CALGARY, ALBERTA--(Marketwire - Jan. 12,
2009) - NAL Oil & Gas Trust ("NAL" or the "Trust") (TSX:NAE.UN) is
meeting with investment analysts today in Calgary to outline details of
NAL's 2009 budget and operating plan. The detailed 2009 guidance
presentation will be available for viewing on NAL's website (www.nal.ca) at 8:00 am MST.
2009 STRATEGIC DIRECTION AND PRIORITIES
NAL's strategic direction for 2009 will focus on balancing
opportunities between delivering results from its existing strong asset
base and adding opportunities in core areas while maintaining financial
flexibility and prudent balance sheet management in a lower commodity
price environment. NAL has structured its 2009 budget to live within
forecast cash flow at reasonable commodity prices, targeting a total
(distributions + capital expenditures) payout ratio of 100%. Preserving
balance sheet strength today will allow NAL to take advantage of
acquisition opportunities in the future, adding value for Unitholders.
The Trust has $1.1 billion of safe harbour available for transactions
before the end of 2010. Safe harbour restrictions were imposed as part
of the Tax Fairness Plan announced on October 31, 2006.
NAL has based its 2009 budget forecast on a US$50 WTI per barrel
crude oil price (US$45 for the first six months and US$55 for the last
six months of the year), a 1.20 Cdn/US$ exchange rate and Cdn$6.50 per
GJ AECO natural gas price.
2009 CAPITAL PROGRAM
NAL's capital program for 2009 has been designed to be scalable and
flexible in response to uncertain commodity price and market conditions.
NAL is planning a $100 - $120 million capital program and expects to
drill approximately 82 (40 net) wells. The trust controls over 90% of
the capital expenditures in 2009 and is not facing material land
expiries, providing significant flexibility over timing and scale of the
2009 Capital Allocation
Drill, complete, tie-in 89
Plant / facilities 7
Land / seismic 7
Capitalized G&A 7
Note: assumes mid-point of guidance range.
The 2009 program is focused 70 - 75% on oil development
opportunities in Alberta and Saskatchewan with incremental capital
committed to ongoing drilling, completion and tie-in spending on the
Trust's gas focused area in Monkman, BC. Highlights of the opportunities
in the 2009 program include:
- In the fourth quarter of 2008, the Trust drilled and successfully
executed a horizontal multi-stage frac program on three Cardium oil
wells in Central Alberta. Initial production rates were as high as 500
boe/d per well with expected stabilized production rates of 200 - 300
boe/d after three months. The Trust will drill 10 (7 net) Cardium
horizontals in the Sylvan Lake area in 2009 on its significant acreage
- In Saskatchewan, a large inventory of prospects on existing lands
coupled with opportunities from $10 million spent in 2008 for new land
purchases will translate into drilling 40 (19 net) horizontal wells.
These wells are expected to add production and continue to delineate
several existing Mississippian and Bakken trends, adding new locations
- In Alberta, the Trust will drill nine stacked multi-zone Mannville
opportunities in the Ellerslie, Ostracod and Glauconite horizons in the
Garrington / Westward Ho areas.
- In Northeast B.C., NAL is completing, testing and potentially
tying in production from two multi zone high impact Monkman gas wells
(10% WI) drilled in late 2008, plus drilling one additional exploration
well (20% WI) to validate additional lands in the area.
The Trust plans to have an active first quarter, spending
approximately 35% of its full year capital, building on the momentum
established in Q4 2008. At the end of the first quarter 2009, the Trust
will reassess capital spending plans and timing as market conditions
unfold. Should commodity prices remain low, the Trust may defer certain
internal opportunities in favour of property or corporate acquisitions
that NAL's acquisition team is regularly evaluating. Alternatively, if
commodity prices improve, the Trust is well positioned to add
incremental opportunities to its capital program in the third and fourth
quarters of the year.
Lower commodity prices and a reduced capital program are forecast to
deliver production volumes averaging between 22,200 - 23,500 boe per
day. The midpoint of this range, is approximately 4% lower than
estimated 2008 full year levels. Production is relatively balanced with
52% weighted to crude oil and natural gas liquids and 48% weighted to
2009 Production Volume
Crude oil (bbl/d) 10,100
Natural gas liquids (bbl/d) 1,700
Natural gas (mmcf/d) 66
Total Volume (boe/d) 22,800
Note: assumes mid-point of guidance range.
Operating costs per boe are expected to be 8 - 10% higher in 2009
versus 2008 levels due to lower volumes and higher processing fees, plus
higher property taxes and utilities primarily in Saskatchewan.
Operating costs are expected to be between $11.60 - $11.90 per boe. NAL
will continue to focus on cost initiatives in its field operations to
manage increases in these costs and take advantage of lower activity
levels expected in 2009.
2009 FULL YEAR GUIDANCE SUMMARY
Our 2009 Guidance is summarized as follows:
Average total production (boe/d) 22,200 - 23,500
Capital expenditures ($MM)(i) 100 - 120+
Operating costs ($/boe) 11.60 - 11.90
Cash G&A ($/boe)(ii) 1.75 - 1.95
(i)excluding property and corporate acquisitions
(ii)excluding unit based compensation
FINANCIAL POSITION - BALANCE SHEET, CREDIT LINES, HEDGING
NAL's full year 2008 results will be announced on February 26, 2009.
At year-end 2008, bank debt is estimated to be approximately $285
million compared to committed credit lines of $450 million. The Trust's
2009 net debt to 12 month trailing cash flow ratio is anticipated to be
in the range of 1.05 times (with total debt, including convertible
debentures, at 1.3 times).
NAL has attractive oil and gas hedges in place for 2009,
significantly above market levels. For crude oil, NAL has hedged an
average of 42% of net budgeted production (after royalty) for the first
half of 2009 with a total of 31% of 2009 average volume hedged for the
full year. Volumes are hedged at floor prices averaging Cdn$123 per
barrel. For natural gas, first half 2009 hedges total 36% of net
budgeted production or 26% on a full year basis with floors averaging in
excess of $8.15 per GJ (or $8.60 per mcf). All commodity hedge
counterparties are Canadian chartered banks in our lending syndicate.
NAL's current hedge position contributes an additional $65 - 70
million in cash flow when compared to cash flows from budgeted prices.
This incremental cash flow allows the Trust to maintain and execute its
ongoing capital program, to set distributions at higher levels than
would be supported by current commodity prices and to maintain debt at
2008 year-end levels.
NAL has consistently paid monthly distributions at the current $0.16
per unit level or more since August 2004. However, after considering
the currently low commodity price environment, the level of capital
expenditures required to deliver future production and reserves, and the
challenges of raising additional capital in the current markets, the
Board of Directors has decided to reduce the current distribution level.
Balancing the above factors, with Unitholders' desire for yield and
the support provided by NAL's 2009 hedging program, the Trust will pay a
distribution of $0.11 per unit on February 16, 2009, to Unitholders of
record on January 22, 2009. The units will begin trading on an
ex-distribution basis on January 20, 2009.
Trailing cash distributions for the past 12 months total $1.87 per
unit, representing a 23% cash-on-cash yield based on the January 9, 2009
closing unit price of $8.07.
Assuming the Trust's performance matches the commodity price and
operations forecast, this distribution reduction will allow the Trust to
live within cash flow and maintain balance sheet strength. NAL
management will continue to actively monitor commodity prices and
financial market conditions making adjustments to the capital program
and distribution level as required throughout the year.
Forward Looking Statements
This press release contains statements that constitute
"forward-looking information" or "forward-looking statements"
(collectively "forward-looking information") within the meaning of
applicable securities legislation. This forward-looking information
includes, among others, statements regarding: business plans for
drilling, exploration and development; estimates of production and
operations performance; forecasted commodity price estimates of future
sales; estimated amounts and timing of capital expenditures; estimates
of operating costs and unit operating costs; business strategy and plans
or budgets; estimated timing and results of new development; and other
expectations, beliefs, plans, goals, objectives, assumptions,
information and statements about possible future events, conditions,
results of operations or performance.
Various assumptions were used in drawing the conclusions or making
the forecasts and projections contained in the forward-looking
information contained in this press release. Forward-looking information
is based on current expectations, estimates and projections that
involve a number of risks, which could cause actual results to vary and
in some instances to differ materially from those anticipated by NAL and
described in the forward-looking information contained in this press
release. Undue reliance should not be placed on forward-looking
information. The material risk factors include, but are not limited to:
the risks of the oil and gas industry, such as operational risks in
exploring for, developing and producing oil and natural gas, market
demand and unpredictable facilities outages; risks and uncertainties
involving geology of oil and gas deposits; the uncertainty of estimates
and projections relating to production, costs and expenses; potential
delays or changes in plans with respect to exploration or development
projects or capital expenditures; risk that adequate pipeline capacity
to transport the natural gas to market may not be available;
fluctuations in oil and gas prices, foreign currency exchange rates and
interest rates; the outcome and effects of any future acquisitions and
dispositions; safety and environmental risks; uncertainties as to the
availability and cost of financing and changes in capital markets;
competitive actions of other industry participants; changes in general
economic and business conditions; the possibility that government
policies or laws may change or governmental approvals may be delayed or
withheld; changes in tax laws; changes in royalty rates; and the results
of NAL's risk mitigation strategies, including insurance; and NAL's
ability to implement its business strategy. Readers are cautioned that
the foregoing list of risk factors is not exhaustive. Additional
information on these and other factors which could affect NAL's
operations or financial results are included in NAL's most recent Annual
Information Form and Annual Financial Report. In addition, information
is available in NAL's other reports on file with Canadian securities
Forward-looking information is based on the estimates and opinions of NAL's management at the time the information is released.
Throughout this press release, the calculation of barrels of oil
equivalent (boe) is calculated at a conversion rate of six thousand
cubic feet (mcf) of natural gas for one barrel of oil and is based on an
energy equivalence conversion method. Boes may be misleading,
particularly if used in isolation. A boe conversion ratio of 6 mcf:1 bbl
is based on an energy equivalence conversion method primarily
applicable at the burner tip and does not represent a value equivalence
at the wellhead.
NAL Oil & Gas Trust provides investors with a yield-oriented
opportunity to participate in the Canadian Upstream Conventional Oil and
Gas Industry. The Trust generates monthly cash distributions for its
Unitholders by pursuing a strategy of acquiring, developing, producing
and selling crude oil, natural gas and natural gas liquids from pools in
southeastern Saskatchewan, central Alberta, northeastern British
Columbia and Lake Erie, Ontario. Trust units trade on the Toronto Stock
Exchange under the symbol "NAE.UN".
NAL Oil & Gas Trust
Manager, Investor Relations
(403) 294-3620 or Toll Free: 1-888-223-8792
(403) 515-3407 (FAX)