Argent Energy Trust Reports First Quarter 2015 Results

CALGARY, May 13, 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 March 31, 2015 ("Q1 2015").  For Q1 2015, average production was 5,819 boe/d barrels of oil equivalent per day ("boe/d"), of which 67% was oil and NGLs, producing funds flow from operations of $6.2 million ($0.10 per unit of the Trust ("Unit")) for the quarter.  Impairment charges of $25.6 million were booked in Q1 2015 on certain assets sold subsequent to the quarter end to reflect their recoverable value, that resulted in a net loss for the quarter of $21.6 million ($0.34 per Unit).

The Trust's consolidated financial statements for the quarter ended March 31, 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 March 31, 2015

Operations

• Production decreased by 9% to 5,819 boe/d (67% Oil & NGL) in Q1 2015 from 6,390 boe/d (69% Oil & NGL) in Q1 2014, primarily due to the natural decline of Eagle Ford and South Escobas wells and the cessation of capital spending on drilling in the second half of 2014.
  
  
• Oil & gas revenue decreased by 48% to $22.0 million from $46.2 million in Q1 2014, mainly due to lower oil & gas prices in Q1 2015. The average WTI oil price decreased by 45% from $108.91 per barrel in Q1 2014 to $60.18 per barrel in Q1 2015. The average Henry Hub natural gas price decreased by 37% from $5.72 per mmBTU in Q1 2014 to $3.60 per mmBTU in Q1 2015.
  
  
• Netbacks from sales volume for Q1 2015 were $4.1 million, or $7.84 per boe, as compared to $22.9 million, or $39.52 per boe for Q1 2014. An additional $1.0 million in netback was received from overriding royalties in Q1 2015 (compared to $2.2 million in Q1 2014).
  
  
• Q1 2015 funds flow from operations was $6.2 million, or $0.10 per Unit, compared to $14.9 million, or $0.24 per Unit in Q1 2014. The decrease was mainly due to lower oil & gas prices.
  
  
• Q1 2015 loss was $21.6 million, or $0.34 per Unit, as compared to Q1 2014 loss of $2.3 million, or $0.04 per Unit.
  
  
• 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

• Capital expenditures, excluding corporate acquisitions, decreased to $2.4 million in Q1 2015, from $28.1 million in Q1 2014. This is in line with the Trust's 2015 capital budget of US$12 million.
  
  
• Subsequent to quarter end, the Trust entered into agreements to sell certain oil and gas properties located in Manvel, Texas and Kansas and Oklahoma for total gross proceeds of US$40.5 million (Cdn$51.3 million). In accordance with IFRS, the carrying value of these assets at March 31, 2015 was adjusted to reflect the sale value of these assets, resulting in a charge of $25.6 million booked as an impairment. The proceeds from disposition will be used to pay down part of the credit facility.
  
  
• In conjunction with the sale of the Manvel Field, the Trust bank credit facility is to be redetermined with a borrowing base of US$110.0 million, with a further redetermination to occur upon closing of the sale of the Kansas and Oklahoma assets expected in June. Upon closing of both sales, the Trust is expected to be approximately US$69 million drawn on its facility.
  
  
• Declared unitholder distributions of $0.03 per Unit during Q1 2015 ($0.01 per Unit per month), with distributions being suspended from April 2015.

Selected Quarterly Information

($000 unless stated)	Q1 2015	Q1 2014
Oil and gas sales, before royalties	$21,981	$46,248
Production
- Oil (bbl/d)	3,627	4,085
- NGL (bbl/d)	255	326
- Natural Gas (mcf/d)	11,619	11,876
Oil & gas production (boe/d)	5,819	6,390
% Oil and NGLs	67%	69%
Total Netback ^(2)	$5,096	$25,092
Netback from sales volume only	$4,118	$22,865
- per boe	$7.84	$39.52
Funds flow from operations ^(2)	$6,189	$14,866
- per boe	$11.82	$25.85
- per Trust Unit, basic	$0.10	$0.24
Loss	($21,551)	($2,294)
- per Trust Unit, basic and fully diluted	($0.34)	($0.04)
Total Assets	$438,844	$751,715
Non-current Liabilities	$201,379	$253,399
Distribution per Trust Unit	$0.03	$0.26
Capital Expenditures ^(1)	$2,421	$28,128
Unitholders' Equity	$202,021	$427,781

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 lower oil and gas prices and a decrease in the value of Canadian dollar, which cumulatively represent the main drivers of the change in revenue, netbacks and funds flow from operations from the prior year.

During Q1 2015, the Trust recognized an impairment loss of $6.0 million on its Texas Conventional CGU, $9.4 million on its Kansas CGU and $10.2 million on its Oklahoma CGU. This loss represents an adjustment made to the recoverable value of these assets due to the Trust entering into a purchase and sale agreement for the Trust's Manvel Field assets within its Texas Conventional CGU and for its Kansas and Oklahoma assets.

As at March 31, 2015, the Trust had a net working capital surplus of $10.8 million and undrawn availability under its committed credit facility of approximately $40.5 million (US$32 million) providing sufficient liquidity to fund its obligations.

Outlook

In accordance with its previously announced strategy to manage through the challenging market conditions and maintain financial flexibility, Argent entered into agreements to sell its holdings in the Manvel Field, Texas ("Manvel") and its interest in Kansas & Oklahoma (the "Mid-Continent Assets"). The net proceeds from the sales will be used to pay down amounts drawn on Argent's credit facility.  Upon closing of the Manvel sale which is expected to occur on May 14, 2015, Argent's credit facility (which is currently US$108 million drawn) will be set at US$110 million, and Argent expects to be approximately US$89 million drawn at that time.  Upon closing of the Mid-Continent Assets' sale which is expected to occur in June 2015, Argent's credit facility will be reduced to a level expected to be above the forecast amount drawn of approximately US$69 million at that date.  These sales conclude the strategic review sales process and Argent will cease marketing its assets.

In addition, Argent has reduced its technical and administrative staff by approximately 30%, with resulting annualized salary cost savings (excluding severance payments) expected to be approximately US$2 million, the benefit of which will start to be seen in the third quarter of 2015.

Argent believes these measures, together with the focus on reducing operating costs, put the Trust in position to maintain liquidity in the low commodity price environment and provide a stable base of operations on which to move forward.

The revised 2015 annual production target after accounting for the sales will be approximately 4,500 boe/d (approximately 67% oil and NGLs), with an exit rate of approximately 4,300 boe/d to 4,400 boe/d.  For 2015, Argent has hedged approximately 65% of its forecast oil production at WTI oil prices of US$90/bbl equivalent or higher and has hedged approximately 65% of its forecast natural gas production at an average price of US$4.12/mmbtu, which will assist in supporting the funds flow from operations.  For 2016, to date Argent has hedged 1,000 bbl/d of oil at WTI prices averaging US$65.45/bbl and has hedged 4,000 mmbtu/d of natural gas at an average price of US$4.06/mmbtu, and Argent will continue to review its hedged position to protect future cashflow and enterprise value.

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, the payment of cash distributions by the Trust, including the amount and timing of payment of cash distributions, source of funding for capital expenditures, timing of drilling and completion of its Parkman wells, the Trust's ability to maintain compliance and liquidity, the Trust's ability to market certain assets and pay down amounts drawn under its credit facility, the Trust's ability to achieve success with its Houston management team, and the ability to reduce overhead costs in Calgary and Houston.

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 Houston management team, 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 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 and other sources of liquidity to fund its 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, [phone]; Steve Hicks, Chief Operating Officer, Argent Energy Trust, [phone]