Harvest Energy Trust Announces Fourth Quarter and Full Year 2005 Financial and Operating Results.CALGARY, Alberta -- Harvest Energy Trust (TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension :HTE HTE Hírközlési És Informatikai Tudományos Egyesület (Hungary) HTE High Temperature Electronics HTE HazMat Trucking Enforcer (software) HTE HighTech Engineering HTE High Tension Electrode HTE High Turnover of Employees .UN) (NYSE NYSE See: New York Stock Exchange :HTE) ("Harvest") is pleased to announce the release of its fourth quarter and year ended December 31, 2005 financial and operating results. The audited financial statements, notes and MD&A are filed on SEDAR SEDAR System for Electronic Document Analysis and Retrieval SEDAR Southeast Data, Assessment, and Review or are available on Harvest's website on the 'Financial Information - Financial Reports' page. All figures reported herein are Canadian dollars Noun 1. Canadian dollar - the basic unit of money in Canada; "the Canadian dollar has the image of loon on one side of the coin" loonie dollar - the basic monetary unit in many countries; equal to 100 cents unless otherwise stated. Strategic Highlights: - Harvest achieved accretive growth in 2005 on the key measures of cash flow per unit, debt adjusted reserves per unit, debt adjusted production per unit, and reserve life index ("RLI RLI Realtors Land Institute RLI Reserve Life Index (oil industry) RLI Rhodesian Light Infantry (Rhodesian Army Unit) RLI Retail & Leisure International RLI Resource List Interoperability "), while reducing its debt leverage. - Cash flow increased to $1.84 per Trust Unit ($96.4 million) for the fourth quarter of 2005 compared to $1.31 per Trust Unit ($52.9 million) for the prior year. Cash flow for the year ended December 31, 2005 increased to $6.66 per Trust Unit ($309.8 million) compared to $4.94 per Trust Unit ($123.7 million) for the prior year. - Proved plus probable ("P+P") reserves per Trust Unit increased 11% year over year on a debt adjusted basis, a strong indicator of value generation especially given that reserve life index (RLI) also increased over the same period from 7.9 to 9.4, after giving effect to the merger with Viking Energy Royalty Trust royalty trust An ownership interest in certain assets, generally crude oil or gas production and real estate. Unlike the usual corporate organization, a trust arrangement permits income and tax benefits to flow through to the individual owners. ("Viking"). - Average daily production in 2005 increased 59% to 36,571 (BOE/per day). Fourth quarter 2005 production increased 5% to 38,834 BOE/d compared with the fourth quarter of 2004. On a debt adjusted basis, year over year exit production per million Trust Units increased 1.5% from 594 BOE/d to 603 BOE/d, another key measure of Harvest's sustainability. - Based on development capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. of $120.5 million in 2005, Finding & Development (F&D) costs, before changes in future development capital ("FDC FDC - Floppy Disk Controller "), were $10.73 per BOE BOE Based on Experience BOE Board of Education BOE Boletín Oficial del Estado (Spanish) BOE Bank of England BOE Board of Equalization BOE Board of Elections BOE Barrel of Oil Equivalent BOE Bind on Equip on a P+P reserve basis, and $11.80 per BOE on a Total Proved basis. Including FDC, the P+P and Total Proved reserves proved reserves The quantity of minerals expected to be recoverable under current economic and operating conditions. The amount of proved reserves is important in valuing the stock of a company with significant holdings in natural resources. , F&D costs are $13.10 per BOE and $15.17 per BOE, respectively. - Harvest increased distributions by 75%, from $0.20 to $0.35 per trust unit during 2005 and led the performance of the conventional energy royalty trusts with a total return to unitholders of 76% for the year. This return is comprised of 62% capital appreciation and 14% from cash distributions, significant value creation for unitholders. - Harvest's balance sheet and financing flexibility improved with debt to annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. cash flow of 0.9 times at December 31, 2005 compared with 1.9 times at the end of 2004, and securing a $750 million, 3 year term credit facility. Harvest plans to syndicate this facility and increase it up to $900 million by the end of March. - Harvest's trust units were listed for trading on the New York Stock Exchange New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. ("NYSE") during 2005, which has improved trading liquidity for all unitholders, and increased access to the U.S. capital markets. Harvest's strong balance sheet, combined with its largely undrawn un·draw tr.v. un·drew , un·drawn , un·draw·ing, un·draws To draw to one side, as a curtain. Adj. 1. undrawn - not represented in a drawing undelineated - not represented accurately or precisely credit facility and NYSE listing, provide the financial flexibility needed to continue pursuing value-adding acquisition opportunities. - Finally, Harvest and Viking successfully concluded a plan of arrangement effective February 3, 2006. Following the arrangement, Harvest is one of Canada's largest energy royalty trusts with a balanced production base (50% light/medium oil, 25% heavy oil and 25% natural gas) and significant long-term development opportunities. Financial & Operating Highlights The table below provides a summary of Harvest's financial and operating results for the three and twelve month periods ended December 31, 2005 and 2004.
Three months ended Twelve months ended
December 31 December 31
2005 2004(4) 2005 2004(4)
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FINANCIAL ($000s except
where noted)
Revenue, net(1) 174,383 108,969 436,452 212,118
Cash Flows(2) 96,431 52,870 309,843 123,710
Per Trust Unit, basic(2) $ 1.84 $ 1.31 $ 6.66 $ 4.94
Per Trust Unit,
diluted(2) $ 1.81 $ 1.18 $ 6.35 $ 3.97
Net income 75,638 11,600 104,946 11,241
Per Trust Unit, basic $ 1.45 $ 0.29 $ 2.25 $ 0.45
Per Trust Unit, diluted $ 1.42 $ 0.27 $ 2.19 $ 0.43
Distributions declared,
per Trust Unit $ 1.05 $ 0.60 $ 3.20 $ 2.40
Payout ratio (2)(3) 57% 47% 50% 52%
Capital asset additions
(excluding acquisitions) 39,476 8,873 120,508 42,662
Trust Units outstanding,
end of period 52,982,567 41,788,500 52,982,567 41,788,500
Operating netback
(/BOE)(2)(5) $ 33.68 $ 23.90 $ 32.47 $ 24.14
Total daily sales
volumes (BOE/day) 38,834 37,215 36,571 23,136
Harvest and
As at December 31, 2005 Viking Combined Harvest Standalone
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RESERVES (MBOE) Gross Net Gross Net
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Proved reserves 151,591 131,882 87,731 77,557
Probable reserves 54,663 47,175 31,946 27,984
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Total proved plus
probable (P+P) reserves 206,254 179,057 119,677 105,541
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(1) Revenues are net of royalties and realized and unrealized losses
on risk management contracts.
(2) These are non-GAAP measures; please refer to "Non-GAAP Measures"
as described in the MD&A for the year ended December 31 2005.
(3) Ratio of distributions to Cash Flows, excluding special
distribution settled with Trust Units in March 2005.
(4) Restated to reflect the adoption of new CICA recommendations to
account for convertible debentures and exchangeable shares. See
Note 3 to the Consolidated Financial Statements for the year
ended December 31, 2005.
(5) Petroleum and natural gas sales, net of royalties and net of
operating costs, including realized gain on electricity risk
management contracts.
Message to Unitholders Harvest continued to generate value for unitholders in 2005. We successfully closed the Hay River Hay River A river of northwest Canada rising in northeast British Columbia and flowing about 853 km (530 mi) generally northeast across northwest Alberta to Great Slave Lake in southern Northwest Territories. property acquisition, adding approximately 5,200 BOE/d of production at favorable acquisition metrics metrics Managed care A popular term for standards by which the quality of a product, service, or outcome of a particular form of Pt management is evaluated. See TQM. (approximately $46,000 per BOE/d, $13.15 per P+P reserves and recycle ratio of 2.8 times). This property has contributed strong netback net·back n. Linkage of the price of crude oil to the market price of products refined from it. production and will be an important area for Harvest's development program in 2006 and beyond. Opportunity exists for valuable future development opportunities to increase production and reserves from this property. We also expanded our reach into the U.S. with the listing of our trust units on the New York Stock Exchange ("NYSE"). Since listing on July 21, 2005, our trading liquidity has almost doubled. Harvest merged with Viking Energy Royalty Trust on February 3, 2006. A significant driver behind combining these two organizations was to capture the synergy of our similar strategies to creating value. Integration of the two entities is proceeding smoothly, having already completed a physical move to bring our Calgary office staff together into operating and administrative teams. Harvest's larger market capitalization Market Capitalization A measure of a public company's size. Market capitalization is the total dollar value of all outstanding shares. It's calculated by multiplying the number of shares times the current market price. This term is often referred to as market cap. and liquidity will make its units more attractive to U.S. investors. We have successfully secured a new $750 million credit facility that provides Harvest with more flexible and favorable terms than was possible as a smaller entity. Harvest anticipates increasing the size of this facility following syndication in March, leaving an undrawn balance in excess of $700 million which can be used to carry out acquisitions. In addition to acquisition opportunities, we have developed numerous internal development opportunities and a significant land base. With more than 700 drilling locations identified to date, our strong technical teams can leverage our demonstrated capital efficiency strengths to improve recovery factors, and further the ultimate goal of maintaining or increasing cash flow per unit. For 2006, Harvest's internal capital development program is expected to total approximately $250 million, with a focus on our core areas of Markerville, Hay River, Southeast Saskatchewan and Hayter. We expect to drill between 240 and 280 gross wells and will continue to focus our efforts on production increases, reserve recovery optimization and cost reduction initiatives. Production volumes in 2006 are expected to average approximately 60,000 BOE/d, which is based on one month of Harvest standalone stand·a·lone adj. Self-contained and usually independently operating: a standalone computer terminal. , and eleven months of combined production. We expect our royalty rate as a percentage of revenue to average 19.5%. Like all oil and natural gas producers, Harvest is faced with rising operating costs operating costs npl → gastos mpl operacionales , especially for power, but through our existing power hedges and cost reduction activities, our 2006 average operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. per BOE are expected to be approximately $10.00. Hedging remains a key part of our strategy to sustain distributions to unitholders, and we have contracted for downside price protection on approximately 55% of our total crude oil production volumes in 2006. All of our crude oil price risk management contracts are designed to provide upside Upside The potential dollar amount by which the market or a stock could rise. Notes: This is basically an educated guess on how high a stock could go in the near future. See also: Bull, Downside participation while ensuring downside protection Downside Protection Generally used in connection with covered call writing, this is the cushion against loss, in case of a price decline by the underlying security, that is afforded by the written call option. . In 2005, Harvest generated a total return to unitholders of 76%. Since inception to the end of 2005, Harvest has paid $8.20 in distributions per unit which is greater than our initial public offering price of $8.00 per unit. We plan to continue to move forward and build on these past successes with our internal development inventory and highly skilled technical teams. Harvest will be hosting a conference call and Webcast to discuss our fourth quarter and full year 2005 results at 9:00 a.m. Mountain time (11:00 a.m. Eastern time) on March 10th, 2006. Callers may dial 1-866-902-2211 (international callers or Toronto local dial 416-695-5259) a few minutes prior to start and request the Harvest conference call. The call will also be available for replay by dialing 1-888-509-0081 (international callers or Toronto local dial 416-695-5275). No passcode is required. Webcast listeners are invited to go to the Investor Relations Investor relations The process by which the corporation communicates with its investors. - Presentations & Events page of the Harvest Energy website at www.harvestenergy.ca for the live Webcast and/or a replay of the Webcast. Harvest is one of Canada's largest conventional oil and natural gas trusts, actively managed to maintain or increase cash flow per unit through our strategy of acquiring, enhancing, and producing crude oil, natural gas and natural gas liquids. Distributions to unitholders are based on cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses , which are generated by the production and enhancement of properties within our five key areas across Western Canada
Western Canada, commonly referred to as the West . Harvest Trust Units are traded on the Toronto Stock Exchange Toronto Stock Exchange (TSE) Canada's largest stock exchange, trading approximately 1,200 company stocks and 33 options. ("TSX") under the symbol "HTE.UN" and on the New York Stock Exchange ("NYSE") under the symbol "HTE". ADVISORY Certain information in this press release, including management's assessment of future plans and operations, contains forward-looking information that involves risk and uncertainty. Such risks and uncertainties include, but are not limited to, risks associated with: imprecision im·pre·cise adj. Not precise. im  pre·cise ly adv. of reserve estimates; conventional oil and
natural gas operations; the volatility in commodity prices and currency
exchange rates; risks associated with realizing the value of
acquisitions; general economic, market and business conditions; changes
in environmental legislation and regulations; the availability of
sufficient capital from internal and external sources; and, such other
risks and uncertainties described from time to time in Harvest's
regulatory reports and filings made with securities regulators.Forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. in this press release may include, but are not limited to, production volumes, operating costs, commodity prices, capital spending, access to credit facilities credit facilities npl → facilidades fpl de crédito credit facilities npl → facilités fpl de paiement credit facilities , and regulatory changes. For this purpose, any statements that are contained in this press release that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements often contain terms such as "may", "will", "should", "anticipate", "expects" and similar expressions. Readers are cautioned not to place undue reliance on forward-looking statements as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated. Harvest assumes no obligation to update forward-looking statements should circumstances or management's estimates or opinions change. Forward-looking statements contained in this press release are expressly qualified by this cautionary statement. HARVEST ENERGY TRUST (TSX:HTE.UN) (NYSE:HTE) |
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