Enduro Royalty Trust (NYSE: NDRO) (the “Trust”) today announced its 2014
capital program, including development opportunities in the Wolfcamp
play of west Texas, and reported its monthly cash distribution to be
paid in February 2014.
Recent Activity
In December 2013, Enduro Resource Partners LLC (“Enduro”), the sponsor
of the Trust, received drilling proposals from Pioneer Natural Resources
(“Pioneer”) for 3 gross (0.8 net) wells in the Wolfcamp play in the
Midland Basin. The wells have been drilled and the completions are
scheduled in late January. The wells are anticipated to begin production
in February 2014.
2014 Capital Program
Enduro has informed the Trust that total capital expenditures included
in 2014 distributions are expected to range from $27 to $30 million
attributable to the properties in which the Trust owns an interest, or
$22 to $24 million net to the Trust’s 80% net profits interest. The 2014
capital program is expected to be focused on Wolfcamp Permian Basin oil
projects in the Midland Basin, with $18 million of the capital program
expected to be allocated to drilling projects operated by Pioneer in
Reagan County and Irion County, Texas. The remaining $9 to $11 million
of capital is anticipated to be spent on workover and development
opportunities across several Permian Basin and north Louisiana
properties. The increase in expected capital during 2014 is based on
additional information obtained by Enduro from the operator of the
Wolfcamp projects.
During periods included in 2014 distributions, Enduro will participate
in several wells drilled by Pioneer in the Wolfcamp play in the Midland
Basin. Development began in the fourth quarter of 2013 and through 2014,
Enduro anticipates 25 locations to be drilled on the properties in which
the Trust has an interest, where Enduro owns working interests ranging
from 6.25% to 25%. Enduro estimates that the projects in the Wolfcamp
will provide internal rates of return of approximately of 50% at $90 per
Bbl crude oil and $4 per Mcf natural gas prices. Capital costs per well
are expected to be $7.2 million gross with estimated ultimate recovery
of 525 MBOE. This development is anticipated to increase the Trust’s oil
production in 2014.
Enduro owns 4,800 gross (1,200 net) acres prospective for the Wolfcamp
in this area of the Midland Basin operated by Pioneer. Enduro estimates
that the area in which the Trust has an interest could include up to 80
locations with full development of the Wolfcamp B reservoir, which is
the zone currently being exploited by Pioneer on this acreage.
Additional potential could be realized and additional capital deployed
if additional Wolfcamp zones are prospective on the acreage.
Monthly Cash Distribution
A cash distribution of $0.117935 per unit will be paid on February 14,
2014 to the Trust’s unitholders of record on January 31, 2014. The
distribution primarily represents oil production during the month of
October 2013 and natural gas production during September 2013.
The following table displays underlying oil and natural gas sales
volumes and average prices attributable to the current and prior month
distributions.
|
|
Underlying Sales Volumes
|
|
Average Price
|
|
|
Oil
(Bbls)
|
|
Natural Gas
(Mcf)
|
|
Oil
(per Bbl)
|
|
Natural Gas
(per Mcf)
|
Current Month
|
|
75,378
|
|
507,407
|
|
$
|
99.76
|
|
$
|
3.82
|
Prior Month
|
|
69,045
|
|
541,653
|
|
$
|
105.79
|
|
$
|
3.79
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures for the properties underlying the Trust during the
period were approximately $1.8 million, which relates to expenses
incurred during November 2013. Capital costs of $1.1 million related to
the 3 Wolfcamp wells spud in 2013 are included in the current month’s
distribution.
The following projects constitute the capital expenditures of $1.8
million included in this month’s distribution:
Well Name
|
|
Operator
|
|
Reservoir
|
|
County & State
|
|
Incurred Capital
(in millions)
|
Rocker B 42 H
|
|
Pioneer
|
|
Wolfcamp
|
|
Reagan, TX
|
|
$
|
0.4
|
Rocker B 40 H
|
|
Pioneer
|
|
Wolfcamp
|
|
Reagan, TX
|
|
$
|
0.4
|
Rocker B 41 H
|
|
Pioneer
|
|
Wolfcamp
|
|
Reagan, TX
|
|
$
|
0.3
|
Arrowhead Grayburg Unit 126
|
|
ExxonMobil
|
|
Grayburg – San Andres
|
|
Lea, NM
|
|
$
|
0.2
|
South Foster Unit
|
|
Occidental
|
|
Grayburg – San Andres
|
|
Ector, TX
|
|
$
|
0.2
|
Other Projects
|
|
|
|
$
|
0.3
|
|
|
|
|
|
|
Proceeds from the settlement of hedge contracts for the properties
underlying the Trust were approximately $0.6 million, which primarily
related to settlements of November 2013 natural gas hedges.
About Enduro Royalty Trust
Enduro Royalty Trust is a Delaware statutory trust formed by Enduro
Resource Partners to own a net profits interest representing the right
to receive 80% of the net profits from the sale of oil and natural gas
production from certain of Enduro Resource Partners’ properties in the
states of Texas, Louisiana and New Mexico. As described in the Trust’s
filings with the Securities and Exchange Commission, the amount of the
periodic distributions is expected to fluctuate, depending on the
proceeds received by the Trust as a result of actual production volumes,
oil and gas prices and the amount and timing of capital expenditures and
the Trust’s administrative expenses, among other factors. Future
distributions are expected to be made on a monthly basis. For additional
information on the Trust, please visit www.enduroroyaltytrust.com.
Forward-Looking Statements and Cautionary Statements
This press release contains statements that are “forward-looking
statements” within the meaning of Section 21E of the Securities Exchange
Act of 1934, as amended. All statements contained in this press release,
other than statements of historical facts, are “forward-looking
statements” for purposes of these provisions. These forward-looking
statements include the amount and date of any anticipated distribution
to unitholders, estimates of capital expenditures, drilling activity and
potential results of any such drilling activity (including estimates of
the gross estimated ultimate recovery (“EUR”) estimated by Enduro
relating to the anticipated drilling in the Wolfcamp play and of
internal rates of return relating to the investment in the Wolfcamp play
as more fully described below, and Enduro’s expectations that any such
drilling will result in increases to the oil production attributable to
the Trust’s interest in 2014). The anticipated distribution is based, in
part, on the amount of cash received or expected to be received by the
Trust from Enduro Resource Partners with respect to the relevant period.
Any differences in actual cash receipts by the Trust could affect this
distributable amount.
Enduro has provided information disclosed in this press release
regarding the EUR of volumes of reserves potentially recoverable through
additional drilling by Pioneer in the Wolfcamp play in Reagan County and
Irion County, Texas. The SEC prohibits disclosure of resources that do
not constitute proved, probable or possible reserves (in each case, as
defined by the SEC) in filings with the SEC. Consequently, the SEC’s
rules prohibit the Trust from including these estimates of the EUR in
filings with the SEC. However, the Trust is disclosing Enduro’s
estimates of the EUR relating to the Wolfcamp in this press release
because Enduro has advised the Trust that it believes the estimates to
be highly reliable and that, without this information, investors would
be unable to understand Enduro’s decision to participate in the Wolfcamp
drilling projects.
Estimates of the EUR are by their nature more speculative than estimates
of proved, probable or possible reserves and accordingly are subject to
substantially greater risk of being actually realized. These EUR
estimates have not been risk-adjusted. Actual locations drilled and
quantities that may be ultimately recovered attributable to Enduro’s
interest and the Trust’s interest may differ substantially from Enduro’s
estimates. Enduro is under no contractual obligation to the Trust to
drill any or all of the drilling locations contemplated by these
estimates in this press release. Factors affecting ultimate recovery
include the scope of the drilling program, which may be directly
affected by the availability of capital to the working interest owners,
drilling and production costs, the availability and costs of drilling
and completion services and equipment, lease expirations, regulatory
approval, and by actual drilling results, whether of the wells
contemplated by this press release or by other wells drilled in the
area, whether by Pioneer or other operators. Estimates of the EUR may
change significantly as development of the area provides additional data
or other relevant factors change. Similarly, estimated internal rates of
return are highly sensitive to the assumptions made in the estimates.
Investors are cautioned that actual results are likely to vary from
estimates, that actual results may be materially different from
estimates, and that Enduro’s actual internal rates of return on invested
capital, including capital expenditures relating to the Wolfcamp, may be
materially less than its estimates.
The EUR is Enduro’s estimate based on Enduro’s evaluation of results in
the area and consultation with independent engineers. The EUR is a
hypothetical recovery that may occur if assumptions and estimates
regarding recoverable hydrocarbons, recovery factor and costs prove
correct. Accordingly, such estimates may change significantly as results
from the initial wells are evaluated. The EUR does not constitute
reserves; rather it is an estimate of contingent resources which the SEC
has determined are too speculative to include in SEC filings.
Other important factors that could cause actual results to differ
materially from the estimates and expectations included in this press
release include expenses, capital investments, timing of production from
new wells, production from the underlying properties of the Trust and
reserves for anticipated future expenses. Statements made in this press
release are qualified by the cautionary statements made in this press
release and by all of the cautionary statements and risks described in
the Trust’s Annual Report on Form 10-K for the year ended December 31,
2012, filed with the SEC on March 18, 2013 (the “2012 Form 10-K”). None
of Enduro Resource Partners, the Trust or the Trustee intends, and none
of them assumes any obligation, to update any of the statements included
in this press release. An investment in units issued by Enduro Royalty
Trust is subject to the risks described in the Trust’s filings with the
SEC, including the risks described in the Trust’s 2012 Form 10-K. The
Trust’s quarterly and other filed reports are or will be available over
the Internet at the SEC’s website at http://www.sec.gov.
Copyright Business Wire 2014