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Argent Energy Trust provides third quarter results and increased production guidance

Tuesday, November 13, 2012 4:11 PM

CALGARY, Nov. 13, 2012 /CNW/ - Argent Energy Trust ("Argent" or the "Trust") (TSX: AET.UN) is pleased to provide its financial and operating results for the quarter ended September 30, 2012, being the first interim report for Argent since completing its initial public offering and the commencement of operations in Texas. Argent is also pleased to provide increased guidance for its forecast 2012 exit and 2013 average production rates. The Trust's unaudited interim consolidated financial statements for the three months and period ended September 30, 2012 and related management's discussion and analysis have been filed with the securities regulators and will be available shortly 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 September 30, 2012

  • Completed initial public offering for gross proceeds of $212.3 million together with over-allocation for additional gross proceeds of $31.84 million, through the issuance of a total of 24,414,500 units at $10.00 per unit.
  • Completed acquisition on August 10, 2012, of operated oil and gas assets in Texas for cash consideration, including closing adjustments and restricted cash, of $203.6 million. Working interest production from the acquired assets was initially approximately 1,630 boe/d, comprised of 23% oil and natural gas liquids and 77% natural gas. As a result of drilling activity since acquisition, production on these assets alone as at November 12, 2012, is approximately 2,300 boe/d comprised of 60% oil and NGLs and 40% natural gas.
  • Completed acquisition on August 28, 2012, of the Forest Over-ride for approximately US$19 million. The interest generated $517,443 in revenue for the Trust during the period.
  • Negotiated a US$8 million operating credit facility with a Canadian chartered bank, which was undrawn as at September 30, 2012. Since increased to a syndicated US$45 million facility, of which US$13 million has been drawn.
  • Completed and tied in two (2 net) wells in the Austin Chalk oil formation that had been drilled prior to closing of the Denali Acquisition and commenced drilling of a third well targeting this and an additional formation. Commenced drilling of two (2 net) wells in the Eagle Ford Shale oil formation and one (1 net) well targeting an additional oil formation, all in the Fayette and Gonzales counties in Texas. First production has now commenced on the first of these Eagle Ford wells, with the second due for completion later in November.
  • Commenced unitholder distributions at a rate of $1.05 per unit per year ($0.0875 per unit per month).
  • Recorded funds flow from operations of $0.8 million ($0.06 per unit), reflecting the expensing of $0.3 million of acquisition costs connected with completing the Denali acquisition, as well as the general and administrative expenses incurred in Calgary prior to active operations commencing on August 10, 2012.
  • Currently hedged for 2013, a total of 1,000 bbl/d oil with a floor price of US$90/bbl WTI and 2,000 mmbtu/d of natural gas at average swap price of US$4.04 mmbtu NYMEX.

Summary of Quarter Results

The following table shows selected information for the Trust's fiscal quarter ended September 30, 2012. As this is the first quarter in which the Trust had active operations, no comparatives are available.


(000s unless stated)
Q3 2012
Total production (boe/d) 1,618
% Oil and NGLs 35.5%
Oil, NGL and natural gas sales $ 3,326
Total Revenue $ 3,843
Netback $ 2,405
Netback ($/boe) $22.89
Funds flow from operations
- per boe $9.82
- per Trust Unit, basic $ 0.06
- per Trust Unit, basic $ 0.33
Total Assets $ 278,911
Current Liabilities $ 47,303
Non-current Liabilities $ 14,310
Unitholders' Equity $ 217,298
Capital Expenditures $ 12,967
Units outstanding for accounting (1) 13,511

(1) Units outstanding for accounting purposes exclude restricted trust units units due to the performance conditions that have to be met to enable such units to be vested.

Oil, NGL and Natural Gas Sales and production levels in the quarter reflect the period from close of the Denali Acquisition on August 10th through September 30, 2012. Production during the period of operations since close of the Denali Acquisition (the "Operating Period") totaled 84,153 boe or an average of 1,618 boe per day, with oil and NGL sales at 576 bbls per day, being 36% of the total sales volume and natural gas sales being approximately 6.3 mmcf per day, or 64% of the total sales volume on a boe basis. Oil price for the Operating period averaged US$100.65 per bbl (Cdn$99.02) which represents an uplift of US$5.79 per bbl over the WTI Benchmark of US$94.86 per bbl, while natural gas price averaged US$2.37 per mcf (Cdn$2.34) compared to the NYMEX Benchmark of US$2.81 per mcf.

The breakdown of netback by product during the period was $77.69/bbl for oil production, $20.56/bbl for NGL production and $5.17/boe for Natural Gas production. This reflects the strong economics from oil production in Texas, such that with the Trust's focus on oil drilling in the near term, management expects the average aggregate netbacks to improve.

While oil and natural gas production was initially lower than projected for the interim period primarily due to delays in the start-up of planned new wells and the shut-in of some wells for minor workovers, production levels subsequent to the quarter end are already at the Trust's previously forecast year-end 2013 production rate of between 2,300 and 2,400 boe/d from just the Denali Acquisition assets. The Trust is currently producing approximately 2,300 boe/d, with 60% being oil and NGL volumes and 40% being natural gas volumes, from these assets. An additional 850 boe/d (97% oil) is being produced from the assets acquired from Energyquest II, LLC, on October 25, 2012, for a current total of 3,150 boe/d, of which 70% is oil and NGLs.


By the end of 2012 the Trust expects to complete both Eagle Ford wells, and both Austin Chalk wells that were being drilled during the third quarter. Furthermore, the Trust expects to drill approximately two (2 net) new wells from October 1, 2012 to the end of 2012, both in the Austin Chalk, one of which should be completed by year end.

This activity, together with the completion of the EnergyQuest acquisition in October, leads the Trust to increase its forecast production exit rate for 2012 to between 3,500 and 3,600 boe/d. The Trust is also increasing its 2013 average production guidance to 4,100 to 4,200 boe/d, of which approximately 63% is expected to be oil.

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 exiting the year 2012 and 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. Additional risks and uncertainties affecting the Trust are contained in the Trust's IPO Prospectus dated August 1, 2012, under the heading "Risk Factors".

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 2012 and 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 2012 and 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

Brian Prokop 
Chief Executive Officer 
Argent Energy Trust 
(403) 770-4807

Sean Bovingdon
Chief Financial Officer
Argent Energy Trust
(403) 770-4803

(Source: CNW )
(Source: Quotemedia)


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