CALGARY, ALBERTA--(Marketwire - Jan. 20,
2010) - NAL Oil & Gas Trust ("NAL" or the "Trust") (TSX:NAE.UN) is
meeting with the investment community in Calgary, Alberta on Thursday,
January 21, and in Toronto, Ontario on Monday, January 25, to outline
details of NAL's 2010 operating plan and financial assumptions. The
Trust's 2010 guidance presentation will be available on its website (www.nal.ca) Thursday, January 21, at 8:30 am MST.
2010 STRATEGIC DIRECTION AND PRIORITIES
NAL's strategic focus for 2010 will build on the Trust's positive
performance in 2009. The Trust plans to maintain its leadership position
in the Cardium oil resource play in central Alberta, continue ongoing
activity in the attractive Mississippian oil portfolio in SE
Saskatchewan and invest in strategic gas opportunities on the Trust's
expanded land portfolio. The Trust also plans to divest of approximately
500 boe/d of non-strategic assets designed to high grade its asset
base.
NAL has structured its 2010 plans targeting a total payout ratio
(distributions + capital expenditures) of 110% - 115% which balances an
extensive inventory of light oil opportunities, maintaining
distributions, and prudently managing the balance sheet. Consistent with
2009, NAL's balance sheet strength and access to capital markets
positions the Trust to take advantage of value adding acquisition
opportunities in the future. Subject to final bank documentation being
completed, the Trust's credit facility is expected to be increased to
$550 million from $450 million as a result of the Breaker Energy
transaction closing, which occurred on December 11, 2009.
The Trust currently has $535 million 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 management continues to assess alternatives for corporate
conversion and reiterates that the company plans to maintain a yield
oriented business model post conversion. The timing of conversion is
expected to occur in late 2010 or early 2011 in order to maximize the
tax shield currently provided for in the trust model and protect its
$1.2 billion of available tax pools.
NAL has based its 2010 plans on a US$77 WTI per barrel crude oil
price a 1.05 Cdn/US$ exchange rate and Cdn$5.00 per GJ AECO natural gas
price.
2010 CAPITAL PROGRAM FOCUSED ON CARDIUM & MISSISSIPPIAN OIL
NAL is planning a $175 million capital program and expects to drill
approximately 137 (67 net) wells, the largest drilling program in the
Trust's 14 year history. The trust operates over 90% of its capital
expenditures in 2010 and is not facing material land expiries, providing
significant flexibility over timing and scale of the program to react
to commodity prices and prevailing market conditions.
2010 Capital Allocation
$MM
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Drill, complete, tie-in 140
Recompletions 7
Plant / facilities 8
Land / seismic 10
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165
Other 10
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175
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Note: Capital is before AB drilling credits of $10 million.
The 2010 program is focused 80% on Cardium oil development
opportunities in Alberta and Mississippian oil projects in Saskatchewan
with incremental capital committed to strategic natural gas drilling, in
Alberta and British Columbia. Highlights of the opportunities in the
2010 program include:
-- Cardium oil projects in Central Alberta will continue to be a focus for
the Trust at its existing Garrington/Westward Ho core area as well as
delineating trend acreage to the south, at Lochend (Cochrane) and to the
north, at Pine Creek;
-- In Saskatchewan, a large inventory of conventional oil prospects on
existing lands coupled with new opportunities added in 2009 will lead to
drilling 61 (30 net) horizontal wells. These wells are expected to add
production and continue to delineate several existing Mississippian
trends, adding new locations to future inventory;
-- For natural gas, the Trust plans to drill two additional wells on the
existing Kakwa Falher development program in Alberta and in NE British
Columbia, NAL is planning to drill two Fireweed horizontal wells and the
first Halfway horizontal at Trutch.
The Trust plans to have an active first quarter, spending approximately 35% of its full year capital.
PRODUCTION VOLUMES
The 2010 capital program is forecast to deliver production volumes
averaging between 29,500 - 30,500 boe per day. Incorporated in this
guidance range, the Trust plans to divest of approximately 500 boe per
day in non-strategic assets designed to high grade the existing asset
base. Production in 2010 is forecast to be balanced with a 50% weighting
to crude oil and natural gas liquids and 50% weighting to natural gas.
2010 Production Volume
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Crude oil (bbl/d) 13,000
Natural gas liquids (bbl/d) 2,100
Natural gas (mmcf/d) 89
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Total Volume (boe/d) 30,000
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Note: assumes mid-point of guidance range.
OPERATING COSTS
Operating costs per boe are expected to be consistent with 2009
levels due to lower power and third party costs, offset somewhat by
higher property taxes and utilities primarily in Saskatchewan. Operating
costs are expected to be between $11.00 - $11.50 per boe. NAL will
continue to focus on cost initiatives in its field operations to manage
increases in these costs and take advantage of improved operations
efficiencies in 2010.
2010 FULL YEAR GUIDANCE SUMMARY
Our 2010 Guidance is summarized as follows:
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Average total production (boe/d) 29,500 - 30,500
Capital expenditures ($MM)(i) 175
Wells Drilled (Gross/Net) 137/67
Operating costs ($/boe) 11.00 - 11.50
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(i)excluding property and corporate acquisitions & before AB drilling
credits of $10MM
(ii)excluding unit based compensation
FINANCIAL POSITION - BALANCE SHEET, CREDIT LINES, HEDGING
NAL's full year 2009 results will be announced on Wednesday, March
10, 2010. At year-end 2009, net debt is estimated to be approximately
$282 million compared to committed credit lines of $550 million (subject
to completion of final bank documentation). The Trust's 2010 net debt
to 12 month trailing cash flow ratio is anticipated to be in the range
of 1.0 times (with total debt, including convertible debentures, at 1.7
times).
NAL continued its hedging activity to protect cash flow for the
purposes of sustaining distributions and maintaining an active capital
program. For crude oil, NAL has 46% of net budgeted 2010 production
(after royalty) hedged for the full year. For natural gas, NAL has 45%
of net budgeted volumes hedged for the full year. All commodity hedge
counterparties are Canadian chartered banks.
DISTRIBUTION LEVELS
NAL anticipates maintaining the monthly distribution at the current
$0.09 per unit level, provided that the stated guidance parameters and
commodity price assumptions are realized.
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
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.
About NAL
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".
Contact Information:
NAL Oil & Gas Trust
Clayton Paradis
Manager, Investor Relations
(403) 294-3620 or Toll Free: 1-888-223-8792
(403) 515-3407 (FAX)
investor.relations@nal.ca
www.nal.ca