Parallel Energy Trust
TSX : PLT.UN
TSX : PLT.DB

Parallel Energy Trust

November 26, 2013 08:00 ET

Parallel Energy Trust Announces its 2014 Capital Plans and Production and Cash Flow Guidance

CALGARY, ALBERTA--(Marketwired - Nov. 26, 2013) - Parallel Energy Trust (TSX:PLT.UN)(TSX:PLT.DB) ("Parallel" or the "Trust") today announced its capital expenditure plans, and production and cash flow guidance for 2014.

Capital Expenditure Plans and Production Guidance

Parallel's capital expenditure budget for 2014 is estimated to be approximately US$13.5 million, which is expected to result in annual average daily production of 7,100 to 7,300 boe/day. The principal drilling and operations assumptions underlying this guidance are that Parallel will:

  • drill, complete and tie-in up to 14 gross wells for a total cost of US$9.5 million. The wells are currently expected to be single lateral wells completed using Parallel's proven drilling techniques. The average 30 day initial production rate is anticipated to be in the range of 35 to 40 boe/day per well, resulting in capital efficiencies of less than $20,000 per flowing boe/day;
  • spend approximately US$2 million on workovers, consistent with the number of workovers Parallel completed in 2013; and,
  • purchase additional equipment and perform planned compressor overhauls in the Carson operating area for a total cost of US$2 million.

Based on the midpoint of the Trust's 2014 production guidance, Parallel will have increased the gross production of its asset base by more than 25 per cent since the Trust's initial public offering and increased Parallel's net production by more than 50 per cent on a production per unit basis.

Cash Flow Guidance

Based on the above production guidance and other assumptions described below, Parallel estimates cash flow of approximately $46 million for 2014. This guidance is based on estimated commodity prices for 2014 of US$95.00 per bbl of WTI, US$4.00 per mcf of NYMEX natural gas and an average natural gas liquids price of 45 per cent of the WTI price. This cash flow guidance also assumes an estimated exchange rate of $1.04 Canadian dollar to U.S. dollar. Parallel's commodity mix and all other costs are expected to be consistent with the Trust's 2013 results.

Payout Ratios

Based on the Trust's 2014 capital plans, its production and cash flow guidance, and estimated commodity prices, Parallel's basic payout ratio (calculated as declared distributions of $0.05 per unit per month divided by funds from operations) is expected to be approximately 70 per cent in 2014. The Trust's total payout ratio (calculated as declared distributions of $0.05 per unit per month plus capital expenditures divided by funds from operations) is expected to be less than 100 per cent in 2014. As a result, Parallel continues to view its current distribution as being sustainable.

Parallel also has a distribution reinvestment program and Premium DRIP™ program in place. The Trust expects that the average annual participation rate in its distribution reinvestment programs will be approximately 15 per cent in 2014.

Bank Debt

As previously announced, Parallel's existing bank facility of US$190 million was reconfirmed by the Trust's lenders during the semi-annual review in October 2013. The facility was drawn at approximately US$157 million as of October 31, 2013, which results in US$33 million of availability under the bank facility. Based on the Trust's 2014 capital plans, and production and cash flow guidance, Parallel estimates it will continue to reduce its bank debt in 2014 through the use of excess cash flow and moderate participation in the distribution reinvestment programs.

The Trust currently has $63 million of convertible debentures due on June 30, 2017 and the Trust recognizes that it will require the financial flexibility to refinance these debentures at maturity. To provide this financial flexibility, the Trust's long term debt reduction goal is to have sufficient availability under its bank facility to pay off the convertible debentures prior to the maturity date. Therefore, given that Parallel has over three and a half years to meet its debt reduction goal and that the Trust has a unique asset base (which is comprised of very low decline fields in the 8 to 10 per cent range and capital efficiencies of approximately $20,000 per flowing boe/day) the Trust believes that it has a number of alternatives available to meet its goal.

President's Message

"In 2013 we restructured Parallel from the top-down and introduced a new corporate strategy designed to improve our competitive position as a distribution-paying income trust. This strategy initially included three high-level goals. Our first goal was to provide our investors with a sustainable monthly distribution that, when combined with our capital expenditure program, would be fully funded within our available cash flow. Our second goal was to improve our operations and stabilize our full year average daily production levels above 7,000 barrels per day. Our third goal was to reduce our current level of bank debt and improve our financial flexibility," explains Rick Alexander, President and CEO of Parallel. "Throughout 2013 we have made significant progress on all three of these goals and I am pleased to say that we are now seeing the positive results of our corporate strategy. After reviewing our progress in 2013 and looking at our long term goals, Parallel's Board and senior management continue to endorse this strategy."

"Our 2014 capital plans and production guidance are intended to further improve our operating position and enhance our production reliability. We are also targeting a modest increase to our full year average daily production levels at industry leading metrics. On the operations front, our primary goal is to continue to mitigate the risks associated with third-party disruptions and weather-related incidents. Furthermore, we have recently demonstrated that we can operate while undertaking a disciplined capital program and still increase our base level of production. This has resulted in realized debt reduction in the second half of 2013 and we believe we can continue to reduce our total outstanding debt in 2014. Finally, based on our 2014 capital plans and guidance, we are estimating a full year total payout ratio of less than 100 per cent and, as a result, Parallel's Board believes that the current distribution level of $0.05 per unit per month remains both sustainable and appropriate."

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 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.

Contact Information

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