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Argent Energy Trust Sees Production Fall After Manvel Sale

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   |    Wednesday,August 12,2015

Argent Energy Trust has provided its financial and operating results for the quarter ended June 30, 2015.

Operations

  • strong>Production decreased to 4,942 boe/d (64% Oil & NGL) in Q2 2015 from 5,819 boe/d (67% Oil & NGL) in Q1 2015, primarily due to the disposal of the Manvel property during the quarter and the natural decline of Eagle Ford and South Escobas wells. The capital drilling incurred in the first half of 2015 is expected to be reflected in production in the second half of 2015.
  • Oil & gas revenue was $22.1 million in Q2 2015 compared to $22.0 million in Q1 2015. This reflects the lower production volumes offset by an increase in realized prices from an average of $40.02 per boe in Q1, 2015 to $46.26 per boe in Q2, 2015.
  • The operating results for the quarter reflect the impacts of the sale of the Manvel Field, natural declines in the Eagle Ford oil wells and South Texas gas wells drilled in 2014, slightly improved oil prices over Q1, 2015 (while significantly lower than Q2, 2014), and a reduction in operating expenses (excluding workovers) from US$16.19 per boe in Q2, 2014 and US$15.57 per boe in Q1, 2015 to US$13.27 per boe in Q2, 2015. These factors cumulatively represent the main drivers of the change in revenue, netbacks and funds flow from operations from the prior quarter and the comparative quarter of 2014.
  • As at June 30, 2015, the Trust had a net working capital surplus of $3.8 million and undrawn availability under its committed credit facility of approximately $14.4 million (US$11.5 million) providing sufficient liquidity to fund its obligations.

Outlook

With the sales of the Manvel Field, Texas (Manvel) and its interest in Kansas & Oklahoma (the "Mid-Continent Assets") completed, Argent is focused on reducing operating costs for its base assets. Argent will continue to monitor its borrowing requirements and balance sheet to maintain liquidity in the low commodity price environment. Argent's credit facility has a US$80 million limit upon which US$68.5 million is drawn.

Capital expenditures for the balance of the year are expected to be approximately US$6 million, to be incurred on participation in the drilling of Parkman oil wells in Wyoming and maintenance capital. This level of capital expenditure is expected to be funded by cashflow from operations. Argent has approximately 11,800 net acres with significant Parkman potential including 29 drilling locations currently identified. Drilling results from the initial wells Argent has participated in, operated by Devon Energy, indicate results in line with expected type curves.

The 2015 annual production target is now approximately 4,500 boe/d (approximately 67% oil and NGLs), with a Q4 2015 production rate of approximately 4,300 boe/d to 4,400 boe/d.

For 2015 Argent has hedged approximately 65% of its forecast oil production at WTI oil prices of US$90/bbl equivalent or higher and has hedged approximately 65% of its forecast natural gas production at an average price of US$4.12/mmbtu, which will assist in supporting the funds flow from operations.

For 2016, to date Argent has hedged 1,000 bbl/d of oil at WTI prices averaging US$65.45/bbl and has hedged 4,000 mmbtu/d of natural gas at an average price of US$4.06/mmbtu, and Argent will continue to review its hedged position to protect future cashflow and enterprise value.

Investing and Financing

  • Realized net proceeds of $48.6 million (US$39.7 million) from the sales of the Manvel Field assets and the Mid-Continent assets, which consisted of the Oklahoma and Kansas oil & gas properties. Proceeds from asset sales were used to pay down the credit facility.
  • Renewed its bank credit facility with a borrowing base of US$80.0 million ($99.9 million) on June 30, 2015. During Q2 2015, the Trust had reduced bank credit facility outstanding to US$68.5 million ($85.6 million), from US$108.0 million ($136.8 million) at the end of Q1 2015.
  • Capital expenditures, excluding corporate acquisitions, were $6.2 million in Q2 2015, focused on the non-operated Parkman drilling program and capital workovers. This is in line with the Trust's 2015 capital budget of US$12 million.


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