Argent Energy Trust reports 2013 year end results and management update
CALGARY, March 4, 2014 /CNW/ - Argent Energy Trust ("Argent" or the "Trust") (TSX: AET.UN) is pleased to provide its financial and operating results for the quarter and year ended December 31, 2013. For December 2013, average production was 6,975 boe/d barrels of oil equivalent per day ("boe/d"), of which 68% was oil and NGLs, while Q4 2013 production was 6,747 boe/d producing funds flow from operations of $18.3 million ($0.31 per unit of the Trust ("Unit")) for the quarter. Funds flow from operations for the year was $64.6 million, or $1.22 per Unit. Certain non-cash charges were booked in Q4 2013 that resulted in a net loss for the year of $87.2 million, or $1.65 per Unit.
Argent confirms its average annual production guidance for 2014 of approximately 7,000 boe/d (for a year over year forecasted growth rate of 25%). Argent's calculation of its net asset value per unit at December 31, 2013 is as follows:
|2P Reserve Value (1)||679,333|
|Land Value (2)||44,801|
|Less: Deferred land purchase payment (3)||(13,827)|
|Credit Facility (4)||(81,897)|
|Net Asset Value Per Unit||$7.93|
|(1)||Based on NPV10 of company interest proved plus probable reserves per GLJ independent reserve report as at December 31, 20133 of US$638,711,000 converted at year-end rate of US$1.0636 to Cdn $1.|
|(2)||Based on carrying value of "Exploration and evaluation assets" in audited financial statements.|
|(3)||Based on cash liability of US$13mm converted at year-end rate of US$1.0636 to Cdn $1.|
|(4)||Based on year-end drawn amount of US$77mm converted at year-end rate of US$1.0636 to Cdn $1.|
|(5)||Based on face value of debentures issued.|
The Trust's audited consolidated financial statements for the year ended December 31, 2013 and related management's discussion and analysis have been filed with the securities regulators and will be available 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 the three months and year ended December 31, 2013
Completed first full year of operations, growing from approximately
1,600 boe/d barrels of oil equivalent ("boe/d") (36% oil and NGLs) at
IPO on August 10, 2012, to an average of 6,975 boe/d (68% oil and NGLs)
for December 2013.
Q4 2013 funds flow from operations increased to $18.3 million, or $0.31
per Unit, from $7.4 million, or $0.21 per Unit in Q4 2012. For the
year ended December 31, 2013, funds flow from operations was $64.6
million, or $1.22 per Unit. The increase in funds flow from operations
was mainly due to higher production and higher netbacks, as the Trust
brought new, mainly oil wells on production and acquired oil & gas
properties during 2013.
Q4 2013 loss was $82.7 million, or $1.39 per Unit, as compared to Q4
2012 income of $270,000, or $0.01 per Unit. Year-ended December 31,
2013 loss was $87.2 million, or $1.65 per Unit. This loss arises
mainly due to non-cash charges in Q4 2013, including a $69.2 million
impairment related to Texas unconventional (primarily on Austin Chalk
probable reserves) and Oklahoma oil assets (primarily on probable
reserves in one field), and $8.4 million in increased depletion charges
arising from changing to using proved reserves as depletion basis
instead of proved plus probable reserves.
Q4 2013 oil & gas sales increased by 140% to $44.1 million, as compared
to $18.4 million in Q4 2012. For the year ended December 31, 2013,
total oil & gas sales before royalties and risk management gain or loss
were $154.4 million.
Average production in Q4 2013 increased by 113% to 6,747 boe/d (71% oil
and NGLs) from 3,169 boe/d (57% oil and NGLs) in Q4 2012, reflecting
new, mainly oil wells coming on production and the acquisition of oil
weighted properties during 2013. For the year ended December 31, 2013,
the average production was 5,591 boe per day (69% oil and NGLs).
- Netbacks from sales volumes for Q4 2013 were $21.3 million, or $34.33 per boe, while for the year ended December 31, 2013 netbacks from sales volumes were $74.7 million, or $36.68 per boe.
During 2013, the Trust obtained an increase in the credit limit of its
long term credit facility to US$160 million as at December 31, 2013. Of
this facility, only US$77 million was drawn at year end.
Declared unitholder distributions of $1.05 per Unit during 2013 ($0.0875
per Unit per month).
In June 2013, the Trust closed an offering of $86.25 million in
unsecured convertible debentures (the "1st Debentures"). The 1st
Debentures bear interest at a rate of 6.00% per annum and mature on
June 30, 2018. The Debentures are convertible at the holder's option
into trust units of Argent at a conversion price of $13.90 per Unit.
In August 2013, the Trust closed a bought deal financing and issued 8.16
million units of the Trust (the "Trust Units") at a price of $10.20 per
Trust Unit (the "Unit Offering"), which included 800,000 Trust Units
issued in conjunction with the exercise of the over-allotment option
granted to the underwriters. Total gross proceeds of the Unit Offering
were $83.2 million.
During October and November 2013, the Trust closed the issuance of $63
million convertible debentures (the "2nd Debentures"), at an interest
rate of 6.50% p.a., maturing on December 31, 2018. The net proceeds
from the issuance of the 2nd Debentures were used to reduce outstanding
indebtedness under the Trust's credit facility, which indebtedness was
used to purchase producing petroleum properties in Wyoming (the
"Wyoming Assets") for approximately US$102 million in October 2013.
- Adopted a Premium DistributionTM and Distribution Reinvestment Plan ("DRIP"), with approximately 71% participation rate by December 2013. The adoption of the DRIP has provided new capital through the issuance of additional Units on a monthly basis.
In August 2013, the Trust acquired producing petroleum properties in
various counties in Kansas and Colorado (the "Kansas Assets") for
approximately US$45 million. The Kansas Assets are principally oil
properties estimated to cover approximately 35,000 net acres of land,
with working interest December 2013 exit production rate of
approximately 433 boe/d (94% oil & NGLs).
- In October 2013, the Trust closed the purchase of the Wyoming Assets. The purchase price was approximately US$102 million (net of closing adjustments), with working interest December 2013 exit production rate of approximately 1,269 boe/d (100% oil & NGLs).
Selected Annual Information
|($000 unless stated)||2013||2012|
|Oil and gas sales, before royalties(1)||$154,356||$22,255|
|- Oil (bbl/d)||3,450||1,225|
|- NGL (bbl/d)||403||145|
|- Natural Gas (mcf/d)||10,429||7,432|
|Oil & gas production (boe/d)||5,591||2,609|
|% Oil and NGLs||69%||53%|
|Total Netback (3)||$82,053||$13,373|
|- per boe||$40.21||$35.60|
|Netback from sales volume only||$74,738||$11,917|
|- per boe||$36.68||$31.72|
|Funds flow from operations (3)||$64,588||$6,780|
|- per boe||$31.65||$18.05|
|- per Trust Unit, basic||$1.22||$0.50|
|- per Trust Unit, basic||($1.65)||($0.42)|
|- per Trust Unit, fully diluted||($1.65)||($0.42)|
|Distribution per Trust Unit||$1.05||$0.41|
|Capital Expenditures (2)||$105,809||$53,121|
|Note (1):||Oil, NGL and Natural Gas sales and production levels in 2012 reflect the period from close of the Denali Assets acquisition on August 10th through December 31, 2012.|
|Note (2):||Capital expenditures exclude corporate acquisitions|
|Note (3):||Netbacks and funds flow from operations are non-IFRS financial measures. See the Non-IFRS Measures section of this MD&A.|
The operating results for the year reflect Argent bringing ten new wells on production and previously disclosed acquisitions of oil & gas properties during 2013 and the Wapiti acquisition that closed at the end of December 2012. These events are the main drivers of the growth in netbacks and funds flow from operations from the prior year.
As at December 31, 2013, the Trust recognized a non-cash impairment charge on two of its six cash generating units ("CGU"). Argent booked an impairment of $66.0 million on its Texas unconventional oil CGU which includes the Austin Chalk, Eagle Ford and the production payment, and booked an impairment loss of $3.3 million on its Oklahoma CGU. The impairment on its Texas unconventional oil CGU resulted from the decline in realized forecast oil price, due to reduced WTI differentials to Light Louisiana Sweet price at the Gulf coast and reserves revisions primarily on probable reserves on the Austin Chalk properties. The impairment on its Oklahoma CGU resulted from the reserves revisions primarily on its probable reserves in one field. The impairment losses recognized were the difference between the carrying amount of each CGU and their fair value less costs of disposal.
During Q4 2013, the Trust continued a three-well pad drilling program in the Eagle Ford that began in late Q3 2013. Three Robertson wells were spud and surface casing set in each. The Trust drilled out below the surface casing in two of the wells but encountered geologic conditions which resulted in suspension of operations. The Trust moved to a separate pad to begin drilling operations on the Hrncir 5H and the Hayden 1H, which were still in progress at year-end, representing approximately $2.4 million of the capital expenditures in Q4 2013. These wells were successfully cased and cemented to total depth after year-end and are awaiting fracture completion, which is expected in March 2014. Pending further evaluation, the Trust anticipates returning to the Robertson pad in 2014 or 2015.
The Trust also completed one South Escobas gas well (the Violeta Ranch #6) during Q4 2013, which reached a peak rate of 6.6 mmcf per day and averaged 3.6 mmcf per day for the quarter. The good performance of the Violeta Ranch #6 has led to at least two subsequent gas wells targeting the same horizon being included in the Trust's drilling program in 2014.
In total for the year ended December 31, 2013, the Trust successfully drilled and completed a total of nine new wells, and also completed an Eagle Ford oil well that was drilled in late 2012. The wells successfully drilled and completed included four Eagle Ford oil wells, four Austin Chalk/Buda oil wells and one South Escobas gas well. Total capital expenditures were $105.8 million, including $8.9 million on minor interest acquisitions, $9.7 million spent on facilities and capital improvements on approximately 31 wells, $1.5 million for vehicles, office equipment and other fixtures and $0.9 million on additional land for exploration.
Following the successful drilling results, notably of Eagle Ford wells and one successful South Escobas well, the Board approved a 2014 H1 drilling budget of $45 million focused primarily on the Eagle Ford and the optimization of the Trust's recent acquisitions. In light of stronger, extended natural gas pricing the Board has increased the Trust's drilling budget to $60 million for the full year to further develop its natural gas properties in South Texas in the second half of 2014.
Subsequent to year-end, the Trust has successfully completed the drilling of two additional Eagle Ford wells (Hayden 1H, Hrncir 5H) with completion ongoing and first production from these wells expected before the end of the first quarter. The Trust has also commenced operations to drill its next Eagle Ford well pair (Makers 1H and 3H) as well as a South Escobas location (Violeta Ranch #7) in South Texas with production from all these wells targeted for late Q2. The Trust has intentionally chosen to move to a measured pace of growth to enable proper integration and consolidation of its acquisitions.
The Trust's Eagle Ford program utilizes pad drilling of multi-well locations followed by simultaneous completion using "zipper frac" technology. Pad development drilling procedures are complex operations, where wells are drilled, suspended, and then wait on completion so multiple wells can be fracked simultaneously. This type of drilling and completion process generates cost savings but results in a longer duration between production additions. Nearby wells are shut-in during the fracs and production will vary above and below the annual average rate of 7,000 boe/d. Argent's first quarter planned production will be in the range of 6,300 to 6,500 boe/d with the new Eagle Ford wells drilled this quarter coming on production in late March. The Trust maintains its 2014 annual production guidance of approximately 7,000 boe/d (which is approximately a 25% production growth rate year over year).
Rick Louden, Co-CEO and President, has made the decision to retire and accepted the Trust's request to stay on as a Board member on both Argent Energy Trust and Argent Energy (US) Holdings, Inc., the U.S. operating company located in Houston. Additionally, Argent is pleased to announce John Elzner will be promoted to President. Rick has headed up the Houston office since the IPO in August 2012 along with John Elzner (who previously served as Executive Vice President), who worked side by side with Rick at Denali Oil & Gas for nine years and then at Argent. Brian Prokop will continue as CEO.
Argent's Houston team has focused on three fundamental concepts - increasing Argent's scale so that any one well or event will not significantly impact the financial results, building a team as Argent grows with both experienced industry veterans but also a foundation of young talent and leaders that will grow with the Trust and lead to success down the road, and increasing Argent's cash flow per unit to strengthen the long term sustainability. Since the IPO, Argent has grown from 1,600 boe/d (23% oil & NGL's) to approximately 6,750 boe/d (71% oil & NGL's) in the fourth quarter of 2013. The Trust has also assembled a Houston team with upper management having an average 36 years of experience and middle management with an average of 17 years of experience. Most importantly, Argent's cash flow per unit has gone from an annualized rate of $0.35/unit as of the IPO to $1.22/unit in 2013. Management is proud of the progress the Houston team has made and looks forward to continued progress under the new leadership with John Elzner.
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
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, Argent's capital program, drilling and completion plans (including fracing), oil, natural gas and NGL production rates, operating costs, production growth, hedging activities, the payment of cash distributions by the Trust, including the amount and timing of payment of cash distributions, source of funding for capital expenditures, timing of drilling and completion of its Eagle Ford and South Escobas wells, the Trust's expectation regarding its average working interest production and average production rate for the first quarter and year 2014, the Trust's ability to grow and achieve success with its Houston management team, the cash-flow per unit and ability to strengthen long-term sustainability. 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 and completion program with a success rate that, in turn, is based upon historical drilling and completion success and an evaluation of the particular wells to be drilled and completed, future recoverability of reserves from the assets, future potential and experience and performance of its Houston management team, 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).
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.
These risks include, but are not limited to, 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, a lack of performance of its staff or ability to retain experienced personnel, 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.
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.
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.
Note regarding barrel of oil equivalency
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.
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 TrustFor further information:
For further information concerning this press release, please contact:
Argent Energy Trust
Co-President & Chief Executive Officer
Argent Energy Trust
Chief Financial Officer
Argent Energy Trust
Manager, Investor Relations
Argent Energy Trust