CALGARY, ALBERTA -- (Marketwire) -- 05/20/09 -- All values are in Canadian dollars and conversions of natural gas volumes to barrels of oil equivalent (boe) are at 6:1 unless otherwise indicated.
Provident Energy Trust (Provident) (TSX: PVE.UN) (NYSE: PVX) announced today that it has completed the previously announced strategic review process and has determined that Provident will maintain its current diversified midstream and upstream business model. Provident also announced an internal reorganization intended to improve efficiency, reduce controllable costs and simplify the organization.
Strategic Review
The strategic review process was announced in February of 2008 with the objectives of optimizing business performance, facilitating business growth, improving overall access to and cost of capital, enhancing the valuation of Provident's component businesses and optimizing structure in response to the federal government decision to tax income trusts beginning in 2011. During this review, it was determined that the sale of the U.S. oil and gas business unit was an important step in the process. The U.S. business unit was successfully sold in a two-stage process that concluded in August of 2008 for total gross proceeds of US$650 million ($458 million, after-tax). Following the sale of the U.S. business unit, management and the board of directors evaluated the complete spectrum of strategic options available for Provident's remaining Canadian oil and gas production (Provident Upstream) and midstream (Provident Midstream) business units. After an extensive review, it has been determined that in the context of the current macroeconomic environment (characterized by low commodity prices and volatility in both equity and debt markets), it is in the best interest of unitholders that Provident remain structured as a cash-distributing, diversified energy enterprise.
Provident is well positioned to address the challenges in the business environment and is currently structured as an income trust, which remains tax-efficient until 2011. Provident's tax position is enhanced by approximately $1.4 billion in tax pools which will provide shelter for a portion of taxable income beyond 2011.
Internal Reorganization
Provident has completed an internal reorganization intended to improve the efficiency and competitiveness of the businesses by reducing operating and administrative costs and streamlining the organizational structure. This internal restructuring is designed to increase the focus of each business unit and improve management's line of sight to the key performance measures in each business. This reorganization has resulted in staff reductions at all levels of the organization, including senior management. These staff changes, in addition to other cost-saving initiatives undertaken by management, are expected to reduce costs by approximately $12 million per annum which represents an 18 percent reduction compared to 2008 general and administrative costs in the Canadian upstream and midstream business units.
