Parallel Energy Trust

Parallel Energy Trust

May 09, 2013 17:30 ET

Parallel Energy Trust Announces First Quarter 2013 Financial Results; Operations Update and 2013 Outlook

CALGARY, ALBERTA--(Marketwired - May 9, 2013) - Parallel Energy Trust (TSX:PLT.UN) ("Parallel" or the "Trust") announces its financial and operating results for the three months ended March 31, 2013. Parallel's unaudited interim financial statements and accompanying Management's Discussion and Analysis ("MD&A") will be filed shortly on the SEDAR website at and on the Trust's website at

Summary of Financial and Operating Results

($000s, except were indicated) Quarter Ended March 31, 2013 Quarter Ended December 31, 2012 Quarter Ended March 31, 2012
 Natural gas (mcf/day) 14,349 14,945 8,590
 Condensate (bbls/day) 1,720 1,821 1,027
 Natural Gas Liquids (bbls/day) 2,692 2,684 1,511
 Total (@6:1) (boe/day) 6,803 6,996 3,969
Revenue, net of royalties 20,924 20,882 13,359
Funds from operations(1) 8,589 7,847 8,144
Net income (1,716 ) (84,602 ) (1,410 )
Distributions 7,906 10,920 9,019
Capital expenditures 5,472 5,359 4,755
Working capital (5,866 ) (4,346 ) (7,097 )
Bank loan (C$ equivalent of US$ debt) 156,830 148,651 62,907
Convertible debentures 63,000 63,000 -
Unitholder's equity 279,686 281,409 310,637
(1) Non-GAAP measure. Readers are referred to Advisories at the end of the press release for additional information.

First Quarter Operations and Financial Summary

During the first quarter of 2013, Parallel averaged 6,803 boe/day, which was below the Trust's production forecast for the quarter of approximately 7,200 boe/day. Production was impacted during the quarter by significant weather related issues in January and February which reduced production for those months to 6,600 boe/day, with production returning to the forecasted range in March. Parallel's production forecast includes a contingency for downtime due to winter and summer weather; however, the impact on production due to the January and February winter storms was well beyond normal expectations. Production during the first quarter was also negatively impacted by lower than forecasted drilling results as a new drilling technique was attempted on four wells with limited success. The average 30 day initial production rate from the six wells drilled and completed in the Carson area in the first quarter was 16 boe/day, as compared to the forecasted rate of 30 boe/day.

Parallel's cash flow for the first quarter was also impacted by the weather related issues, due to production being approximately 5% less than forecast, but also because operating expenses were approximately 12% greater than forecast due to the cost to manage and restart production and the cost of repairs to equipment damaged during the winter storms. Parallel also incurred approximately $1.1 million of one-time severance costs in the quarter, reducing cash flow for the quarter, but resulting in lower general and administrative costs in the future.

Operations Update

Since the end of the quarter, Parallel has drilled an additional three wells in the Carson area. Not all of the wells have been on production for 30 days, but the initial production from these wells has been much higher than those drilled in the first quarter. Based on the early indications from these wells, Parallel believes that the average 30 day initial production rate for all of the wells drilled in Carson in 2013 will be at least the expected rate of 30 boe/day. Parallel also participated as a 20% interest owner in a well drilled in the Garfield county area which was placed on production in April. Results to date have exceeded the Trust's expectations.

On May 8, 2013, Parallel closed the purchase of additional acreage in the Hugoton basin, which currently produces approximately 200 boe/day of liquids-rich natural gas. The purchase price was US$6.5 million, or approximately $30,000 per flowing boe/day. The property has upside potential through workovers of the existing wells and is located adjacent to the Trust's Carson operating area which can be managed by the Trust's existing personnel. The acquisition was made as it was available at very attractive metrics and is in Parallel's existing operating areas.

Based on field data, Parallel's production in April averaged 7,100 boe/day and has averaged over 7,300 boe/day to date in May, with the increase due primarily to the wells drilled in April coming on stream. Average production in April and May does not include the additional 200 boe/day expected from the acquisition which closed on May 8.

Capital Expenditure Program and 2013 Outlook

Having completed the recent asset acqusition, Parallel plans not to drill additional wells in the Carson area this year as the Trust intends to limit its capital expenditures for the remainder of 2013 to forecasted cash flow less distributions. The Trust will continue to perform workovers for the remainder of the year, which is anticipated to reduce the decline rate of its existing assets. For 2013, Parallel will have drilled and completed 11 wells in the Carson area. The Trust still plans to drill and complete up to an additional two gross wells (0.4 net wells) in Garfiled county, Oklahoma during the year.

Based on actual results to date and the revised capital program, Parallel's full year production is now expected to average 7,000 boe/day and its 2013 exit production is expected to be 7,100 boe/day. Cash flow for the remaining three quarters of 2013 is estimated to be $36 million based on current commodity prices and production. Capital expenditures for the same period (including the US$6.5 million acquisition) is estimated to be US$11.5 million which results in a projected basic payout ratio of 70% and an all-in payout ratio (defined as cash flow from operations divided by distributions and capital expenditures) of less than 100%. With this profile, and assuming a DRIP participation of 15%, Parallel's bank debt is expected to be reduced to less than US$150 million by year end 2013.

"While we are disappointed that the first quarter results did not meet our expectations, recent drilling results and production levels support our belief that we have a solid foundation for the rest of the year," said Rick Alexander, President and CEO of Parallel. "Our drilling results have been much better in the second quarter and we made a very accretive acquisition of 200 boe/day of liquids-rich natural gas with upside potential. While we are suspending our drilling program in the Carson and Sneed operating areas for the remainder of 2013 because of the acquisition, we will continue to execute our workover program in those areas, which has demonstrated the ability to significantly arrest our decline rates. Our all-in payout ratio is forecasted to be below 100% for the rest of the year, creating a sustainable business model and positioning us to resume our drilling program in 2014. We look forward to providing periodic updates on our operations throughout the year."


Parallel's objectives are to create stable, consistent returns for investors through the acquisition and development of conventional oil and natural gas reserves and production with unexploited low risk potential in certain regions of the United States, and to pay out a portion of available cash to holders of trust units on a monthly basis. The trust units of Parallel are listed on the Toronto Stock Exchange ("TSX") under the symbol "PLT.UN" and the debentures are listed on the TSX under the symbol "PLT.DB".

Parallel is a "mutual fund trust" under the Income Tax Act (Canada) (the "Tax Act"). The Trust will not be a "SIFT trust" (as defined in the Tax Act), provided that the Trust complies at all times with its investment restriction which precludes the Trust from holding any "non-portfolio property" (as defined in the Tax Act). Further information relating to Parallel is set out in Parallel's annual information form dated March 21, 2012, which may be obtained on the SEDAR website at under Parallel's profile.


Forward-Looking Information

This news release contains forward-looking information that involves substantial known and unknown risks and uncertainties, most of which are beyond the control of Parallel, including, without limitation, those listed under "Risk Factors" in Parallel's annual information form dated March 25, 2013 (collectively, "forward-looking information"). Forward-looking information in this news release includes, but is not limited to, Parallel's objectives and status as a mutual fund trust and not a SIFT trust and Parallel's expectations and estimates regarding current and future production rates and drilling results. Parallel cautions investors in Parallel's securities about important factors that could cause Parallel's actual results to differ materially from those projected in any forward-looking statements included in this news release. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. No assurance can be given that the expectations set out in Parallel's final prospectus or herein will prove to be correct and accordingly, prospective investors should not place undue reliance on these forward-looking statements. These statements speak only as of the date of this press release and Parallel does not assume any obligation to update or revise them to reflect new events or circumstances.

In this news release, Parallel and its subsidiaries are referred to collectively as the "Trust" or "Parallel" for purposes of convenience.

Non-GAAP Measures

This press release contains the term "funds from operations". This term is not a recognized measure under Canadian generally accepted accounting principles (GAAP). Parallel believes that in addition to net income, funds from operations is a useful supplemental measurement. Funds from operations provides an indication of the funds generated by the Trust's principal business activities and is defined as "cash from operating activities" prior to workovers and "change in non-cash working capital related to operating activities" in the Statement of Cash Flows.

Oil and Gas Measures and Definitions

This press release contains disclosure expressed as "boe" and "boe/day". All oil and natural gas equivalency volumes have been derived using the ratio of six thousand cubic feet of natural gas to one barrel of oil. Equivalency measures may be misleading, particularly if used in isolation. A conversion ratio of six thousand cubic feet of natural gas to one barrel of oil is based on an energy equivalency conversion method primarily.

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