ENERGY TRUSTS / PrimeWest Energy Records Strong 1998 Reserve Additions
at Costs Lower than Historical Industry Averages
CALGARY, Jan. 27 /CNW/ - PrimeWest Energy Trust today released details of
1998 reserve additions, including reserve-replacement costs that for the third
consecutive year remain well below historical oil and gas industry averages.
According to an independent engineering report, prepared by Gilbert
Laustsen Jung Associates Ltd., PrimeWest's total established reserves (proved
plus one half of probable) grew by 17.7 percent in 1988 -- from 44.6 million
barrels of oil equivalent (boe) to 52.5 million boe. Per-boe costs
(unaudited) for these additions -- made through selective acquisitions and
divestitures and aggressive capital development -- amounted to $4.09. This
performance compares favourably with historical industry average
reserve-addition costs, in the range of $7.00 to $8.00 per boe.
Strong reserve additions in 1998
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Category Crude oil Natural gas NGLs Oil equivalent
(millions (billions of (millions (millions
of barrels) cubic feet) of barrels) of boe)
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1998 1997 1998 1997 1998 1997 1998 1997
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Proved 17.0 12.3 195.6 184.2 4.5 4.6 41.4 35.2
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Probable 9.5 5.9 95.9 86.2 4.2 4.3 22.1 18.8
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Total proved
and probable 26.5 18.2 291.5 270.4 8.6 8.9 63.5 54.0
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Established 21.7 15.2 243.5 227.3 6.5 6.7 52.5 44.6
(proved plus one
half probable)
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>>
On an established-reserves basis, PrimeWest's commodity mix remains well
balanced, at 54 percent oil and natural gas liquids, and 46 percent natural
gas.
Continued low finding and development costs
PrimeWest replaced 153 percent of its 1998 production, or 6.9 million
boe, through acquisitions (net of dispositions) -- at an average cost of $4.92
per boe. In addition, the trust replaced 127 percent of its 1998 production,
or 5.7 million boe, through drilling and development -- at an average cost of
$3.09 per boe.
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Reserve-addition costs 1998 1997
(Dollars per boe)
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For additions from drilling and development 3.09 3.28
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For additions from acquisitions 4.92 5.42
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Weighted average 4.09 4.61
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''Year after year, PrimeWest's reserve-addition costs have been better
than average, and year after year, we gain more credibility for our operating
expertise,'' said Kent MacIntyre, Vice-chairman and Chief Executive Officer.
''Driven by our unique enhancement strategy, our team has increased underlying
value, and has done so at low cost.''
''Adding reserves at low cost continues to be a key, forward-looking
indicator of success in our overriding strategy of sustaining and increasing
distributions to unitholders over the long term.''
Reconciliation of established reserve additions
PrimeWest's total established-reserve additions of 12.5 million boe
replaced 280 percent of 1998 production.
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(Millions of boe) 1998 1997
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As at January 1 44.6 36.1
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Additions from drilling and development 5.3 4.7
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Technical revisions 0.4 1.3
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Additions from acquisitions 8.8 6.0
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Dispositions -1.9 -0.2
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Production -4.5 -3.3
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as at January 1, 1999 52.5
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(Note: oil equivalent volumes are approximate due to variation in NGL
equivalence factors.)
Reserve value increases slightly despite drop in oil price
The present worth of PrimeWest's established reserves as at January 1,
1999, based on industry consensus pricing and evaluated at a discount rate of
10%, increased by five percent over the year, from $298 million to $312.8
million. This increase came despite a significant decline in oil prices year
over year.
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As at January 1 1999 1998
(Millions of dollars)
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Undiscounted 606.1 627.4
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Discounted at 10 percent 312.8 298.0
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Discounted at 12 percent 284.3 268.3
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Discounted at 15 percent 249.9 233.2
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Debt level maintained, despite strong reserve additions
Notwithstanding the significant growth in established reserves,
PrimeWest's debt level remained relatively constant - $69.6 million at the
beginning of 1999, compared with $66.7 million the year before. PrimeWest's
debt-to-cash flow ratio (year beginning 1999 debt to 1999 estimated cash flow)
is currently 1.8 times. This low debt-to-cash flow ratio affords PrimeWest
with continued financial flexibility to provide growth in distributions
through enhancement and acquisition activities.
Highlights of Primewest's previously announced 1999 financial forecast
- Production in 1999 is estimated to average 13,690 boe per day, an
increase of more than 10 percent from 1998 average production.
- Cash distributions for 1999 are estimated to increase to $1.18 per
trust unit, using a reference price of US$13.50 WTI per barrel for
crude oil, and a plant gate price of C$2.32 per Mcf for natural gas.
Units of PrimeWest are traded on the Toronto Stock Exchange under the
symbol ''PWI.UN''. The company's website is www.prime-west.com.
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