ENERGY TRUSTS / Maximum Energy Trust Production and Reserves Report
TSE SYMBOL: MXT.UN
DECEMBER 12, 1997
CALGARY, ALBERTA--
NOT FOR DISTRIBUTION TO THE U.S. NEWSWIRE SERVICES OR FOR
DISSEMINATION IN THE UNITED STATES
Maximum Energy Trust is pleased to report that it has received a
Preliminary Reserves and Economic Analysis report from Gilbert
Laustsen Jung Associates Ltd. with an effective date of December
31, 1997 (GLJ's Preliminary Report). This independent engineering
report was commissioned by Maximum to address technical concerns
regarding the impact on future production of 1995 & 1996
exploitation activities on Maximum's Kindersley, Saskatchewan
properties. GLJ's Preliminary Report entailed a detailed review
of three major properties that were impacted by the exploitation
activity and that in total comprise 89 percent of Maximum's
Saskatchewan properties' reserve base. The remaining properties of
Maximum will be reviewed in conjunction with the release of the
final 1997 year end reserves report. The technical concerns were
raised by Maximum's new Vice-President of Engineering, Mr. Jim
Yip, during the preparation of Maximum's 1998 corporate budget.
GLJ now concurs with Maximum that prior independent engineering
reports were optimistic relating to the timing of the impact on
production of exploitation activities, including the Dodsland
waterflood. Initial reports gave the waterflood an immediate
impact on the Dodsland production volumes. Maximum believes that
it will take four years from inception in December 1996 for the
Dodsland waterflood to begin to beneficially impact production and
GLJ now supports this technical revision. Maximum's October 27,
1997 press release incorporated this technical revision in
arriving at Maximum's forecast average 1998 production level of
3,200 barrels of oil equivalent (BOE) per day.
The corporate reserves figures presented below are a consolidation
of reports prepared by GLJ and another independent engineering
firm, Adams Pearson Associates Inc., which evaluated Maximum's
Provost, Alberta property acquisition which was completed in
October 1997. The Adams Pearson report has been adjusted to
reflect the production to year end 1997.
/T/
Established Reserves as of December 31, 1997
--------------------------------------------
Kindersley, Saskatchewan Properties 16.65 MMBOE
Provost, Alberta Properties 1.90 MMBOE
-----------------------------------------------------------
Total Properties 18.55 MMBOE
/T/
The independent engineering reports show a slight upward revision
to the total established reserves and a shift in the related
production profile of the Kindersley, Saskatchewan properties.
This has resulted in declines typical to the area through to the
year 2000, at which time the Dodsland waterflood is expected to
begin to mitigate normal production declines. The resultant
production profile gives rise to the following operating cash flow
forecasts through to the year 2010. The following cash flow
estimates, net of capital expenditures, have been compiled
directly from the foregoing independent engineering reports.
/T/
Operating Cash Flow Estimate
----------------------------
1998 $18,839,000
1999 $16,991,000
2000 $15,678,000
2001 $15,673,000
2002 $15,986,000
2003 $15,867,000
2004 $15,276,000
2005 $15,285,000
2006 $15,322,000
2007 $14,240,000
2008 $13,407,000
2009 $12,491,000
2010 $11,544,000
Net Asset Value as of September 30, 1997
----------------------------------------
Corporate per Unit
--------- --------
Discounted at 10 percent $100,700,000 $8.39
Discounted at 12 percent $85,900,000 $7.16
Discounted at 15 percent $69,200,000 $5.76
/T/
The 1998 production forecast compiled from the combination of the
GLJ Preliminary Report and the Adams Pearson report estimates
production at 3,325 BOE per day, approximately 4 percent above
Maximum's forecast. Though Maximum remains committed to the 1998
target of 3,200 BOE per day, Maximum accepts this variance as
being within reasonable technical bounds.
Based on Maximum's 1998 forecast average production rate of 3,200
BOE per day, an average crude oil price of US$20.25 WTI per barrel
and a US$ exchange rate of CDN$1.3575, a cash distribution to the
unitholders of $1.08 per unit is forecast for 1998. At Maximum
Energy Trust's current market price of $5.90 per unit, this
forecast distribution represents an estimated 1998 yield of 18.3
percent before and after tax.
As Maximum's production base is 89 percent light crude oil which
is currently not hedged in 1998, this forecast's key sensitivity
rests on crude oil pricing where every US $1.00 variance from the
forecast price of US$20.25 WTI results in a $0.10 per unit
variance in the annual unit distribution. The sensitivity with
respect to US currency exchange rates is CDN$0.015 per unit
variance in the annual unit distribution for every CDN$0.01
variance in the Canadian dollar forecast exchange rate of
$1.3575.
Mr. Glenn C. Proudfoot, President and C.E.O. of Maximum Holdings
Corp., stated, "I appreciate the support and patience of Maximum's
unitholders through a period of adversity both at the corporate
level and within the entire royalty trust sector in this last
quarter of 1997. In addition to reserve uncertainty during this
period, we have been faced with softening commodity prices,
interest rate uncertainty and a general capital market correction
both domestically and globally.
This rigorous and extensive review of our assets, supporting a
stable reserve base, backed by current production performance data
enables Maximum to begin the process of restoring investor
confidence in an asset base which is ideally suited for a
conventional oil and gas royalty trust. With an established
reserve life index of 15.9 years, Maximum is positioned to deliver
consistent and predictable long term unitholder cash distributions
levered to light oil pricing."
Maximum Energy Trust trades on the T.S.E. under the symbol MXT.UN
MAXIMUM HOLDINGS TRUST operates on behalf of MAXIMUM ENERGY TRUST,
a royalty trust trading on the TSE under MXT.UN |
