More news on Advantage hedging.
Interesting that even though on Oct 12 spot prices and futures prices were below these hedge prices, someone was willing to pay them 10-15% more for guaranteed supply on a certain date. Suggests the Nymex is for the traders, and a separate producer-industrial customer market exists with different prices and contracts, much like the PGM market.
Advantage Energy declares reduced dividend
Advantage Energy Income Fund AVN
Shares issued 18,584,282 Oct 22 close $7.90
Mon 22 Oct 2001 News Release
Mr. Gary Bourgeois reports
Advantage Energy Income Fund, has declared a cash distribution at the
rate of 15 cents per unit and payable on Nov. 15, 2001, to unitholders of
record at the close of business on Oct. 31, 2001. The ex-distribution date
is Oct. 29, 2001. The board of directors has also declared a 15 cent per
unit distribution payable on Dec. 17, 2001.
The monthly cash distribution has been reduced as the result of a steep
decline in both natural gas and crude oil prices in the past several
months. The fund's realized natural gas prices will have fallen by 55 per
cent from $5.30 (Canadian) (per thousand cubic feet in May of this year to
$2.40 (Canadian) per thousand cubic feet in October, while crude oil prices
have fallen by 23 per cent from $28.66 (U.S.) per barrel in May to $22
(U.S.) per barrel currently.
Increased cash distribution stability
On Oct. 12, 2001, Advantage entered into a revenue protection plan which
has secured a minimum floor price of $3.51 (Canadian) per thousand cubic
feet for natural gas and $23.27 (U.S.) for crude oil on 75 per cent of
anticipated net production while simultaneously ensuring that unitholders
retain significant exposure to commodity price upside. Specifically, the
fund will receive any price above $3.76 (Canadian) per thousand cubic feet
for natural gas and $24.27 (U.S.) per barrel for crude oil on 75 per cent
of anticipated net production volumes. The forward yield of the fund's
units would be approximately 23 per cent based upon the recent closing
price of $7.94 and the current annualized distribution of $1.80.
Significant reserve and production growth
During the five months since its inception, Advantage has increased
production by approximately 40 per cent through the acquisition of
high-quality, long-life properties and a successful natural gas drilling
program on lands in the Vermilion area. As a result of the acquisition, the
fund's natural gas and crude oil reserves have grown by over 43 per cent
and the reserve life index has increased by 15 per cent. These reserve
numbers do not include the effect of the Vermilion drilling program which
will be evaluated as part of the year-end reserve study. The acquisition
and drilling program have significantly strengthened and diversified the
production and underlying net asset value of the fund.
Equity issue reduces debt-to-cash-flow ratio
As a result of the recently completed equity issue of $43.1-million, the
fund's balance sheet is now one of the most conservative of all the
conventional oil and gas trusts with a debt-to-cash-flow ratio of
approximately 1.4:1 based upon minimum floor commodity prices. In addition,
the equity issue has increased the fund's unit liquidity by 45 per cent. |
