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

Parallel Energy Trust

August 11, 2014 08:00 ET

Parallel Energy Trust Announces Second Quarter 2014 Financial Results and Operations Update

CALGARY, ALBERTA--(Marketwired - Aug. 11, 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 months ended June 30, 2014. Parallel's unaudited second quarter 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 Second Quarter 2014 Financial and Operating Results

($000s, except where indicated) Quarter ended Jun. 30, 2014 Quarter ended Mar. 31, 2014 Quarter ended Jun. 30, 2013
Production
Natural gas (mcf/day) 15,140 14,316 15,254
Condensate (bbls/day) 1,686 1,669 1,743
Natural Gas Liquids (bbls/day) 2,973 2,552 3,174
Total (@6:1) (boe/day) 7,183 6,607 7,459
Average sales price (US$ per boe) 46.33 53.71 40.18
Revenue, net of royalties 26,820 28,974 22,750
Funds from operations(1) 10,659 11,492 11,282
Net income 849 731 4,012
Distributions 8,128 8,078 7,945
Capital expenditures excluding acquisitions 5,539 5,552 3,014
Bank debt outstanding (US$) 159,000 157,700 161,800
Convertible debentures (CAD$) 63,000 63,000 63,000
Unitholder's equity 276,085 294,447 288,763
(1) Non-GAAP measure. Readers are referred to Advisories at the end of the press release for additional information.

Second Quarter & Year-to-Date 2014 Financial and Operating Highlights

  • Parallel recorded average daily production of 7,183 boe/day in the second quarter, consistent with the Trust's expectations and its full year production guidance of 7,100 - 7,300 boe/day. Production consisted of approximately 65 per cent natural gas liquids and condensate.

  • Parallel realized an average sales price (prior to hedging) of US$46.33 per boe, representing approximately 45% of the WTI benchmark price during the quarter, in line with the Trust's expectations.

  • Parallel generated funds from operations of $10.7 million ($0.20 per basic unit), which was slightly below the Trust's expectations primarily due to higher operating expenses related to the lingering effects of extreme winter weather in the first quarter of 2014. Parallel is now experiencing normal operating conditions and the Trust's operating expenses are forecasted to be in line with expectations for the remainder of the year.

  • Parallel drilled and completed five wells in the Carson operating area in the second quarter. The average 30 day initial production ("IP30") rate for the five wells was 55 boe/day, resulting in drilling efficiencies of approximately US$13,000 per flowing boe/day. In the first half of 2014, Parallel drilled and completed a total of 10 wells in the Carson operating area. The average IP30 rate for the 10 wells was 55 boe/day, which exceeds the Trust's expected IP30 rates of 35 to 40 boe/day.

  • Parallel participated as a 20% interest holder in the drilling and completion of one horizontal well in Garfield County, Oklahoma in the second quarter. To date, the well is performing in line with the Trust's expectations.

  • Parallel reported bank debt of US$159.0 million drawn against the Trust's borrowing base of US$190.0 million as at June 30, 2014. This represents an increase of approximately US$1.3 million during the second quarter. This increase was expected as the Trust's drilling program is concentrated in the first half of 2014. Parallel's bank debt is expected to decline in the second half of 2014 as minimal capital expenditures are planned for the remainder of the year. The Trust's lenders also completed their annual review of Parallel's credit facility in April 2014 and reaffirmed the Trust's borrowing base of US$190.0 million.

  • Parallel declared total distributions of $0.15 per unit during the quarter, representing $0.05 per unit per month for April, May and June.

Operations Update

In the third quarter to date, Parallel has drilled three additional wells in the Carson operating area, of which two are currently on production and the third is expected to be on production by mid-August. Although the wells have not been on production for 30 days, initial production rates indicate that they will meet or exceed the Trust's expectations. With the completion of these three wells, Parallel will have concluded its 2014 drilling program. Parallel plans to continue to perform workovers to its existing wells in the second half of 2014 to optimize its assets.

Based on field data, Parallel's average daily production for July 2014 was approximately 7,400 boe/day, which reflects a period of normal operating conditions as well as the positive results from the Trust's 2014 drilling program. The Trust remains well positioned to meet its full year production guidance of 7,100 - 7,300 boe/day.

Based on actual financial results in the first half of 2014 as well as the Trust's expected production levels for the balance of the year, Parallel is reiterating its cash flow estimate of $46 million for the full year 2014. In addition, the Trust continues to forecast that based on the actual results for the first six months of the year and assuming its original 2014 estimated commodity prices (WTI - US$95.00; NYMEX natural gas - US$4.00; and, natural gas liquids at 45 per cent of the forecasted WTI price) for the remainder of 2014, the Trust's full year basic payout ratio will be approximately 70 per cent and its all-in payout ratio (defined as distributions and capital expenditures divided by cash flow from operations) will be less than 100 per cent for the year.

President's Message

"We are very pleased with the success of our operating team in maintaining production from our operating areas in the first half of 2014. More importantly, our assets have continued to demonstrate their resiliency as our production levels fully recovered in the second quarter of 2014 to normal operating conditions. Our 2014 drilling program also yielded excellent results in the first half of the year. Thanks to the hard work of our team and our exceptional drilling results to date, we are confident that we can achieve our full year production guidance of 7,100 - 7,300 boe/day."

"In terms of sustainability, we remain on target to achieve our full year cash flow guidance of $46 million. We consider this to be a noteworthy achievement as that will represent sufficient free cash flow to fund our capital program and pay our $0.05 monthly distribution notwithstanding experiencing extremely difficult operating conditions in the first half of 2014. We look forward to providing additional updates on our production levels and financial results as the year progresses."

ABOUT PARALLEL ENERGY TRUST

Established in March 2011, Parallel Energy Trust ("Parallel" or the "Trust") is a Calgary-based distribution-paying energy income trust. Parallel's assets and operations are located in the Mid-Continent Region of the United States and its portfolio consists of mature, liquids-rich natural gas assets. The Trust's business strategy is focused on acquiring and developing long-life, conventional oil and natural gas assets.

Parallel is considered to be a "mutual fund trust" under the Income Tax Act of Canada; however, the Trust is not subject to specified investment flow through ("SIFT") trust taxes as all of its properties are held outside of Canada. Parallel's common units are traded on the Toronto Stock Exchange ("TSX") under the symbol "PLT.UN" and the Trust's debentures are traded on the TSX under the symbol "PLT.DB".

Additional information about Parallel can be found on the Trust's website at www.parallelenergy.ca or in Parallel's annual information form, available on SEDAR at www.sedar.com.

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, 2014 (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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