Argent Energy Trust reports first quarter results

CALGARY, May 14, 2014 /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, 2014. Average Q1 production was 6,390 barrels of oil equivalent per day ("boe/d"), being 69% oil and NGLs, generating funds flow from operations of $14.9 million, or $0.24 per unit, after allowing for an ad valorem tax charge of $3.6 million representing a full year charge for all leases, except those in Wyoming, as that is required to be fully booked in the first quarter now due to application of new IFRS accounting standards.

Argent confirms its average annual production guidance for 2014 of approximately 6,000 boe/d (70% oil and NGLs).

The Trust's unaudited interim consolidated financial statements for the three months ended March 31, 2014 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 ended March 31, 2014

  • Increased production by 21% to 6,390 boe/d (69% Oil & NGL) in Q1 2014 from 5,278 boe/d (67% Oil & NGL) in Q1 2013, reflecting new, mainly oil wells coming on production and the acquisition of oil weighted properties during 2013.

  • Successfully drilled and completed two Eagle Ford wells (Haydens 1H, Hrncir 5H) and one South Escobas well (Violeta Ranch #7) and put these three wells on production during the quarter.  The Trust also completed drilling operations on two additional Eagle Ford wells (Makers 1H and Makers 3H).

  • Q1 2014 oil & gas sales increased by 32% to $46.2 million, as compared to $35.0 million in Q1 2013.

  • Netbacks from sales volume for Q1 2014 were $22.9 million, or $39.53 per boe, as compared to $18.7 million, or $39.37 per boe for Q1 2013.  An additional $2.2 million in netback was received from overriding royalties in Q1 2014 (compared to $1.0 million in Q1 2013).

  • Q1 2014 funds flow from operations was $14.9 million, or $0.24 per Unit, compared to $13.6 million, or $0.28 per Unit in Q1 2013. This reflects a charge for ad valorem taxes of $3.6 million in Q1, 2014, (compared to budgeted $1.3 million) and a $1.7 million increase from previously reported for Q1, 2013, due to the application of a new IFRS accounting standard that required the full year ad valorem taxes on all leases, except those in Wyoming, to be recognized on January 1st of each year, rather than accrued on a monthly or quarterly basis. As such, there will be a significantly lower charge in the remaining quarters of 2014 related only to Wyoming.

  • Q1 2014 loss was $2.3 million, or $0.038 per Unit, as compared to Q1 2013 income of $3.6 million, or $0.075 per Unit.

  • Declared unitholder distributions of $0.2625 per Unit during Q1 2014 ($0.0875 per Unit per month).

Production and Oil, NGL and Natural Gas Sales

     
(Amounts in Cdn$)    
Q1 2014 Q1 2013
Oil volumes (bbl/d) 4,085 3,118
NGL volumes (bbl/d) 326 438
Natural gas volumes (mcf/d) 11,876 10,331
Total sales volumes (boe/d) 6,390 5,278
% Oil & NGL 69% 67%
Total BOE 575,102 475,008
     
Benchmark Prices:    
WTI crude oil spot ($/bbl) $108.91 $95.11
Henry Hub natural gas Spot ($/MMBtu) $5.72 $3.52
     
Realized sales prices:    
Oil ($/bbl) $101.61 $106.56
NGLs ($/bbl) $41.63 $29.96
Natural gas ($/mcf) $4.86 $3.07
Per Boe $76.10 $71.45
     
($000s):    
Oil sales $37,353 $29,899
NGL sales 1,222 1,183
Natural gas sales 5,193 2,858
  $43,768 $33,940
     
Overriding royalty revenue 2,480 1,097
Oil and gas sales, before royalties and risk management gain(loss)    
$46,248 $35,037



Oil and gas sales before royalties, and Netback, in Q1 2014 remained relatively consistent with Q4 2013 levels.  Higher commodity prices realizing $76.10 per boe in Q1 2014, compared to $68.48 per boe in Q4 2013, offset lower oil and gas production.  Production decreased from 6,747 boe/d in Q4 2013 to 6,390 boe/d in Q1 2014 mainly due to natural declines and the timing of new wells coming on during the quarter.

During Q1 2014, the Trust incurred capital expenditures of approximately $27.5 million (excluding $0.9 million of purchase price adjustments) in the development of its oil & gas properties, focusing on the Eagle Ford drilling program.  This represents approximately 50% of the annual capital expenditure budget of US$55 million, with the majority of the balance of the budget expected to be spent in Q2 2014.  During Q1 2014, the Trust had successfully drilled and completed two Eagle Ford wells (Hayden 1H, Hrncir 5H) and one South Escobas well (Violeta Ranch #7).  The Trust also completed drilling and began completion operations on two additional Eagle Ford wells (Makers 1H and Makers 3H).  Subsequent to Q1 2014, the Trust began early flow back from the completion on these two Makers' Eagle Ford wells.  Drilling operations commenced in Q1 2014 on a further two new Eagle Ford wells (Haydens 2H and Haydens 3H) and one new South Escobas well (Violeta Ranch #8).  Completion operations and production on these three wells is expected before the end of Q2 2014.

Outlook

As previously announced (April 10, 2014 Press Release), the Trust has reduced its 2014 capital program to US$55 million (including US$45 million for drilling and US$10 million in maintenance) from US$70 million (including US$60 million for drilling and US$10 million in maintenance). The majority of this budget will be incurred by the end of June 2014, with minimal capital expenditure expected in the second half of the year.  This reduced capital program will result in the Trust deferring the drilling of 3 gas wells (2 South Escobas and 1 AA wells) and one shallow oil well (Manvel) until 2015.  Consequently, the Trust also reduced its production guidance from an annual average rate of 7,000 boe/d to approximately 6,000 boe/d (70% oil and ngls) for 2014, a modest increase year over year from the 2013 average achieved of 5,591 boe/d. Given the capital expenditure spending profile, production for each of Q2 2014 and Q3 2014 is expected to average in the 6,100 - 6,200 boe/d range, with natural declines leading to approximately 5,600 boe/d average exit rate of production in December 2014, which the Trust is targeting to maintain in 2015.

The Trust continues to review plans to rationalize a portion of its assets targeting a reduction in debt as use of proceeds.  As part of this review process, the Trust has engaged BMO Capital to sell a production payment and royalty interest it currently receives from a third party. Any proceeds will be used to reduce the amounts drawn under the credit facility to improve the Trust's financial flexibility.

The Trust has also undertaken measures to reduce general and administrative costs in both the Houston and Calgary offices. These cost reductions, taken with capital spending reductions and portfolio rationalization will help strike a more reasonable balance between yield and growth with improving payout and sustainability ratios going forward.

Conference Call Details

Management of Argent will host a conference call for investors, financial analysts, media and any interested persons on Thursday, May 15, 2014 at 9:00 a.m. MST (11:00 a.m. EST) to discuss first quarter 2014 results. To participate in the live call please use one of the following methods:

Dial toll free from Canada or the US:     888-390-0605
Dial from outside Canada or the US:     416-764-8609
Pass Code:    43642930

Participants should dial in five to ten minutes before the call.

The conference call will be recorded and available until May 22, 2014 at 23:59 EST. You can listen to an archive of the call by dialing in:

Dial toll free from Canada or the US:     888-390-0541
Dial from outside Canada or the US:     416-764-8677
Pass Code:        642930

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, 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 and the Trust's expectation regarding its average working interest production rate for the year 2014. 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).

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, 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 Trust

For further information:

John Elzner
President & Chief Executive Officer
Argent Energy Trust
(832) 320-9206

Sean Bovingdon
Chief Financial Officer
Argent Energy Trust 
(403) 770-4803