Argent Energy Trust Reports Third Quarter Results and Record Cashflow

CALGARY, Nov. 12, 2013 /CNW/ - Argent Energy Trust ("Argent" or the "Trust") (TSX: AET.UN) is pleased to provide its financial and operating results for the quarter and nine months ended September 30, 2013. Average Q3 production was 5,407 barrels of oil equivalent per day ("boe/d") producing record cash flow from operations of $17.8 million ($0.33 per unit of the Trust ("Unit")). Current 30-day average production of over 6,500 boe/d (72% oil and NGLs) and the current production of approximately 7,200 boe/d reflect both successful Eagle Ford drilling and the impact of the recent acquisition of oil-weighted assets in Wyoming.  In addition the Trust successfully completed a planned gas well in South Escobas, Texas in October that is producing at approximately 4 million cubic feet per day ("mmcf/d").

Argent confirms its average annual production guidance of approximately 5,700 boe/d and its projected 2013 exit production rate of approximately 7,000 boe/d for a year over year growth rate of 40%, and confirms it will continue making monthly distributions at a rate of $0.0875 per Unit throughout 2014.

The Trust's unaudited interim consolidated financial statements for the three and nine months ended September 30, 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 Q3 2013

  • Completed first full year of operations on August 10, 2013, growing from approximately 1,600 boe/d (36% oil and NGLs) at the Trust's initial public offering (the "IPO"), to an average of 5,407 boe/d (72% oil and NGLs) for Q3 2013.
  • 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 with working interest production from the Kansas Assets in June 2013 of approximately 450 barrels per day. Argent expects to maintain this production through the remainder of 2013 and into 2014 with minimal operational activity or capital investment.
  • Closed a bought deal financing and issued 8.16 million Units at a price of $10.20 per Unit (the "Unit Offering"), which includes 800,000 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.
  • Q3 2013 gross oil & gas sales increased by 28% to $42.2 million, as compared to $33.0 million in Q2 2013.
  • Average production in Q3 2013 increased by 10% to 5,407 boe/d from 4,920 boe/d in Q2 2013.  Oil & NGL % also increased to 72% in Q3 2013 from 67% in Q2 2013.
  • Average netbacks increasing to $41.37 per boe in Q3 2013 from $33.12 per boe in Q2 2013.
  • Q3 2013 funds flow from operations increased to $17.8 million, or $0.33 per Unit, from that in Q2 2013 of $13.0 million, or $0.26 per Unit.
  • Q3 2013 loss was $16.5 million, or $0.30 per Unit, as compared to Q2 2013 income of $6.7 million, or $0.14 per Unit.
  • Declared unitholder distributions of $0.2625 per Unit for the quarter ($0.0875 per Unit per month)

Production and Oil, NGL and Natural Gas Sales
       
      Nine Months
      Ended September
(Amounts in Cdn$) Q3 2013 Q2 2013 30, 2013
Oil volumes (bbl/d) 3,396 2,840 3,119
NGL volumes (bbl/d) 516 310 422
Natural gas volumes (mcf/d) 8,967 10,616 9,966
Total sales volumes (boe/d) 5,407 4,920 5,202
% Oil & NGL 72% 64% 68%
Total BOE 497,440 447,675 1,420,123
       
Benchmark Prices:      
WTI crude oil spot ($/bbl) $109.92 $96.24 $100.46
Henry Hub natural gas Spot ($/MMBtu) $3.69 $4.11 $3.78
       
Realized sales prices:      
Oil ($/bbl) $110.56 $103.98 $107.24
NGLs ($/bbl) $31.58 $30.43 $30.74
Natural gas ($/mcf) $3.39 $3.78 $3.42
Per Boe $78.08 $70.10 $73.35
       
($000s):      
Oil sales $34,545 $26,874 $91,317
NGL sales 1,500 858 3,541
Natural gas sales 2,795 3,649 9,302
  $38,840 $31,381 $104,160
       
Overriding royalty revenue 3,311 1,641 6,050
Oil and gas sales, before royalties and risk      
management gain(loss) $42,151 $33,022 $110,210
       

For Q3 2013, the Trust incurred capital expenditures of approximately $35.9 million (excluding $45.7 million of corporate acquisitions) in development of its oil & gas properties, transitioning from drilling lower cost Austin Chalk/Buda wells to higher cost Eagle Ford wells.  During Q3 2013, two net wells were drilled and completed in the Eagle Ford, in addition to the successful completion of two net Eagle Ford wells and one Buda well that were drilled in Q2 2013. By utilizing pad drilling and zipper fracs (alternating fracs between wells) techniques, the Trust's most recent Eagle Ford wells, the Hrncir #3 and Hrncir #4, were drilled and completed at significant cost savings. The Trust is pleased to report the Hrncir 3H and 4H Eagle Ford oil wells in Gonzales County have been on production for two months with current combined production at over 600 bbl/d of oil. These are the Trust's two best sustained oil wells drilled to date in terms of highest production, lowest drilling cost and least drilling time. As a result of this success and quicker than expected execution, the Trust has expanded its capital budget to $107 million from $85 million to drill additional Eagle Ford wells in Q4 2013.

As previously disclosed, as certain leases were set to expire in Q4 2013, Argent drilled a natural gas well in a separate fault block in the Escobas Field, Texas. Unfortunately, that well had insufficient quantities of natural gas and was abandoned.  The Trust has since drilled another gas well in South Escobas, Texas.  This gas well, Violeta Ranch #6, was completed in October and brought on production at average rates of approximately 4 mmcf/d.

As a result of the new Eagle Ford wells and Violeta Ranch #6 success, the Trust's current 30-day average production is over 6,500 boe/d, of which 72% is oil and NGLs, and the current production rate is approximately 7,200 boe/d.

Revenue from overriding royalties increased from $1.6 million in Q2 2013 to $3.3 million in Q3 2013, due to the recent success of the operator's drilling in the Eagle Ford. The majority of the overriding royalty revenue of $3.3 million was derived from the Forest Override royalty that was acquired from Denali Oil and Gas Partners upon closing of the over-allotment option of the IPO on August 28, 2012.  It represents an approximate 4% royalty interest earned from Eagle Ford oil production developed by a third party on certain leases in the Wilson and Gonzales Counties in Texas, and represent the equivalent of revenue from 292 boe/d of production.

Outlook

Subsequent to the end of Q3 on October 9, 2013, the Trust announced the purchase of producing petroleum properties in Wyoming (the "Wyoming Assets"). On October 25, 2013, the Trust announced the closing of the purchase of the Wyoming assets. These assets are characterized by long-lived, low decline oil production and generate significant free cash flow and result in positive accretion on all transaction metrics.

With the increased oil weighting and the acquisition in Wyoming operating costs per boe (including transportation, excluding workovers) are expected to average approximately US$14.00 per boe by year-end 2013 (previously US$12.00 per boe), resulting in average operating cash flow netbacks of approximately US$40.00 per boe (previously at between US$38.00 and US$40.00 per boe).

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 the balance of 2013 and approximately 50% hedged at either US$90 per bbl WTI or US$95 per bbl Light Louisiana Sweet ("LLS"), or better, for 2014.  For 2015, currently approximately 25% of the Trust's oil production is hedged at US$90 per bbl LLS or better.  Natural Gas is approximately 40% hedged at an average of US$4.08/mmBTU for 2013, approximately 40% hedged at an average of US$4.11/mmBTU for 2014 and approximately 50% hedged at an average of US$4.12/mmBTU for 2015.

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 per plan and guidance, Argent remains on track to achieve its 2013 average production guidance of approximately 5,700 boe/d and 2013 exit production guidance of approximately 7,000 boe/d.

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 and exit production rate 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).

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:

For further information concerning this press release, please contact: 

Eric Tremblay 
Executive Chairman
Argent Energy Trust
(403) 770-4817

Brian Prokop
Co-President & Chief Executive Officer 
Argent Energy Trust 
(403) 770-4807

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

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