Parallel Energy Trust

Parallel Energy Trust

March 20, 2013 19:01 ET

Parallel Energy Trust Announces Fourth Quarter 2012 Financial Results; 2012 Reserve Report; Operational Update; and Changes in Senior Management

CALGARY, ALBERTA--(Marketwire - March 20, 2013) -


Parallel Energy Trust (TSX:PLT.UN) ("Parallel" or the "Trust") is pleased to announce its financial and operating results for the three and twelve months ended December 31, 2012, and to provide a summary of its 2012 year-end reserve report.

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 2012 Financial and Operating Results

($000s, except were indicated) Quarter ended December 31, 2012 Quarter ended December 31, 2011 Year Ended December 31, 2012 Year Ended December 31, 2011
 Natural gas (mcf/day) 14,945 8,856 12,331 8,601
 Condensate (bbls/day) 1,821 955 1,423 817
 Natural Gas Liquids (bbls/day) 2,684 1,569 2,448 1,538
 Total (@6:1) (boe/day) 6,996 4,001 5,926 3,789
Revenue, net of royalties 20,882 13,979 70,441 37,344
Funds from operations(1) 7,847 7,731 35,049 23,185
Net income (84,602 ) (50,918 ) (69,956 ) (39,768 )
Distributions 10,920 8,867 44,205 24,599
Capital expenditures 5,359 4,474 24,862 12,153
Working capital (4,346 ) (3,530 ) (4,346 ) (3,530 )
Bank loan (C$ equivalent of US$ debt) 148,651 62,991 148,651 62,991
Convertible Debentures 63,000 - 63,000 -
Unitholder's equity 281,409 320,977 281,409 320,977

(1) Non-GAAP measure. Readers are referred to Advisories at the end of the press release for additional information.

Fourth Quarter 2012 Financial and Operating Highlights

  • Quarterly average production volumes were 6,996 boe/day (64% natural gas liquids and condensate). Production during the quarter was impacted by the previously announced transportation outages in the Carson operating area due to the curtailment of a third party pipeline. This issue was resolved at the end of October 2012.
  • Weighted average sales price was US$40.18 per boe (approximately 46% of the WTI benchmark price), an improvement of 5% over US$38.37 per boe (approximately 42% of the WTI benchmark price) realized in the third quarter 2012.
  • The Trust realized a write down of $81.7 million on its oil and gas assets which was predominantly due to lower year-over-year forecasted natural gas liquids and natural gas prices.
  • Drilled and completed seven wells in the Carson operating area with all wells currently on production. The average gross first month production ("IP30") rate for the wells was 60 boe/day per well, double the Trust's expected IP30 rate of 30 boe/day per well for 2013, resulting in capital efficiencies of $10,000 per flowing boe/day.

2012 Year-End Operating Highlights

  • Completed the acquisition of the remaining 41% interest in the Carson and Sneed operating areas.
  • Completed the acquisition of an operating area in Texas, known as SE Roberts, located within close proximity to the Carson and Sneed operating areas. SE Roberts produces approximately 200 boe/day of natural gas liquids and natural gas with some oil.
  • Became the operator of the Trust's Texas operating areas in Carson, Sneed and SE Roberts with a professional team that has extensive experience managing Mid-Continent U.S. assets.
  • Drilled, completed and tied-in a total of 38 gross wells (34 net wells) in the Texas operating areas which experienced a 100% success rate in finding hydrocarbons. The average cost of these wells was approximately $600,000 per well with an average IP30 rate of 30 boe/day, resulting in capital efficiencies of $20,000 per flowing boe/day.
  • Built and tied-in a pipeline in the Carson operating area to a back-up processing plant to improve future production reliability and installed additional cooling equipment to support consistent condensate yields throughout the year.
  • Purchased a 20% working interest in a Mississippian Lime play in Garfield County, Oklahoma that targets oil production from an established reservoir.
  • Observed corporate decline rates of less than 10% during the year.

2012 Year-End Reserve Report

The following information is provided on the Trust's reserves as at December 31, 2012, as evaluated by the Trust's independent reserves engineering firm, Ryder Scott. The evaluation of Parallel's petroleum and natural gas reserves was conducted pursuant to National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities - ("NI 51-101") and the Canadian Oil and Gas Evaluation Handbook ("COGEH") reserves definitions.

2012 Reserves Summary

(Company interest before royalties - December 31, 2012)

Condensate & NGLs (mbbl) Natural Gas
Total Oil Equivalent (mboe)
Proved developed producing (PDP) 20,178 60,783 30,309
Proved undeveloped 6,131 18,950 9,289
 Total proved 26,382 79,940 39,705
Probable 4,944 15,367 7,505
 Total proved plus probable (P+P) 31,326 95,307 47,211

Net Present Value of Future Revenue

(Company interest - December 31, 2012 escalated price forecast)

Present value of cash flows before tax (US$000s) 2012
10% Discount Rate
Proved developed producing (PDP) $ 366,334
Proved undeveloped 61,481
 Total proved 428,614
Probable 71,885
 Total proved plus probable (P+P) $ 500,500

2012 Year-End Reserve Report Highlights

  • Reserve life index of 10 years for PDP reserves and 18 years for P+P reserves based on current estimated production of 7,200 boe/day.
  • Total of 162 gross potential drilling locations after having drilled 38 gross wells in 2012. At the current estimated drilling pace of up to 23 wells for 2013, this represents over seven years of drilling potential.

Bank Facility

Parallel's lending syndicate recently reviewed the Trust's revolving credit facility and, based on the 2012 year-end reserve report, increased the Trust's borrowing base from US$175 million to US$190 million. The Trust has no current intentions to utilize this additional credit capacity and continues to project a reduction in bank debt during 2013 based on its current cash flow forecast.

Operational Update

Based on field data, Parallel's production for first two months of 2013 was impacted by severe winter storms in Texas and averaged 6,600 boe/day. Production volumes have since recovered in March and are now averaging 7,200 boe/day, consistent with the Trust's production guidance for 2013. Lower than forecasted production volumes in the first part of the year have been offset by improved natural gas liquids and condensate prices; therefore, there has been no material change to the Trust's 2013 cash flow forecast.

Changes in Senior Management

Parallel's Board of Directors commenced a search for a new President and CEO in December 2012. In the interim, the Board appointed Richard "Rick" Alexander, a director of the Trust since its inception, as the Interim President and CEO. Today, the Board is pleased to announce the appointment of Rick Alexander as President and Chief Executive Officer of Parallel Energy Trust on a permanent basis effective March 20, 2013. Mr. Alexander has over 35 years of experience in the oil and gas industry, and most recently served as President and Chief Operating Officer of AltaGas Ltd.

"I am very pleased that Rick Alexander has agreed to become President and CEO of the Trust," said Henry Sykes, Executive Chairman of the Board of Parallel Energy Trust. "We had a number of impressive candidates for the position; however, when Rick agreed to take on this responsibility we knew he was the right fit for the job. Rick's experience on both the financial and operation sides of the energy business, his intimate knowledge of the Trust and its operations, and his ability to hit the ground running, was a package that couldn't be duplicated. I want to thank Rick for his confidence in the Trust. On behalf of the Board, we look forward to working with Rick to create value for our unitholders."

The Trust also announces a reallocation of responsibilities within its executive ranks following Mr. Alexander's appointment. Effective March 31, 2013, Don Cameron, Vice-President, Geosciences, and Don Van Tetering, Vice-President, Operations, both based in Calgary, Alberta, will be leaving the Trust. The responsibilities of Messr's Cameron and Van Tetering will be allocated among those who report to Tony Swindell, Vice-President, Mid-Continent, based in Tulsa, Oklahoma. "We want to thank both Don Cameron and Don Van Tetering for their contributions to the Trust since its inception," said Rick Alexander, President and CEO of the Trust. "We wish them all the best in their future endeavours."

President's Message - Rick Alexander, President & CEO

"I am very pleased to have the opportunity to lead Parallel Energy Trust as we begin to execute our business plan in 2013. To recap our previous year of operations, in 2012 we delivered on our business objective to grow the base level of our assets and operations by acquiring the remaining 41% of our assets in the Carson and Sneed operating areas in Texas. We also completed an acquisition in Roberts County, Texas and purchased a 20% working interest in a Mississippian Lime play in Oklahoma that targets an established reservoir. These acquisitions demonstrated our ability to strengthen our reserve base and production volumes, and positioned us as the sole operator of our assets in Texas."

"We further enhanced our infrastructure in 2012 by building a second pipeline in the Carson operating area to improve our production reliability and by installing additional cooling equipment to maintain condensate yields during the hotter summer months."

"We are pleased to report that based on a review of our 2012 year-end reserve report, our total number of proven and probable drilling locations remains strong at 162 locations. This represents seven years of drilling potential based on our current drilling pace of up to 23 wells per year. Our total reserve life index is also strong at 10 years for proved developed producing reserves and 18 years for total proved plus probable reserves based on our current production rates of 7,200 boe/day. In addition, our lending syndicate recently increased our borrowing base from US$175 million to US$190 million, which validates the underlying value of our assets."

"We are well positioned to deliver on our business model in 2013. From an investor's perspective, if you consider our long-life reserve summary, our industry-leading low decline rates and our top quartile capital efficiencies it results in an ideal income trust business model that allows us to pay out a higher rate of distributions to our investors while requiring less capital re-investment to sustain our production levels. As the total cash amount of our distribution payments and capital budget for 2013 is forecasted to be below 100% of our estimated cash flow, we believe we have one of the most sustainable business models among distribution-paying oil and gas producers in North America."


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 21, 2012 (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.

Contact Information

  • Parallel Energy Trust
    Curtis Pelletier
    Manager, Investor Relations
    403-781-7888 or Toll Free: 1-855-781-7888