Argent Energy Trust reports second quarter results

CALGARY, Aug. 13, 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 June 30, 2014.  Average second quarter production was 6,373 barrels of oil equivalent per day ("boe/d"), being 69% oil and NGLs, generating funds flow from operations of $15.8 million, or $0.25 per unit.

The Trust's unaudited interim consolidated financial statements for the three months ended June 30, 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 June 30, 2014

  • Increased production by 30% to 6,373 boe/d (69% Oil & NGL) in Q2 2014 from 4,920 boe/d (64% Oil & NGL) in Q2 2013, reflecting new wells coming on production and the acquisition of oil weighted properties in Kansas and Wyoming during 2013.  Q2 2014 production exceeded the previously announced production guidance of 6,100 to 6,200 boe/d.

  • Successfully completed and brought onstream one new South Escobas well (Violeta Ranch #8) and two new Eagle Ford wells (Makers 1H and Makers 3H).  The Trust also finished drilling operations on two additional Eagle Ford wells (Haydens 2H and Haydens 3H) during the quarter, with completion operations finalized subsequent to June 30, 2014. 

  • Q2 2014 oil & gas sales increased by 44% to $47.5 million, as compared to $33.0 million in Q2 2013, due to higher oil & gas production coupled with higher realized prices.

  • Netbacks from sales volumes for Q2 2014 were $22.0 million, or $38.03 per boe, as compared to $15.3 million, or $34.22 per boe for Q2 2013.  An additional $2.4 million in netback was received from overriding royalties in Q2 2014, compared to $1.5 million in Q2 2013.

  • Q2 2014 funds flow from operations was $15.8 million, or $0.25 per Unit, as compared to $13.5 million, or $0.28 per Unit in Q2 2013.

  • Q2 2014 loss was $25.3 million, or $0.40 per Unit, as compared to Q2 2013 income of $7.2 million, or $0.15 per Unit, mainly due to unrealized non-cash foreign exchange loss on an intercompany loan, higher non-cash depreciation, depletion and amortization expenses and mark-to-market loss on the Trust's risk management contracts, which more than offset the increase in funds flow from operations.

  • Successfully renewed the US$160 million long term credit facility and extended the maturity date by one year to August 12, 2016.

  • Declared unitholder distributions of $0.06 per Unit during Q2 2014 ($0.02 per Unit per month).

Summary Results





($000 unless stated)

Q2 2014

Q1 2014

Q2 2013





Oil and gas sales, before royalties

$47,538

$46,248

$33,022





Production




- Oil (bbl/d)

4,071

4,085

2,840

- NGL (bbl/d)

324

326

310

- Natural Gas (mcf/d)

11,867

11,876

10,616





Oil & gas production (boe/d)

6,373

6,390

4,920

% Oil and NGLs

69%

69%

64%





Total Netback

$24,383

$25,092

$16,864

Netback from sales volume only

$21,962

$22,865

$15,321

- per boe

$38.03

$39.53

$34.22





Funds flow from (used in) operations

$15,791

$14,866

$13,540

- per boe

$27.23

$25.85

$30.25

- per Trust Unit, basic

$0.25

$0.24

$0.28





Income (Loss)

($25,334)

($2,294)

$7,242

- per Trust Unit, basic

($0.40)

($0.04)

$0.15

- per Trust Unit, fully diluted

($0.40)

($0.04)

$0.12





Total Assets

$734,230

$751,715

$621,849

Non-current Liabilities

$278,202

$253,399

$110,947

Distribution per Trust Unit

$0.06

$0.26

$0.26





Capital Expenditures

$29,702

$28,128

$32,893

Unitholders' Equity

$394,023

$427,781

$478,798





 

Oil and gas production of 6,373 boe/d in Q2 2014 was flat compared to 6,390 boe/d in Q1 2014.  Oil and gas sales before royalties, and total netback, in Q2 2014 remained relatively consistent with those in Q1 2014.  While commodity prices realized of $77.82 per boe in Q2 2014 increased slightly from the $76.10 per boe in Q1 2014, the Trust incurred higher operating expenses and workover expenses in Q2 2014 to bring a South Escobas gas well and new Eagle Ford wells on production and scheduled facilities maintenance in Manvel, Texas.  Therefore, netbacks per boe decreased to $38.03 per boe from $39.53 per boe in Q2 2014. 

During Q2 2014, the Trust incurred capital expenditures of approximately $28.9 million in the development of its oil and gas properties, focusing on the Eagle Ford drilling program, and an additional $0.8 million on office and field related equipment. For the six months ended June 30, 2014, the Trust incurred approximately $56.4 million (US$51.4 million) on its oil and gas properties, representing approximately 94% of the annual capital expenditure budget of $60.3 million (US$55 million). The capital expenditures in the remainder of 2014 are expected to be minimal.

During Q2 2014, the Trust successfully completed and brought on stream one new South Escobas well (Violeta Ranch #8) and two new Eagle Ford wells (Makers 1H and Makers 3H).  In addition, the Trust successfully drilled two new Eagle Ford wells (Haydens 2H and Haydens 3H).  Subsequent to Q2 2014, the Trust began early flow back from the completion on the Haydens 2H and 3H Eagle Ford wells.  

Outlook
During the month of July, the Trust achieved a new all-time daily production high, a milestone that is reflected in the Trust's 30-day production average of approximately 7,600 boe/d. This production level reflects initial flush rates from the planned new Eagle Ford oil and South Escobas natural gas wells that were brought on as well as production increases resulting from workovers and facility upgrades.

During Q2 2014, the Trust successfully drilled two new Eagle Ford wells, Haydens 2H and Haydens 3H, both of which were successfully completed and brought onstream subsequent to the quarter's end.  The Haydens 2H and Haydens 3H wells are in the initial stages of flowback, and it will be a number of weeks before the results of the wells can be fully evaluated.  This marks the completion of the Trust's 2014 drilling program, with minimal capital expenditure expected for the remainder of the year.

The Trust continues to review plans to rationalize a portion of its assets. As part of this review process, the Trust has recently entered into a purchase and sale agreement to sell certain properties located in Kansas for approximately US$10 million. Current production from these properties is approximately 95 boe/d. This transaction is expected to close by August 15, 2014.  Proceeds will be used to reduce the amounts drawn under the credit facility, which remains at US$160 million following its recent annual review. Upon completion of the sale, the Trust will have approximately US$50 million of undrawn capacity on its credit facility. With the drilling component of the 2014 capital program having drawn to a close, the Trust expects indebtedness to continue to decrease over the remainder of the year utilizing positive cash flows from operations.

The Trust is also currently evaluating offers on its third party operated production payment and royalty interest; however the timeline to close has been extended as a result of the recently announced Forest Oil Corporation (the operator) and Sabine Oil & Gas LLC transaction.

Given the above successful drilling and workover results, the Trust recently increased its average annual production guidance for 2014 from approximately 6,000 boe/d (approximately 68% oil and NGLs) to an expected range of 6,200 to 6,300 boe/d, and increased its Q3 2014 guidance to an expected range of 6,400 to 6,500 boe/d from previous guidance of 6,100 to 6,200 boe/d.

Conference Call Details

Management of Argent will host a conference call for investors, financial analysts, media and any interested persons on Wednesday, August 13, 2014 at 9:00 a.m. MST (11:00 a.m. EST) to discuss second quarter 2014 results. To participate in the live call please use one of the following methods:

Dial toll free from Canada or the US:


1-888-390-0546

Dial from outside Canada or the US:  


1-416-764-8688

Pass Code:     


85509019

 

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

The conference call will be recorded and available until August 20, 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:  


1-888-390-0541

Dial from outside Canada or the US:  


1-416-764-8677

Pass Code:     


509019

 

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, level of debt drawn on its credit facility, the ability to close on the sale of its third party operated production payment and Kansas asset disposition, source of funding for capital expenditures and the Trust's expectation regarding its average working interest production rate for Q3 2014 and 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 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) 770-4809