CALGARY, Jan. 21, 2013 /CNW/ - Argent Energy Trust ("Argent" or the "Trust") (TSX: AET.UN) is pleased to provide an operational update and Argent's 2013 budget, including forecast capital program and production guidance for this year.
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.
2012 Exit Rate Target Exceeded
Argent exited the year at approximately 3,700 boe/d, excluding the Wapiti acquisition, about 100 boe per day above the year-end guidance target of 3,500 to 3,600 boe per day. This includes production from five Austin Chalk wells and two Eagle Ford wells drilled and completed (100% success) since the IPO in August. The Austin Chalk wells are performing as expected in total with some wells performing significantly above type curve (requiring jet pumps for high volume throughput), and other wells performing at the lower end of the range for an overall average well rate and return in line with expectations. The two completed Eagle Ford wells were brought on line at conservative rates on 24/64 chokes and both flowed oil at 30 day initial production rates above 350 barrels of oil per day. Currently, the first well is producing 250 bopd after 82 days and the second is still at 350 bopd after 55 days online. Argent is modifying its Eagle Ford type curves to incorporate the initial well performance data and nearby analogues; EURs (Estimated Ultimate Recoveries) are expected to exceed the previous forecast and the initial data indicates the wells are very commercial. Argent's third Eagle Ford well has been successfully drilled with completion operations ongoing. We continue to receive oil prices of US$5.00 to US$8.00 per barrel in excess of WTI.
2013 Budget, Capital Expenditures, and Production Guidance
Argent's Board of Directors has approved a 2013 capital budget of US$41 million, an increase of US$5 million. This small increase is the addition of maintenance capital for new Wapiti acquisition (closed December 28, 2012), as well as the addition of one additional Austin Chalk well. Argent intends to drill approximately 10 Austin Chalk and two Eagle Ford wells in 2013 in Fayette and Gonzales counties. The budget excludes corporate and property acquisitions.
Argent is forecasting a 2013 average production rate of approximately 5,500 to 5,600 boe per day (65% oil, 7% NGLs, and 28% natural gas) which includes relatively flat, low-decline, stable production from both the Energy Quest and Wapiti assets purchased in the fourth quarter of 2012 and production growth that will continue to come from Austin Chalk and Eagle Ford development.
Operating costs per boe (including transportation and workovers) are expected to average between US$11.00 to US$12.00 per boe, resulting in an average operating cash flow netback of approximately US$44.00 per boe. Realized oil netbacks are over US$70.00 per boe.
Argent expects first quarter production of approximately 5,200 boe per day (63% oil, 6% NGL and 31% natural gas) including 1400 boe per day (64% oil, 14% NGLs and 22% natural gas) from the Wapiti assets.
Argent plans to drill continuously throughout the entire year, primarily targeting oil in the Austin Chalk and the Eagle Ford.
Argent plans to continue to actively hedge to ensure its distribution and its capital program. Oil production is approximately 60% hedged at US$90/B WTI or better for 2013, and approximately 35% hedged at US$90/B WTI or better in 2014. Natural gas is approximately 35% hedged at an average of US$4.05/Mcf for 2013.
Argent intends to adopt a Premium DistributionTM and Distribution Reinvestment Plan. With a modest DRIP participation of 25%, Argent forecasts a payout ratio of 48% and a sustainability ratio (distribution plus capital budget) of 96% of net cash flow.
Until further notice, 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 results of operations may vary, the distribution of cash is not guaranteed. The Trust intends to make these monthly distributions from a portion of its available cash and use the remainder of its available cash, and advances under its credit facilities, to fund growth through additional acquisitions and capital expenditures.
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. Field netback is calculated by subtracting royalties and operating costs from revenues. See the "Non-IFRS measures" section of the MD&A for a reconciliation of funds flow from operations and field 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
Certain of the statements made and information contained in this press release are forward-looking statements and forward looking information (collectively referred to as "forward-looking statements") within the meaning of Canadian securities laws. All statements other than statements of historic fact are forward-looking statements. The Trust cautions investors that important factors could cause the Trust's actual results to differ materially from those projected, or set out, in any forward-looking statements included in this press release.
In particular, and without limitation, this press release contains forward looking statements pertaining to Argent's drilling and completion plans, and the Trust's expectation regarding its average working interest production for 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 both the Texas assets and the Oklahoma 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 for both the Texas assets and the Oklahoma 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 Trust's actual results could differ materially from those anticipated in these forward-looking statements as a result of the volatility of commodity prices, commodity supply and demand, fluctuations in currency and interest rates, inherent risks and changes in costs associated in the drilling and development of petroleum properties, unexpected operational delays and challenges, access to drilling equipment on a timely basis and at reasonable prices, ultimate recoverability of reserves, timing, results and costs of drilling activities and resulting production, availability of financing and capital, and new regulations and legislation that apply to the Trust and the operations of its subsidiaries.
The success of Argent's drilling program is a key assumption in the production estimates for the 2013 financial year. The primary risk factors which could lead to Argent not meeting its production targets are: (i) production additions from drilling activity are less than expected; (ii) a lack of access to drilling rigs and related equipment on a timely basis and at reasonable prices due to high industry demand or poor weather; and (iii) unexpected operational delays and challenges. Increases in capital costs from forecast amounts can result from the foregoing reasons as well as general cost inflation in the industry.
Additionally, Argent may choose to decrease capital expenditures from those anticipated in its budget projections, therefore affecting production estimates for the 2013 financial year. 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.
As a result of these risks, actual performance and financial results in 2013 may differ materially from any projections of future performance or results expressed or implied by these forward looking statements. New factors emerge from time to time, and it is not possible for management to predict all of these factors or to assess, in advance, the impact of each such factor on the Trust's business, or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward looking statement. Undue reliance should not be placed on forward-looking statements, which are inherently uncertain, are based on estimates and assumptions, and are subject to known and unknown risks and uncertainties (both general and specific) that contribute to the possibility that the future events or circumstances contemplated by the forward looking statements will not occur. Although Management believes that the expectations conveyed by the forward-looking statements are reasonable based on information available to it on the date the forward-looking statements were made, there can be no assurance that the plans, intentions or expectations upon which forward-looking statements are based will in fact be realized. Actual results will differ, and the difference may be material and adverse to the Trust and its unitholders. The Trust does not undertake any obligation, except as required by applicable securities legislation, to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise.
Note regarding barrel of oil equivalency
This press release contains disclosure expressed as "boe" or "boe/d". All oil and natural gas equivalency volumes have been derived using the conversion ratio of six thousand cubic feet ("Mcf") of natural gas to one barrel ("bbl") of oil. Equivalency measures may be misleading, particularly if used in isolation. A conversion ratio of 6 Mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the well head. In addition, given that the value ratio based on the current price of oil as compared to natural gas is significantly different from the energy equivalent of six to one, utilizing a boe conversion ratio of 6 Mcf: 1 bbl would 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
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Chief Executive Officer
Argent Energy Trust
Chief Financial Officer
Argent Energy Trust