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As Of Filer Filing For·On·As Docs:Size Issuer Agent 8/15/06 Harvest Energy Trust 6-K 6/30/06 8:1.0M Newsfile Cor… Toronto/FA |
Document/Exhibit Description Pages Size 1: 6-K Report of a Foreign Private Issuer -- form6k HTML 17K 2: EX-99.1 News Release Issued August 10, 2006 HTML 52K 3: EX-99.2 Interim Unaudited Financial Statements HTML 344K 4: EX-99.3 Interim Management's Discussion & Analysis HTML 330K 5: EX-99.4 CEO Certification HTML 7K 6: EX-99.5 CFO Certification HTML 7K 7: EX-99.6 Material Change Report Filed on Sedar HTML 8K 8: EX-99.7 Final Short Form Prospectus Filed on Sedar HTML 160K
Harvest Energy Trust: News Release - Prepared by TNT Filings Inc. |
Harvest Energy Trust – News Release
HARVEST ENERGY TRUST ANNOUNCES SECOND QUARTER 2006
FINANCIAL AND OPERATING RESULTS
Calgary, August 9, 2006 (TSX: HTE.UN; NYSE: HTE)
– Harvest Energy Trust ("Harvest") today announces the release of its second quarter 2006 financial and operating results. The unaudited financial statements, notes and MD&A are filed on SEDAR and are available on Harvest’s website on the ‘Financial Information – Quarterly Reports’ page. All figures reported herein are Canadian dollars unless otherwise stated. Readers are reminded that the second quarter results reflect the first full quarter of Harvest as a combined entity including three full months of operations from Viking Energy Royalty Trust, acquired in the first quarter.Highlights:
Financial & Operating Highlights The table below provides a summary of Harvest's financial and operating
results for the three and six month periods ended June 30, 2006 and 2005, and
the first quarter of 2006.
Three Months Ended |
Six Months Ended |
|||||||||
($000s except where noted) | ||||||||||
Revenue, net (1) |
233,128 |
131,432 |
102,007 |
364,560 |
118,545 |
|||||
|
|
|
|
|
||||||
Cash Flows (2) |
147,010 |
100,971 |
57,217 |
247,981 |
109,904 |
|||||
Per Trust Unit, basic (2) | $ |
1.45 |
$ |
1.23 |
$ |
1.32 |
$ |
2.70 |
$ |
2.57 |
Per Trust Unit, diluted (2) | $ |
1.43 |
$ |
1.22 |
$ |
1.29 |
$ |
2.66 |
$ |
2.45 |
|
|
|
|
|
||||||
Net income |
60,682 |
(33,937) |
19,516 |
26,745 |
(23,554) |
|||||
Per Trust Unit, basic (2) | $ |
0.60 |
$ |
(0.41) |
$ |
0.45 |
$ |
0.29 |
$ |
(0.55) |
Per Trust Unit, diluted (2) | $ |
0.60 |
$ |
(0.41) |
$ |
0.44 |
$ |
0.29 |
$ |
(0.56) |
|
|
|
|
|
||||||
Distributions declared |
115,889 |
94,812 |
26,140 |
210,701 |
62,266 |
|||||
Distributions declared, per |
|
|
|
|
|
|||||
Trust Unit |
1.14 |
1.11 |
0.60 |
2.25 |
1.20 |
|||||
Payout ratio (2)(3) | 79% |
94% |
46% |
85% |
47% |
|||||
Capital asset additions |
|
|
|
|
|
|||||
(excluding acquisitions) |
54,230 |
103,239 |
26,154 |
157,469 |
49,377 |
|||||
Bank Debt |
227,554 |
201,652 |
138,090 |
227,554 |
138,090 |
|||||
|
|
|
|
|
||||||
Production |
|
|
|
|
|
|||||
Light to medium oil (bbl/d) |
28,951 |
23,900 |
15,336 |
26,497 |
15,474 |
|||||
Heavy oil (bbl/d) |
13,037 |
15,182 |
13,519 |
14,045 |
13,993 |
|||||
Natural gas liquids (bbl/d) |
2,016 |
1,709 |
798 |
1,865 |
789 |
|||||
Natural gas (mcf/d) |
96,848 |
73,337 |
28,857 |
85,158 |
27,990 |
|||||
Total daily sales volumes |
|
|
|
|
|
|||||
(boe/day) |
60,145 |
53,014 |
34,463 |
56,600 |
34,921 |
|||||
(1) Revenues are net of
royalties and risk management contracts. (2) These are non-GAAP measures; please refer to "Non-GAAP" measures in this MD&A (3) Ratio of distributions declared to Cash Flows, excluding special distribution of $10.7 million settled with the issuance of Trust Units in 2005 |
Message to Unitholders
Harvest’s second quarter 2006 marks the first full reporting period incorporating the assets of Viking Energy Royalty Trust acquired in the first quarter. I am proud of the success of our team in completing the integration with Viking, and our focus continues to be on activities that support Harvest’s long term operational, financial and distribution sustainability.
Q2 Review
Our production volumes in the second quarter averaged 60,145 barrels of oil equivalent (boe) per day. Compared to our first quarter production volumes of 53,014 boe/d, second quarter production is 13% higher and a better reflection of our current productive capacity. Second quarter cash flow per unit was $1.45, 18% higher than the $1.23 reported in the previous quarter. At 79%, our second quarter payout ratio was within our expected range.
Our higher cash flow per unit was supported by crude prices that were 11% higher in the second quarter compared to the first quarter, as well as lower differentials for heavy oil. Relative to the first quarter, second quarter heavy oil prices were 52% higher, due in part to narrower differentials as the summer paving season commenced, as well as higher overall crude prices. Unfortunately, natural gas prices continued to weaken, as Alberta daily index prices were 20% lower in the second quarter compared to the first quarter, and continue to be significantly lower than levels realized late in 2005. After cash distributions and capital spending, we generated net Cash Flows of $26.9 million in the quarter, which was utilized to reduce bank debt and which reflected an increase of 76% compared to $6.4 million of net Cash Flows generated in the second quarter of 2005.
Second quarter production reflects volume additions from our Hay River drilling program which came on-stream in mid-quarter, as well as benefits realized from improved pumping technology implemented in the area. The positive gains from drilling in Hay River and other areas were partly offset by a scheduled turnaround at a third party processing facility that exceeded our budgeted downtime by more than two weeks. Although the facility came back on-stream late in the second quarter, our production volumes at the affected property were restored slightly below levels experienced prior to the turnaround.
Operational Sustainability
An important element of Harvest’s sustainability is the
short, medium and longer term opportunities we see in our asset base. These
opportunities are supported by our capital program, which is heavily weighted to
drilling and production optimization projects in the short term. We are proud of
the successes we have realized to date, including production growth from
drilling and the identification of new productive trends in Southeast
Saskatchewan; improved pumping performance with electric submersible pumps at
Hay River; tighter downspace drilling in Markerville; and exciting drilling
results and production growth in Ferrier. During the second quarter, we drilled 23 net wells with a
success rate of 100%, and year to date have drilled 93 net wells compared to 41
for the first six months in 2005. This substantial increase in drilling activity
has moved Harvest into the top ten most active drillers in the Western Canadian
Sedimentary Basin. The benefits of our size, extensive inventory of development
projects, larger capital program and technical expertise are demonstrated in our
ability to maintain an eight rig drilling program throughout the entire year. As
such, we are not subject to rig availability and can maximize the efficiency of
our program by moving rigs quickly to the opportunities offering the highest
value within our asset base.
In the medium and longer term, Harvest is focused on
innovative techniques to improve the recovery of the large hydrocarbon deposits
situated on our working interest lands. With over 2 billion boe of original
resource in place, and a total reserve recovery to date of only 25%, we are
actively pursuing activities and technologies that can improve recovery from
these pools. An incremental 10% improvement in recovery equates to an additional
200 million boe of produced reserves. Medium term initiatives include improved
waterflooding at Hay River; water handling upgrades at Suffield; and well
reactivations in Eastern Alberta. Over the longer term, we will continue to test
and develop enhanced oil recovery projects including polymer, solvent and carbon
dioxide flooding, pursue the Coal Bed Methane potential on our lands, and expand
our existing inventory of oil sands opportunities.
During the quarter we acquired 27 sections (equivalent to
17,280 acres) of oil sands leases in our Northern Alberta area, adjacent to our
Red Earth property. This acquisition is important to Harvest because it expands
our rights in the area to include the oil sands horizon in addition to the
conventional productive hydrocarbon zones, and brings our total oil sands leases
to 26,200 gross and net acres. Management has extensive experience maximizing
heavy oil and oil sands production, and these assets further contribute to our
long-term sustainability goals.
We continue to seek opportunities to consolidate within our
core areas, create new core areas, as well as identify unique opportunities that
may arise domestically or internationally. Consistent with our success in the
past, Harvest will continue to be opportunistic in our approach to acquisitions.
Our goal is to undertake acquisitions that are accretive to reserves, production
and cash flow per unit, rather than conform to a specific production mix,
reserve life or geographic area. With the significant undrawn capacity under our
credit facility, we are financially well positioned to continue taking advantage
of future opportunities.
Financial Sustainability
Hedging continues to be an important part of Harvest’s risk
management strategy. We attempt to establish price floors that provide
sustainability, while still allowing for upside participation. In 2007, our
hedging contracts have a floor price that is $10.81 higher than in 2006 with
greater participation above the floor, which is expected to increase our cash
flow in 2007 and reduce the payout ratio under current commodity price levels.
For the balance of 2006, we have over 50% of our oil volumes hedged using
contracts that provide for participation of approximately 55% above the average
U.S.$45.47 floor price. In 2007, we have approximately 60% of our oil volumes
hedged with greater than 73% participation above the U.S.$56.28 average floor
price. With the increase in our natural gas weighting over the past
six months, we have also layered in some downside natural gas price protection
with costless collars. For the balance of 2006, approximately 25% of our natural
gas production is hedged with average floor and ceiling prices of $5.92 and
$13.28, respectively, and approximately 11% of our estimated 2007 natural gas
production is protected with average floor and ceiling prices of $6.00 and
$13.03, respectively.
Our non-resident ownership has increased to approximately 44%
at the end of the second quarter from approximately 33% at the end of the first
quarter. We believe this increase reflects the ongoing interest in Harvest’s
financial and operational sustainability, as well as our ongoing marketing
efforts to new audiences. With our third quarter 2006 distributions announced at
the Cdn$0.38 per unit level, Harvest offers unitholders sustainability as well
as the potential for yield compression through price appreciation. Recent Developments
On July 26, 2006, Harvest announced the $440 million acquisition of a private
Canadian oil and natural gas company, adding approximately 6,300 boe/d of
primarily natural gas production and 22.6 million boe of proved plus probable (P+P)
reserves to our portfolio.
This acquisition elevates our P+P reserve life index to 9.5
years, provides significant multi-zone drilling and development opportunities,
lightens up our crude oil mix and modifies our production weighting to
approximately 70% crude oil / liquids, and 30% natural gas. The acquired
properties fit well with Harvest’s existing assets in our Western Alberta core
area, providing overlapping and adjacent lands in Sylvan Lake / Markerville,
Willesden Green, Wilson Creek and Ferrier. This acquisition supports Harvest’s
future development activities by increasing our total undeveloped land to
approximately 800,000 net acres, and expanding our seismic inventory. It is also
accretive to Cash Flow per unit, reserves per unit and production per unit, and
is expected to raise our 2006 exit production to approximately 66,000 boe/d. Our
capital expenditure program for 2006 has also been increased by $50 million to
$300 million; $25 million allocated to the acquired properties, and $25 million
to our existing assets for further crude oil development which will add
incremental production and cost benefits in 2007. Concurrent with the acquisition, we announced a $200 million
bought deal equity financing in Canada, the proceeds of which were used to
partially fund the acquisition, with the underwriters having an option to
increase the amount to $230 million. The balance of the acquisition cost was
financed through our existing credit facility, which will continue to have more
than $400 million of undrawn capacity following closing of the acquisition and
financing. Our balance sheet strength positions Harvest well to continue seeking
out and capitalizing on acquisition opportunities as they arise.
Just after the end of the second quarter, a non-operated
facility in the Sylvan Lake / Markerville area was shut down following a fire
that damaged one of the compressors. Although Harvest was able to redirect a
portion of our Markerville volumes shortly after the incident, approximately
3,500 boe/d of natural gas and liquids remained off-line until early August.
Although the operator has restored the majority of its processing capabilities
in Markerville, approximately 500 boe/d remains shut-in and is expected to come
back on stream through the third quarter.
Conference Call & Webcast To provide further discussion of our second quarter 2006
financial and operating results, Harvest will be hosting a conference call and
Webcast at 9:00 a.m. Mountain time (11:00 a.m. Eastern time) on August 10th,
2006. Callers may dial 1-877-888-3490 (international callers or Toronto local
dial 416-695-5259) a few minutes prior to start and request the Harvest
conference call. The call will also be available for replay by dialing
1-888-509-0081 (international callers or Toronto local dial 416-695-5275) and
entering passcode 626360.
Webcast listeners are invited to go to the Investor Relations – Presentations
& Events page of the Harvest Energy website at www.harvestenergy.ca for the live
Webcast and/or a replay of the Webcast. Harvest is one of Canada’s largest energy royalty trusts. We
are focused on identifying opportunities within the oil and natural gas sector
to create and deliver value to unitholders through monthly distributions and
unit price appreciation. With an active acquisition program and the technical
approach taken to maximizing our assets, we strive to grow Cash Flow per unit.
Harvest offers unitholders a sustainable trust with a reserve life index of 9.5
years, and current production weighted approximately 70% to crude oil and
liquids and 30% to natural gas. Harvest trust units are traded on the Toronto
Stock Exchange ("TSX") under the symbol "HTE.UN" and on the New York Stock
Exchange ("NYSE") under the symbol "HTE". ADVISORY
Certain information in this press release, including
management’s assessment of future plans and operations, contains forward-looking
information that involves risk and uncertainty. Such risks and uncertainties
include, but are not limited to, risks associated with: imprecision of reserve
estimates; conventional oil and natural gas operations; the volatility in
commodity prices and currency exchange rates; risks associated with realizing
the value of acquisitions; general economic, market and business conditions;
changes in environmental legislation and regulations; the availability of
sufficient capital from internal and external sources; and, such other risks and
uncertainties described from time to time in Harvest’s regulatory reports and
filings made with securities regulators. Forward-looking statements in this press release may include,
but are not limited to, production volumes, operating costs, commodity prices,
capital spending, access to credit facilities, and regulatory changes. For this
purpose, any statements that are contained in this press release that are not
statements of historical fact may be deemed to be forward-looking statements.
Forward-looking statements often contain terms such as "may", "will", "should",
"anticipate", "expects" and similar expressions. Readers are cautioned not to place undue reliance on
forward-looking statements as there can be no assurance that the plans,
intentions or expectations upon which they are based will occur. Such
information, although considered reasonable by management at the time of
preparation, may prove to be incorrect and actual results may differ materially
from those anticipated. Harvest assumes no obligation to update forward-looking
statements should circumstances or management’s estimates or opinions change.
Forward-looking statements contained in this press release are expressly
qualified by this cautionary statement.
Investor & Media Contacts: |
|
John Zahary President & CEO |
Robert Fotheringham Vice President, Finance & CFO |
Cindy Gray Manager, Investor Relations |
Corporate Head Office:
Harvest Energy Trust
2100, 330 – 5th Avenue S.W.
Calgary, AB Canada T2P 0L4
Phone: (403) 265-1178
Toll Free: (866) 666-1178
Fax: (403) 265-3490
Email: information@harvestenergy.ca
Website: www.harvestenergy.ca
This ‘6-K’ Filing | Date | Other Filings | ||
---|---|---|---|---|
Filed on: | 8/15/06 | |||
8/9/06 | ||||
7/26/06 | 6-K | |||
For Period End: | 6/30/06 | |||
3/31/06 | ||||
6/30/05 | 6-K | |||
List all Filings |