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Argent Energy Trust Reports Third Quarter 2015 Results

Argent Energy Trust Reports Third Quarter 2015 Results

Canada NewsWire

CALGARY, Nov. 12, 2015 /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, 2015 ("Q3 2015").  For Q3 2015, average production was 4,455 boe/d barrels of oil equivalent per day ("boe/d"), of which 66% was oil and NGLs, producing funds flow from operations of $13.8 million ($0.21 per unit of the Trust ("Unit")) for the quarter reflecting lower operating and administrative costs from Q2 2015.  After adjusting for the strategic divestitures in Q2 2015, production for Q3 2015 increased sequentially by 3% to 4,455 boe/d, from 4,311 boe/d in Q2 2015.  The increase was due to new production from the capital drilling incurred in the first half of 2015 in the Wyoming properties, offset by natural declines.

The Trust's unaudited consolidated financial statements for the three and nine months ended September 30, 2015 and related management's discussion and analysis have been filed with the securities regulators and will be available 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, 2015

Operations

  • Q3 2015 production was 4,455 boe/d (66% oil and NGL), representing a reduction of 39% from Q3 2014 at 7,264 boe/d, primarily due to the strategic divestitures of the Manvel and Mid-Continent properties during Q2 2015 and the natural decline of Eagle Ford and South Escobas wells.

  • Oil & gas revenue decreased to $17.1 million from $49.7 million in Q3 2014, mainly due to lower oil & gas prices in Q3 2015 and lower production. The average WTI oil price decreased by 43% from $106.57 per barrel in Q3 2014 to $60.84 per barrel in Q2 2015. The average Henry Hub natural gas price decreased by 16% from $4.32 per mmBTU in Q2 2014 to $3.61 per mmBTU in Q3 2015.

  • Q3 2015 operating expense excluding workovers was reduced to an average of US$9.37 (CAD$12.27) per boe, from US$12.57 (CAD$13.68) per boe in Q3 2014, due to ongoing efforts to improve efficiencies and the divestiture of the Mid-Continent assets which historically had high operating costs relative to the remaining fields.

  • Netbacks from sales volume for Q3 2015 were $5.0 million, or $12.28 per boe, as compared to $25.7 million, or $38.47 per boe for Q2 2014, with the decrease being primarily due to lower oil and gas prices. An additional $0.7 million in netback was received from overriding royalties in Q3 2015, as compared to $2.2 million in Q3 2014.

  • Reduced general and administrative ("G&A") expenses in US$ by 19% as compared to Q3 2014.

  • Q3 2015 funds flow from operations was $13.8 million, or $0.21 per Unit, compared to $24.0 million, or $0.38 per Unit in Q3 2014, a decrease of 42% due to lower oil & gas prices and lower oil & gas production partially offset by lower administrative costs and the hedge gains realized during the quarter. Q3 2015 funds flow from operations was flat relative to the $13.9 million, or $0.22 per Unit in Q2 2015.

  • Q3 2015 loss decreased to $95.1 million, or $1.48 per Unit, from Q3 2014 loss of $141.9 million, or $2.24 per Unit. The reduction in Q3 2015 loss was primarily due to lower depreciation, depletion and amortization and impairment expenses, which more than offset the decrease in funds flow from operations.

Note:  Netbacks and funds flow from operations are non-IFRS financial and additional GAAP measures respectively. See the Non-IFRS Financial and Additional GAAP Measure sections in this press release.

Investing and Financing

  • During Q3 2015, the Trust had reduced bank credit facility outstanding to US$65.0 million (Cdn$86.7 million), from US$68.5 million at the end of Q2 2015. The credit facility is currently being redetermined, which process is expected to be completed by November 30 2015.

  • Capital expenditures, excluding corporate acquisitions, were US$6.2 million in Q3 2015, focused on the non-operated Parkman drilling program in Wyoming and capital workovers. To date the Trust has participated in 10 (1.3 net) wells, 2 Turner and 8 Parkman, with working interest percentages of between 3% and 25%, and workovers on 27 wells. Argent has incurred a total of US$13.3 million in capital expenditures in 2015, with minimal capital expenditures expected for the remainder of the year.

Selected Quarterly Information









($000 unless stated)



Q3 2015


Q2 2015


Q3 2014









Oil and gas sales, before royalties



$17,146


$22,108


$49,680

Production








- Oil (bbl/d)



2,715


2,954


4,426

- NGL (bbl/d)



213


225


277

- Natural Gas (mcf/d)



9,163


10,577


15,365

Oil & gas production (boe/d)



4,455


4,942


7,264

% Oil and NGLs



66%


64%


65%









Total Netback (2)



$5,750


$8,660


$27,918

Netback from sales volume only



$5,040


$7,401


$25,710

- per boe



$12.28


$16.45


$38.47









Funds flow from operations (2)



$13,808


$13,893


$23,958

- per boe



$33.69


$30.90


$35.85

- per Trust Unit, basic



$0.21


$0.22


$0.38









Loss



($95,102)


($17,315)


($141,884)

- per Trust Unit, basic and fully diluted



($1.48)


($0.27)


($2.24)









Total Assets



$262,210


$354,087


$574,959

Non-current Liabilities



$149.778


$147,649


$253,508

Distribution per Trust Unit



$0.00


$0.01


$0.06

Capital Expenditures (1)



$8,390


$6,206


$7,157

Unitholders' Equity



$81,420


$176,825


$279,615









Note (1): 

Capital expenditures exclude corporate acquisitions

Note (2):

Netbacks and funds flow from operations are non-IFRS financial and additional
GAAP measures respectively. See the Non-IFRS Financial and Additional GAAP
Measure sections in this press release.

The operating results for the quarter reflect the impacts of the sale of the Manvel Field, natural declines in the Eagle Ford oil wells and South Texas gas wells drilled in 2014, and a reduction in general and administrative expenses, impairment loss of $112.1 million due to lower commodity prices, and reduction in operating expenses (excluding workovers) from US$15.57 per boe in Q1, 2015 to US$13.27 per boe in Q2, 2015 to US$9.37 per boe in Q3 2015.  These factors cumulatively represent the main drivers of the change in revenue, netbacks and funds flow from operations and loss from the prior quarter and the comparative quarter of 2014.

Outlook
Argent is focused on maintaining liquidity and working through the current challenging low commodity price environment. Capital expenditures, operating costs and administrative costs have all been reduced significantly, and Argent continues to review areas for additional savings while prudently managing operations.  Argent continues to generate positive cash-flow from operations.

Argent is US$65 million drawn on its US$80 million credit facility, which is subject to a semi-annual borrowing base redetermination that is ongoing.  Based on current commodity prices, it is expected that the facility could be reduced.  Argent is in active discussions with the banking syndicate regarding its borrowing base, an extension of the credit facility and other terms. Argent continues to advance and explore all alternatives to provide the necessary liquidity and capital to the Trust based on the current commodity pricing environment. The redetermination is expected to be completed by November 30, 2015.

Capital expenditures for the year are substantially completed, with Argent having participated in the drilling of eight Parkman oil wells in Wyoming.  The capital expenditure budget for 2016 will be finalized upon completion of the credit facility discussions.  Assuming the continuation or replacement of the facility, the capital budget is expected to be approximately US$12 million for 2016, again focused on the Parkman formation prospects. Argent has approximately 11,500 net acres with significant Parkman potential including 18 more drilling locations currently identified.  Drilling results from the wells Argent has participated in indicate results in line with expected type curves.

The 2015 annual production target is approximately 4,500 boe/d (approximately 67% oil and NGLs), with a Q4 2015 production rate of approximately 4,000 boe/d to 4,100 boe/d, which is down from the previous forecast range of 4,300 boe/d to 4,400 boe/d due to earlier commencement of production from the successful Parkman wells drilled, such that the higher initial production output was received in Q3 2015 rather than previously expected Q4.  For 2016, depending on the ability to finance the US$12 million capital budget noted above, Argent has an annual production rate target of approximately 3,700 boe/d (approximately 70% oil and NGLs).  This target represents limited capital to be incurred due to the current commodity price outlook.

Argent has entered into the following risk management contracts to protect its future cashflow in a low commodity price environment:


Oil (US$ / bbl)

Natural Gas (US$ per mmBtu)

Q4 2015

2,000 barrels per day at average US$91.72

6,000 mmBTU per day at average US$4.12

Year 2016

1,000 barrels per day at average US$65.45

4,000 mmBTU per day at average US$4.06

Non-IFRS Financial Measure

Statements throughout this press release make reference to the term "netbacks", which is a non-IFRS financial measure that does not have any standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other issuers. Management believes that "netbacks" provides useful information to investors and management since this measure is commonly used by other oil and gas companies.  "Netbacks" is equal to oil, natural gas and NGL sales revenue less royalties, transportation costs, production taxes and operating expenses.  Other financial data has been prepared in accordance with IFRS.

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 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, Argent's capital program, drilling and completion plans (including fracing), oil, natural gas and NGL production rates, operating costs, production growth, hedging activities, its credit facility, including the amount and timing of its credit facility redetermination, production estimates for 2016, source of funding for capital expenditures, timing of drilling and completion of its Parkman wells, potential drilling locations and results of the drilling of its Parkman wells, the Trust's ability to maintain compliance with its credit facility and liquidity, and the Trust's ability to achieve success with its management team.

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 the Trust's assets, which estimates are based on the proposed drilling and completion program with a success rate that, in turn, is based upon historical drilling and completion success and an evaluation of the particular wells to be drilled and completed, future recoverability of reserves from the assets, future potential and experience and performance of its management team, future capital expenditures and the ability of the Trust to obtain financing on acceptable terms for its capital projects and future acquisitions, ability of the Trust to maintain its credit facility or obtain alternative credit financing, 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 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 credit facilities and other sources of liquidity to fund its operations and 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, a lack of performance of its staff or ability to retain experienced personnel, 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.

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.

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.

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

concerning this press release, please contact: Sean Bovingdon, President & CFO, Argent Energy Trust, (403) 770-4809; Steve Hicks, Chief Operating Officer, Argent Energy Trust, (281) 847-1888Copyright CNW Group 2015


Source: Canada Newswire (November 12, 2015 - 7:43 PM EST)

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