Canadian oil and gas investment trust Penn West Energy Trust (PWE, PWT_U.TO) reported Thursday a profit for the third quarter that plunged from last year, reflecting significant revenue drop amid lower commodity prices and a 6% decline in production.
The company also reaffirmed its production outlook for the full year 2009, and provided initial production guidance for fiscal 2010.
With the economic crisis curtailing demand for oil, companies operating in the oil sector have had a tough time. Lower commodity prices and a decline in margins have hurt the bottom line of many of them. Oil prices have almost halved from an all-time high of $147 per barrel in July 2008, although they have improved from a yearly low of less than $34 a barrel in February this year. Oil prices in the third quarter averaged US$68.29 per barrel, while it averaged US$118.13 per barrel in the year-ago quarter.
Penn West noted that it continued to focus on positioning the company to move from a trust to a corporate model prior to the end of 2011. The company intends to primarily use a combination of organic growth and dividends to provide a return on capital in the future so as to position itself with the other senior independent North American oil and gas producers.
Third Quarter Results
The Calgary, Canada-based company, which engages in acquiring, developing and holding interests in petroleum and natural gas properties, reported net and comprehensive income of C$7 million or C$0.02 per unit, sharply lower than C$1.06 billion or C$2.73 per unit in the prior-year quarter. The company noted that the significantly higher income in the prior year was primarily due to unrealized risk management gains on our oil and natural gas collars.
Funds flow for the quarter dropped 47% to C$349 million from C$662 million in the year-ago quarter as a result of continued weakness in commodity prices. On a per-unit basis, funds flow nearly halved to C$0.83 from C$1.71 in the comparable quarter a year ago.
Penn West's gross revenues, including realized gains and losses on commodity, for the quarter dropped 35% to C$800 million from C$1.24 billion in the comparable period a year ago.
Quarterly revenues plunged to C$610 million from C$1.17 billion in the year-ago quarter. Oil and natural gas revenues were C$732 million, sharply lower than C$1.44 billion recorded in the prior-year quarter. Royalties' expenses declined to C$122 million from C$265 million in the year-ago quarter.
Other Metrics
The company's third-quarter total production averaged 178,124 barrels of oil equivalent or boe per day, down 6% from last year, but came within the guidance range of 175,000 to 180,000 boe per day for the year.
The company's crude oil and NGL production averaged 104,583 barrels per day and natural gas production averaged about 441 million metric cubic feet or mmcf per day in the third quarter.
During the third quarter, average sales price for light oil and NGL dropped 42% to C$64.15 per barrel or bbl, from a year ago. Heavy oil's average sales price reached C$58.72 per bbl, down 40% from last year and natural gas sales price averaged at C$3.13 per metric cubic feet or mcf, 63% lower than the year-ago quarter.
The company's third-quarter netback was C$25.91 per boe, after the effects of risk management, down 40% from last year, on lower commodity prices for natural gas and oil.
Total expenses for the third quarter declined to C$674 million from C$768 million in the year-ago quarter. Capital expenditure for the third quarter totaled C$142 million, down 39% from C$232 million in the prior-year quarter.
Penn West said it reduced its fiscal 2009 development programs compared with 2008 in response to the issues in the financial markets and the decline in commodity prices. The company also successfully focused its efforts on less capital intensive production restoration and optimization activities to maintain its production.
The company also said that its Board of Directors resolved to maintain the Trust's distribution level at C$0.15 per unit per month, subject to maintenance of current forecasts of commodity prices, production levels and finalization of the 2010 capital budget.
Nine-Month Highlights
For the nine-month period, Penn West reported net and comprehensive loss of C$132 million or C$0.32 per unit, compared to income of C$817 million or C$2.17 per unit in the prior-year period.
Funds flow for the period dropped to C$1.13 billion from C$2.05 billion in the year-ago period. On a per-unit basis, funds flow more halved to C$2.74 from C$5.41 in the comparable period a year ago.
Penn West's gross revenues, including realized gains and losses on commodity, for the period dropped 36% to C$2.37 billion from C$3.68 billion in the comparable period a year ago.
Total revenues for the year-to-date period plunged to C$1.71 billion from C$3.41 billion in the same period last year.
Looking Ahead.........
For fiscal 2009, Penn West narrowed its forecast for development capital expenditures to a range of about $650 to $700 million from the prior guidance in the range of C$600 million to C$825 million range, reflecting year-over-year commodity price erosion. Based on the level of capital expenditures, the company now forecasts 2009 average production to remain in the range of about 175,000 to 180,000 boe per day.
The company added that it is currently in the process of finalizing our capital spending budget for 2010. However, it anticipates 2010 capital spending program between $800 and $900 million, with production guidance for the full year 2010 being in the range of 170,000 to 180,000 boe per day, prior to acquisitions and dispositions.
Stock Quote
PWE closed Wednesday's regular trading session at US$17.50, up US$0.35 on a volume of 4.59 million shares, sharply higher than the three-month average volume of 2.81 million shares. In the past 52-week period, the stock has been trading in a range of US$6.77 to US$18.54.
PWT_U.TO closed on the Toronto Stock Exchange at C$18.60, up C$0.35 on a volume of 1.63 million shares, higher than the three-month average volume of 1.17 million shares. In the past 52-week period, the stock has been trading in a range of C$8.82 to C$21.34.
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