Paramount Energy Trust releases third quarter 2009 financial and operating
results and confirms November distribution
PET is also pleased to confirm that its distribution to be paid on
Third Quarter Summary
- Average production measured 152.4 MMcfe/d for the three months ended
September 30, 2009 as compared to 183.7 MMcfe/d reported in the same
period of 2008. With the significant downturn in natural gas prices,
PET undertook a detailed analysis of the economic attributes of all
of its properties and identified opportunities to preserve value
through voluntary production curtailments. As a result of this
analysis, the Trust shut in approximately 35 MMcfe/d of natural gas
production in the second and early in the third quarter of 2009. As
of November 1, 2009 approximately 20 MMcfe/d has been returned to
production due to recent strengthening in natural gas prices.
- The Trust's realized gas price was $7.51 per Mcfe for the three
months ended September 30, 2009, a 14 percent decrease from the
comparable quarter in 2008. The effect of the 67 percent decrease in
AECO prices from quarter to quarter was largely offset by realized
gains on financial instruments totaling $56.3 million for the three
months ended September 30, 2009, comprised of $14.9 million received
for monthly settlements during the quarter and $41.4 million
crystallized through the early termination of PET's AECO-based
financial fixed price natural gas contracts for November 2009 through
March 2010. The hedge price on the crystallized volumes was
immediately reset to $5.38 per GJ to provide continued downside
protection. PET collected $1.1 million in call option proceeds during
the third quarter, further enhancing the Trust's realized gas price.
- Funds flow decreased to $59.6 million ($0.49 per Trust Unit) from
$76.4 million ($0.68 per Trust Unit) for the third quarter of 2008
primarily due to lower gas prices and voluntary production shut-ins,
partially offset by lower royalties and cost reductions in both the
operating and administrative aspects of PET's operations. Funds flow
netbacks for the quarter decreased six percent to $4.25 per Mcfe/d
from $4.52 per Mcfe/d in the third quarter of 2008.
- Distributions payable for the third quarter of 2009 totaled $0.15 per
Trust Unit, comprised of $0.05 per Trust Unit paid on August 17,
September 15 and October 15, representing a payout ratio of
30.7 percent of funds flow as compared to 44.0 percent for the third
quarter of 2008.
- On September 21, 2009, PET announced that it had adopted a Premium
Distribution(TM) component in its Distribution Reinvestment Plan (the
"Premium DRIP Plan") payable with the September 2009 cash
distribution and onwards. The Premium DRIP Plan supersedes, amends
and restates in its entirety the Distribution Reinvestment and
Optional Trust Unit Purchase Plan of PET dated December 17, 2003 (the
"Original Plan"). The primary differences between the Premium DRIP
Plan and the Original Plan are the addition of the Premium
Distribution(TM) component, through which eligible Unitholders who
enroll in the Premium DRIP Plan can elect to receive 102 percent of
the regular monthly distribution, and the discontinuation of the
Optional Trust Unit purchase component which was available under the
Original Plan. For more information visit www.paramountenergy.com.
- The Trust reported a net loss of $44.2 million ($0.36 per basic and
diluted Trust Unit) for the three months ended September 30, 2009 as
compared to net earnings of $180.8 million ($1.62 per basic and $1.60
per diluted Trust Unit) for the 2008 period. The net loss is due to
an unrealized loss on financial instruments of $45.8 million caused
by the early termination of financial instrument contracts and the
change in the mark to market value of these contracts at the end of
the quarter. In the third quarter of 2008 PET recorded an unrealized
gain on financial instruments of $168.9 million.
- Exploration, development and land expenditures totaled $10.7 million
for the three months ended September 30, 2009, and were focused on
drilling and facilities in the Southern district, as well as
expenditures on the Trust's gas storage project located near
Vegreville, Alberta.
- Net bank debt was reduced by $23.0 million during the quarter to
$295.5 million from $318.5 million at June 30, 2009. The Trust repaid
and terminated the Profound Energy Inc. credit facility after
finalizing the corporate acquisition in August 2009.
Subsequent Events
- On October 14, 2009, the Trust announced that it intends to seek
debentureholder approval to combine and amend the terms of its 2005
6.25% and 2006 6.25% convertible debentures. The proposed changes to
the terms include an increase of the coupon rate by 0.50% to 6.75%, a
reduction of the conversion price to $8.40 per Trust Unit, an
extension of the maturity date to October 31, 2016 and the provision
of a four year non-call ending on October 31, 2013. The Trust has
scheduled a meeting of debentureholders on November 13, 2009 to seek
approval of the amendments.
- Since the end of the third quarter, PET has locked in an additional
$5.4 million in hedging gains relating to the reset natural gas
hedging contracts put into place in late September for the November
2009 through March 2010 period. The Trust's current outstanding
financial and physical forward sales arrangements are detailed in
management's discussion and analysis of the third quarter of 2009.
- PET has entered into a purchase and sale agreement to dispose of a
non-core asset in northeast Alberta, producing approximately
2.1 MMcf/d, for net proceeds of $12 million. Closing is anticipated
in November 2009.
Outlook and Sensitivities
The following table reflects PET's projected realized gas price, monthly funds flow and payout ratio at the current monthly distribution of
Funds flow outlook - Average AECO Monthly Index Gas Price ($/GJ)
Fourth quarter of 2009 $3.00 $4.00 $5.00
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Oil and natural gas production
(MMcfe/d) 146 146 146
Realized gas price ($/Mcfe) 4.87 5.36 5.62
Funds flow ($millions)(1) 17 22 24
Per Trust Unit ($/Unit/month) 0.045 0.058 0.063
Payout ratio (%)(1) 111 86 79
Ending net bank debt ($millions)(1) 288 283 281
Ending net debt ($millions)(1) 518 513 511
Ending net bank debt to annual
funds flow ratio (times)(2) 1.4 1.3 1.3
Ending net debt to annual funds
flow ratio (times)(3) 2.5 2.4 2.4
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(1) These are non-GAAP measures; see "Significant accounting policies and
non-GAAP measures" in management's discussion and analysis.
(2) Calculated as ending net bank debt divided by estimated annual 2009
funds flow.
(3) Calculated as ending net debt (including convertible debentures)
divided by estimated annual funds flow.
Funds flows for the second half of 2009 have to date been materially higher than projected in the Trust's outlook and sensitivities in PET's press release dated
PET has a revolving credit facility with a syndicate of Canadian chartered banks (the "Credit Facility"). With the persistent weakness in natural gas prices in 2009, lenders have significantly reduced the natural gas price forecasts used in their credit evaluations. As a result PET expects that the borrowing base under the Credit Facility will be reduced by approximately ten percent in the next few weeks following the completion of the semi-annual borrowing base review by the lenders.
The Board of Directors of the administrator of the Trust has approved an exploration and development capital expenditure budget of
The following table reflects PET's projected realized gas price, monthly funds flow and payout ratio at the current monthly distribution of
Average AECO Monthly Index Gas Price ($/GJ)
Funds flow outlook - 2010 $4.00 $5.00 $6.00
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Oil and natural gas production
(MMcfe/d) 147 147 147
Realized gas price ($/Mcfe)(1) 6.68 7.05 7.43
Funds flow ($millions)(2) 175 187 195
Per Trust Unit ($/Unit/month) 0.112 0.120 0.125
Payout ratio (%)(2) 45 42 40
Ending net debt ($millions)(2) 470 458 450
Ending net debt to funds flow
ratio (times)(3) 2.7 2.4 2.3
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(1) PET's weighted average forward price on an average of 88,000 GJ/d for
the period January 1 to December 31, 2010 is $7.24 per GJ.
(2) These are non-GAAP measures; see "Significant accounting policies and
non-GAAP measures" in management's discussion and analysis.
(3) Calculated as ending net debt (including convertible debentures)
divided by estimated 2010 funds flow.
PET's sensitivity to gas prices for both the remainder of 2009 and 2010 has changed with changes in its financial and forward physical hedging position, including the early crystallization of hedging gains in the winter 2009/2010 period. Sensitivity of PET's fund flows to changes in production volumes, operating and general and administrative costs and interest rates has not changed significantly from the sensitivity analysis presented in the Trust's management's discussion and analysis for the year ended
PET is in the final stages of evaluating the development potential of its gas storage project located north of Vegreville, Alberta. The Trust expects to make its determination as to whether or not to move to full scale development of the project prior to the end of
Additional Information
A copy of PET's unaudited interim consolidated financial statements and related notes and management's discussion and analysis for the three and nine months ended
Forward-Looking Information
Certain information regarding PET in this news release including management's assessment of future plans and operations and the information contained under the heading "Outlook and Sensitivities" above may constitute forward-looking statements under applicable securities laws. The forward-looking information includes, without limitation, statements regarding PET's projected production levels, costs, capital expenditures, realized gas price, debt levels, funds flow and payout ratio. Various assumptions were used in drawing the conclusions or making the forecasts and projections contained in the forward-looking information contained in this press release, which assumptions are based on management analysis of historical trends, current conditions and expected future developments pertaining to PET and the industry in which it operates as well as certain assumptions as specifically outlined in the release above. Forward-looking information is based on current expectations, estimates and projections that involve a number of risks, which could cause actual results to vary and in some instances differ materially from those anticipated by PET and described in the forward-looking information contained in this press release. Undue reliance should not be placed on forward-looking information, which is not a guarantee of performance and is subject to a number of risks or uncertainties. Readers are cautioned that the forgoing list of risk factors is not exhaustive. Forward-looking information is based on the estimates and opinions of PET's management at the time the information is released and PET disclaims any intent or obligation to update publicly any such forward-looking information, whether as a result of new information, future events or otherwise, other than as expressly required by applicable securities laws.
Non-GAAP Measures
This news release contains financial measures that may not be calculated in accordance with generally accepted accounting principles in
Conference Call and Webcast
PET will be hosting a conference call and webcast at
PET is a natural gas-focused Canadian energy trust. PET's Trust Units and convertible debentures are listed on the
The TMX Group has neither approved nor disapproved the information contained herein.
FINANCIAL AND
OPERATING HIGHLIGHTS Three Months Ended Nine Months Ended
($Cdn thousands September 30 September 30
except volume
and per Trust % %
Unit amounts) 2009 2008 Change 2009 2008 Change
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Financial
Revenue,
including
realized gains
and losses on
financial
instruments 105,274 148,328 (29) 339,741 424,538 (20)
Funds flow(1) 59,599 76,380 (22) 191,938 213,921 (10)
Per Trust
Unit(2) 0.49 0.68 (28) 1.66 1.93 (14)
Net earnings
(loss) (44,151) 180,796 (124) 25,680 39,771 (35)
Per Trust
Unit(2) (0.36) 1.62 (122) 0.22 0.36 (39)
Distributions 18,324 33,584 (45) 57,028 100,036 (43)
Per Trust
Unit(3) 0.15 0.30 (50) 0.49 0.90 (46)
Payout
ratio (%)(1) 30.7 44.0 (30) 29.7 46.8 (37)
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Total assets 1,099,869 1,158,996 (5) 1,099,869 1,158,996 (5)
Net bank and
other debt
outstanding(4) 295,549 286,708 3 295,549 286,708 3
Convertible
debentures,
at principal
amount 230,168 236,034 (2) 230,168 236,034 (2)
Total net
debt(4) 525,717 522,742 1 525,717 522,742 1
Unitholders'
equity 268,611 295,681 (9) 268,611 295,681 (9)
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Capital
expenditures
Exploration and
development 10,666 34,979 (70) 58,092 97,762 (41)
Acquisitions,
net of
dispositions 18,723 (9,733) 292 114,376 (16,371) (798)
Other 105 235 (55) 244 661 (63)
Net capital
expenditures 29,494 25,481 16 172,712 82,052 110
Trust Units
outstanding
(thousands) 124,591 124,591
End of period 123,955 112,396 10 123,955 112,396 10
Weighted average 121,452 111,783 9 115,861 111,005 4
Incentive Rights
outstanding 7,201 7,205 - 7,201 7,205 -
Trust Units
outstanding
at November 9,
2009 124,591 124,591
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Operating
Production
Total natural
gas (Bcfe)(7) 14.0 16.9 (17) 44.1 50.6 (13)
Daily average
natural gas
(MMcfe/d)(7) 152.4 183.7 (17) 161.6 185.3 (13)
Gas over
bitumen deemed
production
(MMcf/d)(5) 17.5 19.0 (8) 18.1 19.6 (8)
Average daily
(actual and
deemed -
MMcfe/d)(5) 169.9 202.7 (16) 179.7 204.9 (12)
Per Trust Unit
(cubic feet
equivalent/d/
Unit)(2) 1.40 1.81 (23) 1.55 1.85 (16)
Average natural
gas prices
($/Mcfe)
Before financial
hedging and
physical
forward sales(6) 3.41 8.93 (62) 4.26 8.64 (51)
Including
financial
hedging and
physical
forward sales(6) 7.51 8.78 (14) 7.69 8.39 (8)
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Land (thousands
of net acres)
Undeveloped land
holdings 2,009 1,967 2 2,009 1,967 2
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Drilling (wells
drilled gross/net)
(84)/ (37)/
Gas 4/3.8 25/20.5 (81) 42/35.2 67/51.8 (32)
(100)/
Dry -/- -/- -/- -/- 2/1.6 (100)
(84)/ (39)/
Total 4/3.8 25/20.5 (81) 42/35.2 69/53.4 (34)
Success
rate (%) 100/100 100/100 -/- 100/100 97/97 3/3
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(1) These are Non-GAAP measures. Please refer to "Significant Accounting
Policies and Non-GAAP Measures" included in management's discussion
and analysis.
(2) Based on weighted average Trust Units outstanding for the period.
(3) Based on Trust Units outstanding at each distribution date.
(4) Net debt includes net working capital (deficiency) before short-term
financial instrument assets and liabilities and the current portion
of convertible debentures. Total net debt includes convertible
debentures measured at principal amount. Please refer to "Significant
Accounting Policies and Non-GAAP Measures" included in management's
discussion and analysis.
(5) The deemed production volume describes all gas shut-in or denied
production pursuant to a decision report, corresponding order or
general bulletin of the Alberta Energy and Utilities Board ("AEUB")
or its successor, the Energy Resources Conservation Board ("ERCB"),
or through correspondence in relation to an AEUB ID 99-1 application.
This deemed production volume is not actual gas sales but represents
shut-in gas that is the basis of the gas over bitumen financial
solution which is received monthly from the Alberta Crown as a
reduction against other royalties payable.
(6) PET's commodity hedging strategy employs both financial forward
contracts and physical natural gas delivery contracts at fixed prices
or price collars. In calculating the Trust's natural gas price before
financial and physical hedging, PET assumes all natural gas sales
based on physical delivery fixed-price or price collar contracts
during the period were instead sold at AECO monthly index.
(7) Production amounts are based on the Trust's interest before
royalties.
For further information: Paramount Energy Operating Corp., Administrator of Paramount Energy Trust, Suite 3200, 605 - 5 Avenue SW, Calgary, Alberta, Canada, T2P 3H5, Telephone: (403) 269-4400, Fax: (403) 269-4444, Email: [email protected]; Sue Riddell Rose, President and Chief Executive Officer; Cam Sebastian, Vice President, Finance and Chief Financial Officer; Sue Showers, Investor Relations and Communications Advisor
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