ENERGY TRUSTS / Reserve Royalty Announces Financial and Operating
Results
TSE SYMBOL: ROI
MAY 29, 1998
CALGARY, ALBERTA--Reserve Royalty Corporation (TSE: ROI) announced
its financial and operating results for the three months ended
March 31, 1998.
RESULTS
The financial and operating results for the three months ended
March 31, 1998 represent the first full reporting period for
Reserve Royalty Corporation which includes the assets acquired in
the corporate acquisition which closed on December 19, 1997. With
the acquisition of JORDAN PETROLEUM LTD., the Company had a
dramatic increase in the asset base of the Company in terms of
both producing properties and undeveloped land with which to
create new gross overriding royalties. During the first quarter
of 1998, Reserve Royalty took control of the asset base acquired
in the transaction, significantly strengthened the professional
and technical team of the Corporation, and immediately began the
process of converting the working interests acquired into royalty
interests. Even with the challenges associated with completing
corporate acquisition process and the 35 percent decline in the
price of crude oil, the Company is in a strong position, has a
firm belief in the benefits of being a royalty company, and is
aggressively pursuing new opportunities for profitability.
Funds from operations to March 31, 1998 increased to $7,361,000
from $2,501,000 for the same three month period in 1997. On a per
share basis, this represents $0.09 for the first quarter of 1998,
compared with $0.06 for the first quarter of 1997. Revenue from
oil and gas properties, after deducting royalties and production
expenses, was $10,008,000 for the first three months, compared
with $2,444,000 for the same period in 1997. The production
profile of Reserve Royalty for the first quarter of 1998 is a
combination of royalty interests and working interests. On a
barrel of oil equivalent basis, royalty production was 1,207 BOE
per day with a netback of $19.16 per BOE, and working interest
production was 7,295 BOE per day with a netback of $12.07 per BOE.
During the first quarter of 1998 the Company received an average
oil price of $15.62 per barrel and an average gas price of $2.36
per thousand cubic feet. This compares with $28.12 per barrel of
oil and $2.62 per thousand cubic feet during the first three
months of 1997.
Reserve Royalty reports a loss for the three months ended March
31, 1998 of $407,000 compared to earnings of $1,249,000 for the
first three months of 1997. Earnings per share were zero to March
31, 1998 versus $0.03 for the comparable period in 1997.
During the first quarter of 1998, Reserve Royalty had capital
expenditures on petroleum and natural gas properties of $7,787,000
relating to the continuation of capital programs on acquired
interests commenced in 1997, and to specific capital programs on
acquired assets to further delineate the reservoir base or improve
economics of the properties. With the completion of these
initiatives, capital expenditures during the second quarter of
1998 will be greatly reduced, and the funds from operations will
be available for debt repayment or investment in new royalties.
The 45 million special warrants issued November 5, 1997 were
converted into 45 million common shares between February 3 and 11,
1998, pursuant to a prospectus dated January 30, 1998.
OUTLOOK
Reserve Royalty is continuing to convert the working interests
acquired at the end of last year into gross overriding royalty
interests. To date the Company has announced transactions to
convert $38 million of oil and gas properties into $24 million of
new gross overriding royalties, $11 million of cash, and $3
million in common shares and warrants of industry partners. As
Reserves Royalty converts working interests into royalty interests
during 1998 there will be a significant decline in administrative
and operating expenses, the level of capital expenditures required
for field operations, and abandonment liabilities.
As an oil and gas company, the decline in crude oil prices during
the first quarter of 1998 decreases the funds from operations and
earnings of the Company. In mid March Reserve Royalty shut-in
1,100 barrels of heavy crude oil, and will monitor pricing to
ascertain when to recommence production. With current low oil
prices the industry as a whole battles to maintain cashflow, have
access to capital, and achieve growth. This scenario provides
opportunities for Reserve Royalty to convert working interests
into royalty interests and to create new royalties by providing
off balance sheet financing.
Reserve Royalty is dedicated to enhancing shareholder value and
has built the team to meet the challenges and aggressively pursue
opportunities.
Reserve Royalty Corporation is an innovative financial company
which creates gross overriding royalties in the oil & gas industry
through off balance sheet financing for industry partners and by
the redeployment of oil & gas assets acquired by the Corporation.
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