Reserve Royalty Income Trust announces its 2017 guidance and a distribution increase
CALGARY, Feb. 8, 2017 /CNW/ - Reserve Royalty Income Trust ("The Trust") finished 2016 by delivering a strong fourth quarter of financial and production results. The following is a forecast of 2016 results and 2017 base guidance:
| 2016 FORECAST |
2017 BASE GUIDANCE |
|
| Production boe/day |
2,200 |
2,100 |
| Net Cash Flow $ Millions |
$5.80 |
$9.50 |
| Net Debt $ Millions |
$4.60 |
$0.00 |
| Net Reduction in debt $ Millions |
$2.30 |
$4.60 |
| Distributions Cents/Unit |
1.75 |
4.0 |
| Annual Payout Ratio % |
60% |
45% |
| Equity raised $ Millions |
$5.50 |
|
| 2016 production was flat with minimal capital spending |
||
| 2017 production guidance includes 6 new royalty wells |
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| Net Cash Flow is after deducting G&A and financing costs |
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| Annual Payout Ratio = (Distributions + Capital $)/Net Cash Flow |
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The Trust made two royalty acquisitions in 2016 which added ~ 60 boe/day to second half royalty production. These acquisitions cost $4.7 Million, after adjustments, and were funded by equity.
2017 has started very favourably for The Trust. Five new horizontal Midale oil wells will be producing on The Trust's Southeast Saskatchewan royalty lands late in Q1. These wells were drilled at no cost to The Trust and should add 25 – 50 bbl/day of net royalty oil production. As well a 3,000 meter long horizontal Fahler natural gas well has been drilled at no cost to The Trust across 2 sections of royalty lands in the Ferrier, Alberta area. This well is forecast to add at least 100 boe/day of natural gas and liquids royalty production. The Trust has elected to participate in the drilling of a Belly River natural gas well by an industry partner in the Deep Basin area of Alberta.
Two natural gas financial swaps were put in place to meet cash flow objectives for 2017:
- 4,000 GJ/day at $3.055 Cdn./GJ for calendar 2017
- 1,000 GJ/day at $3.345 Cdn./GJ for Q1 2017
The Trust's business plan is focused on growing royalty production through acquisitions and drilling. As well The Trust will continue to search for opportunities to transform non-operated production and infrastructure assets in the Deep Basin area of Alberta in whole or in part into royalties.
Net cash flow guidance for 2017 is $9.5 Million, an increase of more than 60% from 2016's forecast. This guidance includes an estimate of royalty production from the 6 new wells and revenue from the natural gas financial swaps that were described above. However it does not include any acquisitions or additional wells drilled on The Trust's lands.
The Board of Directors has declared a quarterly distribution of Cdn. $0.01 per unit to be paid on April 30, 2017 to unitholders of record on March 31, 2017. This is a 100% increase in the quarterly distribution. Significant cash flow and debt capacity, net of distributions, are available in 2017 to continue to grow the royalty business accretively.
The Trust's distribution policy is reviewed quarterly by its Board of Directors and is based on future commodity prices, current operations and investment opportunities.
The Trust focuses on creating value for its unitholders through disciplined and creative oil and natural gas royalty investments.
SOURCE Reserve Royalty Income Trust
For further information: Rick F. (Buck) Braund, Chairman and CEO, t. 403-813-3063, e. [email protected]; Randy Best, President and COO, t. 587-349-1051, e. [email protected]; Sue Nash, Investor Relations, t. 587.349.1055, e. [email protected]
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