ENERGY TRUSTS / ARC Energy Trust Announces 1998 Results
CALGARY, Feb. 3 /CNW/ - (AET.UN. - TSE) - ARC Energy Trust (''the
Trust'') announces its results for the twelve month period ending December 31,
1998.
Twelve Months Ended
December 31
1998 1997
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OPERATING
Production
Crude Oil (Bbls/d) 4,439 3,656
Natural Gas Liquids (Bbls/d) 2,018 1,929
Natural Gas (Mmcf/d) 37.7 38.4
Oil Equivalent (Boe/d) 10,225 9,425
Average Prices ($Cdn)
Crude Oil ($/Bbl) $18.99 $26.35
Natural Gas Liquids ($/Bbl) $13.17 $18.27
Natural Gas ($/Mcf) $1.93 $1.82
Oil Equivalent ($/Boe) $17.99 $21.54
FINANCIAL
($000s except per unit amounts)
Revenue Before Royalties 67,124 74,103
Cash Flow 30,040 37,757
Net Income (Loss) (14,098) 9,165
Cash Distributions 30,725 33,242
Per Unit 1.20 1.40
Financial and Operating Performance
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Production during 1998 was 10,225 barrels of oil equivalent (boe) per day
which was 8 percent greater than 1997 production of 9,425 boe per day. During
1998, oil production increased 21 percent to 4,439 barrels per day, natural
gas production decreased 2 percent to 37.7 million cubic feet per day and
natural gas liquids production increased 5 percent to 2,018 barrels per day.
The decline in natural gas production was the result of the mid-year
disposition of a large gas property.
As a result of weak crude oil and natural gas liquids prices, revenue
before royalties for the year decreased 9 percent to $67.1 million. Cash flow
during the year declined 20 percent to $30.0 million. The average commodity
prices for the year were $18.99/bbl for oil, $1.93/mcf for gas and $13.17/bbl
for natural gas liquids. On an oil equivalent basis, the average price was
$17.99/boe, which was 16 percent lower than 1997. Despite the significant
decline in commodity prices, the Trust's operating netback remained relatively
strong at $10.38 per boe.
Operating costs for 1998 were $5.04 per boe; general and administrative
costs net of recoveries and reimbursements were $0.87 per boe and management
fees were $0.32 per boe, resulting in overall costs of $6.23 per boe; this
compares to $6.35 per boe for 1997.
The Trust incurred a net loss of $14.1 million for the year which
included the impact of a writedown in the value of the Trust's assets by $14.7
million (6 percent). Earnings prior to the writedown fell to $0.6 million in
1998 from $9.2 million in 1997 which is entirely attributable to the decline
in oil prices. The low oil price in 1998 (especially the fourth quarter
average price for West Texas Intermediate (WTI) of $12.25 US/bbl) and
continuing low oil prices in 1999 were the main factors in the writedown in
the carrying value of the Trust's assets.
Capital expenditures of $10.5 million included development drilling,
recompletions and tie-ins in Buick Creek, Marten Hills, Midale, Medicine
River, Minnehik Buck Lake, Mitsue, Niton and Progress. In addition,
production and waterflood optimization activities were undertaken in the House
Mountain, Midale and Pembina properties. As previously announced, the Trust's
capital program and asset rationalization initiatives resulted in the Trust
replacing 101 percent of its 1998 production at a net effective cost of
$3.06/boe. The Trust's proved plus risked probable reserves at December 31,
1998 were 47.2 million barrels of oil equivalent.
Cash Distributions
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Despite WTI prices which were 30 percent lower than the comparable period
in 1997, the Trust was able to maintain its regular monthly distributions to
unitholders of $0.10 per unit throughout 1998. This was accomplished through
production enhancements, optimizations, cost reductions and a distribution
stabilization initiative whereby a portion of the proceeds of disposition of
some non-producing assets was distributed to unitholders. As at December 31,
1998, cumulative distributions to unitholders since inception totaled $3.41
per unit.
The Trust has finalized its 1998 split of distributions for tax purposes
with 10% of 1996 distributions being taxable and 90% being tax deferred.
Outlook
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On January 18, 1999, the Trust announced it had agreed in separate
transactions to merge with each of Starcor Energy Royalty Fund and Orion
Energy Trust with the merged entity to be managed by ARC Financial
Corporation, manager of the Trust. Upon completion of the transactions,
expected to occur in mid-March, the Trust's reserves and production would
increase 91 percent and 88 percent, respectively. The improved financial
efficiencies and increased market liquidity which would result from the
mergers would be of significant benefit to the Trust's unitholders. Most
importantly, based upon the average 1999 price forecasts of three major
independent oil and gas consulting firms, the combined transactions are
expected to allow the Trust to maintain its distributions at $0.10 per unit
per month through 1999.
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