CALGARY, ALBERTA--(Marketwire - Dec. 5, 2012) -
NOT FOR DISTRIBUTION IN THE UNITED STATES OR OVER UNITED STATES WIRE SERVICES
Argent Energy Trust ("Argent" or the "Trust") (TSX:AET.UN) is pleased to announce that Argent Energy (US) Holdings, a wholly-owned subsidiary of the Trust, has entered into a binding agreement with an effective date of October 1, 2012, (the "PSA") to acquire producing petroleum properties, including in the Newton, Livingston and Double AA Wells North fields in East Texas (the "Acquired Assets") from Wapiti Oil & Gas, L.L.C. and Wapiti Energy, LLC, for a purchase price of US$120 million, subject to closing adjustments (the "Acquisition"). The Acquired Assets are principally oil properties covering approximately 14,990 net acres of land with total estimated gross proved plus probable reserves of 8.7 million barrels of oil equivalent ("boe") as at March 31, 2012. Working interest production from the Acquired Assets in September 2012 was approximately 1,705 boe per day ("boe/d"), of which approximately 78% was from oil and NGLs, which Argent expects to maintain through the remainder of 2012 and into 2013 with very minimal operational activity or investment. Oil represents approximately 69% and liquids (oil and NGLs) represent approximately 77% of the total proved plus probable reserve value of the Acquired Assets and natural gas represents the remaining 23%. Pricing on produced oil from the Acquired Assets is linked to the Louisiana Light Sweet crude oil benchmark, which trades at a premium to West Texas Intermediate crude oil and more closely tracks Brent crude oil benchmark pricing.
This Acquisition adds a significant oil and NGL production and reserves component to the overall asset base of Argent, which is currently outperforming our previously forecast 2012 exit production rate of 3,500 to 3,600 boe per day by more than 10%, as November 30, 2012 production exceeded 4,000 boe per day. The Acquisition is aligned with Argent's strategy of acquiring, exploiting and developing sustainable crude oil and natural gas reserves in established producing basins. Argent believes that, due to the expected increase in U.S. capital gains tax rates in 2013, there has been an increase in U.S. based oil and gas assets for sale in the fourth quarter of 2012. Argent's ability to transact quickly and opportunistically allowed the Trust to complete this Acquisition, which is highly accretive to all key value metrics including Argent's production, reserves and cash flow per unit. As a result, this Acquisition further strengthens the Trust's solid distribution payout and sustainability ratios now and going forward.
In conjunction with the Acquisition, the Trust is also pleased to announce that it has entered into an agreement with a syndicate of underwriters co-led by Scotiabank, CIBC and RBC Capital Markets, pursuant to which it will issue 10,755,000 trust units of the Trust ("Trust Units") on a bought deal basis for gross proceeds of C$100,021,500 (the "Offering"). The Acquisition will be funded from the net proceeds from the Offering and an advance under Argent's Credit Facility (as defined below). Closing of the Acquisition and the Offering are expected to occur on December 28, 2012.
Highlights of the Acquisition
The Acquired Assets are expected to generate long term sustainable cash flow, which will positively contribute to the strong and growing near-term cash flow of Argent's Austin Chalk and Eagle Ford development program.
Key Acquisition attributes:
- Working interest production of 1,705 boe/d (64% oil, 78% oil and NGLs)
- Approximately 97% of the Acquired Assets will be operated by Argent
- Estimated gross proved plus probable reserves of 8.7 million boe (66% oil by volume, 69% oil by value (based on net present value of future net revenue, discounted at 10%)) - evaluated by GLJ Petroleum Consultants Ltd. ("GLJ")
- Reserve Life Index ("RLI") of approximately 13 years (proved plus probable reserves)
- Acquisition costs are US$72,507 per boe/d and US$13.77 per boe on a proved plus probable basis
Acquisition's highly accretive metrics include:
- Accretive to 2013 cash flow and production per unit by approximately 21%
- Accretive to reserves per unit by approximately 5%
- Lowers 2013 payout ratio and sustainability ratio by approximately 18% and 15% respectively
In conjunction with the Acquisition, Argent has entered into an agreement with a syndicate of underwriters (the "Underwriters") co-led by Scotiabank, CIBC and RBC Capital Markets, pursuant to which the Underwriters have agreed to purchase, on a bought deal basis, 10,755,000 Trust Units at a price of C$9.30 per Trust Unit, for aggregate gross proceeds of $100,021,500. In addition, the Underwriters have been granted an over-allotment option, exercisable for a period of 30 days from closing of the Offering, to purchase up to 1,613,250 additional Trust Units at a price of C$9.30 per Trust Unit. If the over-allotment option is fully exercised, gross proceeds from the Offering will be approximately C$115,024,725. The Offering is expected to close on December 28, 2012 and is subject to certain conditions including, but not limited to, the receipt of all necessary approvals, including the approval of the Toronto Stock Exchange and the securities regulatory authorities.
Argent's Credit Facility
The Acquisition will more than double the Trust's borrowing base capacity under its Credit Facility (the "Credit Facility") from $45 million to $95 million. The expected amendment to increase the borrowing base of the Credit Facility is subject to certain conditions that are typical of transactions of this nature, including the closing of the Acquisition. Currently, the Trust has $15 million drawn under the Credit Facility. Argent expects to use the net proceeds from the Offering (assuming the over-allotment option has not been exercised), a US$5 million deposit paid on signing the PSA and US$20 million drawn from its existing Credit Facility to fund the purchase price of the Acquired Assets. After the closing of the Acquisition, Argent expects to have approximately US$55 million of undrawn capacity available under the Credit Facility.
About Argent Energy Trust
Argent is a mutual fund trust under the Income Tax Act (Canada) (the "Tax Act"). Argent's objective is to create stable, consistent returns for investors through the acquisition and development of oil and natural gas reserves and production with low risk exploitation potential, located primarily in the United States. Material information pertaining to Argent Energy Trust may be found on www.sedar.com or www.argentenergytrust.com.
Argent's units are traded on the Toronto Stock Exchange under the symbol AET.UN.
Forward Looking Statements
This press release includes forward-looking information within the meaning of applicable Canadian and United States securities legislation. All statements, other than statements of historical facts, that address activities, circumstances, events, outcomes and other matters that Argent budgets, forecasts, plans, projects, estimates, expects, believes, assumes or anticipates (and other similar expressions) will, should or may occur in the future, are considered forward-looking information. In particular, forward-looking information contained in this press release includes, but is not limited to, information and statements concerning the Offering, the Acquisition and the Credit Facility, including the funding for the Acquisition and that both the Acquisition and the Offering will close as expected; the Units to be issued pursuant to the Offering; regulatory and other approvals required for the Offering and the Acquisition; the use of proceeds from the Offering; the availability and the increase in the borrowing base under the Credit Facility; the performance and production characteristics of the Acquired Assets; that the Acquired Assets will be able to generate long term, sustainable cash flows; the key metrics of the Acquisition; the financial and operational benefits of the Acquisition to the Trust and the expected impact of the Acquisition on the Trust's commodity profile, reserves profile, payout and sustainability ratio and to production, reserves and cash flow from operations per Trust Unit.
In addition, statements relating to "reserves" are by their nature forward-looking information, as they involve the implied assessment, based on certain estimates and assumptions that the reserves described can be profitably produced in the future. The recovery and reserve estimates of the Trust's reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. The forward-looking information provided in this press release is based on management's current beliefs, expectations and assumptions, based on currently available information as to the outcome and timing of future events. Argent cautions that its future oil, natural gas and natural gas liquids production, revenues, cash flows, liquidity, plans for future operations, expenses, outlook for oil and natural gas prices, timing and amount of future capital expenditures, and other forward-looking information is subject to all of the risks and uncertainties normally incident to the exploration for and development and production and sale of oil and gas.
These risks include, but are not limited to, oil and natural gas price volatility, Argent's access to cash flows and other sources of liquidity to fund its capital expenditures, its level of indebtedness, its ability to replace production, the impact of the current financial climate on Argent's anticipated business and financial condition, a lack of availability of or increases in costs of goods and services, environmental risks, drilling and other operating risks, regulatory changes, the uncertainty inherent in estimating future oil and gas production or reserves, economic conditions and other risks as described in documents and reports that Argent files with the securities commissions or similar authorities in applicable Canadian jurisdictions on the System for Electronic Document Analysis and Retrieval (SEDAR). Any of these factors could cause Argent's actual results and plans to differ materially from those contained in the forward-looking information.
Forward-looking information is subject to a number of risks and uncertainties, including those mentioned above, that could cause actual results to differ materially from the expectations set forth in the forward-looking information. Forward-looking information is not a guarantee of future performance or an assurance that our current assumptions and projections are valid. All forward-looking information speaks only as of the date of this press release, and Argent assumes no obligation to, and expressly disclaims any obligation to, update or revise any forward-looking information, except as required by law. You should not place undue reliance on forward-looking information. You are encouraged to closely consider the additional disclosures and risk factors contained in Argent's periodic filings on SEDAR that discuss in further detail the factors that could cause future results to be different than contemplated in this press release.
The reserves data set forth herein is based upon an evaluation by GLJ dated effective March 31, 2012, using GLJ's March 31, 2012 forecast prices and costs. Reserve Life Index, as referenced herein, is calculated by dividing total proved plus probable reserves by current annualized production.
Barrels of oil equivalent (boe) may be misleading, particularly if used in isolation. A boe conversion ratio of six Mcf to one bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and do not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of oil as compared to natural gas is significantly different from the energy equivalency conversion ratio of six to one, utilizing a boe conversion ratio of six Mcf to one bbl may be misleading as an indication of value.
Non-IFRS Financial Measures
Statements in this press release make reference to the terms "payout ratio", and "sustainability ratio" which are non-IFRS financial measures that do not have any standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other issuers. Investors should be cautioned that these measures should not be construed as an alternative to net income calculated in accordance with IFRS. Management believes that "payout ratio" and "sustainability ratio" provide useful information to investors and management since these terms reflect the quality of production, the level of profitability, the ability to drive growth through the funding of future capital expenditures and the sustainability of, distributions to unitholders. The Trust calculates its payout ratio by dividing the cash distributions the Trust pays to its unitholders in accordance with the Trust's distribution policies by funds flow from operations. Sustainability ratio is calculated by dividing the sum of cash distributions and capital expenditures by funds flow from operations. Funds flow (i.e., cash flow) from operations is calculated before changes in non-cash working capital. Field netback or netback is calculated by subtracting royalties and operating expenses from revenue.