Parallel Energy Trust

TSX : PLT.UN
TSX : PLT.DB


Parallel Energy Trust

March 20, 2014 08:00 ET

Parallel Energy Trust Announces Fourth Quarter and Year End 2013 Financial Results; 2013 Year End Reserve Report and Operational Update

CALGARY, ALBERTA--(Marketwired - March 20, 2014) - Parallel Energy Trust ("Parallel" or the "Trust") (TSX:PLT.UN)(TSX:PLT.DB) is pleased to announce its financial and operating results for the three and twelve months ended December 31, 2013, and to provide a summary of its 2013 year end reserve report.

Parallel's audited year end financial statements and accompanying Management's Discussion and Analysis ("MD&A") will be filed shortly on the SEDAR website at www.sedar.com and on the Trust's website at www.parallelenergy.ca.

Summary of 2013 Financial and Operating Results

($000s, except where indicated) Quarter ended
Dec. 31, 2013
Quarter ended
Dec. 31, 2012
Year Ended
Dec. 31, 2013
Year Ended
Dec. 31, 2012
Production
Natural gas (mcf/day) 14,842 14,945 14,594 12,331
Condensate (bbls/day) 1,803 1,821 1,715 1,423
Natural Gas Liquids (bbls/day) 2,943 2,684 3,000 2,448
Total (@6:1) (boe/day) 7,220 6,996 7,147 5,926
Average sales price (US$ per boe) 44.49 40.18 42.62 39.85
Revenue, net of royalties 25,274 20,882 93,430 70,441
Funds from operations(1) 11,306 7,847 41,964 35,049
Net income 9,912 (84,602) 10,088 (69,956)
Distributions 8,028 10,920 31,862 44,205
Capital expenditures excluding acquisitions 720 5,743 11,367 27,119
Bank debt outstanding (US$) 154,039 148,651 154,039 148,651
Convertible debentures (CAD$) 63,000 63,000 63,000 63,000
Unitholder's equity 286,481 281,409 286,481 281,409
(1) Non-GAAP measure. Readers are referred to Advisories at the end of the press release for additional information.

Fourth Quarter 2013 Financial and Operating Highlights

During the fourth quarter of 2013, Parallel:

  • Recorded average daily production of 7,220 boe/day (66% natural gas liquids and condensate), an improvement of 2% compared to production of 7,100 boe/day in the third quarter of 2013.
  • Realized an average sales price (prior to hedging) of US$44.49 per boe, representing approximately 46% of the average WTI price during the quarter.
  • Generated funds from operations of $11.3 million ($0.21 per unit, basic) an increase of 5% compared to $10.8 million funds from operations in the third quarter of 2013.
  • Recorded a net impairment reversal of $7.4 million on the Trust's oil and gas assets which was predominantly due to higher reserve volumes in the Sneed and Carson operating areas, partially offset by lower forecasted commodity prices.
  • Reduced bank debt by approximately US$4.2 million during the quarter. This resulted in total bank debt of US$154.0 million drawn against the Trust's borrowing base of US$190.0 million.
  • Declared total distributions of $0.15 during the quarter, representing $0.05 per unit per month for October, November and December.

2013 Year End Financial and Operating Highlights

During the full year 2013, Parallel:

  • Achieved record annual average daily production of 7,147 boe/day, which exceeded the Trust's full year guidance of 7,000 boe/day.
  • Drilled, completed and tied-in a total of 12 gross wells (11.2 net wells) in the Texas and Oklahoma operating areas and experienced a 100% success rate. The average 30 day initial production ("IP30") rate was 40 boe/day, resulting in drilling efficiencies of approximately $14,000 per flowing boe/day.
  • Completed 91 cleanouts to the Trust's existing wells and confirmed Parallel's decline rates of 8-10%.
  • Generated funds from operations of $42.0 million ($0.79 per unit, basic).
  • Completed the acquisition of the Cargray operating area which added approximately 200 boe/day of liquids-rich natural gas to the Trust's production base at accretive metrics.
  • Declared total distributions of $0.60 during the year, equal to $0.05 per unit per month.

2013 Year End Reserve Report

The following information is provided on the Trust's reserves as at December 31, 2013, 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.

2013 Reserves Summary

(Company interest before royalties - December 31, 2013)

2013 Total Oil
Equivalent
(mboe)
% 2012 Total Oil
Equivalent
(mboe)
%
Proved developed producing (PDP) 32,985 67 30,307 64
Proved undeveloped 9,521 19 9,397 20
Total proved 42,506 86 39,703 84
Probable 6,994 14 7,507 16
Total proved plus probable (P+P) 49,500 100 47,210 100

Net Present Value of Future Revenue

(Company interest - December 31, 2013 escalated price forecast)

Present value of cash flows before tax (US$000s) 2013 10%
Discount Rate
% 2012 10%
Discount Rate
%
PDP $ 373,856 76 $ 366,334 74
Proved undeveloped 50,981 10 62,279 12
Total proved 424,837 86 428,614 86
Probable 66,437 14 71,885 14
P+P $ 491,274 100 $ 500,500 100
CAD/US Exchange Rate at Dec. 31 $ 1.0636 $ 0.9949
P+P (C$000s) $ 522,519 $ 497,947

2013 Year End Reserve Report Highlights

  • Increased proved developed producing reserves by 9% and total proved plus probable reserves by 5% between December 31, 2012 and December 31, 2013. The increase was primarily due to above forecasted drilling results in 2013 and the Trust's assets experiencing a lower decline rate than previously forecast.
  • Reported a reserve life index of 13 years for PDP reserves and 19 years for P+P reserves based on the mid-point of the Trust's 2014 production guidance of 7,200 boe/day.
  • Reported a total of over 150 gross potential drilling locations after having drilled 12 gross wells in 2013. At the 2014 estimated drilling pace of 14 gross wells, this represents over 10 years of drilling locations.

Operational Update

Many oil and gas producing areas in the United States experienced extreme winter weather conditions between November 2013 and March 2014. During these winter months, the Trust's operating areas in Northern Texas experienced over 30 days in which the temperature fell below 20 degrees Fahrenheit (-7 degrees Celsius), which is the highest number of days in almost 20 years and double the average during that period. At temperatures below 20 degrees Fahrenheit, oil and gas operating areas in certain regions of the United States tend to experience equipment freezing, facility and transportation disruptions, power outages and other operating challenges which can materially impact oil and gas production levels. The Trust's operating areas were not immune to these challenges and, as a result, the Trust has recorded average daily production to date in 2014 of approximately 6,500 boe/day based on field data, which exceeded the Trust's three to five per cent contingency for downtime in the first quarter. However, weather conditions in Parallel's operating areas have begun to normalize and the Trust's production is beginning to return to expected levels. Despite the year-to-date performance, Parallel retains its full year production guidance of 7,100 to 7,300 boe/day in 2014.

To date in 2014, Parallel has drilled, completed and tied-in a total of four wells in the Carson operating area. Not all of the wells have been on production for 30 days; however, initial results indicate that the wells are achieving, on average, production levels that at least meet or exceed Parallel's 2014 initial production rate guidance of 35 to 40 boe/day.

President's Message - Rick Alexander, President & CEO

"In 2013 we implemented several changes to stabilize our operations and better manage our business. These changes led to record annual production and cash flow which significantly improved our ability to manage a sustainable business model that supports our $0.05 monthly distribution. Building on this momentum, we set what we believe are realistic production and cash flow targets for 2014 and, while we have experienced challenging operating conditions to date, we remain confident that we can achieve our full year guidance."

"Our 2013 reserve report confirmed our analysis that our assets have a lower decline rate than previously believed. In 2013, we increased total reserves by five per cent and replaced nearly double our 2013 total production, which reflects our lower decline rates and improved drilling results during the year. Our total reserve life index also increased to 13 years for proved developed producing reserves and 19 years for total proved plus probable reserves, which are at or near the highest in the industry and ideal for a distribution-paying energy income trust."

"Our success over the past year is largely due to the hard work and dedication of our U.S. operating team. Thanks to their efforts, we are well positioned to execute our 2014 drilling and workover programs and we expect to begin to realize the benefits of these programs in the coming months. We look forward to providing updates on our 2014 drilling program with the release of our first quarter financial and operating results in early-May."

ABOUT PARALLEL ENERGY TRUST

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 www.sedar.com under Parallel's profile.

ADVISORIES

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.

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