ENERGY TRUSTS / Freehold Royalty Trust reports 1st 3 months Results
CALGARY, April 21 /CNW/ - Freehold Royalty Trust (''FRU.UN'') announces
its results for the first quarter ended March 31, 1998. Against a backdrop of
significantly lower crude oil prices, the Trust realized distributable income
of $4.5 million, translating to seventeen cents ($0.17) per Trust Unit. The
cash distribution is payable May 15, 1998 to Unitholders of record on April
30, 1998. This financial result is lower than a year ago, in direct
proportion to crude oil price declines.
During the first quarter of 1998, Freehold increased production by six
percent versus the first quarter of 1997. Revenue for the period was $6.6
million, representing a 31% decline from the same period of 1997. Freehold
nets greater than two thirds of its revenue through its royalty land holdings,
which do not require any capital investment. Even in this difficult pricing
environment, Freehold's royalty income investor netbacks were strong at $14.08
per barrel. This source of royalty income is key to Freehold's strength and
will serve Unitholders well throughout this period of soft prices.
Beginning April 1, 1998, the Trust has moved from quarterly to monthly
distributions. The monthly distribution will be set initially at five and
three quarters cents ($0.0575), with the first monthly payment being made on
May 15, 1998 to Unitholders of record on April 30, 1998. The monthly
distribution is being set based on expected distributions at current commodity
prices of $16.00 WTI per barrel for oil and $2.00 per thousand cubic feet for
natural gas. Including the above distributions, the Trust has distributed a
total of $1.4575 per Trust unit since its inception on November 26, 1996.
Distributable income is currently 100% tax deferred as it is considered a
'return of capital' and thus reduces the adjusted cost base of the Trust units
for capital gains tax purposes.
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Three Months Ended
Mar. 31, 1998 Mar. 31, 1997 % Change
OPERATING
Production
Crude oil (Bbls/d) 3,619 3,412 +6
NGLs (Bbls/d) 313 262 +19
Natural gas (Mmcf/d) 13.6 13.4 +1
Barrels of oil equivalent (Boe/d) 5,296 5,010 +6
Potash (Tons/d) 20.4 10.9 +87
Average prices ($ Cdn.)
Crude oil and NGLs ($/Bbl) 11.93 21.70 -45
Natural gas ($/Mcf) 2.06 2.15 -4
Barrels of oil equivalent ($/Boe) 14.16 21.66 -35
Potash ($/Ton) 132.31 105.78 +25
FINANCIAL
($000s except per Trust Unit)
Revenue
Royalty income 4,551 6,357 -28
Working interest sales (net
of royalties) 2,054 3,201 -36
Total revenue 6,605 9,558 -31
Funds generated from operations 4,342 8,325 -48
Net income (2,063) 2,577 -180
Distributable income 4,450 8,382 -47
per Trust Unit 0.17 0.32 -47
>>
OPERATING RESULTS ON TARGET
Oil and NGL production averaged 3,932 barrels per day for the quarter, up
seven percent compared to first quarter 1997 levels of 3,674 barrels per day.
Natural gas production averaged 13.6 million cubic feet per day, up slightly
from the same period last year of 13.4 million cubic feet per day. Potash
production, which represents a small portion of the Trust's revenue, rose
strongly from the same period last year.
Total Trust operating costs of $1.91 per barrel of oil equivalent for the
period are up from $1.06 per barrel of oil equivalent for the first quarter of
1997. This is mainly as a result of property acquisitions completed during
1997. However, these first quarter 1998 operating costs are down six percent
when compared to the fourth quarter of 1997.
Working Interest Properties
During the first quarter of 1998, Freehold participated in the drilling
of 21 working interest wells (0.5 net) with a 95% success rate. Freehold
incurred capital expenditures of $552,000 during the period. This capital was
spent on drilling and associated costs for production equipment and
re-completions.
Activity on Royalty Interest Lands Continues
Based on the royalty income stream received to-date during the first
quarter, activity continues on lands where the Trust receives a royalty
percentage of the production. By mid February of this year, lessees had
drilled a total of 20 wells on Freehold's royalty lands, as compared to 16
wells at the same time last year.
1998 OUTLOOK
Freehold was adversely affected by the decline in the price of crude oil
on North America markets. The benchmark West Texas Intermediate (WTI) crude
posting of $15.95 US for the first quarter of 1998 was down 30% from the first
quarter of 1997. This price represents the fourth lowest quarterly average
oil price over the past ten years. This price reduction, along with increases
in the heavy oil differential and rising premiums for diluent used to
transport heavy oil, combined to reduce crude oil netbacks. The change in
distributable income per Trust unit from the first quarter of 1997 to the
first quarter of 1998 is reconciled in the following table:
<<
Distributable income for the three
months ended March 31, 1997 $0.32
Effect of increased production 0.02
Impact of lower commodity prices (0.13)
Increased interest, production and other charges (0.04)
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Distributable income for the three
months ended March 31, 1998 $0.17
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>>
Freehold is well positioned to withstand these low commodity price cycles
and to take advantage of the opportunities that may arise to acquire
additional high quality properties.
Freehold Royalty Trust is a closed-end investment trust, which receives
and distributes royalty income from a diversified asset base of high quality
oil and gas properties. The Trust currently has 26.5 million Trust units
outstanding and trades on the Toronto and Montreal stock exchanges under the
symbol FRU.UN.
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