CALGARY--(CCNMatthews - Dec. 14) - NAL Oil
& Gas Trust ("NAL" or the "Trust") announced today that it will
conduct an active drilling program again in 2007, despite uncertainty
created by tax initiatives proposed by the Federal Government. "Our
unitholders and our employees should know that it is business as usual
at NAL for the foreseeable future," said Andrew Wiswell, President and
Chief Executive Officer. "We are well positioned to respond in an
appropriate manner once the new rules governing income trusts are
clarified."
Capital Expenditures
NAL's Board of Directors has approved a 2007 capital budget of $106
million, consisting of $96 million for development activity and $10
million for capitalized items. The development component consists of
approximately $80 million for drilling and completions, $13 million for
facilities construction and $5 million for land and seismic. Capitalized
items consist largely of general and administrative expense, plus
office equipment and deferred long-term incentive compensation.
The Trust plans to drill 189 gross wells (87.1 net) in 2007,
compared to 84.7 net wells in 2006. The 87.1 net wells planned for 2007
represent an average 46.1 percent working interest, but the NAL group
also operates a drilling program on behalf of Manulife Financial,
largely in the same wells. NAL will operate 139 or 74 percent of the 189
planned wells.
NAL's operations are concentrated in two areas of the Western Canada
Sedimentary Basin - Southeast Saskatchewan and Central Alberta. The
Trust expects to drill 80 gross (30.9 net) wells in Saskatchewan next
year at a total cost of approximately $44 million and 86 gross (51.7
net) wells in Alberta at a total cost estimated to be $48 million. The
largest single project will be the second phase of drilling for coalbed
methane in the Horseshoe Canyon formation at Lacombe in Central Alberta.
NAL plans to participate in 23 gross (4.5 net) well in our major
non-operated properties in 2007, at a cost of approximately $5 million.
Production / Cost Structure
Production is expected to average 18,500 - 19,000 barrels of oil
equivalent per day in 2007 consisting of approximately 50 percent light
and medium crude oil, eight percent natural gas liquids, and 42 percent
natural gas. NAL's revenue projections are based on the assumptions that
West Texas Intermediate crude oil prices will average US$64.00 per
barrel next year, and that natural gas prices will average Cdn$7.50 per
gigajoule at AECO. Operating costs are expected to average $9.50 -
$10.00 per boe in 2007, and general and administrative expense is
expected to average $1.75 - $1.95 per boe, excluding costs associated
with the Trust's long-term incentive program (an estimated $0.45 per
boe).
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2007 full
year estimate
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Average total production (boe/d) 18,500 - 19,000
Capital expenditures ($MM) 106
Operating costs ($/boe) 9.50 - 10.00
G&A ($/boe) 1.75 - 1.95
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Boe @ 6 mcf: 1 bbl
NAL's monthly distribution is currently set at $0.16 per unit. The
Board of Directors reviews the level of distributions on an ongoing
basis in response to changing commodity prices or other industry
conditions. The payout ratio should approximate 75 percent, based on the
current distribution and NAL's cash flow projection for the year.
The Trust's 2007 capital budget will be funded principally from
internally generated cash flow, augmented by proceeds from the
Distribution Reinvestment Program (DRIP). DRIP participation is expected
to continue to average about 17 percent, resulting in the issuance of
an additional 1.8 million units during the course of the year. The DRIP
program is expected to contribute about $2 million per month in new
equity.
Long-term debt is expected to rise slightly in 2007, resulting in a
debt-to-cash flow ratio of approximately 1.2 times by the end of the
year. NAL's strong balance sheet allows it to continue to conduct an
active drilling program and positions the Trust to make value-added
acquisitions from time to time as opportunities arise.
NAL will provide additional detail on its 2007 plans at a meeting
for investment analysts to be held in its office on Tuesday, January 16,
2007.
Risk Management
NAL's 2007 capital program is underpinned by an active hedging
program and NAL's management is authorized to hedge up to 50 percent of
its annual net production. As of December 1, 2006, the Trust had
approximately 23 percent of its estimated 2007 net (after royalty) crude
oil and natural gas liquids production hedged at prices ranging from
$65.10 to $74.42 per barrel, and 34 percent of its net natural gas
production hedged at prices ranging from $6.61 to $8.48 per gigajoule.
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WTI Crude Oil Contacts Volume (bbls/d) Price Range (US$/bbl)
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Collars 1,000 $65.10 - $74.42
Swaps 1,000 $68.69
AECO Natural Gas Contracts Volume (GJ/d) Price Range ($/GJ)
Collars 9,000 $6.61 - $8.48
Swaps 4,000 $7.05
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Appointments
NAL is pleased to welcome two new members to its senior management team:
Marlon McDougall joined NAL on December 4, 2006 as Vice President of
Operations. Mr. McDougall earned a Bachelor of Science degree in
Petroleum Engineering from the New Mexico Institute of Mining and
Technology. Prior to joining NAL, Marlon had broad field operations and
engineering responsibilities and served in positions of increasing
responsibility at Northrock Resources, most recently as Vice President
Operations (Alberta/British Columbia).
Keith A. Steeves joined NAL on December 11, 2006 as Vice President
of Finance. Mr. Steeves earned a Bachelor of Business Administration
degree from the University of New Brunswick and Master of Business
Administration degree from the University of Calgary, as well as
Certified General Accounting and Certified Internal Auditor professional
designations. He spent the last three years as Chief Financial Officer
of Irving Oil Ltd. and has 18 years of business and financial experience
with Gulf Canada Resources. Ross Liland will continue to act as Chief
Financial Officer until his contract expires at the end of March, 2007
at which time Keith will assume the CFO's responsibility.
"I am delighted that both these individuals have chosen to join NAL,
providing a vote of confidence in our track record, asset base and
business plan. Marlon brings lots of hands on experience in the
petroleum industry, while Keith and I have demonstrated success working
together at both Gulf and ICG Propane," said Andrew Wiswell.
Proposed Tax Changes
NAL remains opposed to the proposed tax on trust income announced by
Federal Finance Minister Jim Flaherty on October 31, 2006. This policy
has resulted in the strong erosion of unitholder value and may cause a
negative impact on the recovery of oil and gas from mature fields in the
Western Canada Sedimentary Basin.
NAL has been working with both the Canadian Association of Income
Funds (CAIF) and the Coalition of Canadian Energy Trusts (CCET), meeting
with elected officials on both sides of the House of Commons, and with
editorial boards of major newspapers to educate them about the
unintended and damaging consequences of the proposed policy. Unitholders
who have not already done so, are encouraged to write to their Member
of Parliament, the Minister of Finance and the Prime Minister to make
their views known.
Whether or not the proposed new tax policy is implemented, NAL will
retain significant competitive advantages. These include high working
interests in its properties, a balanced production mix, below average
operating costs, a strong balance sheet and a well-capitalized partner
in Manulife Financial Corporation. The Trust is evaluating alternative
structures and business models in order to build on an eleven-year
record of strong performance on behalf of its unitholders.
Forward Looking Statements
This disclosure contains certain forward-looking statements that
involve substantial known and unknown risks and uncertainties, many of
which are beyond NAL's control, including: the impact of general
economic conditions in Canada and in the United States, industry
conditions, changes in laws and regulations including the adoption of
new environmental laws and regulations and changes in how they are
interpreted and enforced, increased competition, the lack of
availability of qualified operating or management personnel,
fluctuations in commodity prices, foreign exchange or interest rates,
stock market volatility and fluctuations in market valuations of
companies with respect to announced transactions and the final
valuations thereof, and the ability to obtain required approvals from
regulatory authorities. NAL's actual results, performance or achievement
could differ materially from those expressed in, or implied by, these
forward-looking statements and, accordingly, no assurances can be given
that any of the events anticipated by the forward-looking statements
will transpire or occur, or if any of them do so, what benefits,
including the amount of proceeds, that NAL will derive therefrom.
NAL Oil & Gas Trust is an open-end investment trust that
generates distributions through the acquisition, development, production
and marketing of oil, natural gas and natural gas liquids. The Trust
owns high quality assets in Alberta, Saskatchewan and Ontario. Trust
units trade on the Toronto Stock Exchange under the symbol "NAE.UN".
Contact Information:
Gordon Currie
Manager, Investor Relations
(403) 294-3620 or Toll Free: (888) 223-8792
Fax: (403) 515-3407
Email: investor.relations@nal.ca
Website: www.nal.ca