
- The Wyoming Assets also produce significant free cash flow beyond the capital required to maintain production from the Acquired Assets.
The Acquisition is accretive to the Trust's cash flow per unit, production per unit, reserves per unit, payout ratio and sustainability ratio basis, provides geographic diversification, and adds immediate incremental oil production and reserves to the overall asset base of the Trust. Management believes that the Acquisition further enhances the Trust's ability to ensure long term distribution support.
With completion of the Acquisition, current production for Argent is over 7,000 boe/d (approx. 70% oil and NGLs). Prior to the Acquisition, Argent's current 30 day average production rate was 5,700 boe/d, representing an increase from its third quarter average of approximately 5,400 boe/d. Argent remains on track to achieve its 2013 average annual production guidance of 5,700 boe/d and 2013 exit production guidance of approximately 7,000 boe/d.
Increased Credit Facility
In connection with the Acquisition, the Trust has amended its Credit Facility to increase the borrowing base under the facility to US$160 million. After closing of the Acquisition, the Trust expects to have approximately US$127 million drawn on its Credit Facility, which will be reduced to approximately $71 million drawn upon closing of the previously announced $60 million convertible debenture offering which is expected on October 31, 2013. As a result, following the completion of the debenture offering, Argent will have approximately $89 million of spare capacity to ensure balance sheet stability and flexibility.
The Trust currently has 60% of forecast production hedged for 2013. Consistent with its hedging policy, the Trust has also entered into hedges for calendar 2014 and 2015. In 2014, the Trust has hedged 2,500 bbl/d of oil production at a minimum of US$90/bbl WTI and 5 mmbtu/d of natural gas production at an average Nymex price of US$4.11/mmbtu. In 2015, the Trust has hedged 1,200 bbl/d of oil production at a minimum of US$90/bbl WTI and 6 mmbtu/d of natural gas production at an average Nymex price of US$4.12/mmbtu. The hedging program aids the protection of distributions and sustaining capital (capital required to maintain production levels).
About Argent Energy Trust
Argent is a mutual fund trust under the Income Tax Act (Canada). 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 exploitation 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.
The trust units of the Trust and the Trust's 6.00% convertible unsecured subordinated debentures are traded on the Toronto Stock Exchange under the symbols AET.UN and AET.DB, respectively.
Forward Looking Statements
This press release includes forward-looking information within the meaning of applicable Canadian and United States securities legislation. All statements, other than statements of historical facts, that address activities, circumstances, events, outcomes and other matters that Argent budgets, forecasts, plans, projects, estimates, expects, believes, assumes or anticipates (and other similar expressions) will, should or may occur in the future, are considered forward-looking information. In particular, forward-looking information contained in this press release includes, but is not limited to, information and statements concerning the Acquisition, including the amount expected to be drawn under the Credit Facility upon completion of the Acquisition and the completion of the convertible debenture offering, the performance and production characteristics of the Wyoming Assets; the ability of the Wyoming Assets to generate significant free cash flow; the key metrics of the Acquisition; the financial and operational benefits of the Acquisition to the Trust and the expected impact of the Acquisition on the Trust's commodity profile, production profile, reserves profile, payout ratio, sustainability ratio and to cash flow from operations per Unit. 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 reserves data set forth herein is based upon an evaluation by CG&A, dated effective September 1, 2013 using Sproule Associates Limited's forecast prices and costs as at September 1, 2013.
These risks include, but are not limited to, failure to realize the anticipated benefits of the Acquisition, incorrect assessments of the value of the Wyoming Assets, unforeseen difficulties in integrating the Wyoming Assets into the operations of the Trust's subsidiaries, oil and natural gas price volatility, Argent's access to cash flows and other sources of liquidity to fund its capital expenditures, its level of indebtedness, its ability to replace production, the impact of the current financial climate on Argent's anticipated business and financial condition, a lack of availability of or increases in costs of goods and services, environmental risks, drilling and other operating risks, regulatory changes, the uncertainty inherent in estimating future oil and gas production or reserves, economic conditions and other risks as described in documents and reports that Argent files with the securities commissions or similar authorities in applicable Canadian jurisdictions on the System for Electronic Document Analysis and Retrieval (SEDAR). Any of these factors could cause Argent's actual results and plans to differ materially from those contained in the forward-looking information.
Forward-looking information is subject to a number of risks and uncertainties, including those mentioned above, that could cause actual results to differ materially from the expectations set forth in the forward-looking information. Forward-looking information is not a guarantee of future performance or an assurance that our current assumptions and projections are valid. All forward-looking information speaks only as of the date of this press release, and Argent assumes no obligation to, and expressly disclaims any obligation to, update or revise any forward-looking information, except as required by law. You should not place undue reliance on forward-looking information. You are encouraged to closely consider the additional disclosures and risk factors contained in Argent's periodic filings on SEDAR that discuss in further detail the factors that could cause future results to be different than contemplated in this press release.
Barrels of oil equivalent (boe) may be misleading, particularly if used in isolation. A boe conversion ratio of six Mcf to one bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and do not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of oil as compared to natural gas is significantly different from the energy equivalency conversion ratio of six to one, utilizing a boe conversion ratio of six Mcf to one bbl may be misleading as an indication of value.
Non-IFRS Financial Measures
Statements in this press release make reference to the terms "payout ratio", and "sustainability ratio" which are non-IFRS financial measures that do not have any standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other issuers. Investors should be cautioned that these measures should not be construed as an alternative to net income calculated in accordance with IFRS. Management believes that "payout ratio" and "sustainability ratio" provide useful information to investors and management since these terms 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. The Trust calculates its payout ratio by dividing the cash distributions the Trust pays to its unitholders in accordance with the Trust's distribution policy by cash flow from operations. Sustainability ratio is calculated by dividing the sum of cash distributions and capital expenditures by cash flow from operations. Cash flow from operations is calculated before changes in non-cash working capital.
SOURCE Argent Energy TrustFor further information:
Argent Energy Trust
Co-Chief Executive Officer & President
Argent Energy Trust
Chief Financial Officer
Argent Energy Trust