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Provident Energy Announces 2007 Year-End and Fourth Quarter Results and 2007 Reserves Information CALGARY, ALBERTA--(MARKET WIRE)--Mar 19, 2008 -- Provident Energy Trust (Toronto:PVE-UN.TO - News) (NYSE:PVX - News) - All values are in Canadian dollars and conversions of natural gas volumes to barrels of oil equivalent (boe) are at 6:1 unless otherwise indicated. "Provident delivered another year of strong financial and operating results in 2007," said Provident President and Chief Executive Officer, Tom Buchanan. "Our diverse portfolio of assets delivered solid performance in the face of a volatile commodity price environment, stronger Canadian dollar, tighter equity and debt capital markets, and continued challenges related to government policy. We maintained stable distributions of $1.44 ($0.12 per month) for the fourth consecutive year. We strengthened our upstream business substantially in 2007 with the Capitol and Triwest acquisitions in Canada and four asset acquisitions in the U.S. including the $1.5 billion asset acquisition from Quicksilver Resources Inc. The Midstream business unit had another outstanding year, delivering record EBITDA of $226 million." Highlights - Consolidated funds flow from operations increased 8 percent to $468 million ($2.04 per unit) compared to $433 million ($2.20 per unit) in 2006. Consolidated earnings before interest, taxes, depletion, depreciation, accretion and other non-cash items (EBITDA) was $545 million in 2007, an increase of 10 percent compared to $496 million in 2006. - The payout ratio in the fourth quarter of 2007 was strong at 57 percent, down from 64 percent in the fourth quarter of 2006. Full year payout ratio in 2007 was 77 percent, up from 67 percent in 2006. - Consolidated funds flow from operations in the fourth quarter of 2007 increased 45 percent to $178 million ($0.72 per unit) compared to $123 million ($0.58 per unit) in the fourth quarter of 2006. Consolidated EBITDA in the fourth quarter of 2007 was $196 million, an increase of 39 percent compared to $141 million in the fourth quarter of 2006. - Consolidated upstream production increased 22 percent to 38,600 barrels of oil equivalent per day (boed) in 2007, up from 31,700 boed in 2006. Canadian oil and gas production increased 10 percent to 26,500 boed in 2007, up from 24,000 boed in 2006, with a balanced production profile of 58 percent natural gas and 42 percent crude oil and natural gas liquids. In the fourth quarter of 2007, consolidated production averaged 48,200 boed compared to 33,800 boed in the fourth quarter of 2006 reflecting the acquisitions made in both Canada and the United States. - Midstream EBITDA in 2007 was a record $226 million, up from $220 million in 2006, reflecting a favourable price environment and strong operating and marketing performance. In the fourth quarter of 2007, Midstream delivered EBITDA of $89 million, up 20 percent from $74 million in the fourth quarter of 2006. - Consolidated upstream proved plus probable reserve life index (RLI) increased from 12.4 years to 16.9 years, reflecting the increasing quality of the assets and the sustainability of the Trust. Provident's Canadian proved plus probable RLI increased 24 percent to 9.7 years. Factoring in the long-life midstream assets, Provident's economic life on a consolidated basis is now approximately 18.5 years. - On a consolidated basis, Provident drilled 159 net wells with a 99 percent success rate while in Canada 103 net wells were drilled with a 98 percent success rate. Provident's drilling activities in 2007 were focused primarily on crude oil. - Consolidated proved plus probable oil and gas reserves increased 111 percent to 322 million barrels of oil equivalent (boe). Canadian proved plus probable oil and gas reserves increased 37 percent to 101 million boe. - Consolidated reserve additions including acquisitions and revisions, were 13 times greater than current year production. In Canada, reserve additions were 3.8 times greater than current year production. - Consolidated finding, development and acquisition (FD&A) costs including revisions and future development capital (FDC) improved to $15.18 per boe of proved plus probable reserves, compared to $22.04 per boe in 2006. The three year average FD&A costs including revisions and FDC were $16.05 per boe of proved plus probable reserves in 2007 compared to $13.26 per boe in 2006. - 2007 Canadian FD&A costs including revisions and FDC were $23.31 per boe of proved plus probable reserves compared to $23.04 per boe in 2006. The three-year average Canadian FD&A costs including revisions and FDC were $24.48 per boe of proved plus probable reserves in 2007 compared to $23.60 per boe in 2006. These figures reflect the high value oil acquisitions completed in 2007. Canadian finding and development (F&D) costs for proved plus probable additions including revisions and FDC were $24.42 per boe in 2007 compared to $23.99 per boe in 2006. The three-year average Canadian F&D costs for proved plus probable additions including revisions and FDC were $20.82 per boe in 2007 compared to $17.27 per boe in 2006. Outlook Provident's upstream and midstream operations are on track for 2008, as the Trust continues to focus on operational excellence to deliver on our base capital plan and realize additional upside through additional opportunities available in our asset base. In the Canadian upstream business, the two acquisitions in 2007 (Capitol Energy and Triwest), the Rainbow acquisition in 2006, and Provident's existing assets provide Provident with approximately 1,000 identified drilling and recompletion opportunities. The program is well underway to drill 92 net wells in 2008, and to undertake a further 74 recompletions and workovers, with a total $134 million capital budget. Provident expects Canadian upstream production to average approximately 26,000 to 28,000 barrels of oil equivalent per day (boed) in 2008. Provident expects drilling and operating costs to ease somewhat in 2008, as activity in the sector levels off and we realize the benefit of the high quality assets acquired. The U.S. upstream business anticipates a 2008 capital program of approximately U.S.$158 million with average production expected to be in the range of 20,900 to 22,800 boed. BreitBurn Energy Partners, L.P. (the "MLP") has a capital budget of approximately U.S.$120 million and plans to drill 206 net wells in 2008. MLP production is expected to be in the range of 18,300 to 20,000 boed in 2008. BreitBurn Energy Company LP ("BreitBurn") has a capital budget of up to U.S.$38 million with plans to drill 12 net wells in 2008. BreitBurn production is expected to be in the range of 2,600 to 2,800 boed in 2008. Provident anticipates a capital program of $43 million for the Midstream business in 2008. Management anticipates that approximately $18 million will be invested in ongoing development of new underground storage caverns at Redwater, and $10 million will go toward further rail yard development. The 2008 sustaining capital budget has been raised to $13 million, and includes planned expenditures on operated and non-operated facilities. Assuming continued strong market conditions, Provident anticipates another successful year in 2008 for the Midstream business. On February 5, 2008, Provident announced a strategic sales process of its U.S. oil and gas operations. Currently Provident owns approximately 22 percent of the MLP, including units held by the General Partner of which Provident indirectly owns approximately 96 percent. Provident also owns, through a wholly owned subsidiary, approximately 96 percent of BreitBurn. The book value of these investments at December 31, 2007 was approximately $425 million and the related tax basis is estimated to be approximately $100 million. It is Provident's intention to monetize its U.S. upstream investment, but there is no certainty that this process will result in any changes to Provident's ownership stakes in its U.S. holdings. Strategic planning in 2008 will continue to focus on a review of Provident's Canadian businesses and initiatives to consider the most viable strategic and structural options available with the objectives of capturing and protecting unitholder value going forward. Certain options under consideration include the separation of the upstream and the midstream components of Provident's Canadian business. Provident cautions that the planning required before implementation will be lengthy and complex. There is no certainty that the planning will result in significant changes in Provident. Provident's audited financial statements for the year ended December 31, 2007, annual and fourth quarter MD&A, and complete reserves information were filed today on the System for Electronic Document Analysis and Retrieval (SEDAR) (www.sedar.com), and can also be found on Provident's website, at www.providentenergy.com, under the heading "investors." This press release does not constitute and is not intended to be legal or tax advice to any particular holder or potential holder of Provident units. Holders or potential holders of Provident units are urged to consult their own legal and tax advisors as to their particular income tax consequences of holding Provident units. Provident Energy Trust is a Calgary-based, open-ended energy income trust that owns and manages an oil and gas production business and a natural gas liquids midstream services and marketing business. Provident's energy portfolio is located in some of the most stable and predictable producing regions in Western Canada and the United States. Provident provides monthly cash distributions to its unitholders and trades on the Toronto Stock Exchange and the New York Stock Exchange under the symbols PVE.UN and PVX, respectively. This document contains certain forward-looking statements concerning Provident, as well as other expectations, plans, goals, objectives, information or statements about future events, conditions, results of operations or performance that may constitute "forward-looking statements" or "forward-looking information" under applicable securities legislation. Such statements or information involve substantial known and unknown risks and uncertainties, certain of which are beyond Provident's control, including the impact of general economic conditions in Canada and 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 personnel or management, pipeline design and construction, fluctuations in commodity prices, foreign exchange or interest rates, stock market volatility and obtaining required approvals of regulatory authorities. Such forward-looking statements or information are based on a number of assumptions which may prove to be incorrect. In addition to other assumptions identified in this news release, assumptions have been made regarding, among other things, commodity prices, operating conditions, capital and other expenditures, and project development activities. Although Provident believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because Provident can give no assurance that such expectations will prove to be correct. Forward-looking statements or information are based on current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by Provident and described in the forward-looking statements or information. The forward-looking statements or information contained in this news release are made as of the date hereof and Provident undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise unless so required by applicable securities laws. The forward-looking statements or information contained in this news release are expressly qualified by this cautionary statement.
Consolidated financial highlights
Three months ended Year ended
Consolidated December 31, December 31,
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($ 000s
except per
unit data) 2007 2006 % Change 2007 2006 % Change
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Revenue (net
of royalties
and financial
derivative
instruments) $ 541,884 $548,086 (1) $2,167,276 $2,187,253 (1)
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Funds flow
from COGP
operations
(1) $ 58,667 $ 48,574 21 $ 204,252 $ 185,328 10
Funds flow from
USOGP
operations (1) 41,787 13,573 208 85,571 62,970 36
Funds flow from
Midstream
operations (1) 77,109 60,532 27 178,432 184,366 (3)
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Total funds
flow from
operations
(1) $ 177,563 $122,679 45 $ 468,255 $ 432,664 8
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Per weighted
average unit
- basic and
diluted (2) $ 0.72 $ 0.58 24 $ 2.04 $ 2.20 (7)
Distributions
to
unitholders $ 89,063 $ 75,573 18 $ 333,352 $ 283,465 18
Per unit $ 0.36 $ 0.36 - $ 1.44 $ 1.44 -
Percent of
funds flow
from
operations
paid
out as declared
distributions (3) 57% 64% (11) 77% 67% 15
Net income
(loss) (4) $ 68,545 $(25,501) - $ 30,434 $ 140,920 (78)
Per weighted
average unit
- basic and
diluted (2) $ 0.28 $ (0.12) - $ 0.13 $ 0.72 (82)
Capital
expenditures $ 93,365 $ 60,911 53 $ 247,122 $ 190,433 30
Capitol
Energy
acquisition $ (355)$ - - $ 467,495 $ - -
Triwest
Energy
acquisition $ 78,877 $ - - $ 78,877 $ - -
USOGP natural
gas asset
acquisition $1,464,213 $ - - $1,464,213 $ - -
Oil and gas
property
acquisitions,
net $ 2,788 $ 8,678 - $ 265,201 $ 481,625 -
Weighted
average trust
units
outstanding
(000s)
- Basic 247,052 209,826 18 229,939 196,627 17
- Diluted (2) 247,052 210,113 18 229,939 196,914 17
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Consolidated
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As at December 31,
($ 000s) 2007 2006 % Change
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Capitalization
Long-term debt $ 1,549,272 $ 988,785 57
Unitholders' equity $ 1,708,665 $ 1,542,974 11
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(1) Represents cash flow from operations before changes in working capital
and site restoration expenditures.
(2) Includes dilutive impact of unit options, exchangeable shares and
convertible debentures.
(3) Calculated as distributions to unitholders divided by funds flow from
operations less distributions to non-controlling interests of $35.8
million year-to-date and $22.1 million for the quarter (2006 - $6.5
million and $4.7 million, respectively).
(4) Net income (loss) for the year ended December 31, 2007 includes a future
income tax charge of $88.4 million relating to the enactment of Bill
C-52, Budget Implementation Act 2007 by the Canadian government.
Operational highlights
Three months ended Year ended
Consolidated December 31, December 31,
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2007 2006 % Change 2007 2006 % Change
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Oil and Gas
Production
Daily production
Light/medium crude
oil (bpd) 20,721 13,899 49 17,433 14,114 24
Heavy oil (bpd) 1,769 1,838 (4) 1,921 2,057 (7)
Natural gas
liquids (bpd) 1,612 1,345 20 1,421 1,419 -
Natural gas
(mcfpd) 144,678 100,029 45 107,151 84,891 26
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Oil equivalent
(boed)(1) 48,215 33,753 43 38,633 31,739 22
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Average realized
price (before
realized
financial
derivative
instruments)
Light/medium
crude oil
($/bbl) $ 69.70 $ 54.59 28 $ 63.48 $ 60.32 5
Heavy oil
($/bbl) $ 43.36 $ 25.82 68 $ 41.85 $ 36.80 14
Corporate oil
blend ($/bbl) $ 67.56 $ 51.23 32 $ 61.29 $ 57.33 7
Natural gas
liquids
($/bbl) $ 51.39 $ 47.49 8 $ 51.90 $ 51.98 -
Natural gas
($/mcf) $ 6.53 $ 6.71 (3) $ 6.53 $ 6.66 (2)
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Oil equivalent
($/boe)(1) $ 52.59 $ 45.65 15 $ 50.64 $ 49.35 3
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Field netback
(before realized
financial
derivative
instruments)
($/boe) $ 30.22 $ 23.96 26 $ 28.24 $ 27.93 1
Field netback
(including
realized
financial
derivative
instruments)
($/boe) $ 28.31 $ 25.58 11 $ 27.79 $ 28.09 (1)
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Midstream
Midstream NGL
sales volumes
(bpd) 135,981 115,727 18 120,785 115,354 5
EBITDA (000s)
(2) $ 89,423 $ 74,422 20 $ 225,675 $ 219,631 3
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(1) Provident reports oil equivalent production converting natural gas to
oil on a 6:1 basis.
(2) EBITDA is earnings before interest, taxes, depletion, depreciation,
accretion and other non-cash items. See "Reconciliation of non-GAAP
measures".Oil and Natural Gas Reserves Provident's Canadian reserves were evaluated by McDaniel & Associates Consultants Ltd. (McDaniel) and by AJM Petroleum Consultants (AJM) effective December 31, 2007 in accordance with the Canadian Securities Administrators' National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities (NI 51-101). Provident's United States reserves were evaluated by Netherland, Sewell & Associates, Inc. (NSAI) and by Schlumberger Data and Consulting Services (DCS) effective December 31, 2007 in accordance with NI 51-101. The Canadian and U.S evaluations used the McDaniel price forecast. McDaniel, AJM, NSAI and DCS are independent qualified reserves evaluators appointed pursuant to NI 51-101. Additional information pertaining to NI 51-101 and some of the key reserves definitions are provided at the conclusion of the Reserves section. Additional details on the Trust's reserves can be found in Form NI 51-101 F1. To provide clarity, reserves and values are provided by country and on a consolidated basis. For consistency with Provident's financial reporting U.S. reserves are reported based on 100 percent of the interests of BreitBurn Energy Company L.P. (BreitBurn) and of BreitBurn Energy Partners L.P. (the "MLP") in the U.S. properties. As of December 31, 2007 Provident indirectly held approximately 96 percent of the outstanding partnership interests of BreitBurn with the remaining approximately four percent of the partnership interests held by BreitBurn's co-founders and co-chief executive officers. As of December 31, 2007 Provident indirectly held approximately 22 percent of the outstanding partnership interests of the MLP with the remaining approximately 78 percent of the partnership interests held by public unitholders and BreitBurn's co-founders and co-chief executive officers. Provident Consolidated Oil and Natural Gas Reserves Provident had a very successful year with respect to acquisitions and reserve additions in the drive to continually support the sustainability of the Trust. Acquisitions in Canada and in the U.S. improved the quality of the Trust's asset base, as evidenced by the increased reserve life index (RLI). Internal development activities in Western Canada, California and Wyoming were successful in replacing 57 percent of total production. The Trust's reserves increased after production with company interest proved producing reserves growing from 89,851 thousand barrels of oil equivalent1 (Mboe) to 206,063 Mboe, total proved growing from 117,806 Mboe to 253,272 Mboe, and proved plus probable growing from 153,021 Mboe to 322,827 Mboe. Consolidated Oil and Natural Gas Reserves and Present Values Provident's Consolidated oil and natural gas reserves and present value of estimated future cash flows based on forecast prices and costs using the McDaniel price forecast are summarized below. Reserves are presented on a Gross (working interest) and Net basis (refer to the notes under the tables and to the Definitions at the end of the Reserves section for explanations of company share, working interest, gross and net).
Provident Consolidated Reserves Summary(a)(b)
Using McDaniel Price Forecast
Gross Reserves(c)
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Light &
Medium Heavy
Crude Crude Total Natural Total
Oil Oil Oil NGL Gas Boe
(Mbbl) (Mbbl) (Mbbl) (Mbbl) (MMcf) (Mboe)
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Proved Reserves
Producing 73,638 10,882 84,520 4,774 699,075 205,807
Non-Producing 4,247 1,547 5,794 432 60,065 16,236
Undeveloped 13,117 3,003 16,120 930 83,291 30,932
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Total Proved 91,002 15,432 106,434 6,136 842,431 252,975
Probable 31,583 9,189 40,772 1,721 161,639 69,433
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TOTAL Proved
plus Probable 122,585 24,621 147,206 7,857 1,004,069 322,408
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Net Reserves(d)
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Light &
Medium Heavy
Crude Crude Total Natural Total
Oil Oil Oil NGL Gas Boe
(Mbbl) (Mbbl) (Mbbl) (Mbbl) (MMcf) (Mboe)
----------------------------------------------------------------------------
Proved Reserves
Producing 64,520 9,819 74,339 3,854 579,689 174,808
Non-Producing 3,737 1,513 5,250 351 47,443 13,508
Undeveloped 11,138 2,867 14,005 775 69,030 26,285
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Total Proved 79,395 14,199 93,594 4,981 696,162 214,601
Probable 26,332 8,760 35,092 1,353 135,036 58,951
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TOTAL Proved
plus Probable 105,727 22,959 128,686 6,333 831,198 273,552
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(a) Tables may not add due to rounding.
(b) U.S. Reserves are reported based on 100% of the interests of BreitBurn
Energy Company L.P. (BreitBurn) and of BreitBurn Energy Partners L.P.
(the "MLP") in the U.S. properties. As of December 31, 2007 Provident
indirectly held approximately 96% of the outstanding partnership
interests of BreitBurn with the remaining approximately 4% of the
partnership interests held by BreitBurn's co-founders and co-chief
executive officers. As of December 31, 2007 Provident indirectly held
approximately 22% of the outstanding partnership interests of the MLP
with the remaining approximately 78% of the partnership interests held
by public unitholders and BreitBurn's co-founders and co-chief
executive officers. This is consistent with Provident's financial
reporting.
(c) Gross Reserves are Provident's working interest (operated or
non-operated) share before deduction of royalties and without including
any royalty interests of Provident.
(d) Net Reserves are Provident's working interest (operated or non-operated)
share after deduction of royalty obligations, plus Provident's royalty
interests in reserves.
Present Value of Consolidated Reserves
Present Value ($000's) Before Tax Discounted at
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0% 8% 10%
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Proved Reserves
Producing $ 6,251,207 $ 3,128,956 $ 2,818,145
Non-Producing $ 533,094 $ 275,968 $ 244,000
Undeveloped $ 881,581 $ 420,408 $ 364,282
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Total Proved $ 7,665,882 $ 3,825,332 $ 3,426,427
Probable $ 2,386,511 $ 983,831 $ 835,162
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TOTAL Proved plus Probable $ 10,052,393 $ 4,809,163 $ 4,261,590
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Present Value ($000's) Before Tax Discounted at
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15% 20%
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Proved Reserves
Producing $ 2,292,954 $ 1,961,080
Non-Producing $ 187,078 $ 149,900
Undeveloped $ 263,844 $ 197,582
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Total Proved $ 2,743,876 $ 2,308,562
Probable $ 587,853 $ 438,516
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TOTAL Proved plus Probable $ 3,331,729 $ 2,747,078
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Present Value ($000's) After Tax(a) Discounted at
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0% 8% 10%
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Proved Reserves
Producing $ 6,114,740 $ 3,093,166 $ 2,789,489
Non-Producing 541,352 278,757 246,268
Undeveloped 817,687 398,130 346,030
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Total Proved 7,473,779 3,770,053 3,381,787
Probable 2,146,124 925,739 792,717
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TOTAL Proved plus Probable $ 9,619,903 $ 4,695,792 $ 4,174,504
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Present Value ($000's) After Tax(a) Discounted at
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15% 20%
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Proved Reserves
Producing $ 2,274,097 $ 1,946,690
Non-Producing 188,536 150,930
Undeveloped 252,076 189,539
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Total Proved 2,714,709 2,287,158
Probable 568,019 429,476
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TOTAL Proved plus Probable $ 3,282,728 $ 2,716,634
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(a) After tax values include U.S. State and Federal Taxes as well as with
holding tax on funds that flow back to Provident Energy Ltd. in Canada
plus Canadian Federal and Provincial Income taxes beginning January 1,
2011.COGP Oil and Natural Gas Reserves McDaniel evaluated all of Provident's Canadian oil and natural gas reserves, except the Rainbow area assets of northwest Alberta which were evaluated by AJM. Drilling activity made a significant contribution with total proved plus probable drilling and recompletion additions replacing 44 percent of Canadian production. The acquisitions of Capitol Energy Resources Ltd. (Capitol) and Triwest Energy Inc. (Triwest) plus various smaller acquisitions added proved plus probable reserves of 33,292 Mboe. To comply with NI 51-101 requirements that acquisitions be reported as evaluated at the time of the year-end filing the 2007 acquisitions are reported herein as per the McDaniel December 31, 2007 evaluation with actual production added back to develop the actual volumes acquired at the time of acquisition. Over 90 percent of the value of the assets acquired from Capitol is associated with the Dixonville Montney "C" pool in northwest Alberta. This well-delineated homogeneous pool, which produces 30 degree API oil, is being developed using horizontal wells and waterflood technology. All of the production is 100 percent working interest and is operated by Provident. The assets acquired from Triwest are located principally in the Steelman, Crystal Hills and Ingoldsby areas in southeast Saskatchewan. These properties, which produce light crude oil, are also developed using horizontal well technology. Revisions, excluding economic factors, accounted for a five percent increase in proved developed producing (PDP) reserves and a two percent increase in total proved reserves. The positive revisions are an indication of the high degree of confidence in Provident's Canadian reserves. Provident's percentage of PDP reserves has decreased from 62 percent to 51 percent of total proved plus probable reserves since December 2006 due to the acquisition of undeveloped reserves from Capitol, primarily at Dixonville, Alberta and from Triwest in southeast Saskatchewan. Changes in commodity prices had no significant impact on Canadian reserve volumes. After accounting for production of 9,676 Mboe, acquisitions, divestitures, additions and revisions resulted in a 37 percent increase in company share proved plus probable reserves from 74,137 Mboe on December 31, 2006 to 101,239 Mboe (100,820 Mboe WI share) at December 31, 2007. COGP oil and natural gas reserves and present value of estimated future cash flows based on forecast prices and costs are summarized below. The impact of Federal income tax changes that were enacted during 2007 have been incorporated in the tables showing After Tax values. According to the new tax laws the Trust is expected to be taxable beginning January 1, 2011. Tax pools held by the Trust on its Canadian assets will defer the impact of these changes such that only the value of proved plus probable reserves will be affected. In October 2007, the Alberta government announced its intention to increase crown royalties effective January 1, 2009. As of December 31, 2007, legislation enabling the Alberta new royalty framework had not been passed. Furthermore, the government had not provided sufficient clarity on a number of issues to allow precise calculation of net reserves and net present value under the new proposed royalties. Therefore, COGP reserves as presented herein are based on the existing royalty regime. High and low sensitivities, which were run to determine the potential impact of the proposed new royalty framework, indicate no impact on company interest reserves but a potential eight to ten percent decrease in before tax net present value (discounted at 10%) of COGP proved plus probable reserves. Details of reserves and values for these sensitivities are provided in Form NI 51-101 F1.
COGP Reserves Summary(a)
Using McDaniel Price Forecast
Gross Reserves(b)
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Light & Heavy
Medium Crude Total Natural Total
Crude Oil Oil Oil NGL Gas Boe
(Mbbl) (Mbbl) (Mbbl) (Mbbl) (MMcf) (Mboe)
----------------------------------------------------------------------------
Reserves
Producing 19,015 1,142 20,157 2,222 172,128 51,067
Non-Producing 895 273 1,168 48 15,613 3,818
Undeveloped 5,520 423 5,943 114 21,791 9,689
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Total Proved 25,429 1,838 27,267 2,384 209,532 64,573
Probable 19,932 1,885 21,817 880 81,299 36,247
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TOTAL Proved
plus Probable 45,361 3,723 49,084 3,264 290,832 100,820
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Net Reserves(c)
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Light & Heavy
Medium Crude Total Natural Total
Crude Oil Oil Oil NGL Gas Boe
(Mbbl) (Mbbl) (Mbbl) (Mbbl) (MMcf) (Mboe)
----------------------------------------------------------------------------
Reserves
Producing 16,167 966 17,133 1,646 145,207 42,980
Non-Producing 781 239 1,020 38 12,020 3,061
Undeveloped 4,750 361 5,111 75 17,990 8,184
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Total Proved 21,697 1,566 23,264 1,759 175,216 54,225
Probable 16,506 1,641 18,147 646 69,163 30,321
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TOTAL Proved
plus Probable 38,204 3,207 41,411 2,405 244,379 84,545
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(a) Tables may not add due to rounding
(b) Gross Reserves are Provident's working interest (operated or non-
operated) share before deduction of royalties and without including any
royalty interests of Provident.
(c) Net Reserves are Provident's working interest (operated or non-operated)
share after deduction of royalty obligations, plus Provident's royalty
interests in reserves.
Present Value of COGP Reserves (a)(b)
Present Worth Value ($000's) Before Tax Discounted at
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0% 8% 10% 15% 20%
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Proved Reserves
Producing $1,367,465 $1,032,120 $ 975,009 $ 860,619 $ 774,765
Non-Producing 73,575 62,671 57,748 47,762 40,610
Undeveloped 214,065 118,607 103,567 74,491 53,742
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Total Proved 1,655,105 1,213,398 1,136,324 982,872 869,117
Probable 1,258,344 511,244 437,219 315,866 243,146
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TOTAL Proved
plus Probable $2,913,449 $1,724,642 $1,573,543 $1,298,738 $1,112,263
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Present Value ($000's) After Tax(b) Discounted at
----------------------------------------------------------------------------
0% 8% 10% 15% 20%
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Proved Reserves
Producing $1,367,465 $1,032,120 $ 975,009 $ 860,619 $ 774,765
Non-Producing 73,575 62,671 57,748 47,762 40,610
Undeveloped 214,065 118,607 103,567 74,491 53,742
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Total Proved 1,655,105 1,213,398 1,136,324 982,872 869,117
Probable 1,061,182 457,888 396,459 293,738 230,313
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TOTAL Proved
plus Probable $2,716,287 $1,671,286 $1,532,783 $1,276,610 $1,099,430
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(a) Tables may not add due to rounding
(b) After tax values include the impact of Canadian Federal and Provincial
Income taxes beginning January 1, 2011.USOGP Oil and Natural Gas Reserves Provident's U. S. oil and natural gas reserves were evaluated by Netherland, Sewell and Associates, Inc. (NSAI) and by Schlumberger Data and Consulting Services (DCS) effective December 31, 2007 in accordance with NI 51-101. Michigan, Indiana and Kentucky properties that were acquired by BreitBurn Energy Partners L.P. were evaluated by DCS while the remaining properties were evaluated by NSAI. The U.S evaluations used the McDaniel price forecast. NSAI and DCS are qualified reserve evaluators in accordance with NI 51-101. Provident's USOGP division had a very successful year with respect to acquisitions. BreitBurn closed four major and two small acquisitions during the year thereby increasing proved plus probable reserves by 148,858 Mboe. The most significant was the acquisition of Michigan, Indiana and Kentucky assets with over 5,000 gross wells which produce gas from the Antrim and New Albany shales and oil and gas from conventional reservoirs. BreitBurn acquired oil producing assets in the Sunniland Trend in southern Florida and oil and gas producing assets in the Texas Permian Basin. BreitBurn also increased its working interests in the Sawtelle and East Coyote fields in California and several other oil fields in California and Wyoming. Drilling activity in California and Wyoming added proved plus probable reserves of 3,731 Mboe, replacing 84 percent of U.S. production. These additions include reserves added as a result of continuing heavy oil development at the Orcutt Hill field in the Santa Maria Basin of California where steam injection and production have commenced. The North Sunshine field in Wyoming was discovered in 1928 but BreitBurn set a new production record in May 2007. Technical revisions accounted for a seven percent decrease in proved plus probable reserves. These revisions are primarily associated with undeveloped drilling and waterflood reserves in the Los Angeles basin. After accounting for production of 4,425 Mboe and these revisions, acquisitions and additions resulted in the significant growth of company share proved plus probable reserves from 78,885 Mboe as of December 31, 2006 to 221,589 Mboe as of December 31, 2007. USOGP oil and natural gas reserves and present value of estimated future cash flows based on forecast prices and costs are summarized below.
USOGP Reserves Summary(a)(b)
Using McDaniel Price Forecast
Gross Reserves
----------------------------------------------------------------------------
Light & Heavy
Medium Crude Total Natural Total
Crude Oil Oil Oil NGL Gas Boe
(Mbbl) (Mbbl) (Mbbl) (Mbbl) (MMcf) (Mboe)
----------------------------------------------------------------------------
Proved Reserves
Producing 54,624 9,740 64,364 2,552 526,947 154,741
Non-Producing 3,352 1,274 4,626 384 44,451 12,419
Undeveloped 7,597 2,580 10,178 816 61,500 21,243
----------------------------------------------------------------------------
Total Proved 65,573 13,594 79,167 3,753 632,898 188,402
Probable 11,651 7,304 18,955 841 80,340 33,186
----------------------------------------------------------------------------
TOTAL Proved
plus Probable 77,224 20,898 98,122 4,593 713,238 221,589
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net Reserves
----------------------------------------------------------------------------
Light & Heavy
Medium Crude Total Natural Total
Crude Oil Oil Oil NGL Gas Boe
(Mbbl) (Mbbl) (Mbbl) (Mbbl) (MMcf) (Mboe)
----------------------------------------------------------------------------
Proved Reserves
Producing 48,353 8,853 57,207 2,209 434,482 131,829
Non-Producing 2,956 1,274 4,230 314 35,423 10,447
Undeveloped 6,388 2,505 8,894 700 51,041 18,100
----------------------------------------------------------------------------
Total Proved 57,698 12,632 70,330 3,222 520,946 160,376
Probable 9,826 7,119 16,945 707 65,873 28,630
----------------------------------------------------------------------------
TOTAL Proved
plus Probable 67,523 19,752 87,275 3,929 586,819 189,007
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(a) Tables may not add due to rounding.
(b) U.S. Reserves are reported based on 100% of the interests of BreitBurn
Energy Company L.P. (BreitBurn) and of BreitBurn Energy Partners L.P.
(the "MLP") in the U.S. properties. As of December 31, 2007 Provident
indirectly held approximately 96% of the outstanding partnership
interests of BreitBurn with the remaining approximately 4% of the
partnership interests held by BreitBurn's co-founders and co-chief
executive officers. As of December 31, 2007 Provident indirectly held
approximately 22% of the outstanding partnership interests of the MLP
with the remaining approximately 78% of the partnership interests held
by public unitholders and BreitBurn's co-founders and co-chief executive
officers. This is consistent with Provident's financial reporting.
Present Value of USOGP Reserves (a)(b)
Present Value ($000's) Before Tax Discounted at
----------------------------------------------------------------------------
0% 8% 10% 15% 20%
----------------------------------------------------------------------------
Proved Reserves
Producing $4,883,742 $2,096,836 $1,843,136 $1,432,335 $1,186,315
Non-Producing 459,519 213,297 186,251 139,316 109,290
Undeveloped 667,516 301,801 260,716 189,353 143,840
----------------------------------------------------------------------------
Total Proved 6,010,777 2,611,934 2,290,103 1,761,004 1,439,445
Probable 1,128,167 472,587 397,944 271,987 195,370
----------------------------------------------------------------------------
TOTAL Proved
plus Probable $7,138,944 $3,084,521 $2,688,047 $2,032,991 $1,634,815
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Present Value ($000's) After Tax(c) Discounted at
----------------------------------------------------------------------------
0% 8% 10% 15% 20%
----------------------------------------------------------------------------
Proved Reserves
Producing $4,747,275 $2,061,046 $1,814,480 $1,413,479 $1,171,925
Non-Producing 467,777 216,086 188,519 140,774 110,320
Undeveloped 603,622 279,523 242,464 177,585 135,797
----------------------------------------------------------------------------
Total Proved 5,818,674 2,556,655 2,245,463 1,731,837 1,418,041
Probable 1,084,942 467,851 396,258 274,281 199,163
----------------------------------------------------------------------------
TOTAL Proved
plus Probable $6,903,616 $3,024,506 $2,641,720 $2,006,118 $1,617,204
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(a) Tables may not add due to rounding
(b) Values in Canadian dollars
(c) After tax values include U.S. State and Federal Taxes as well as with
holding tax on funds that flow back to Provident Energy Ltd. in Canada.USOGP Proportionate Information For consistency with Provident's financial reporting U.S. reserves are reported based on 100 percent of the interests of BreitBurn Energy Company L.P. (BreitBurn) and of BreitBurn Energy Partners L.P. (the "MLP") in the U.S. properties. As of December 31, 2007 Provident held approximately 96% of BreitBurn and approximately 4% of the MLP. The following tables provide the proportionate information on the reserves and value of USOGP.
USOGP Reserves and Value Proportionate Information(a)(b)
Using McDaniel Price Forecast
Gross Reserves
---------------------------------------------
Light &
Medium Heavy Natural Total
Oil Oil NGL Gas Boe
(Mbbl) (Mbbl) (Mbbl) (MMcf) (Mboe)
---------------------------------------------
MLP
-------------------------------
Proved
Producing 40,057 7,608 2,522 523,327 137,408
Non-Producing 3,094 0 384 44,451 10,887
Undeveloped 5,430 646 734 58,289 16,525
----------------------------------------------------------------------------
Total Proved 48,581 8,254 3,641 626,068 164,820
Probable 4,150 1,631 532 70,400 18,046
----------------------------------------------------------------------------
TOTAL Proved
plus Probable 52,731 9,884 4,173 696,468 182,866
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Provident's Interest of MLP(a)
-------------------------------
Proved
Producing 8,812 1,674 555 115,132 30,230
Non-Producing 681 0 85 9,779 2,395
Undeveloped 1,195 142 162 12,824 3,635
----------------------------------------------------------------------------
Total Proved 10,688 1,816 801 137,735 36,260
Probable 913 359 117 15,488 3,970
----------------------------------------------------------------------------
TOTAL Proved
plus Probable 11,601 2,175 918 153,223 40,231
----------------------------------------------------------------------------
----------------------------------------------------------------------------
BreitBurn
-------------------------------
Proved
Producing 14,567 2,132 30 3,620 17,332
Non-Producing 258 1,274 0 0 1,532
Undeveloped 2,167 1,935 82 3,211 4,718
----------------------------------------------------------------------------
Total Proved 16,992 5,341 112 6,831 23,583
Probable 7,501 5,674 309 9,940 15,140
----------------------------------------------------------------------------
TOTAL Proved
plus Probable 24,493 11,014 421 16,770 38,722
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Provident's Interest of
BreitBurn(b)
-------------------------------
Proved
Producing 13,984 2,047 29 3,475 16,639
Non-Producing 248 1,223 0 0 1,471
Undeveloped 2,080 1,857 78 3,082 4,530
----------------------------------------------------------------------------
Total Proved 16,312 5,127 107 6,557 22,639
Probable 7,201 5,447 297 9,542 14,534
----------------------------------------------------------------------------
TOTAL Proved
plus Probable 23,513 10,574 404 16,099 37,173
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Provident's Interest of USOGP
-------------------------------
Proved
Producing 22,797 3,721 584 118,607 46,869
Non-Producing 929 1,223 85 9,779 3,866
Undeveloped 3,275 1,999 240 15,906 8,165
----------------------------------------------------------------------------
Total Proved 27,000 6,943 908 144,292 58,900
Probable 8,114 5,805 414 25,030 18,504
----------------------------------------------------------------------------
TOTAL Proved
plus Probable 35,114 12,748 1,322 169,322 77,404
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Present Value ($000's) Before Tax Discounted at
-----------------------------------------------------------
0% 8% 10% 15% 20%
-----------------------------------------------------------
MLP
-----------------
Proved
Producing 4,454,324 1,872,302 1,643,794 1,276,330 1,057,417
Non-Producing 414,479 183,010 158,378 116,154 89,520
Undeveloped 559,411 242,041 208,209 150,382 114,045
----------------------------------------------------------------------------
Total Proved 5,428,215 2,297,354 2,010,380 1,542,866 1,260,982
Probable 637,428 256,203 216,914 151,440 111,688
----------------------------------------------------------------------------
TOTAL Proved
plus Probable 6,065,643 2,553,556 2,227,294 1,694,306 1,372,670
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Provident's
Interest of
MLP(a)
-----------------
Proved
Producing 979,951 411,906 361,635 280,793 232,632
Non-Producing 91,185 40,262 34,843 25,554 19,694
Undeveloped 123,071 53,249 45,806 33,084 25,090
----------------------------------------------------------------------------
Total Proved 1,194,207 505,418 442,284 339,430 277,416
Probable 140,234 56,365 47,721 33,317 24,571
----------------------------------------------------------------------------
TOTAL Proved
plus Probable 1,334,441 561,782 490,005 372,747 301,987
----------------------------------------------------------------------------
----------------------------------------------------------------------------
BreitBurn
-----------------
Proved
Producing 429,418 224,534 199,343 156,005 128,899
Non-Producing 45,040 30,287 27,874 23,162 19,770
Undeveloped 108,104 59,760 52,507 38,971 29,795
----------------------------------------------------------------------------
Total Proved 582,562 314,580 279,723 218,138 178,463
Probable 490,739 216,385 181,030 120,547 83,682
----------------------------------------------------------------------------
TOTAL Proved
plus Probable 1,073,302 530,965 460,754 338,685 262,145
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Provident's
Interest of
BreitBurn(b)
-----------------
Proved
Producing 412,241 215,553 191,369 149,765 123,743
Non-Producing 43,238 29,075 26,759 22,236 18,979
Undeveloped 103,780 57,369 50,407 37,412 28,603
----------------------------------------------------------------------------
Total Proved 559,260 301,997 268,534 209,412 171,325
Probable 471,110 207,729 173,789 115,725 80,334
----------------------------------------------------------------------------
TOTAL Proved
plus Probable 1,030,369 509,726 442,323 325,138 251,659
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Provident's
Interest of
USOGP
-----------------
Proved
Producing 1,392,193 627,459 553,004 430,557 356,374
Non-Producing 134,424 69,338 61,602 47,790 38,674
Undeveloped 226,850 110,618 96,213 70,496 53,693
----------------------------------------------------------------------------
Total Proved 1,753,467 807,415 710,818 548,843 448,741
Probable 611,344 264,094 221,510 149,042 104,906
----------------------------------------------------------------------------
TOTAL Proved
plus Probable 2,364,811 1,071,509 932,328 697,885 553,647
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(a) Provident interest in MLP = 22%
(b) Provident interest in BreitBurn = 96%
Consolidated Proportionate Information
Provident's interest share of total United States and Canada reserves and
value as of December 31, 2007 is shown in the following table.
United States and Canada Reserves and Value
Provident Interest using McDaniel Price Forecast
Gross Reserves
---------------------------------------------
Light &
Medium Heavy Natural Total
Oil Oil NGL Gas Boe
Proved (Mbbl) (Mbbl) (Mbbl) (MMcf) (Mboe)
---------------------------------------------
Producing 41,812 4,862 2,806 290,735 97,936
Non-Producing 1,823 1,496 132 25,392 7,683
Undeveloped 8,795 2,422 354 37,697 17,854
----------------------------------------------------------------------------
Total Proved 52,429 8,781 3,292 353,825 123,472
Probable 28,046 7,690 1,294 106,329 54,751
----------------------------------------------------------------------------
TOTAL Proved
plus Probable 80,475 16,471 4,585 460,154 178,224
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Present Value ($000's) Before Tax Discounted at
-----------------------------------------------------------
Proved 0% 8% 10% 15% 20%
Producing 2,759,658 1,659,579 1,528,013 1,291,176 1,131,139
Non-Producing 207,998 132,009 119,350 95,552 79,283
Undeveloped 440,915 229,225 199,779 144,987 107,435
----------------------------------------------------------------------------
Total Proved 3,408,571 2,020,813 1,847,142 1,531,715 1,317,857
Probable 1,869,688 775,338 658,729 464,908 348,052
----------------------------------------------------------------------------
TOTAL Proved
plus Probable 5,278,260 2,796,151 2,505,871 1,996,623 1,665,909
----------------------------------------------------------------------------
----------------------------------------------------------------------------Provident Consolidated Reconciliation Summaries The following reconciliation tables summarize Provident's consolidated reserve activity for each reserve category for the year ended December 31, 2007 on the basis of company share reserves. Working interest reserves as of December 31, 2007 are provided at the bottom of each table to tie back to the volumes provided in the previous tables.
Provident Consolidated Reconciliation Summary (d)
Proved Developed Producing
Light &
Medium Heavy Total
Company Share Crude Crude Crude
(WI+RI)(a)(c) Oil Oil Oil Gas NGL Total
Mbbl Mbbl Mbbl MMcf Mbbl Mboe
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance at
December 31, 2006 49,133 6,738 55,871 188,738 2,524 89,851
Production (6,068) (996) (7,064) (39,110) (518) (14,101)
Drilling Activity
Exploration Discoveries 132 0 132 0 0 132
Drilling Extensions 491 0 491 6,663 34 1,635
Recompletion 149 693 843 2,504 17 1,277
Transfer 1,808 0 1,808 4,113 15 2,509
Acquisition 26,510 3,802 30,311 533,180 2,573 121,748
Divestiture (22) 0 (22) (146) (1) (47)
Economic Factors 733 369 1,102 (1,439) (0) 862
Technical Revisions 805 284 1,090 5,710 156 2,197
----------------------------------------------------------------------------
Balance at
December 31, 2007 73,671 10,890 84,562 700,214 4,800 206,063
----------------------------------------------------------------------------
----------------------------------------------------------------------------
WI Share (b)
Balance at
December 31, 2007 73,638 10,882 84,520 699,075 4,774 205,807
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Provident Consolidated Reconciliation Summary (d)
Total Proved
Light &
Medium Heavy Total
Company Share Crude Crude Crude
(WI +RI) (a)(c) Oil Oil Oil Gas NGL Total
Mbbl Mbbl Mbbl MMcf Mbbl Mboe
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance at
December 31, 2006 63,076 11,958 75,034 236,464 3,362 117,806
Production (6,068) (996) (7,064) (39,110) (518) (14,101)
Drilling Activity
Exploration Discoveries 132 0 132 0 0 132
Drilling Extensions 1,901 0 1,901 9,923 40 3,595
Recompletion 169 734 903 2,492 18 1,337
Transfer 981 0 981 1,900 6 1,303
Acquisition 36,547 3,802 40,349 641,842 3,692 151,015
Divestiture (22) 0 (22) (146) (1) (47)
Economic Factors 929 339 1,268 (1,318) 8 1,056
Technical Revisions (6,611) (396) (7,007) (8,270) (440) (8,825)
----------------------------------------------------------------------------
Balance at
December 31, 2007 91,035 15,440 106,475 843,776 6,167 253,272
----------------------------------------------------------------------------
----------------------------------------------------------------------------
WI Share (b)
Balance at
December 31, 2007 91,002 15,432 106,434 842,431 6,136 252,975
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Provident Consolidated Reconciliation Summary (d)
Total Proved plus Probable
Light &
Medium Heavy Total
Company Share Crude Crude Crude
(WI +RI) (a)(c) Oil Oil Oil Gas NGL Total
Mbbl Mbbl Mbbl MMcf Mbbl Mboe
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance at
December 31, 2006 74,824 19,238 94,062 325,665 4,681 153,021
Production (6,068) (996) (7,064) (39,110) (518) (14,101)
Drilling Activity
Exploration
Discoveries 132 0 132 0 0 132
Drilling Extensions 3,778 0 3,778 14,531 56 6,256
Recompletion 209 887 1,096 3,125 23 1,640
Transfer 0 0 0 0 0 0
Acquisition 54,697 4,100 58,797 714,745 4,229 182,150
Divestiture (28) 0 (28) (261) (1) (73)
Economic Factors 283 383 666 (3,198) 2 135
Technical Revisions (5,196) 1,020 (4,177) (9,496) (573) (6,333)
----------------------------------------------------------------------------
Balance at
December 31, 2007 122,630 24,632 147,262 1,006,000 7,898 322,826
----------------------------------------------------------------------------
----------------------------------------------------------------------------
WI Share (b)
Balance at
December 31, 2007 122,585 24,621 147,206 1,004,069 7,857 322,408
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(a) Company share includes working interest (WI) and royalty interest (RI)
volumes.
(b) WI share includes the Company's working interests only, and excludes
volumes associated with royalties.
(c) Tables may not add due to rounding.
(d) U.S. Reserves are reported based on 100% of the interests of BreitBurn
Energy Company L.P. (BreitBurn) and of BreitBurn Energy Partners L.P.
(the "MLP") in the U.S. properties. As of December 31, 2007 Provident
indirectly held approximately 96% of the outstanding partnership
interests of BreitBurn with the remaining approximately 4% of the
partnership interests held by BreitBurn's co-founders and co-chief
executive officers. As of December 31, 2007 Provident indirectly held
approximately 22% of the outstanding partnership interests of the MLP
with the remaining approximately 78% of the partnership interests held
by public unitholders and BreitBurn's co-founders and co-chief executive
officers. This is consistent with Provident's financial reporting.Price Forecast Summary The following table summarizes the McDaniel January 1, 2008 price forecast used in evaluating Provident's reserves under forecast price and cost assumptions.
WTI Light,
Crude at Sweet Heavy Alberta
Cushing Crude at Oil at AECO Gas
Exchange Rate Oklahoma Edmonton Hardisty Spot Price
Year US$/Cdn$ US$/bbl Cdn$/bbl Cdn$/bbl Cdn$/MMbtu(a)
----------------------------------------------------------------------------
2008 1.000 90.00 89.00 55.30 6.80
2009 1.000 86.70 85.70 53.20 7.38
2010 1.000 83.20 82.20 50.50 7.38
2011 1.000 79.60 78.50 48.70 7.38
2012 1.000 78.50 77.40 48.00 7.49
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(a) Alberta AECO Gas Spot price assuming 1,000 btu/scfReserve Life Index (RLI) The acquisition of the Dixonville and southeast Saskatchewan assets increased the Trust's Reserve Life Index (RLI) in 2007. Provident's RLI of 16.9 years as of December 31, 2007 was determined by applying the average actual production rates for December 2007 to COGP and USOGP reserve volumes for each reserve category from the McDaniel, AJM, NSAI and DCS evaluations as of December 31, 2007. The following tables illustrate the reserve life index for Provident for the various product and reserve categories and the RLI by country as of December 31, 2007.
Provident Consolidated Reserve Life Index
Company share (WI + RI)
December 31
Total Crude Oil 2007 2006 2005 2004 2003
----------------------------------------------------------------------------
Proved Producing 9.8 9.7 8.2 6.5 3.0
Total Proved 12.4 13.1 11.7 8.9 3.9
Proved plus Probable 17.1 16.4 14.9 11.7 5.4
Natural Gas & NGL
----------------------------------------------------------------------------
Proved Producing 11.6 5.2 4.5 4.2 4.4
Total Proved 14.0 6.5 6.0 5.5 4.9
Proved plus Probable 16.7 9.0 7.9 7.2 6.1
Oil Equivalent (6:1)
----------------------------------------------------------------------------
Proved Producing 10.8 7.3 6.6 5.5 3.7
Total Proved 13.3 9.6 9.2 7.4 4.4
Proved plus Probable 16.9 12.4 11.8 9.7 5.7
Canada and United States Reserve Life Index Company share (WI + RI)
December 31, 2007
Total Crude Oil COGP USOGP
----------------------------------------------------------------------------
Proved Producing 4.6 15.2
Total Proved 6.2 18.7
Proved plus Probable 11.2 23.2
Natural Gas & NGL
----------------------------------------------------------------------------
Proved Producing 5.2 20.0
Total Proved 6.3 24.2
Proved plus Probable 8.7 27.3
Oil Equivalent (6:1)
----------------------------------------------------------------------------
Proved Producing 4.9 17.7
Total Proved 6.2 21.6
Proved plus Probable 9.7 25.4Finding, Development and Acquisition Costs Finding and development costs (F&D) include all costs to develop reserves, including land and seismic costs. The methodology used to calculate F&D costs under NI 51-101 requires that F&D costs incorporate changes in future development capital (FDC) required to bring non-producing and undeveloped reserves to production. This capital, which is included in the reserves evaluations, is part of the ongoing development process necessary to bring production on stream and generate cash flow. Provident's FDC has increased over the past several years with the acquisition of undeveloped reserves. To provide clarity in the true costs to find and develop reserves, Provident does not include the FDC associated with acquisitions in the F&D costs. However, since FDC is a component of the cost of acquiring reserves Provident does include the FDC associated with acquisitions in the FD&A costs. Drilling and recompletion activity during 2007 made a significant contribution with total proved additions of 5,064 Mboe and proved plus probable additions of 8,027 Mboe. As an energy trust and not an exploration oriented venture, Provident's focus is development and exploitation of reserves and promotes between reserve categories. As a result of capital expenditures during 2007, Provident promoted 2,509 Mboe of reserves into the proved developed producing category. The associated capital and any changes to it have been accounted for in the F&D calculations. Provident's all-in finding, development and acquisition costs for 2007 were $15.18/boe. Acquisition costs include the cash cost of acquiring reserves and the fair value of liabilities assumed. NI 51-101 does not contemplate nor define acquisition costs. Provident has included goodwill on the corporate acquisitions as part of the purchase price allocation, and therefore forms part of the costs of acquiring the reserves. The aggregate of the development costs incurred in the most recent financial year and the change during that year in estimated future development costs generally will not reflect total finding and development costs related to reserve additions for that year. A three-year average of F&D costs is a better reflection of full cycle economics and is therefore a more appropriate view of the cost of reserve additions. The three-year average FD&A cost does include the change in FDC, including acquisitions, over the three year period. Three-year average total proved and probable FD&A costs are $16.05 per boe, including reserve revisions and changes in FDC. The following table presents the details of the 2007 Finding, Development and Acquisition cost calculation for Provident and illustrates the impact of including the change in future development capital in the calculation.
Provident Consolidated
2007 Finding, Development and Acquisition Costs (FD&A)
Company
Interest
Capital Reserve Reserves
Expenditures Additions (3) Costs
---------------------------------------
($000s) Mboe(4) $/boe(4)
Total Proved
Total FD&A Costs (1) (a) $ 2,498,730 149,566 $ 16.71
Change in FDC(2) (b) 185,856
------------
------------
Total FD&A including change in
FDC (a+b) $ 2,684,587 149,566 $ 17.95
Proved + Probable
Total FD&A Costs (1) (a) $ 2,498,730 183,906 $ 13.59
Change in FDC(2) (b) 292,542
------------
------------
Total FD&A including change in
FDC (a+b) $ 2,791,273 183,906 $ 15.18
----------------------------------------------------------------------------
Notes:
(1) Total FD&A Costs ($000s)
2007 Oil and Gas Capital
Expenditures $ 148,464
Property Acquisitions (net
dispositions) $ 1,754,023
Corporate Acquisitions $ 596,243
------------
------------
Total Oil and Gas FD&A costs $ 2,498,730
----------------------------------------------------------------------------
(2) Change in Future Development Costs
($000s) Proved
Total plus
Proved Probable
--------------------------
--------------------------
FDC as of December 31, 2007 $ 335,387 $ 547,189
FDC as of December 31, 2006 $ 149,531 $ 254,647
--------------------------
--------------------------
Change in FDC $ 185,856 $ 292,542
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(3) Reserve Additions include revisions.
(4) BOEs may be misleading, particularly if used in isolation. A BOE
conversion ratio of 6 Mcf: 1 bbl is based on an energy equivalency
conversion method primarily applicable at the burner tip and does not
represent a value equivalency at the wellhead. BOE conversions of 1:1
were used for Heavy Oil and NGL.The following tables present finding and development costs and finding, development and acquisition costs for proved and proved plus probable reserves on a consolidated basis and by country.
Provident Consolidated Finding and Development Costs $ per boe)
Three year
2007 2006 2005 average (d)
----------------------------------------------------------------------------
Finding and Development Costs per boe
(includes FDC) (a)(b)(c)
Proved
Additions $ 22.02 $ 26.84 $ 23.79 $ 23.88
Additions including revisions - (e) $ 13.68 $ 22.90 $ 30.76
Proved plus probable
Additions $ 19.82 $ 17.21 $ 16.37 $ 17.80
Additions including revisions - (e) $ 19.04 $ 28.39 $ 31.89
Finding, Development and Acquisition
Costs per boe (includes FDC)
Proved
Proved excluding revisions $ 17.06 $ 29.92 $ 12.03 $ 18.05
Proved including revisions $ 17.95 $ 25.18 $ 11.88 $ 18.38
Proved plus probable
Proved plus probable
excluding revisions $ 14.68 $ 21.56 $ 11.73 $ 15.35
Proved plus probable
including revisions $ 15.18 $ 22.04 $ 14.44 $ 16.05
----------------------------------------------------------------------------
COGP Finding and Development Costs ($ per boe)
Three year
2007 2006 2005 average (d)
----------------------------------------------------------------------------
Finding and Development Costs per boe
(includes FDC) (a)(b)(c)
Proved
Additions $ 25.55 $ 24.76 $ 17.61 $ 22.20
Additions including
revisions $ 20.39 $ 25.06 $ 15.35 $ 19.36
Proved plus probable
Additions $ 20.23 $ 16.80 $ 11.61 $ 16.05
Additions including
revisions $ 24.42 $ 23.99 $ 15.01 $ 20.82
Finding, Development and Acquisition Costs
per boe (includes FDC)
Proved
Proved excluding revisions $ 41.48 $ 30.07 - (e) $ 36.57
Proved including revisions $ 39.76 $ 30.11 - (e) $ 35.31
Proved plus probable
Proved plus probable
excluding revisions $ 22.85 $ 22.12 - (e) $ 23.36
Proved plus probable
including revisions $ 23.31 $ 23.04 - (e) $ 24.48
----------------------------------------------------------------------------
USOGP Finding and Development Costs (Canadian $ per boe)
Three year
2007 2006 2005 average (d)
----------------------------------------------------------------------------
Finding and Development Costs per boe
(includes FDC) (a)(b)(c)
Proved
Additions $ 17.81 $ 29.46 - (e) $ 26.48
Additions including
revisions - (e)$ 9.24 - (e) - (e)
Proved plus probable
Additions $ 19.35 $ 17.65 $ 22.32 $ 19.81
Additions including
revisions - (e)$ 15.80 - (e) - (e)
Finding, Development and Acquisition Costs per boe
(includes FDC)
Proved
Proved excluding
revisions $ 13.45 $ 28.38 $ 10.57 $ 13.32
Proved including
revisions $ 14.35 $ 8.90 $ 10.80 $ 13.76
Proved plus probable
Proved plus probable
excluding revisions $ 12.67 $ 17.08 $ 10.20 $ 12.47
Proved plus probable
including revisions $ 13.14 $ 15.29 $ 11.59 $ 13.03
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(a) FDC - Future Development Capital, excluding USOGP Obligatory
(Maintenance) capital.
(b) Based on Company share reserves.
(c) BOEs may be misleading, particularly if used in isolation. A BOE
conversion ratio of 6 Mcf: 1 bbl is based on an energy equivalency
conversion method primarily applicable at the burner tip and does not
represent a value equivalency at the wellhead.
(d) Three-year average is the average of 2005, 2006 and 2007. The aggregate
of the exploration and development costs incurred in the most recent
financial year and the change during that year in estimated future
development costs generally will not reflect total finding and
development costs related to reserves additions for that year.
(e) Revisions exceed additions or dispositions exceed acquisitions plus
additions, therefore the calculation is not included in the table.National Instrument 51-101 Estimation and reporting of oil and natural gas reserves in Canada were governed by National Policy 2B (NP 2B) from the late 1970's until 2003. Effective September 2003 the Canadian Securities Administrators implemented new standards that govern all aspects of reserves disclosure in the form of National Instrument 51-101 (NI 51-101). NI 51-101 requirements were updated effective December 28, 2007. NI 51-101 establishes prescribed disclosures regarding oil and natural gas information. NI 51-101 also enhanced corporate governance by mandating the involvement of independent reserves evaluators in the preparation of reserves data and assigning responsibility for the content of reserves data directly to management and the board of directors. Provident's reserves have been evaluated in accordance with the Canadian Oil and Gas Evaluation Handbook Volumes 1 and 2 ("COGEH") and comply with NI 51-101. Under NI 51-101, proved reserves are defined as having a high degree of certainty to be recoverable. Probable reserves are defined as those reserves that are less certain to be recovered than proved reserves. The targeted levels of certainty, in aggregate, are at least 90 percent probability that the quantities actually recovered will equal or exceed the estimated proved reserves and at least 50 percent probability that the quantities recovered will equal or exceed the sum of the estimated proved plus probable reserves. Under NI 51-101 standards proved plus probable are considered a "best estimate" of future recoverable reserves. The following outlines some of the key reserves definitions according to NI 51-101. Reserve Definitions Acquisitions and Dispositions: Positive or negative changes to the reserves as a result of purchasing or selling all or a portion of an interest in oil and gas properties. Closing Balance: Reserves assigned at the end of the period. Company Share: Includes working interest volumes before the deduction of royalties plus volumes equivalent to royalty interests received from others. Drilling Extensions: Additions to reserves resulting from capital expenditures for step-out drilling in previously discovered reservoirs. Economic Factors: Changes to reserves between the current and previous reporting periods resulting from different price forecasts, inflation rates, operating and capital cost escalation and regulatory changes. Exploration Discoveries: Additions to reserves where no reserves were previously booked. Improved Recovery: Additions to reserves resulting from capital expenditures associated with the installation of enhanced recovery schemes that were not previously included in the reserves category. Infill Drilling: Additions to reserves resulting from capital expenditures for wells that were drilled in previously discovered reservoirs but were not drilled for enhanced recovery schemes. These additions were not previously included in the initial reserves assignment. Net Reserves: Includes the company's share of gross reserves after the deduction of royalties plus volumes equivalent to royalty interests received from others and excludes volumes equivalent to royalties paid to others. Opening Balance: Reserves assigned at the end of the last reporting period. Production: Reductions in reserves due to production during the reporting period. Technical Revisions: Positive or negative revisions to a reserves entity resulting from new technical data or revised interpretations on previously assigned reserves. Working Interest: The Company's interest before royalties paid to or received from others. The following analysis provides a detailed explanation of Provident's operating results for the quarter and year ended December 31, 2007 compared to the quarter and year ended December 31, 2006 and should be read in conjunction with the consolidated financial statements of Provident. This analysis has been prepared using information available up to March 18, 2008. Provident Energy Trust has diversified investments in certain segments of the energy value chain. Provident currently operates in three key business segments: Canadian crude oil and natural gas production ("COGP"), United States crude oil and natural gas production ("USOGP"), and Midstream. Provident's COGP business produces crude oil and natural gas from seven core areas in the western Canadian sedimentary basin. USOGP produces crude oil and natural gas in several states across the U.S.A. including California, Wyoming, Texas, Florida and Michigan. The Midstream business unit operates in Canada and the U.S.A. and extracts, processes, markets, transports and offers storage of natural gas liquids within the integrated facilities at Younger in British Columbia, Redwater and Empress in Alberta, Kerrobert in Saskatchewan, Sarnia in Ontario, Superior in Wisconsin and Lynchburg in Virginia. This analysis commences with a summary of the consolidated financial and operating results followed by segmented reporting on the COGP business unit, the USOGP business unit and the Midstream business unit. The reporting focuses on the financial and operating measurements management uses in making business decisions and evaluating performance. This analysis contains forward-looking information and statements. See "Forward-looking statements" at the end of the analysis for further discussion. Fourth quarter highlights The fourth quarter highlights section provides commentary on the fourth quarter 2007 results compared to the fourth quarter of 2006. Definitions of terms used in this section, as appropriate, are defined in the year over year section of the Management's Discussion and Analysis following later in this press release. Consolidated funds flow from operations and cash distributions
Consolidated Three months ended December 31,
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($ 000s, except per unit data) 2007 2006 % Change
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Revenue, Funds Flow from Operations
and Distributions
Revenue (net of royalties and
financial derivative instruments) $ 541,884 $ 548,086 (1)
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Funds flow from operations $ 177,563 $ 122,679 45
Per weighted average unit -
basic and diluted (1) $ 0.72 $ 0.58 24
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Declared distributions $ 89,063 $ 75,573 18
Per Unit 0.36 0.36 -
Percent of funds flow from
operations distributed (2) 57% 64% (11)
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(1) Includes dilutive impact of unit options, exchangeable shares and
convertible debentures.
(2) Calculated as declared distributions to unitholders divided by funds
flow from operations less distributions to non-controlling interests of
$22.1 million for the quarter (2006 - $4.7 million).Fourth quarter 2007 funds flow from operations was $177.6 million, 45 percent above the $122.7 million recorded in the fourth quarter of 2006. COGP 2007 fourth quarter funds flow from operations was $58.7 million, a 21 percent increase from the $48.6 million recorded in the comparable 2006 quarter. The main drivers for the COGP increase were increased production primarily from the acquisitions of Capitol Resources Ltd. ("Capitol") on June 19, 2007 and Triwest Energy Inc. ("Triwest") on December 3, 2007, which were primarily light/medium crude oil production. Higher realized crude oil and natural gas liquids prices also positively contributed to the increase in COGP funds flow from operations. The increase was partially offset by lower realized natural gas price due to the decrease in the AECO natural gas index price. The Midstream business unit added $77.1 million to fourth quarter 2007 funds flow from operations, 27 percent above the $60.5 million recorded in the comparable 2006 quarter. This increase reflects higher operating margins for all business lines within the Midstream segment, partially offset by realized losses on financial derivative instruments. Funds flow from operations in USOGP increased 208 percent to $41.8 million compared to $13.6 million in the comparable 2006 quarter. The increase is primarily driven by increased production due to oil and gas property acquisitions by the MLP in 2007, including the $1.5 billion USOGP natural gas asset acquisition in November 2007, combined with higher commodity prices. Declared distributions in the fourth quarter of 2007 totaled $89.1 million, 57 percent of funds flow from operations, after distributions to non-controlling interests of $22.1 million. This compares to $75.6 million of declared distributions in fourth quarter 2006, 64 percent of funds flow from operations, after distributions to non-controlling interests of $4.7 million.
Net income (loss)
Consolidated Three months ended December 31,
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($ 000s, except per unit data) 2007 2006 % Change
----------------------------------------------------------------------------
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Net income (loss) $ 68,545 $ (25,501) -
Per weighted aver age unit
- basic and diluted (1) $ 0.28 $ (0.12) -
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(1) Based on weighted average number of trust units outstanding including
the dilutive impact of the unit option plan, exchangeable shares and
convertible debentures.Net income for the fourth quarter of 2007 increased to $68.5 million compared to a loss of $25.5 million in the comparable 2006 quarter. The increase was driven by a 39 percent increase in earnings before interest, taxes, depletion, depreciation, accretion and other non-cash items (EBITDA) reflecting higher operating results in all three operating segments and a $161.7 million dilution gain related to Provident's change in ownership of the MLP due to the USOGP natural gas asset acquisition, as well as lower non-cash unit based compensation and a future income tax recovery. These items were partially offset by a $219.7 million fourth quarter change in unrealized loss on financial derivative instruments that extend to January 2013. The COGP business segment had net income of $16.9 million compared to a 2006 fourth quarter net loss of $8.2 million. A 24 percent increase in EBITDA combined with a future income tax recovery were partially offset by unrealized losses on derivative financial instruments and increased depletion expense. The Midstream segment recognized a net loss of $62.0 million in the fourth quarter of 2007, compared to $11.0 million of net loss in the fourth quarter of 2006. Midstream results include EBITDA of $89.4 million in 2007 compared to $74.4 million in the fourth quarter of 2006. Midstream EBITDA reflected an increase in operating margins for all three business lines within the Midstream segment. Offsetting this strong EBITDA were unrealized losses on outstanding financial derivative instruments amounting to $161.8 million for the fourth quarter of 2007 (2006 - $28.7 million). Under generally accepted accounting principles, these unrealized "mark-to-market" amounts, which relate to financial instruments with effective periods ranging from 2008 through January 2013, were required to be fully recognized in the financial statements of Provident, affecting current quarter earnings. USOGP generated net income of $113.6 million in the fourth quarter of 2007 with a comparative net loss of $6.3 million for 2006. The significant increase in net income was due to a fourth quarter 2007 dilution gain generated as Provident's ownership of the MLP was reduced when the MLP issued equity to finance the USOGP natural gas asset acquisition. Reconciliation of non-GAAP measure The Trust calculates earnings before interest, taxes, depletion, depreciation, accretion and other non-cash items (EBITDA) within its segment disclosure. EBITDA is a non-GAAP measure. A reconciliation between EBITDA and income before taxes and non-controlling interests follows:
EBITDA Reconciliation Three months ended December 31,
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($ 000s) 2007 2006 % Change
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EBITDA $ 195,802 $ 140,919 39
Adjusted for:
Cash interest (22,285) (16,308) 37
Unrealized loss on financial
derivative instruments (243,970) (24,293) 904
Dilution gain 161,732 - -
Depletion, depreciation and
accretion and other non-cash
expenses (105,589) (100,084) 6
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(Loss) income before taxes and
non-controlling interests $ (14,310) $ 234 -
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Reconciliation of funds flow
from operations to distributions Three months ended December 31,
----------------------------------------------------------------------------
2007 2006 % Change
----------------------------------------------------------------------------
Cash provided by operating
activities $ 137,330 $ 162,889 (16)
Change in non-cash operating
working capital 38,149 (41,424) -
Site restoration expenditures 2,084 1,214 72
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Funds flow from operations 177,563 122,679 45
Distributions to non-controlling
interests (22,124) (4,715) 369
Cash retained for financing and
investing activities (66,376) (42,391) 57
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Distributions to unitholders 89,063 75,573 18
Accumulated cash distributions,
beginning of period 1,171,114 851,252 38
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Accumulated cash distributions,
end of period $ 1,260,177 $ 926,825 36
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Cash distributions per unit $ 0.36 $ 0.36 -
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Taxes
Consolidated Three months ended December 31,
----------------------------------------------------------------------------
($ 000s) 2007 2006 % Change
----------------------------------------------------------------------------
Capital tax expense $ 510 $ 452 13
Current and withholding tax
(recovery) expense (261) 1,433 -
Future income tax (recovery) expense (57,593) 21,253 -
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$ (57,344) $ 23,138 -
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----------------------------------------------------------------------------Fourth quarter Saskatchewan capital taxes totaled $0.5 million, consistent with the $0.5 million recorded in the fourth quarter of 2006. The current and withholding tax recovery was $0.3 million in the fourth quarter of 2007 with a comparative expense of $1.4 million in the fourth quarter of 2006. These taxes arise from Provident's U.S. based operations and reflect a decrease in fourth quarter income subject to tax, primarily in U.S. Midstream operations. The 2007 fourth quarter future tax recovery of $57.6 million compares to an expense of $ 21.3 million in the fourth quarter of 2006. The future tax recovery in the fourth quarter of 2007 resulted from an increased loss for tax purposes in the Canadian operations and the impact of income tax rate changes. Interest expense Consolidated Three months ended December 31, ---------------------------------------------------------------------------- ($ 000s, except as noted) 2007 2006 % Change ---------------------------------------------------------------------------- Interest on bank debt $ 17,299 $ 11,162 55 Weighted-average interest rate on bank debt 5.95% 5.33% 12 Interest on 8.75% convertible debentures 438 557 (21) Interest on 8.0% convertible debentures 503 543 (7) Interest on 6.5% convertible debentures 1,609 1,609 - Interest on 6.5% convertible debentures 2,436 2,437 - ---------------------------------------------------------------------------- Total cash interest $ 22,285 $ 16,308 37 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Weighted average interest rate on all long-term debt 6.12% 5.75% 6 Debenture accretion and other non-cash interest expense 2,026 1,708 19 ---------------------------------------------------------------------------- Total interest expense $ 24,311 $ 18,016 35 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Cash interest expense increased for the quarter as compared to the same quarter in 2006 due to the increase in the overall size of Provident, with commensurate increases in debt levels. Increased debt levels are a direct result of the third quarter 2006 Rainbow asset acquisition, the second quarter 2007 Capitol acquisition and the fourth quarter 2007 USOGP natural gas asset acquisition. Commodity price risk management program A summary of Provident's risk management contracts executed during the fourth quarter of 2007 is contained in the following tables.
Activity in the Fourth Quarter:
COGP
Volume
Year Product (Buy)/Sell Terms Effective Period
----------------------------------------------------------------------------
2008 Crude Oil 150 Bpd Puts US $75.00 per bbl January 1-December 31
1,000 Bpd Puts US $67.50 per bbl January 1-December 31
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USOGP
Volume
Year Product (Buy)/Sell Terms Effective Period
----------------------------------------------------------------------------
2008 Crude Oil 250 Bpd Participating Swap US
$70.00 per bbl (61.8%
above the floor price) July 1-December 31
2009 Crude Oil 250 Bpd Participating Swap US
$70.00 per bbl (61.8%
above the floor price) January 1-December 31
2010 Crude Oil 250 Bpd Participating Swap US
$70.00 per bbl (61.8%
above the floor price) January 1-March 31
500 Bpd Participating Swap US
$70.00 per bbl (37.3%
above the floor price) April 1-September 30
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----------------------------------------------------------------------------
Midstream
Volume
Year Product (Buy)/Sell Terms Effective Period
----------------------------------------------------------------------------
2008 Crude Oil (10,535) Bpd US $86.93 per bbl (4) January 1-March 31
Propane 3,225 Bpd US $1.5308 per gallon
(6) (9) January 1-January 31
1,206 Bpd US $1.5382 per gallon
(6) (9) February 1-February 29
10,287 Bpd US $1.4595 per gallon
(4) (6) January 1-March 31
Normal
Butane 2,258 Bpd US $1.8148 per gallon
(7) (9) January 1-January 31
2,230 Bpd US $1.647 per gallon
(4) (7) January 1-March 31
ISO Butane 1,720 Bpd US $1.6424 per gallon
(4) (8) January 1-March 31
Power (20) MW/hpd Cdn $76.43 per MW/h(12) January 1-December 31
2009 Crude Oil 598 Bpd Participating Swap US
$75.64 per bbl (55.7%
above the floor price) July 1-November 30
500 Bpd Participating Swap Cdn
$73.38 per bbl (48.9%
above the floor
price) September 1-November 30
Natural Gas (2,792) Gjpd Participating Swap Cdn
$7.73 per gj (39% below
the ceiling price) July 1-November 30
(2,810) Gjpd Cdn $6.62 per gj September 1-October 31
(2,810) Gjpd Costless Collar Cdn
$6.20 floor, Cdn $7.10
ceiling September 1-October 31
Foreign
Exchange Sell US $596,166 per
month @0.9815 (5) July 1-October 31
Sell US $1,686,650 per
month @0.9620 (5) September 1-October 31
Sell US $1,163,100 per
month @1.013 (5) November 1-November 30
2010 Crude Oil 376 Bpd Participating Swap Cdn
$70.91 per bbl (56%
above the floor price) July 1-October 31
820 Bpd Participating Swap US
$73.63 per bbl (51.8%
above the floor price) January 1-November 30
Natural Gas(4,089) Gjpd Participating Swap Cdn
$7.62 per gj (31.3%
below the ceiling
price) January 1-November 30
(3,529) Gjpd Cdn $6.69 per gj July 1-October 31
Foreign
Exchange Sell US $582,821 per
month @1.0159 (5) January 1-August 31
Sell US $1,407,419 per
month @0.9781 (5) July 1-August 31
Sell US $587,903 per
month @1.0165 (5) July 1-November 30
Sell US $2,254,103 per
month @0.9577 (5) September 1-October 31
Sell US $1,750,992 per
month @1.0176 (5) September 1-November 30
2011 Crude Oil 250 Bpd Participating Swap US
$63.00 per bbl (64%
above the floor price) January 1-December 31
Natural Gas (1,405)Gjpd Cdn $6.91 per gj January 1-December 31
Foreign
Exchange Sell US $479,063 per
month @0.9725 (5) January 1-December 31
2012 Crude Oil 1,141 Bpd Participating Swap US
$66.67 per bbl (59%
above the floor price) April 1-December 31
500 Bpd Cdn $71.88 per bbl October 1-December 31
250 Bpd Participating Swap Cdn
$71.50 per bbl (50%
above the floor price) October 1-December 31
Natural Gas (7,827)Gjpd Cdn $6.83 per gj April 1-December 31
Foreign
Exchange Sell US $1,437,986 per
month @0.9657 (5) July 1-December 31
Sell US $976,436 per
month @0.9413 (5) April 1-October 31
Sell US $1,634,227 per
month @0.9832 (5) October 1-December 31
2013 Crude Oil 250 Bpd Cdn $75.32 per bbl January 1-January 31
750 Bpd Participating Swap US
$70.92 per bbl (50.6%
above the floor price) January 1-January 31
250 Bpd Participating Swap Cdn
$71.50 per bbl (50%
above the floor price) January 1-January 31
Natural Gas (7,025)Gjpd Cdn $7.19 per gj January 1-January 31
Foreign
Exchange Sell US $1,651,990 per
month @0.9832 (5) January 1-January 31
----------------------------------------------------------------------------
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Corporate
Volume
Year Product (Buy)/Sell Terms Effective Period
----------------------------------------------------------------------------
2008 Foreign
Exchange Sell US $9,000,000 @.9701 (5.1) January 25
Sell US $3,000,000 @1.0105 (5.1) February 25
----------------------------------------------------------------------------
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(1) The above table represents a number of transactions entered into over
an extended period of time.
(2) Natural Gas contracts are settled against AECO monthly index.
(3) Crude Oil contracts are settled against NYMEX WTI calendar average.
(4) Conversion of Crude Oil BTU positions to liquids.
(5) US dollar contracts settled against Bank of Canada noon rate average.
(5.1) US dollar cashflows sold forward.
(6) Propane contracts are settled against Belvieu C3 TET.
(7) Normal Butane contracts are settled against Belvieu NC4 NON-TET.
(8) ISO Butane contracts are settled against Belvieu IC4 NON-TET.
(9) Midstream inventory price stabilization contracts.
(10) Natural Gas contracts settle against Natural Gas - Michcon Citygate
Inside FERC.
(11) Settles quarterly against 3M CAD BA interest rate.
(12) Power contracts are settled monthly against the average hourly price
of Electricity as published by the AESO in $/MWh.Settlement of commodity contracts The following is a summary of the net cash flow to settle Commodity contracts during the fourth quarter of 2007. For comparative purposes, the 2006 amounts are also summarized. a) Crude oil For the quarter ending December 31, 2007, Provident paid $15.2 million (2006 - $1.3 million received) to settle various oil market based contracts on an aggregate volume of 1.0 million barrels (2006 - 0.6 million barrels). b) Natural Gas For the quarter ending December 31, 2007, Provident received $5.1 million (2006 - $3.7 million received) to settle various natural gas market based contracts on an aggregate volume of 3.2 million gj's (2006 - 4.2 million gj's). c) Midstream For the quarter ending December 31, 2007 Provident received $0.2 million (2006 - $3.6 million) to settle midstream oil market based contracts on an aggregate volume of 0.4 million barrels (2006 - 0.3 million barrels) and paid $16.8 million (2006 - $8.8 million) to settle midstream natural gas market based contracts on an aggregate volume of 6.8 million gj's (2006 - 4.7 million gj's). In addition, Provident paid $26.6 million (2006 - $10.6 million received) to settle midstream NGL market based contracts on an aggregate volume of 2.0 million barrels (2006 - 1.9 million barrels). d) Foreign exchange contracts For the quarter ending December 31, 2007 Provident received $6.3 million to settle various foreign exchange based contracts. Provident's Commodity Price Risk Management activities are also discussed in the year over year section of Management's Discussion and Analysis and in note 13 to the consolidated financial statements. COGP segment review Crude oil price and liquids COGP Three months ended December 31, ---------------------------------------------------------------------------- ($ per bbl) 2007 2006 % Change ---------------------------------------------------------------------------- Oil per barrel WTI (US$) $ 90.68 $ 60.21 51 Exchange rate (from US$ to Cdn$) $ 0.98 $ 1.14 (14) WTI expressed in Cdn$ $ 89.03 $ 68.64 30 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Realized pricing before financial derivative instruments Light/Medium oil $ 65.18 $ 51.93 26 Heavy oil $ 43.36 $ 25.82 68 Natural gas liquids $ 63.63 $ 47.46 34 ---------------------------------------------------------------------------- Crude oil and natural gas liquids $ 61.94 $ 46.39 34 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- The above prices are net of transportation expense. In the fourth quarter of 2007 COGP's realized oil and natural gas liquids price, prior to the impact of financial derivative instruments, increased by 34 percent to $61.94 per barrel compared to $46.39 per barrel in the fourth quarter of 2006. The increase was related to a 51 percent higher US$ WTI crude oil price, partially offset by a stronger Canadian dollar and wider differentials. Natural gas price COGP Three months ended December 31, ---------------------------------------------------------------------------- ($ per mcf) 2007 2006 % Change ---------------------------------------------------------------------------- AECO monthly index (Cdn$ per mcf) $ 6.00 $ 6.36 (6) Corporate natural gas price per mcf before financial derivative instruments (Cdn$) $ 6.08 $ 6.73 (10) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- COGP's fourth quarter 2007 realized natural gas price, prior to the impact of financial derivative instruments, decreased 10 percent as compared to the fourth quarter of 2006, higher than the decrease in the benchmark AECO index price of six percent. Provident's gas portfolio includes aggregator contracts sold on a term basis that can differ from the benchmark price and sells to the spot market on monthly or daily indices and receives prices which take into account heat content. Provident's realized prices and changes in prices can therefore differ from benchmark indices.
Production
COGP Three months ended December 31,
----------------------------------------------------------------------------
2007 2006 % Change
----------------------------------------------------------------------------
Daily production
Crude oil - Light/Medium (bpd) 9,483 6,569 44
- Heavy (bpd) 1,769 1,838 (4)
Natural gas liquids (bpd) 1,277 1,331 (4)
Natural gas (mcfd) 92,584 97,489 (5)
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Oil equivalent (boed) (1) 27,960 25,986 8
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----------------------------------------------------------------------------
(1) Provident reports equivalent production converting natural gas to oil
on a 6:1 basis.Production increased eight percent to 27,960 boed during the fourth quarter of 2007 as compared to 25,986 boed in 2006. The increase was primarily a result of the acquisitions of Capitol Resources Ltd. ("Capitol") on June 19, 2007 and Triwest Energy Inc. ("Triwest") on December 3, 2007, as well as an active drilling and optimization program. The Capitol acquisition became COGP's newest core area, Dixonville, and the Triwest acquisition has been rolled up into the Southeast Saskatchewan core area. The overall increase in production was partially offset by natural production declines. Production for the fourth quarter of 2007 was weighted 55 percent natural gas, 39 percent medium/light crude oil and natural gas liquids and six percent heavy oil. This compared to fourth quarter 2006 production weighted 63 percent natural gas, 30 percent medium/light oil and natural gas liquids and seven percent heavy oil. Quarter-over-quarter, the change in mix reflected the Capitol and Triwest acquisitions which were primarily light/medium crude oil production and natural production.
COGP's production summarized by core areas is as follows:
Three months ended December 31,
----------------------------------------------------------------------------
COGP 2007 2006 % Change
----------------------------------------------------------------------------
Daily Production - by area (boed) (1)
West Central Alberta 6,762 7,648 (12)
Southern Alberta 5,493 6,022 (9)
Northwest Alberta 4,714 4,731 -
Dixonville 4,090 - -
Southeast Saskatchewan 2,144 1,627 32
Southwest Saskatchewan 1,527 2,545 (40)
Lloydminster 3,217 3,330 (3)
Other 13 83 (84)
----------------------------------------------------------------------------
27,960 25,986 8
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Provident reports equivalent production converting natural gas to oil
on a 6:1 basis.Internal development activities included 35.8 net wells drilled during the quarter ended December 31, 2007 with a 97 percent success rate. Production results at Dixonville have met internal expectations, however, Dixonville did experience significant downtime during December due to cold weather conditions. Optimization of the Dixonville production and facilities are ongoing. In the fourth quarter of 2007, activity at Southern Saskatchewan focused on light/medium conventional oil drilling in southeast Saskatchewan. The production increase in Southeast Saskatchewan is primarily a result of the Triwest acquisition and the related drilling program. Results from the Triwest assets during the quarter exceeded internal expectations. Provident has shifted some capital expenditures from shallow gas drilling in Southwest Saskatchewan to other areas to enhance the return on capital. In Southwest Saskatchewan, Provident focused primarily on operating cost initiatives such as a water injection well and compressor optimization. In both Southern Alberta and West Central Alberta, Provident has managed production declines in a lower gas price environment by successfully reactivating wells and conducting workovers. Northwest Alberta's production was flat quarter over quarter although there was some unfavorable cold weather in December, which resulted in a unit compressor and pump jack failure impacting production. In Lloydminster, Provident is working to enhance t | |||