Argent Energy Trust reports 2014 year end reserves and strategic review ongoing

CALGARY, Feb. 27, 2015 /CNW/ - Argent Energy Trust ("Argent" or the "Trust") (TSX: AET.UN) is pleased to provide its 2014 year-end oil and gas reserves as evaluated by independent reserves evaluator GLJ Petroleum Consultants Ltd ("GLJ").  For 2014, average production was 6,641 boe/d barrels of oil equivalent per day ("boe/d"), of which 67% was oil and NGLs, while Q4 2014 production was 6,528 boe/d, producing funds flow from operations of $69.4 million ($1.10 per unit of the Trust ("Unit")) for the year and $14.8 million ($0.23 per Unit) for the quarter.  Impairment charges on certain assets were booked in 2014 that resulted in a net loss for the year of $301.6 million ($4.80 per Unit). Excluding the impairment charges, the income for the year would have been $14.0 million ($0.22 per Unit).

The evaluation of all of Argent's oil and gas properties was done in accordance with the definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook and National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities ("NI 51-101"). Additional reserve information as required under NI 51-101 will be included in the Trust's Annual Information Form which will be filed on SEDAR on or before March 31, 2015.

The previously announced strategic review is ongoing and the Trust will provide an update when the Trust completes and releases the audited consolidated financial statements for the year ended December 31, 2014 and related management's discussion and analysis, expected in mid-March 2015.

Highlights

  • Proved reserves of 21.3 MMboe (68% oil and NGLs) and proved plus probable reserves of 38.0 MMboe (64% oil and NGLs).

  • Net Present Value of Future Net revenue, before taxes, discounted at 10% ("NPV10") of proved reserves of US$256.8 million and of US$424.0 million for proved plus probable reserves.

  • Organic proved reserve additions replaced 107% of production in the year and proved plus probable reserve additions replaced 172% of production, excluding reserves added through acquisitions.

  • Including reserves added through acquisitions, proved plus probable reserve additions replaced 199% of production in the year.

  • Reserve life index ("RLI") for proved reserves is 8.9 years and proved plus probable reserves is 16.0 years based on Q4 2014 production of 6,528 boe/d.

  • Total proved reserves comprise 56% of total proved plus probable reserves on a volume basis and 61% on a NPV10 basis.

  • Achieved finding, development and acquisition ("FD&A") costs of $13.82 per proved plus probable boe, excluding changes in future development costs ("FDC"), which results in a recycle ratio of 2.50 times.

  • Achieved finding and development ("F&D") costs of $15.95 per proved plus probable boe, excluding changes in FDC, which results in a recycle ratio of 2.17 times.

  • FDC in the reserve report decreased by US$63.8 million ($74.0 million), more than the capital expenditure for the year, as certain previously prospective locations primarily in the Eagle Ford and Austin Chalk formations were deemed uneconomic, as a result of the significant reduction in commodity prices and reduced well performance.  As such, the F&D cost calculation including net change in FDC is not meaningful for 2014.

Reserve Information

The following table summarizes the aggregate of the independent reserves estimates and values as at December 31, 2014, based on the GLJ evaluations:




2014

Company Gross (1,4)

NPV of Future Net

Revenue before Income

Taxes, discounted at

10%/yr (2,3,4)

Reserves Category

(Mboe)

(US$000)

Proved:




Developed Producing

12,802

204,664


Developed Non-Producing

899

15,900


Undeveloped

7,616

36,224

Total Proved

21,317

256,788

Probable

16,714

167,189

Total Proved Plus Probable

38,031

423,978

Notes:

(1)

Gross reserves are Argent's total working interest share before the deduction of any royalties.

(2)

Estimates of after-tax future net revenue are not presented because neither US Opco nor the Trust will be subject to taxes in Canada.

(3)

NPVs shown above are based on GLJ's escalated price forecast as of December 31, 2014, which assumes a base 2015 WTI oil price of US$62.50/bbl and base 2015 Henry Hub gas price of US$3.31/MMBTU.

(4)

Totals may not add due to rounding.

 

Capital Program Efficiency

The Trust's 2014 oil and gas development capital expenditures of $66.6 million (US$58.2 million) resulted in additions to the Trust's working interest proved plus probable reserves, from drilling and improved recoveries, of 4,172 Mboe, at an F&D cost of $15.95/boe, excluding changes in FDC. With the addition of 652 Mboe of proved plus probable reserves from acquisitions of minor working interests in fields that Argent already participates in, for $128,000 (US$114,000) of direct costs, the FD&A cost was $13.82/boe, excluding changes in FDC, reflecting the accretive nature of the acquisitions undertaken by the Trust.

The following table shows the efficiency of Argent's capital program for the period ending December 31, 2014:



2014

Proved plus Probable

Development Expenditures ($000)

66,554

Acquisitions ($000) (1)

128

Reserve Additions (Mboe)



Development (2)

4,172


Acquisitions

652


4,824

Reserves Replacement (3)

199%

Excluding Future Development Costs:



Finding and Development costs ($/boe)

$15.95


Finding, Development & Acquisitions costs ($/boe) (4)

$13.82

Recycle Ratio (5)

2.50

Net increase/(decrease) in undiscounted Future Development Costs:



Proved reserves

($73,674)


Proved plus Probable reserves

($74,019)

Notes:

(1)

Reflects direct acquisition costs, related to acquiring additional minor working interests in South Texas gas assets.

(2)

Includes reserve additions from drilling, extensions and improved recovery.

(3)

The reserves replacement is calculated using the production of 2.4Mboe for 2014.

(4)

Since acquisitions have a notable impact on Argent's annual reserves, Argent believes that FD&A costs provide a meaningful portrayal of Argent's cost structure.

(5)

The recycle ratio is calculated using the 2014  netback from sales volume of $34.60/boe divided by FD&A. Netbacks is a non-IFRS financial measure; see the Non-IFRS Financial Measure section of this press release.

 

Non-IFRS Financial Measure
Statements throughout this press release make reference to the term "netbacks", which is a non-IFRS financial measure that does not have any standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other issuers. Management believes that "netbacks" provides useful information to investors and management since this measure is commonly used by other oil and gas companies.  "Netbacks" is equal to oil, natural gas and NGL sales revenue less royalties, transportation costs, production taxes and operating expenses.  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, this press release contains forward looking statements pertaining to the completion of the strategic review process, and Argent's reserves, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described exist in the quantities predicted or estimated and that the reserves can be profitably produced in the future.

It should not be assumed that the present worth of estimated future cash flow presented in the tables above represents the fair market value of the reserves. There is no assurance that the forecast prices and costs assumptions will be attained and variances could be material. The recovery and reserve estimates of Argent's crude oil, natural gas liquids and natural gas reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual crude oil, natural gas and natural gas liquids reserves may be greater than or less than the estimates provided herein.

All future net revenues are stated prior to provision for interest, general and administrative expenses and after deduction of royalties, operating costs and estimated future capital expenditures. Future net revenues have been presented on a before tax basis. Estimated values of future net revenue disclosed herein do not necessarily represent fair market value.

Finding and development costs both including and excluding acquisitions and dispositions have been presented above. While NI 51-101 requires that the effects of acquisitions and dispositions be excluded, FD&A costs have been presented because acquisitions and dispositions can have a significant impact on the Trust's ongoing reserve replacement costs and excluding these amounts could result in an inaccurate portrayal of the Trust's cost structure.

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, 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.

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").  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: concerning this press release, please contact: John Elzner, President & Chief Executive Officer, Argent Energy Trust, (281) 847-1888; Sean Bovingdon, Chief Financial Officer, Argent Energy Trust, (403) 770-4809

RELATED LINKS
www.argentenergytrust.com

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