Argent Energy Trust Reports 2014 Year End Results and 2015 Outlook


CALGARY, March 31, 2015 /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, 2014.  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 Trust's audited consolidated financial statements for the year ended December 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.  A conference call for investors, analysts and any interested persons will be held on Wednesday, April 01, 2015 at 9:00am MST.

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 quarter and year ended December 31, 2014

Operations

  • Sales volume 2014 production increased by 19% to 6,641 boe/d (67% oil & NGL) from 5,591 boe/d in 2013, reflecting new wells coming on production and the acquisitions of properties in the second half of 2013.

  • Q4 2014 sales volume was 6,528 boe/d, a decrease of 3% from 6,747 in Q4 2013, primarily due to the natural decline of Eagle Ford and South Escobas wells and the cessation of capital spending on drilling in the second half of 2014.

  • 2014 oil & gas revenue increased by 16% to $179.4 million from $154.4 million in 2013.

  • Q4 2014 oil & gas revenue decreased by 19% to $35.9 million, from the $44.1 million in Q4 2013, mainly due to lower oil & gas prices during the quarter.

  • 2014 funds flow from operations was $69.4 million ($1.10 per Unit), as compared to $64.6 million ($1.22 per Unit) for 2013.

  • Q4 2014 funds flow from operations decreased to $14.8 million ($0.23 per Unit), from $18.9 million ($0.32 per Unit) in Q4 2013, mainly due to lower oil & gas prices during the quarter.

  • Netbacks from sales volumes for 2014 were $83.9 million ($34.60 per boe), as compared to $77.4 million ($37.91 per boe) in 2013. An additional $8.5 million in netbacks was received from overriding royalties in 2014, compared to $7.2 million in 2013.

  • Netbacks from sales volumes for Q4 2014 were $13.4 million ($22.23 per boe), as compared to $22.2 million ($35.77 per boe) in Q4 2013. The decrease in netbacks was due to lower oil & gas prices during the quarter. An additional $1.6 million in netbacks was received from overriding royalties in Q4 2014, compared to $1.5 million in Q4 2013.

  • Loss for the year-ended December 31, 2014 was $301.6 million ($4.80 per Unit), as compared to 2013 loss of $87.2 million ($1.65 per Unit). Q4 2014 loss was $132.0 million ($2.08 per Unit), as compared to Q4 2013 loss of $82.1 million ($1.38 per Unit).

  • The losses in Q4 2014 and year-ended December 31, 2014 arise mainly due to the impairment charges of $159.5 million and $315.6 million respectively, recorded in the Trust's oil & gas properties from lower oil & gas prices, as compared to the impairment charge of $69.3 million in Q4 and year-ended December 31, 2013. Excluding the impairment charges, the reported income for Q4 2014 and year-ended December 31, 2014 would have been $27.5 million ($0.43 per Unit) and $14.0 million ($0.22 per Unit) respectively.

Note:  Netbacks is a non-IFRS financial measure. See the Non-IFRS Financial Measure section of this press release.

Investing and Financing

  • Capital expenditures, excluding corporate acquisitions, decreased to $68.3 million ($66.7 million on oil and gas properties) in 2014, from $105.8 million ($103.4 million on oil and gas properties) in 2013. Q4 2014 capital expenditures decreased to $3.3 million, from $16.7 million in Q4 2013. During 2014, the Trust cut back on its capital program to preserve cashflow with the aim to reduce debt.

  • During 2014, the Trust sold certain oil and gas properties located in Kansas for proceeds of $10.7 million, leading to a gain on sale of $2.4 million. The proceeds from disposition were used to pay down part of the credit facility.

  • On December 10, 2014, the Trust successfully renewed the bank credit facility with a borrowing base of US$140.0 million ($162.4 million), noting that permission from the lender is required for draws over US$125.0 million ($145 million).

  • Declared aggregate unitholder distributions of $0.44 per Unit and $0.06 per Unit during year-ended 2014 and Q4 2014 respectively.

Selected Annual Information











($000 unless stated)






2014



2013











Oil and gas sales, before royalties






$179,404



$154,356

Production










- Oil (bbl/d)






4,133



3,450

- NGL (bbl/d)






303



403

- Natural Gas (mcf/d)






13,229



10,429

Oil & gas production (boe/d)






6,641



5,591

% Oil and NGLs






67%



69%

Total Netback (2)






$92,368



$84,569

- per boe






$38.11



$41.44

Netback from sales volume only






$83,885



$77,391

- per boe






$34.60



$37.91

Funds flow from operations (2)






$69,365



$64,588

- per boe






$28.62



$31.65

- per Trust Unit, basic






$1.10



$1.22

Loss






($301,556)



($87,228)

- per Trust Unit, basic






($4.80)



($1.65)

- per Trust Unit, fully diluted






($4.80)



($1.65)

Total Assets






$444,464



$712,407

Non-current Liabilities






$192,407



$257,073

Distribution per Trust Unit






$0.44



$1.05

Capital Expenditures (1)






$68,336



$105,809

Unitholders' Equity






$210,579



$405,259

Note (1):  Capital expenditures exclude corporate acquisitions

Note (2): Netbacks and funds flow from operations are non-IFRS financial and additional GAAP measures respectively. See the Non-IFRS Financial and Additional GAAP Measure sections in this press release.

The operating results for the year reflect a full year of results from the Kansas and Wyoming oil weighted properties acquired in the second half of 2013 coupled with new wells coming on production in South Escobas and Eagle Ford in 2014.  The positive impact of these events were partly offset by the impacts of the significant decrease in oil and gas prices and a decrease in the value of Canadian dollar in the latter half of 2014, which cumulatively represent the main drivers of the change in netbacks, funds flow from operations and loss from the prior year.

During the year ended December 31, 2014, the Trust recognized non-cash impairment charges of $315.6 million.  The impairment losses recognized were the difference between the carrying amount of each cash generating unit ("CGU") and its fair value less costs of disposal. The major elements of these charges were an impairment of $142.6 million on its Texas unconventional oil CGU which includes the Austin Chalk, Eagle Ford and the production payment, an impairment of $75.4 million on its Texas conventional oil CGU and an impairment of $36.7 million related to undeveloped leasehold acreage located in the Eagle Ford Shale and Buda formations.  The non-cash impairment charge on the Texas unconventional and conventional oil CGUs resulted mainly from the decline in realized forecast oil price in the latter half of 2014.  The non-cash impairment charge on the leasehold acreage arose due to the downward revision of reserves associated with the Texas unconventional oil CGU, resulting in reduced prospectivity of the leasehold and substantive expenditure for further exploration in this area no longer being planned.

For the year ended December 31, 2014, the Trust incurred capital expenditures of approximately $66.7 million in the development of its oil & gas properties,  of which $11.8 million was spent on facilities and capital improvement on approximately 75 wells.  The Trust successfully drilled and completed a total of eight wells; six Eagle Ford oil wells and two South Escobas gas wells.

As at December 31, 2014, the Trust had a net working capital surplus of $9.8 million and undrawn availability under its committed credit facility of approximately $42.9 million (US$37 million) providing sufficient liquidity to fund its obligations. The credit facility was renewed on December 10, 2014, and in conjunction with its renewal, the borrowing base was revised to $162.4 million (US$140 million). The next redetermination date is May 31, 2015.

2015 Outlook

On October 1, 2014, the Trust announced a decision by its Board of Directors to initiate a process to explore a range of strategic alternatives to maximize unitholder value. The Board oversaw the strategic alternatives review process with the assistance of senior management and its appointed external financial advisor, BMO Capital Markets.

The Board considered all alternatives to increase unitholder value, which included, but was not limited to: a sale of a material portion of the assets of the Trust; a sale of the Trust, either in one transaction or in a combination of transactions; a merger or other business combination; or a joint venture or a farmout on a material portion of the assets.

The external advisor conducted a well-attended process which resulted in the receipt of a significant number of bids ranging from individual fields to the entire set of assets.  With the recent plunge in commodity prices, bid levels failed to achieve an acceptable level and after review with the Board, the external advisor has been instructed to conclude the corporate process.  The Trust will continue to market a combination of certain assets with the goal to utilize proceeds to pay down the existing credit facility, which is currently US$108 million drawn.

In order to preserve cash and maintain compliance and liquidity in the low commodity price environment, the Trust will be suspending all monthly distributions to unitholders commencing with the month of April 2015, and is reducing its capital expenditure budget for 2015 to US$12 million, representing already committed development capital on eight gross (1.25 net) Parkman formation wells in Wyoming and necessary maintenance and workover capital for the balance of the year.  The 2015 capital budget is based on a 2015 oil price forecast for WTI of US$50 per barrel.  The Trust will also be undertaking a further reduction of its ongoing overhead costs, both in Calgary and Houston. To assist management with the formation and execution of the strategic plan, the Board has appointed Mr. Richard Louden as Executive Chairman.  Mr. Louden has been on the Argent Board since May 2012 and was the Co-Chief Executive Officer and President of Argent.  He has extensive experience in marketing oil and gas assets through his previous position as CEO and co-founder of Denali Oil and Gas LLC.  Including his nine years with Denali, he has over 35 years of operation and management experience in the oil and gas industry. The Board, including Mr. Louden, continue to forego any compensation for their service.

These measures will allow for the Trust to manage through the challenging market conditions and maintain financial flexibility using its US$140 million credit facility, while it continues with marketing the sale of certain assets.  For 2015 Argent has 2,000 net bbl/d of oil hedged at WTI oil prices of US$90/bbl equivalent or higher and 6,000 net mmbtu/d of natural gas hedged at an average price of US$4.12/mmbtu, which will assist in supporting the funds flow from operations.

Conference Call Details

Management of Argent will host a conference call for investors, financial analysts, media and any interested persons on Wednesday, April 01, 2015 at 9:00 a.m. MST (11:00 a.m. EST) to discuss Q4 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:     



56049674

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

The conference call will be recorded and available until April 08, 2015 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:     



049674

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.

Additional GAAP Measure

In this press release, the Trust refers to an additional GAAP measure that does not have any standardized meaning as prescribed by IFRS.  "Funds flow from operations" is considered an additional GAAP measure and is equal to cash provided by operating activities, before changes for non-cash working capital, as stated in the Trust's unaudited interim consolidated financial statements.  We believe funds flow from operations, which is not impacted by fluctuations in non-cash working capital balances, is more indicative of operational performance.

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 Parkman wells, the Trust's ability to maintain compliance and liquidity, the Trust's ability to market certain assets and pay down amounts drawn under its credit facility, the Trust's ability to achieve success with its Houston management team, and the ability to reduce overhead costs in Calgary and Houston.

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.

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: 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

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www.argentenergytrust.com

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