Enterra Energy Trust Significantly Reduces Debt in Third Quarter
Enterra Energy Trust has announced its financial and operating results for the three and nine months ended September 30, 2008.
"We made tremendous progress on reducing our debt during the quarter," commented Blaine Boerchers, Enterra's Chief Financial Officer. "We were successful in keeping our production steady and achieved 100 percent drilling success during the quarter. The improvement in our financial strength during 2008 will provide us with more financial flexibility to manage through the current volatile economic and financial market conditions."
Q3 2008 Significant Accomplishments
- Reduction of total bank debt in the quarter by $31.3 million to $102.8 million, for a total decrease of $69.2 million since the beginning of 2008
- Funds from operations for the quarter were $27.9 million and $83.7 million for nine months
- Average production of 10,117 boe per day, better than previous target
- Drilled seven liquids-rich gas wells in Oklahoma with 100 percent success
In the third quarter 2008, Enterra reported net income of $14.9 million ($0.23 per unit), compared to a net loss of $47.7 million ($0.78 per unit) in the same period last year. The Trust's funds from operations totalled $27.9 million during the quarter, which is an increase of 29 percent over the same period last year. The increase in funds from operations is primarily the result of higher commodity prices realized.
Capital expenditures during the quarter were $13.7 million. Enterra participated in the drilling of seven (1.6 net) wells in Oklahoma. The wells were liquids-rich natural gas wells which were 100 percent successful. All seven wells have been completed and are in the early dewatering stages.
The Trust recorded a provision for non-recoverable receivables for the full amount owed by SemGroup L.P. of $9.1 million with a corresponding decrease to net income ($6.7 million net of tax). Management believes that some portion of the $9.1 million may be recoverable; however, that amount cannot be determined at this time and therefore an allowance for the full amount has been recorded.
In light of current market uncertainty, Enterra's management and board of directors have decided not to reintroduce any distribution payments for the balance of 2008. Instead, it was determined that the best use of excess cash flow available to the Trust will be towards further debt reduction. Enterra's priority remains the maintenance of the maximum financial flexibility possible, while also continuing to reinvest conservatively to preserve and grow the underlying value of the Trust's assets. Enterra intends to announce specific strategies and targets for 2009 by the end of November.
Revised 2008 Outlook
- Enterra continues to target 100 percent replacement of reserves produced in 2008. However, low commodity prices at year end compared with pricing levels seen during much of 2008 may lead to a lower reserve life across Enterra's portfolio and make this target challenging to achieve.
- Average daily production target for 2008 is in the range of 9,700 - 10,300 boe per day (an increase of 500 boe per day from previous guidance), with a year end exit rate of between 9,600 - 10,100 boe per day (an increase of 600 boe per day from previous guidance).
- 2008 capital program is revised upward from previously announced $38 million budget to $43 million.
- During the fourth quarter of 2008, the Trust anticipates drilling 15 wells (7.2 net), in addition to the 26 (9.5 net) wells drilled year-to-date.
- Objective to achieve a bank debt level of between $95 million and $100 million drawn on $135 million senior credit facility by year end.