CALGARY, ALBERTA--(Marketwire - Jan. 23,
2008) - NAL Oil & Gas Trust (TSX:NAE.UN) is meeting with investment
analysts today in Calgary to provide an update on NAL's 2007 performance
and to outline further detail on 2008 plans. The presentation is
available for viewing on NAL's website.
2008 STRATEGIC DIRECTION AND PRIORITIES
NAL's strategic direction for 2008 focuses on performance and
opportunities. The management team remains committed to delivering top
quartile performance, effectively executing our current plan and
generating new attractive opportunities. NAL plans to retain its
attractive balance sheet, continue to maintain available lines of credit
and add to its growing tax pool base. As a result, we are well
positioned to make the transition to a dividend paying corporation in
the future.
2008 GUIDANCE
NAL has a strong operating and financial plan for 2008 which follows
up on the positive performance of 2007. President and CEO Andrew
Wiswell commented: "Production volumes and funds from operations are
forecast to be higher in 2008 compared to 2007. Our capital program of
$110 - 120 million is consistent with last year's spending, and rig and
service costs are anticipated to be lower than in 2007. NAL has
increased its inventory of opportunities significantly by adding new
prospecting capability, broadening opportunities and extensions in our
core areas, and working through the new prospects acquired in the Seneca
acquisition in 2007. Financially, NAL expects to be able to maintain
distributions assuming current commodity prices and has an active
hedging program, which has locked in average prices above our Base Case
forecast. NAL's debt to cash flow ratios are expected to improve in 2008
and we have over $100 million of available committed bank lines to take
advantage of opportunities which continue to be available".
Our guidance for 2008 is outlined below:
2008 Full Year Guidance - Base Case
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Average total production (boe/d) 23,000 - 24,000
Capital expenditures ($MM) 110 - 120
Operating costs ($/boe) 9.50 - 9.80
G&A ($/boe) 1.90 - 2.10
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NAL's assumptions for our 2008 guidance are as follows:
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Base Case Sensitivity Case
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WTI Oil Price (US$/bbl) 80.00 90.00
AECO Natural Gas Price (C$/GJ) 6.50 7.00
Exchange Rate (Cdn/USD) 1.00 0.98
Base Decline Rate (%) 20 20
Interest Rate (%) 5.4 5.4
DRIP Participation (%) 17 17
DRIP Proceeds ($MM) 30 30
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PRODUCTION
NAL is forecasting relatively consistent quarterly production within
the guidance range of 23,000 - 24,000 barrels of oil equivalent (boe)
per day, and with a 2008 year end exit rate of approximately 23,600 boe
per day. The production mix is expected to be weighted 50 percent to
crude oil, and seven percent to natural gas liquids with 43 percent
being natural gas. Geographically on a boe basis, 54 percent of
production is expected to originate in Alberta, 34 percent in
Saskatchewan, nine percent in British Columbia and three percent in Lake
Erie in Ontario. This production diversification and the nature of our
volumes in Alberta results in limited impact from the proposed changes
in Alberta royalties.
CAPITAL EXPENDITURES
Based upon a $113 million capital budget (excluding acquisitions), NAL will allocate its capital as follows:
2008 Capital Budget
($ millions)
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Exploration & Development:
Drill, Complete & Tie-in 84
Plant & Facilities 15
Land & Seismic 6
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Subtotal 105
Other
Office Equipment 2
Capitalized G&A 5
Capitalized Long term Incentive Plan (LTIP) 1
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Total 113
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NAL's 2008 capital spending will be consistent with its historical
trend, with 60 percent of capital targeted to be spent during the last
six months of 2008. This profile allows NAL considerable flexibility to
accelerate or defer portions of the program depending on market
conditions.
2008 Quarterly Capital Budget
($ millions)
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Q1 26 25%
Q2 15 14%
Q3 36 34%
Q4 28 27%
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Total 105 (1) 100%
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(1) Exploration and development
OPERATIONAL HIGHLIGHTS
NAL plans to drill 97 (50 net) wells in 2008 at an estimated drill,
complete and tie-in cost of $84 million. Significant capital will be
invested in the Nottingham gas plant expansion ($6 million) and the
Stanmore water flood upgrade ($3 million). These facilities projects are
expected to add significant value through future reserve additions to
existing pools and provide additional revenue streams from third
parties. The Trust expects to spend $6 million on land and seismic to
support current initiatives.
We expect to drill 46 (18 net) wells in Southeast Saskatchewan. NAL
recently purchased 6,000 hectares of new land in the Hoffer area,
executed a 3D seismic program and picked the first two vertical
Mississippian locations to be tested in 2008. In Stoughton, a three well
horizontal Bakken program will follow up on five successful 2007
drills. The Trust will also pursue an additional four well Bakken
program on other lands keying off recent industry activity. We will
continue to exploit our existing core areas around Alida, Nottingham,
Steelman and Elswick with 37 drills, including several water flood
projects, scheduled for 2008.
During 2007, we focused significant time on mapping and testing
concepts to in-fill and extend existing Cardium oil trends in Alberta.
Our geological staff have identified over 230 prospects on NAL land that
will be pursued in a measured approach over the next several years.
Land strategy, oil price, spacing approvals, surface access and
infrastructure will be considered carefully to ensure value is maximized
from these opportunities. For 2008, the Trust anticipates drilling 14
wells to further delineate and test our in-fill strategies.
The Mannville formation continues to be a focus for NAL in Central
Alberta, with over 60 stacked potential leads being evaluated on the
Trust's land base in the Sylvan Lake and Westward Ho areas. A five well
program will be executed in 2008 following four successful drills in
2007, including activity on new land acquired at recent sales.
NAL will continue to expand and exploit the Mannville in the Hanna
and Drumheller areas using proven prospecting techniques. The Trust
expects to drill 10 - 15 wells in this area during 2008 following up on a
successful four well program in 2007 and executing on opportunities
from the acquisition of Seneca Energy. NAL will be investing $3 million
on recompletions in the area with over 90 opportunities identified to
date. The Trust has successfully transferred play concepts from our core
areas onto the Seneca acreage near Drumheller. Our most recent
recompletion tested at approximately three million cubic feet per day
(mmcf/day). In addition, there is an inventory of more than 200 shallow
gas opportunities in the W4 area that will be considered when commodity
prices support the investment. At this time, there is no plan for any
shallow gas development in 2008.
NAL anticipates investing ten percent ($8 million) of our
exploration and development budget on exploration wells in 2008,
following up on recent successes in the Monkman and Peppers areas.
OPERATING COSTS
NAL estimates an operating cost range of $9.50 to $9.80 per barrel
of oil equivalent (boe), up three to four percent from 2007 levels. A
higher weighting to B.C. production plus anticipated increases in
labour, fuel, power and property tax costs will more than offset higher
volumes and lower workover costs.
FINANCIAL HIGHLIGHTS
NAL's financial performance for 2008 is anticipated to deliver the
following results, assuming the mid-point of our guidance ranges.
2008 Forecast Financial Results
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Base Case(1) Sensitivity(1)
US$WTI / C$AECO / FX (Cdn/USD) $80 / $6.50 / 1.00 $90 / $7.00 / 0.98
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Funds from Operations ($MM) 250 275
Funds from Operations ($ per unit) $2.70 $3.00
Payout Ratio 71% 64%
Payout including Capital 116% 105%
Payout including Capital and DRIP 104% 94%
Weighted average Units Outstanding
(MM) 91.7 91.7
Debt / Cash Flow 1.2 / 1.6 (2) 1.0 / 1.4 (2)
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(1) Includes realized hedging gains (losses)
(2) Including convertible debentures
2007 UPDATE
NAL provided 2007 guidance in January, and in August we increased
our guidance to reflect the acquisition of Seneca Energy plus strong
first half performance. NAL's 2007 full year operating and financial
results will be announced on February 28, 2008 and are expected to be in
the range of the guidance provided in August, 2007.
2007 Full Year Guidance
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August 2007 Guidance
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Average total production (boe/d) 20,500 - 20,800
Capital expenditures ($MM)(1) 115 - 120
Operating costs ($/boe) 8.90 - 9.10
G&A ($/boe)(2) 1.75 - 1.90
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(1) Excluding acquisitions.
(2) Excluding unit-based compensation expense and special retention bonus.
RECENT DEVELOPMENTS
NAL participated in drilling three significant wells during 2007
arising from the Seneca acquisition - one at Peppers in West Central
Alberta and two at Monkman in Northeast B.C. Testing operations are
ongoing and NAL is encouraged by the results.
The 16-16 Peppers well (19 percent working interest), recently
successfully tested an upper Devonian reservoir on a restricted
multi-point test with rates ranging from 3 - 5 million mmcf/day of
natural gas at a surface flowing pressure of 3,300 psi (20 percent total
acid gas). Technical evaluation is ongoing with the timing of the
tie-in under review. No volumes have been incorporated into NAL's
forecast of 2008 production.
At Monkman, B.C. NAL participated in two deep, Permian wells
operated by Talisman Energy. The first well at a-26-E (20 percent
working interest) penetrated two distinct natural gas bearing formations
in the target zone. The lower zone was tested in December and pressure
recorders were left in the wellbore over the year-end. The upper sheet
is now being tested.
A second well is being tested at a-44-B (8.45 percent working
interest). Production from the a-26-E well is included in NAL's 2008
budget commencing in the second quarter but no 2008 volumes have been
included for the a-44-B well.
A drilling rig has been moved to the a-31-K location to test a new
structure. NAL has a ten percent working interest in all zones in this
well, after entering into a pooling agreement with Talisman. The
vertical pooling increases NAL's potential number of wells on this
prospect from one to three, and substantially reduces the risk of the
a-31-K well. Results are expected late this year. NAL anticipates that
it will participate in at least one other well in the Monkman area in
2008.
In December, 2007 the B.C. government auctioned six land sale
parcels in the North Brazion and East Bullmoose areas, straddling NAL's
existing Monkman acreage. NAL purchased approximately 2,000 net acres of
exploratory land in the area.
NAL will update information on these prospects as results become available.
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; 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. Undue reliance should not
be placed on forward-looking information. 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. 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 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; 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 regulatory
authorities.
Forward-looking information is based on the estimates and opinions of NAL's management at the time the information is released.
Boe Conversion
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 is an open-end investment trust that
generates distributions through the acquisition, development, production
and marketing of crude oil, natural gas and natural gas liquids. The
Trust owns high quality assets in Alberta, Saskatchewan, British
Columbia and Ontario. Trust units trade on the Toronto Stock Exchange
under the symbol "NAE.UN".
Contact Information:
NAL Oil & Gas Trust
Gordon Currie
Manager, Investor Relations
(403) 294-3620 or Toll Free: 1-888-223-8792
(403) 515-3407 (FAX)
Email: investor.relations@nal.ca
Website: www.nal.ca