Parallel Energy's 2014 P&P reserves at 47.7 mmboe
Parallel Energy's 2014 P&P reserves at 47.7 mmboe
2015-03-16 08:25 ET - News Release
Mr. Rick Alexander reports
PARALLEL ENERGY TRUST ANNOUNCES FOURTH QUARTER AND YEAR-END 2014 FINANCIAL RESULTS; THE 2014 YEAR-END RESERVE REPORT; A PRODUCTION UPDATE; AND CONFIRMS ITS MARCH DISTRIBUTION
Parallel Energy Trust has released its financial and operating results for the three and 12 months ended Dec. 31, 2014, and is providing a summary of its 2014 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 2014 Financial and Operating Results ($000s, except where indicated) Quarter Ended Dec. 31, Year Ended Dec. 31, 2014 2013 2014 2013 Production Natural gas (mcf/day) 14,174 14,842 14,577 14,594 Condensate (bbls/day) 1,760 1,803 1,673 1,715 Natural Gas Liquids (bbls/day) 2,988 2,943 2,980 3,000 Total (@6:1) (boe/day) 7,110 7,220 7,083 7,147 Average sales price (US$ per boe) 33.61 44.49 44.05 42.62 Revenue, net of royalties 15,559 25,274 102,230 93,430 Funds from operations(1) 8,931 11,306 43,521 41,964 Net income (loss) (182,856) 9,912 (175,155) 10,088 Distributions 6,925 8,028 31,309 31,862 Capital expenditures excluding acquisitions 1,717 729 17,437 11,367 Bank debt outstanding (US$) 156,000 154,039 156,000 154,039 Convertible debentures (CAD$) 63,000 63,000 63,000 63,000 Unitholder's equity 117,465 286,481 117,465 286,481
Fourth Quarter 2014 Financial and Operating Highlights
Recorded average daily production of 7,110 boe/day (67% natural gas liquids and condensate), down 2% compared to production of 7,220 boe/day in the fourth quarter of 2013. Quarterly production levels were within the Trust's expectations. Generated funds from operations of $8.9 million ($0.16 per unit, basic), a 21% decrease compared to $11.3 million funds from operations in the fourth quarter of 2013. Lower funds from operations were primarily due to the decline in commodity prices in the fourth quarter of 2014. Recorded a net impairment of $185.2 million on Parallel's oil and gas assets which was solely due to lower forecasted commodity prices and an increase in the discount rate used to calculate the amount of impairment to 12%, compared to 10% in 2013. Reduced bank debt by approximately US$1.6 million. This resulted in total bank debt of US$156.0 million drawn against the Trust's borrowing base of US$190.0 million. Declared total distributions of $0.125 per unit during the quarter, representing $0.05 per unit per month for October and November, and $0.025 per unit for December.
2014 Year-End Financial and Operating Highlights
Recorded annual average daily production of 7,083 boe/day, which was consistent with Parallel's full year production guidance of 7,100 to 7,300 boe/day and Parallel's strategic goal to maintain flat year-over-year production levels in 2014. Generated funds from operations of $43.5 million ($0.80 per unit, basic), up 4% compared to $42.0 million funds from operations in 2013. Full year 2014 funds from operations was below the Trust's expectations of $46 million due to the decline in commodity prices in the fourth quarter of 2014. Drilled and completed a total of 14 gross wells (13.2 net wells) in the Texas and Oklahoma operating areas. The average 30 day initial production ("IP30") rate for the wells drilled in 2014 was 60 boe/day, which exceeded the Trust's expected IP30 rate of 35 to 40 boe/day. Parallel's 2014 drilling program resulted in drilling efficiencies of approximately US$13,000 per flowing boe/day, which exceeded the Trust's drilling efficiency expectations of US$20,000 per flowing boe/day. Completed the acquisition of additional interest in the Cargray operating area as well as the acquisition of an average 23% working interest in eight producing wells in the Garfield County, Oklahoma operating area. Declared total distributions of $0.575 per unit during the year.
2014 Year End Reserve Report
The following information is provided on the Trust's reserves as at December 31, 2014, 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 {A –} Standards of Disclosure for Oil and Gas Activities {A –} ("NI 51-101") and the Canadian Oil and Gas Evaluation Handbook ("COGEH") reserves definitions.
2014 Reserves Summary(Company interest before royalties {A –} December 31, 2014) 2014Total Oil Equivalent (mboe) % 2013Total Oil Equivalent (mboe) % Proved developed producing (PDP) 32,306 67 32,985 67 Proved undeveloped 8,366 18 9,521 19 Total proved 40,672 85 42,506 86 Probable 7,029 15 6,994 14 Total proved plus probable (P+P) 47,701100 49,500100
Net Present Value of Future Revenue(Company interest {A –} December 31, 2014 escalated price forecast)
(US$000s) 0% 5% 10% 15% PDP 588,779389,188280,534215,328 Proved undeveloped 104,827 50,076 22,535 7,705 Total proved 693,606439,264303,070223,033 Probable 149,386 82,256 49,648 32,086 Total P+P 842,992521,520352,717255,119 CAD/US Exchange Rate at Dec. 31, 2014 1.1601 1.1601 1.1601 1.1601 Total P+P (C$000s) 977,955605,015409,187295,963
Reconciliations of Changes in Reserves
The following table sets out a reconciliation of the changes in total company working interest reserve volumes as at December 31, 2014 against such reserves as at December 31, 2013.
Proved(mboe)Probable(mboe)Proved Plus Probable(mboe) Opening balance at Dec. 31, 2013 42,506 6,994 49,500 Technical revisions 1,290 (42) 1,248 Discoveries - - - Acquisitions 160 - 160 Dispositions - - - Economic factors (707) 77 (630) Production (2,577) - (2,577) Closing balance at Dec. 31, 2014 40,672 7,029 47,701
2014 Year End Reserve Report Highlights
Positive technical revisions of proved plus probable reserves of 1.2 million boe, representing a replacement of approximately 50% of volumes produced during 2014, and was due to better than expected drilling results in 2014 and lower than expected decline rates on several wells. Reserve life index of 13 years for proved developed producing reserves and 19 years for proved plus probable reserves based on the Trust's 2015 production guidance of 6,800 boe/day. Approximately 140 gross potential drilling locations. The Trust's 2015 drilling program has been postponed until a sustained recovery in commodity prices is evident; however, the Trust retains multiple years of drilling inventory.
Financial Liquidity
Parallel's credit facility has no financial covenants; however, it is subject to a borrowing base valuation of the Trust's oil and gas assets which is reviewed every six months. Parallel's borrowing base of US$190 million was last reviewed and confirmed by the Trust's lenders in October 2014. Since that time there has been a significant decline in commodity prices which is likely to result in a reduction to the amount of Parallel's borrowing base when it is reviewed in April 2015. However, Parallel anticipates that the available amount of the facility will continue to be above expected usage of the facility and that the Trust will have sufficient liquidity to fund its operations.
Production Update
Based on field data, Parallel's production results for January and February of 2015 averaged 6,600 boe/day, which was below the Trust's expectations due to several winter storms experienced during the period. Parallel is now experiencing normal weather conditions and average production has increased to a level that is consistent with the Trust's production capacity of over 7,000 boe/day. Despite the lower than expected production results to date, the Trust retains its 2015 estimated annual average daily production rate of 6,800 boe/day, which assumes that no drilling is completed during the year.
President's Message {A –} Rick Alexander, President & CEO"In 2014, we marked the second consecutive year in which our production results were in line with our expectations. This is a notable achievement considering that our production was negatively impacted by winter weather conditions in both years. We have experienced similar weather-related production challenges in the first two months of 2015; however, our operating team has done an exceptional job of mitigating downtime and subsequently restoring our production levels in a timely manner.""Our 2014 drilling program yielded the best initial production rates and drilling efficiencies in Parallel's history. This achievement reflects enhancements we have made to our drilling program, our improved ability to select drilling locations and a greater understanding of our assets. Notwithstanding the success of our 2014 drilling program, we previously announced that we have postponed our 2015 drilling program due to ongoing weaknesses in the commodity price environment. We plan to continuously assess market conditions to determine when to re-implement a drilling program.""Our management team and Board have set three main goals for 2015. First, as previously communicated in our January 2015 press release, our primary goal in 2015 is to maintain a sustainable business model amid the currently weak commodity price environment. To achieve this, we plan to continuously evaluate our business throughout the year and, based on these evaluations, we will take any necessary steps to ensure that we are operating within our available cash flow. Our second goal is reduce our bank debt in 2015. Improving our financial flexibility is an important step to ensure the long-term success of our business and this will be one of our top priorities. Finally, our third goal is to continue to look for cost saving measures to reduce our combined year-over-year U.S. dollar operating and general and administrative expenses in 2015 by 10 to 15 per cent from 2014 levels."
Distribution
Parallel confirms that its cash distribution to be paid on April 23, 2015, in respect of the period from and including March 1, 2015 to March 31, 2015, to unitholders of record on March 31, 2015 will be $0.01 per trust unit. The ex-distribution date is March 27, 2015.The payment and the amount of distribution declared in any month will continue to be subject to the discretion of the Trust's Board and will depend on the Board's assessment of Parallel's production levels, capital expenditure requirements, funds from operation, debt position and the commodity price environment.
We seek Safe Harbor.
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