/NOT FOR DISTRIBUTION IN THE UNITED STATES OR OVER UNITED STATES WIRE SERVICES./
CALGARY, Dec. 17, 2014 /CNW/ - Argent Energy Trust ("Argent" or the "Trust") (TSX: AET.UN) today announces that in response to the current commodity price environment, it is reducing both its 2015 capital budget by approximately US$19.5 million and reducing its monthly distribution to $0.01 per unit commencing with the distribution for January 2015 due for payment on February 23, 2015.
As previously announced, the Board of Directors approved a preliminary capital budget for 2015 of US$39.5 million with a targeted annual production for 2015 of approximately 6,500 boe/d. Given that current and future oil prices have fallen significantly since that time, the board has cut the 2015 capital budget in half to a level of approximately US$20 million. Planned capital expenditures along the Gulf Coast will be postponed in favor of the capital opportunities in the Parkman and Turner formations in the Powder River Basin of Wyoming, which opportunities still provide a good rate of return even at the current price of oil. The revised 2015 annual production target will be approximately 6,000 boe/d (approximately 71% oil and NGLs). The 2015 capital budget is based on a 2015 oil price forecast for WTI of US$67 per barrel. As it is too early to estimate the impact that lower commodity prices will have on both operating and capital costs, the guidance and 2015 capital budget do not include any benefits from potential cost reductions.
Currently, Argent is paying a monthly distribution of $0.02 per unit ($0.24 per unit annualized), which would represent a total of approximately $14 million cash outlay in 2015 based on 63.5 million units outstanding with approximate 8% DRIP participation. The cash distribution to be paid on January 23, 2015, in respect of the period from and including December 1 to December 31, 2014, for unitholders of record on December 31, 2014 will be $0.02 per trust unit. The ex-distribution date is December 29, 2014. The annualized distribution of $0.24 per trust unit represents a cash-on-cash yield of approximately 47.06% based on the closing price of the trust units on the Toronto Stock Exchange on December 16, 2014 of $0.51. While the Trust expects to have sufficient funds flow from operations in 2015 to support this distribution given the capital budget reduction, given the commodity price forecast for 2015, the Trust believes it is prudent to lower the amount of its monthly distribution to $0.01 per unit ($0.12 per unit annualized), for a total of approximately $7 million cash outlay in 2015, beginning with the January 2015 distribution payable in February 2015.
The two 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 its strategic alternatives process. Furthermore, for 2015 Argent has approximately 2,000 net bbl/d of oil hedged at WTI oil prices of US$90/bbl equivalent or higher and approximately 6,000 net mmbtu/d of natural gas hedged at an average price ofUS$4.12/mmbtu, which will assist in supporting the funds flow from operations.
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, realizable value of the Trust's assets, the payment of cash distributions by the Trust, the 2015 forecast funds flow from operations, 2015 capital budget, 2015 forecast annual production target and commodity mix, forecast commodity prices, and the ability for repayment of debt. 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", and estimates of anticipated production from the Trust's assets.
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. Furthermore, unlike fixed income securities, Argent has no obligation to distribute any fixed amount and reductions in, or suspension of, cash distributions may occur that would reduce future yield.
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.
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 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.
About Argent Energy Trust
SOURCE: Argent Energy Trust
For further information: John Elzner, President & Chief Executive Officer, Argent Energy Trust, (281) 847-1888; Sean Bovingdon, Chief Financial Officer, Argent Energy Trust, (403) 770-4809