Argent Energy Trust Reports Second Quarter 2015 Results

CALGARY, Aug. 11, 2015 /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, 2015 ("Q2 2015").  For Q2 2015, average production was 4,942 boe/d barrels of oil equivalent per day ("boe/d"), of which 64% was oil and NGLs, producing funds flow from operations of $13.9 million ($0.22 per unit of the Trust ("Unit")) for the quarter reflecting lower operating costs from Q1 2015.  This production level reflects the sale of the Manvel Field assets during the quarter, and natural declines on the Eagle Ford oil and South Texas gas wells drilled in mid-2014.

The Trust's unaudited consolidated financial statements for the three and six months ended June 30, 2015 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 quarter ended June 30, 2015

Operations

  • Production decreased to 4,942 boe/d (64% Oil & NGL) in Q2 2015 from 5,819 boe/d (67% Oil & NGL) in Q1 2015, primarily due to the disposal of the Manvel property during the quarter and the natural decline of Eagle Ford and South Escobas wells. The capital drilling incurred in the first half of 2015 is expected to be reflected in production in the second half of 2015.

  • Oil & gas revenue was $22.1 million in Q2 2015 compared to $22.0 million in Q1 2015. This reflects the lower production volumes offset by an increase in realized prices from an average of $40.02 per boe in Q1, 2015 to $46.26 per boe in Q2, 2015.

  • Netbacks from sales volume for Q2 2015 were $7.4 million, or $16.45 per boe, as compared to $4.1 million, or $7.84 per boe for Q1, 2015.  An additional $1.3 million in netback was received from overriding royalties in Q2 2015.  The increase in netbacks from the first quarter reflects higher realized prices and lower operating costs. 

  • Funds flow from operations increased to $13.9 million ($0.22 per Unit) in Q2 2015, from $6.2 million ($0.10 per Unit) in Q1 2015.  The increase in funds flow from operations in Q2 2015, was due to lower operating expenses and general and administrative expenses from the costs rationalization measures taken in Q1 2015.

  • The loss for Q2 2015 decreased to $17.3 million ($0.27 per Unit) from $21.6 million ($0.34 per Unit) for Q1 2015.  The higher loss in Q1 2015 was mainly due to lower funds flow from operations and the impact of impairment charges offset by non-cash items such as risk management gains and gains on the fair valuing of the convertible debentures.

Note:  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.

Investing and Financing

  • Realized net proceeds of $48.6 million (US$39.7 million) from the sales of the Manvel Field assets and the Mid-Continent assets, which consisted of the Oklahoma and Kansas oil & gas properties.  Proceeds from asset sales were used to pay down the credit facility.

  • Renewed its bank credit facility with a borrowing base of US$80.0 million ($99.9 million) on June 30, 2015.  During Q2 2015, the Trust had reduced bank credit facility outstanding to US$68.5 million ($85.6 million), from US$108.0 million ($136.8 million) at the end of Q1 2015.

  • Capital expenditures, excluding corporate acquisitions, were $6.2 million in Q2 2015, focused on the non-operated Parkman drilling program and capital workovers.  This is in line with the Trust's 2015 capital budget of US$12 million.

Selected Quarterly Information





($000 unless stated)

Q2 2015

Q1 2015

Q2 2014





Oil and gas sales, before royalties

$22,108

$21,981

$47,538

Production




- Oil (bbl/d)

2,954

3,627

4,071

- NGL (bbl/d)

225

255

324

- Natural Gas (mcf/d)

10,577

11,619

11,867

Oil & gas production (boe/d)

4,942

5,819

6,373

% Oil and NGLs

64%

67%

69%





Total Netback (2)

$8,660

$5,096

$24,383

Netback from sales volume only

$7,401

$4,118

$21,962

- per boe

$16.45

$7.84

$38.03





Funds flow from operations (2)

$13,893

$6,189

$15,791

- per boe

$30.90

$11.82

$27.23

- per Trust Unit, basic

$0.22

$0.10

$0.25





Loss

($17,315)

($21,551)

($25,334)

- per Trust Unit, basic and fully diluted

($0.27)

($0.34)

($0.40)





Total Assets

$354,087

$438,844

$734,230

Non-current Liabilities

$147,649

$201,379

$278,202

Distribution per Trust Unit

$0.01

$0.03

$0.06

Capital Expenditures (1)

$6,206

$2,421

$29,702

Unitholders' Equity

$176,825

$202,021

$394,023





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 quarter reflect the impacts of the sale of the Manvel Field, natural declines in the Eagle Ford oil wells and South Texas gas wells drilled in 2014, slightly improved oil prices over Q1, 2015 (while significantly lower than Q2, 2014), and a reduction in operating expenses (excluding workovers) from US$16.19 per boe in Q2, 2014 and US$15.57 per boe in Q1, 2015 to US$13.27 per boe in Q2, 2015.  These factors cumulatively represent the main drivers of the change in revenue, netbacks and funds flow from operations from the prior quarter and the comparative quarter of 2014.

As at June 30, 2015, the Trust had a net working capital surplus of $3.8 million and undrawn availability under its committed credit facility of approximately $14.4 million (US$11.5 million) providing sufficient liquidity to fund its obligations.

Outlook

With the sales of the Manvel Field, Texas ("Manvel") and its interest in Kansas & Oklahoma (the "Mid-Continent Assets") completed, Argent is focused on reducing operating costs for its base assets.  Argent will continue to monitor its borrowing requirements and balance sheet to maintain liquidity in the low commodity price environment.  Argent's credit facility has a US$80 million limit upon which US$68.5 million is drawn. 

Capital expenditures for the balance of the year are expected to be approximately US$6 million, to be incurred on participation in the drilling of Parkman oil wells in Wyoming and maintenance capital.  This level of capital expenditure is expected to be funded by cashflow from operations. Argent has approximately 11,800 net acres with significant Parkman potential including 29 drilling locations currently identified.  Drilling results from the initial wells Argent has participated in, operated by Devon Energy, indicate results in line with expected type curves.

The 2015 annual production target is now approximately 4,500 boe/d (approximately 67% oil and NGLs), with a Q4 2015 production rate of approximately 4,300 boe/d to 4,400 boe/d.  For 2015 Argent has hedged approximately 65% of its forecast oil production at WTI oil prices of US$90/bbl equivalent or higher and has hedged approximately 65% of its forecast natural gas production at an average price of US$4.12/mmbtu, which will assist in supporting the funds flow from operations.  For 2016, to date Argent has hedged 1,000 bbl/d of oil at WTI prices averaging US$65.45/bbl and has hedged 4,000 mmbtu/d of natural gas at an average price of US$4.06/mmbtu, and Argent will continue to review its hedged position to protect future cashflow and enterprise value.

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, potential drilling locations and results of the drilling of its Parkman wells, the Trust's ability to maintain compliance with its credit facility and liquidity, and the Trust's ability to achieve success with its Houston management team.

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: Sean Bovingdon, President & CFO, Argent Energy Trust, (403) 770-4809; Steve Hicks, Chief Operating Officer, Argent Energy Trust, (281) 847-1888

RELATED LINKS
www.argentenergytrust.com

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