CALGARY, Jan. 15, 2015 /CNW/ - Parallel Energy Trust ("Parallel" or the "Trust") (TSX: PLT.UN, PLT.DB) today announces a revised capital plan and distribution level; confirms its January distribution; and provides an update on its estimated 2014 year-end production results and bank debt.
Corporate Summary
Parallel's management team and board have remained committed to operating a sustainable business model, which requires the Trust to generate more than sufficient free cash flow to fund its distribution and capital expenditures. The Trust's initial 2015 capital plans and guidance, announced in late November 2014, were aligned with this commitment based on a WTI oil price of US$80.00 per barrel and were designed to be sustainable at WTI oil prices in the low US$70.00 per barrel range. Since that time, commodity prices have dropped significantly and the Trust's capital plans and distribution level are no longer sustainable in the current commodity price environment. As a result, the Trust is postponing its 2015 drilling program and revising its capital plans and distribution level to reflect current market conditions.
Revised Capital Plans and Guidance
Parallel has decided to postpone the commencement of its 2015 drilling program until further notice. The Trust will continue to assess market conditions throughout the year with the intent of commencing its drilling program once a sustained commodity price recovery is evident. Parallel is also revising its 2015 capital budget to US$3.1 million, comprised of US$2.2 million to complete up to 100 well cleanouts plus US$0.9 million for maintenance and equipment.
Due to the postponement of Parallel's drilling program, and assuming that no drilling is completed in 2015, the Trust is reducing its estimated annual average daily production rate from 7,100 boe/day to 6,800 boe/day. The Trust's production mix remains unchanged at approximately 68 per cent natural gas liquids and condensate, and 32 per cent natural gas.
Given the substantial drop in commodity prices, the Trust is withdrawing the 2015 cash flow and payout ratio guidance provided in its November 2014 press release.
Distribution and DRIP Program
Parallel is reducing its monthly distribution from $0.025 per unit per month to $0.01 per unit per month effective immediately. Based on the Trust's revised distribution level and capital budget, additional cost reduction measures, and utilizing current forward strip WTI oil and NYMEX natural gas prices of approximately US$50.00 per barrel and US$3.00 per mmbtu, respectively, Parallel expects to operate with a total payout ratio of less than 100 per cent in 2015.
Parallel confirms that its cash distribution to be paid on February 23, 2015, in respect of the period from and including January 1, 2015 to January 31, 2015, to unitholders of record on January 30, 2015 will be $0.01 per trust unit. The ex-distribution date is January 28, 2015.
In December 2014, Parallel suspended the use of its distribution reinvestment plan until further notice.
Production and Financial Update
Based on field data, Parallel recorded average daily production of approximately 7,100 boe/day in the fourth quarter of 2014. This results in average daily production of approximately 7,100 boe/day for the full year 2014, which was in line with the Trust's production guidance.
Parallel estimates that its bank debt was approximately US$156.0 million as of December 31, 2014, representing a reduction in its total bank debt of approximately US$1.6 million during the fourth quarter of 2014.
President's Message
"Our primary goal in 2015 is to maintain a sustainable business model amid the currently challenging commodity price environment," explains Rick Alexander, Parallel's President & CEO. "Our assets provide two significant advantages that will assist us in achieving our goal. First, as the operator and 100 per cent owner of almost all of our assets, we control the pace of our drilling program and capital spending. Therefore, we have the flexibility to postpone our drilling program, which we have done, but also to recommence drilling at any time when conditions improve. Second, our assets have a very low decline rate in the eight per cent range, which means that our production will not fall significantly if we delay our drilling program for a period of time. This is evidenced by our forecasted average production rate being reduced by only four per cent in 2015 if we do not recommence the drilling program during the year."
"Our management team and board recognize that costs must be reduced during a period of low commodity prices and therefore we are targeting a reduction in general and administrative costs of approximately 15 per cent in 2015. Costs will be reduced through several initiatives including, cutting discretionary spending such as travel, the previously announced elimination of the executive chairman role, and the management team and board voluntarily reducing their compensation by 20 per cent. We also plan to reduce operating costs where possible and we will continue to respond to market conditions to ensure a sustainable business model throughout 2015."
ABOUT PARALLEL ENERGY TRUST
Established in March 2011, Parallel Energy Trust ("Parallel" or the "Trust") is a Calgary-based distribution-paying energy income trust. Parallel's assets and operations are located in the Mid-Continent Region of the United States and its portfolio consists of mature, liquids-rich natural gas assets. The Trust's business strategy is focused on acquiring and developing long-life, conventional oil and natural gas assets.
Parallel is considered to be a "mutual fund trust" under the Income Tax Act of Canada; however, the Trust is not subject to specified investment flow through ("SIFT") trust taxes as all of its properties are held outside of Canada. Parallel's common units are traded on the Toronto Stock Exchange ("TSX") under the symbol "PLT.UN" and the Trust's debentures are traded on the TSX under the symbol "PLT.DB".
Additional information about Parallel can be found on the Trust's website at www.parallelenergy.ca or in Parallel's annual information form, available on SEDAR at www.sedar.com.
ADVISORIES
Forward-Looking Information
This news release contains forward-looking information that involves substantial known and unknown risks and uncertainties, most of which are beyond the control of Parallel, including, without limitation, those listed under "Risk Factors" in Parallel's annual information form dated March 21, 2014 (collectively, "forward-looking information"). Forward-looking information in this news release includes, but is not limited to, Parallel's objectives and status as a mutual fund trust and not a SIFT trust and Parallel's expectations and estimates regarding capital plans, payment and amount of distributions and expected total payout ratio for 2015, current and future production rates and drilling results. Parallel cautions investors in Parallel's securities about important factors that could cause Parallel's actual results to differ materially from those projected in any forward-looking statements included in this news release. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. No assurance can be given that the expectations set out in Parallel's final prospectus or herein will prove to be correct and accordingly, prospective investors should not place undue reliance on these forward-looking statements. These statements speak only as of the date of this press release and Parallel does not assume any obligation to update or revise them to reflect new events or circumstances.
In this news release, Parallel and its subsidiaries are referred to collectively as the "Trust" or "Parallel" for purposes of convenience.
Oil and Gas Measures and Definitions
This press release contains disclosure expressed as "boe" and "boe/day". All oil and natural gas equivalency volumes have been derived using the ratio of six thousand cubic feet of natural gas to one barrel of oil. Equivalency measures may be misleading, particularly if used in isolation. A conversion ratio of six thousand cubic feet of natural gas to one barrel of oil is based on an energy equivalency conversion method primarily.
Non-IFRS Measures
This press release contains the term "total payout ratio", which does not have a standardized meaning prescribed by International Financial Reporting Standards ("IFRS"). Parallel uses total payout ratio to analyze financial and operating performance. "Total payout ratio" is calculated as declared distributions plus capital expenditures divided by funds from operations. There is no IFRS measure that is reasonably comparable to total payout ratio.
SOURCE Parallel Energy Trust
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