Harvest Energy Posts 3Q 2009 Financial, Operating Results
Harvest Energy has announced the release of its third quarter 2009 financial and operating results. All figures reported herein are Canadian dollars unless otherwise stated.
- Cash from Operating Activities was $99.0 million ($0.55 per Trust Unit) compared to $0.45 per unit in the prior quarter and $0.87 per unit in the same quarter last year. Harvest declared distributions of $27.2 million ($0.05 per Trust Unit/month), representing 27% of Cash from Operating Activities. The payout ratio improved compared to the 33% paid in the previous quarter as downstream cash flow improved over the second quarter;
- On October 21, 2009, Harvest Energy announced an agreement with Korea National Oil Corporation to purchase all of the issued and outstanding trust units at a price of C$10.00 per trust unit for a total cash consideration of approximately C$1.8 billion plus the assumption of C$2.3 billion of debt. The Arrangement Agreement will be completed by way of a plan of arrangement under the Business Corporations Act (Alberta) (the "Arrangement") subject to unitholder and regulatory approval. The Arrangement represents a 47% premium over the 30-day weighted average trading price of the Units on the Toronto Stock Exchange up to and including October 20, 2009;
- In accordance with the terms of the Arrangement Agreement, Harvest will suspend its distribution and Premium Distribution, Distribution Reinvestment and Optional Trust Unit Purchase Plan ("DRIP") effective immediately. The final distribution of C$0.05 per Unit announced on October 8, 2009 will be paid in cash on November 16, 2009 to all Harvest unitholders of record on October 22, 2009.
- Upstream production of 50,368 barrels of oil equivalent per day (boe/d) continues to exceed our expectations as lower than anticipated decline rates continue, as such, we have increased our full-year 2009 production guidance to approximately 51,500 boe/d. With limited capital spent in the quarter, production declined marginally compared to the second quarter average production of 52,745 boe/d. We continue to see low decline rates offset by better than expected performance from a number of our Enhanced Recovery projects and drilling programs;
- Upstream operating cash flow declined to $116.8 million, from the $121.1 million in the second quarter of 2009 largely due to production declines, a stronger Canadian dollar, partially offset by an improvement in the price of oil;
- Development capital spending of $12.5 million in the third quarter was focused on well equipment, pipelines and facilities;
- Operating costs continue to fall below our full year expectations and were $13.02/boe in the third quarter compared to $14.51/boe in the same quarter last year primarily due to lower power and fuel costs.
While natural gas prices continue to remain weak, we have witnessed oil prices making significant gains over the quarter. Partially mitigating this upward trend was the strength in the Canadian dollar. Despite the quarter over quarter decline in production, operational results continue to exceed our expectations as continued reservoir maintenance at Hay River, coupled with strong production additions at Chedderville continue to supplement production. As a result, cash flow in the third quarter was $116.8 million, compared to $121.1 million in the prior quarter.
We continue to be extremely pleased with our operating results. Production volumes were above our expectations for the first nine months of the year despite the sale of approximately 1,020 boe/d in the second quarter as we continued to benefit from the results of our enhanced oil recovery projects as well as new drilling activites. There was a modest $12.5 million of capital spent in the third quarter predominantly focused on well equipment, pipelines and facilities.
Harvest Energy continues to be positioned with short term growth opportunities coupled with long-term enhanced recovery prospects with over 2 billion barrels of estimated original oil in place on conventional land. Future EOR opportunities have been identified in Hayter, Hay River, Kindersley and southeast Saskatchewan, while carbon dioxide (CO2) flooding and sequestration, oilsands and coal bed methane (CBM) represent longer term recovery opportunities for Harvest.
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