ENERGY TRUSTS / PrimeWest Energy Trust announces Reserve Additions
PrimeWest Energy Trust announced today that it has just received a very
favourable assessment of the results of its capital spending and acquisition
activity during 1997. This information is contained in the year end reserve
assessment prepared for PrimeWest by the external engineering firm Gilbert
Laustsen Jung Associates Ltd. ('GLJ').
HIGHLIGHTS OF GLJ REPORT
Based on the GLJ Report, PrimeWest achieved outstanding reserve addition
results during 1997:
* Established reserves increased 23 percent to 44.6 million barrels of oil
equivalent
* Total established reserve additions replaced 365 percent of 1997
production at a cost of $4.61 per barrel of oil equivalent.
* Using industry consensus pricing, the present worth of PrimeWest's
established reserves, discounted at 10%, increased by 31 %, to $298
million.
RESERVE ADDITIONS REPLACE 365 PERCENT OF PRODUCTION
The GLJ Report assessed PrimeWest's established reserves (proven plus one
half of probable) to be 44.6 million barrels of oil equivalent ('boe'), as at
January 1, 1998. This is a 23 percent increase from the 36.1 million boe
assessed by GLJ for PrimeWest's established reserves as at January 1, 1997.
Total established reserve additions of 12.0 million boe replaced 365 percent
of 1997 production of 3.3 million boe.
Reserves Summary Crude Oil Natural Gas Nat. Gas Liquids Oil Equiv.
(January 1, 1998) (MMbbl) (BCF) (MMbbl) (MMboe)
Proved 12.3 184.2 4.6 35.2
Probable 5.9 86.2 4.3 18.8
Total Proved+Probable 18.2 270.4 8.9 54.0
Established 15.2 227.3 6.7 44.6
(MMbbl means millions of barrels)
(BCF means Billion Cubic Feet)
(MMboe means millions of barrels of oil equivalent)
A reconciliation of the 1997 established reserves additions follows:
Oil Equiv.
(MMboe)
as at January 1, 1997 36.1
Additions - Development Program 4.7
Additions - Acquisitions 6.0
Technical Revisions 1.3
Dispositions -0.2
Production -3.3
----
as at January 1, 1998 44.6
RESERVE VALUE INCREASES BY 31 PERCENT
The present worth of PrimeWest's established reserves at January 1, 1998,
evaluated at a discount rate of 10%, has increased to $298.0 million from
$226.6 million from a year earlier. This represents a 31 percent increase.
January 1, 1998 January 1, 1997
Present Worth of
Established Reserves (pre-tax) $ Million $ Million
Undiscounted 627.4 479.2
Discounted at 10% 298.0 226.6
Discounted at 12% 268.3 204.1
Discounted at 15% 233.2 177.5
The GLJ Report projects that PrimeWest's production will average 10,433 boe
per day over the next three years. This compares to the actual average
production rate of 7,512 boe per day for the period September 1 to December
31, 1996, and an expected average production rate of 9,050 boe per day in
1997.
"PrimeWest has achieved record success in 1997 in every asset growth measure,
except unit price. Over the past 12 months we have confirmed our total return
performance by: distributing $1.34 per trust unit, increasing production by
approximately 25%, and increasing the value of our reserve base by 31%," said
Kent MacIntyre, Chief Executive Officer. "Our 1997 performance provides
strong evidence of the degree to which PrimeWest offers predictable
distributions coupled with growth in the value of the assets."
RESERVE REPLACEMENT COSTS BELOW INDUSTRY AVERAGE
PrimeWest's 1997 total reserve addition costs were $4.61 per boe, for
established reserves added through its capital development and acquisition
programs. This performance would place PrimeWest in the top decile of
industry rankings, when compared to 1996 published industry average reserve
addition costs of approximately $7.10 per boe.
"To be really successful, royalty trusts must not only optimize the
performance of their existing properties, but also replenish production
through successful reserve additions. True success can only be achieved if
the reserve additions are made on a low cost basis. This is what builds the
sustainable value of a royalty trust, to provide ongoing distributions to
unitholders," said Mr. Jake Roorda, Vice President, Corporate. "The fact that
PrimeWest replaced over 350 percent of its 1997 production at a cost far
below industry average is clear evidence that PrimeWest can provide
sustainable distributions while adding value for its unitholders."
SUCCESSFUL RESERVE ACQUISITION PROGRAM
PrimeWest replaced 182 percent of its 1997 production through acquisitions at
an average cost of $5.42 per boe. Based on information provided by Sayer
Securities, a recognized industry source, median industry acquisition costs
for 1997 are $6.59 per boe.
"Most people agree that in 1997 the Western Canadian oil industry experienced
an overheated property acquisition market. Since we recognized this early,
PrimeWest was highly selective in the acquisitions it closed," said Ron
Ambrozy, Vice President, Business Development. "We believe PrimeWest's
selectivity is demonstrated by our low 1997 acquisition costs of $5.42 per
boe. Not only did we acquire 6.0 million boe of long life, quality reserves,
we did so at a cost approximately 18 percent lower than the 1997 industry
median cost."
SUCCESSFUL RESERVE DEVELOPMENT PROGRAM
PrimeWest replaced 143 percent of its 1997 production through its capital
development program at an average cost of $3.28 per boe. Comparable industry
average costs published for 1996 were $7.40 per boe.
"When we acquired the initial Amoco properties, we saw significant
development opportunities to enhance the value of the properties beyond the
level that was recognized in the original evaluation report. Accordingly, we
provided our production teams with the support and capital required to pursue
these opportunities," said Al Kiernan, Vice President, Production. "The
industry leading finding and development costs we delivered in 1997 is clear
evidence of the growth potential of our quality asset base and our ability to
continue to add value in the future."
PRIMEWEST'S COMMODITY BALANCE MAINTAINED
On an established reserve basis, PrimeWest's commodity mix remains well
balanced, at 49 percent oil and natural gas liquids and 51 percent natural
gas. This commodity balance provides greater certainty over future
distributions, given the relative exposure to cyclical trends in oil and
natural gas pricing.
Furthermore, based on 1998 forecast production of 10,000 boe per day,
PrimeWest's established reserve life index (RLI) is 12.2 years. The ability
of PrimeWest to maintain a high RLI while increasing the productivity of its
properties demonstrates that PrimeWest has developed a strategy of corporate
renewal, that will offset the natural depletion of its oil and gas reserves.
1998 - CONTINUED FOCUS ON ASSET GROWTH
PrimeWest will continue its two pronged approach to growth in 1998 - pursuing
high quality acquisitions and creating more value from its existing asset
base.
"We see several years worth of development activities within our portfolio of
properties. Based on our production team's success in adding low cost
reserves in 1997, PrimeWest has maintained its capital development budget in
1998 at $16 million," said Kent MacIntyre, CEO.
"Furthermore, the acquisition market could prove to be the real surprise for
1998," said Kent MacIntyre. "We are optimistic that a significant accretive
acquisition will be available to us given the apparent downturn in
acquisition pricing we are now seeing."
The trust units of PrimeWest Energy Trust trade on the Toronto Stock Exchange
under the symbol PWI.UN. There are currently 24,962,562 trust units issued
and outstanding. |
