EXHIBIT 8
---------
PRIMEWEST ENERGY TRUST 2002 QUARTERLY REPORT TO THE UNITHOLDERS
FOR THE THREE MONTHS ENDING MARCH 31, 2002
P R I M E W E S T
- --------------------------------------------------------------------------------
CALGARY, MAY 16, 2002 (TSE: PWI.UN; PWX) -- PRIMEWEST ENERGY TRUST (PRIMEWEST)
TODAY ANNOUNCED UNAUDITED INTERIM OPERATING AND FINANCIAL RESULTS FOR THE FIRST
QUARTER.
- --------------------------------------------------------------------------------
PRIMEWEST ENERGY TRUST ANNOUNCES FIRST QUARTER 2002 RESULTS, PRODUCTION EXCEEDS
TARGET, CASH FLOW $0.37 PER UNIT
FIRST QUARTER HIGHLIGHTS
o Production averaged 31,370 barrels of oil equivalent per day (BOE/day),
exceeding the target range of 29,000-30,000 BOE/day and the 2001 exit rate
of 30,500 BOE/day.
o Cash flow of $48.3 million ($0.37 per unit) compared to $53.2 million
($0.42 per unit) in the fourth quarter of 2001 reflects lower production
due to the disposition of the Garrington and Westward Ho properties in the
fourth quarter of 2001 and lower realized commodity prices.
o Operating expenses were reduced to $5.10 per BOE from $5.69 per BOE in the
fourth quarter of 2001, and $5.42 for the full-year 2001.
o Net debt increased from $225 to $234 million, reflecting capital
expenditures of $25 million, partially offset by the 79% cash flow
distribution rate in the quarter and proceeds from the DRIP and Optional
Trust Unit Purchase programs. Represents a debt-to-cash flow ratio of 1.2
times.
"Our strong production performance in the quarter reflects our success in
overcoming technical challenges encountered in 2001, and a successful 2002
development program thus far," said Don Garner, President and Chief Operating
Officer. "In addition, the significant reduction in operating cash costs per BOE
reflects the success of our operating teams in reducing costs, as well as lower
power costs."
JUNE DISTRIBUTION DECLARED
PrimeWest today confirms a cash distribution of 10 cents per trust unit for May
2002. The distribution will be paid on June 14, 2002, to all unitholders of
record on May 31, 2002. The ex-distribution date is May 29, 2002. This level of
distribution represents a 17% cash-on-cash yield based on May 16th's closing
price of $6.95.
Including the regular 10 cent per unit distribution payable in June, PrimeWest
will have paid a total of $1.77 per trust unit during the previous 12-month
period (July 2001 through June 2002), and $8.28 per trust unit since inception
in October 1996.
================================================================================
WE ARE ONE OF NORTH AMERICA'S LARGEST CONVENTIONAL OIL AND GAS ROYALTY TRUSTS.
WE MANAGE PRIMEWEST CAREFULLY FOR THE ONGOING BENEFIT OF OUR UNITHOLDERS, AND IN
DOING SO ARE GUIDED BY THE OPERATING PRINCIPLE OF RESPONSIBLE STEWARDSHIP. OUR
MAIN OBJECTIVE IS TO DELIVER PREDICTABLE AND SUSTAINABLE CASH DISTRIBUTIONS
MONTHLY, WITHIN THE CONTEXT OF A COMMODITY-BASED BUSINESS ENVIRONMENT.
PRIMEWEST ENERGY TRUST
FINANCIAL & OPERATING HIGHLIGHTS [GRAPHIC OMITTED]
================================================================================
FINANCIAL HIGHLIGHTS
(THOUSANDS OF DOLLARS EXCEPT PER-BOE AND PER-TRUST-UNIT AMOUNTS)
Mar. 31, Per Dec. 31, Per Mar. 31, Per
Three months ended 2002 BOE 2001 BOE 2001 BOE
- --------------------------------------------------------- ---------------------- -------------------
Net revenue $69,442 $24.60 $78,447 $25.99 $56,990 $37.55
Cash flow 48,301 17.11 53,247 17.64 43,534 28.68
Operating expenses 14,393 5.10 17,188 5.69 8,340 5.49
G&A expenses
- Cash 2,635 0.93 2,532 0.84 2,273 1.50
- Non-cash 5,351 1.90 2,815 0.93 5,195 3.42
Management fees
- Cash 1,418 0.50 1,666 0.55 1,269 0.84
- Non-cash 479 0.17 419 0.14 483 0.32
Cash distributed to unitholders 38,131 53,268 40,783
Cash distributed to unitholders
(per trust unit) 0.30 0.44 0.60
Cash available for distribution 0.37 0.42 0.79
Net debt (1) 234,415 225,466 333,354
Net debt (1) (per trust unit) 1.77 1.72 3.04
(1) NET DEBT IS LONG-TERM DEBT PLUS NEGATIVE WORKING CAPITAL.
OPERATING HIGHLIGHTS
Mar. 31, Dec. 31, Mar. 31,
Three months ended 2002 2001 2001
- -------------------------------------------------------------------------------- --------- --------
Daily sales volumes
Natural gas (MMCF/DAY) 113.31 119.65 49.57
Crude oil (BBLS/DAY) 10,244 10,425 6,988
Natural gas liquids (BBLS/DAY) 2,240 2,441 1,613
Total (BOE/DAY) 31,370 32,807 16,864
Prices (CDN $)
Natural gas ($/MCF) 4.57 5.16 10.38
Crude oil ($/BBL) 32.09 30.49 32.33
Natural gas liquids ($/BBL) 20.87 22.54 40.21
Total ($ PER BOE) 28.49 30.18 47.76
2 |
PRIMEWEST ENERGY TRUST
MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A) [GRAPHIC OMMITTED]
================================================================================
The following discussion is management's analysis of PrimeWest's operating and
financial results for the three months ended March 31, 2002 compared with the
previous quarter and the first quarter of 2001. This discussion also contains
information and opinions concerning the Trust's future outlook based on
currently available information. This discussion should be read in conjunction
with the Trust's annual MD&A and audited consolidated financial statements for
the years ended December 31, 2001 and 2000, together with the accompanying
notes, as contained in the Trust's 2001 Annual Report.
FORWARD-LOOKING INFORMATION
Because forward-looking information addresses future events and conditions, it
involves risks and uncertainties that could cause actual results to differ
materially from those contemplated by the forward-looking information. These
risks and uncertainties include commodity price levels; production levels; the
recoverability of reserves; transportation availability and costs; operating and
other costs; interest rates and currency-exchange rates; and changes in
environmental and other legislation and regulations. Please refer to the Trust's
annual report for more detail as to the nature of these risks and uncertainties.
STRATEGY 2002 OBJECTIVES FIRST QUARTER PERFORMANCE
ASSET GROWTH o Use the low cycles in the o Low commodity price cycle
commodity price environment and short-lived. Available acquisition
strong balance sheet to add targets generally poor quality in
high quality reserves to our nature. No acquisitions in first
asset base. quarter.
o Maintain or increase our o Development program successful in
reserve life index. adding reserves and production.
OPERATING EXCELLENCE o Moderate natural production o Production exceeded expectations for
decline through prudent capital the first quarter of 2002.
development.
o Add incremental production o First quarter development success at
through drilling, completions Dawson, Stowe, Grand Forks, Caroline
and workovers. and Brant Farrow. 20.6 net wells
drilled with a 93% success rate.
o Reduce per BOE operating o Reduced operating expenses to $5.10
expenses from 2001 levels. per BOE ($5.69 in the fourth quarter
of 2001).
FINANCIAL PRUDENCE o Maintain a strong financial o Debt-to-cash flow ratio has
position as measured by net increased to 1.21 from 1.05 at year-end
debt per Trust Unit and reflecting reduced cash flow for the
debt-to-cash flow ratio. first quarter of 2002. Unutilized
credit facilities of $115 million at
March 31, 2002.
RISK MANAGEMENT o Use hedging to stabilize and o Stabilized at 10 cents per month
protect distribution levels. through July of 2002 at a minimum.
o Manage distribution rates as o Stabilized at 10 cents per month
commodity prices cycle. through July of 2002 at a minimum.
3 |
PRIMEWEST ENERGY TRUST
MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A) [GRAPHIC OMMITTED]
================================================================================
PRODUCTION VOLUMES
Mar. 31, Dec. 31, Mar. 31,
Three months ended 2002 2001 2001
- -------------------------------------------------------------------------------- --------- ---------
Natural gas (MMCF/DAY) 113.31 119.65 49.57
Crude oil (BBLS/DAY) 10,244 10,425 6,988
Natural gas liquids (BBLS/DAY) 2,240 2,441 1,613
Total (BOE/DAY) 31,370 32,807 16,864
======== ======== ========
Gross Overriding Royalty volumes included above (BOE/DAY) 2,076 1,480 1,900
======== ======== ========
Production volumes exceeded expectations in the first quarter of 2002. With an
exit rate of 30,500 BOE per day for 2001 (reflecting the disposition of
approximately 1,800 BOE/day from the Garrington and Westward Ho areas in
December of 2001) and natural decline, volumes were anticipated to be in the
29,000-30,000 BOE per day range in the first half of 2002. The improvement is a
result of the resolution of technical issues encountered in 2001 and successful
2002 development activities.
In the first quarter of 2002, PrimeWest's drilling program included 31 gross
(20.6 net) wells and achieved a 93% success rate. In addition, there were a
number of facility enhancements, particularly at Roxanna.
Compared to the first quarter of 2001, volumes are higher reflecting the
acquisition of Cypress Energy Inc. on March 29, 2001.
PRODUCTION OUTLOOK
PrimeWest is maintaining its production target at 29,000-30,000 BOE/day, but is
extending that target to encompass the full year 2002. Previously, this target
was effective only for the first half of 2002.
REALIZED COMMODITY PRICES
Benchmark prices
Mar. 31, Dec. 31, Mar. 31,
Three months ended 2002 2001 2001
- ------------------------------------------------------------------------------- -------- --------
Natural gas ($/MCF AECO) 3.34 3.30 10.90
Crude oil ($U.S./BBL WTI) 21.64 20.43 28.72
Average PrimeWest realized selling prices (CDN DOLLARS)
Mar. 31, Dec. 31, Mar. 31,
Three months ended 2002 2001 2001
- ------------------------------------------------------------------------------- -------- --------
Natural gas ($/MCF) 4.57 5.16 10.38
Crude oil ($/BBL) 32.09 30.49 32.33
Natural gas liquids ($/BBL) 20.87 22.54 40.21
Total Oil Equivalent ($ PER BOE) 28.49 30.18 47.76
======== ======== ========
Realized hedging gain (loss) ($ PER BOE) 7.06 3.16 (0.38)
======== ======== ========
Realized natural gas prices in the first quarter of 2002 fell 11% compared to
the fourth quarter of 2001 reflecting market weakness in the first six weeks of
this year.
Of the realized hedging gains of $19.9 million during the first quarter of 2002,
$16.6 million or $1.63/Mcf was attributable to natural gas and $3.3 million or
$3.56 per barrel was attributable to crude oil.
4 |
PRIMEWEST ENERGY TRUST
MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A) [GRAPHIC OMMITTED]
================================================================================
SALES REVENUE (1)
($ THOUSANDS)
Mar. 31, Dec. 31, Mar. 31,
Three months ended 2002 2001 2001
- ------------------------------------------------------------------------------------- -------- --------
Natural gas 46,645 56,776 46,321
Crude oil 29,585 29,240 20,334
Natural gas liquids 4,207 5,062 5,839
-------- -------- --------
Total 80,437 91,078 72,494
======== ======== ========
Hedging gains (losses) (2) for natural gas and crude oil included above 19,926 9,526 (582)
======== ======== ========
(1) Excludes sulphur
(2) Net of amortized premiums
Sales revenues declined 12% compared to the previous quarter both as a result of
weaker natural gas prices and lower production volumes, offset by hedging gains.
Compared to the first quarter of 2001, revenues were higher as a result of the
Cypress volumes, but that increase was substantially offset by weaker prices.
PRICE OUTLOOK
Continued volatility in prices is expected as a result of instability in the
Middle East. Fundamentally, the underlying supply/demand equation for both crude
oil and natural gas is negative, suggesting intermediate term price weakness
should the political uncertainties be resolved.
Nevertheless, current and forward pricing for both crude oil and natural gas is
much higher today than earlier this year. In particular, natural gas prices hit
a recent bottom of $2.56/Mcf AECO in January 2002 compared to $4.86/Mcf AECO in
early May, an increase of 90%. The futures market for 2002/2003 winter gas is
currently trading in excess of $6.00/Mcf. Higher natural gas prices bode well
for natural gas weighted producers, including PrimeWest.
ROYALTIES
($ THOUSANDS)
Mar. 31, Dec. 31, Mar. 31,
Three months ended 2002 2001 2001
- ------------------------------------------------------------------------------- -------- --------
Royalty expense 10,666 13,591 15,651
Per BOE 3.78 4.50 10.31
Royalties as % of sales revenue - including hedging 13.3% 14.9% 21.6%
======== ======== =======
- excluding hedging 17.6% 16.7% 21.4%
======== ======== =======
Royalties as a percent of sales revenue fell from fourth quarter levels as a
result of lower commodity prices and hedging gains that do not attract
royalties, as well as a one-time mineral tax adjustment of $1.8 million.
The first quarter of 2001 royalty rate reflects higher gas prices.
5 |
PRIMEWEST ENERGY TRUST
MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A) [GRAPHIC OMMITTED]
================================================================================
OPERATING EXPENSES
($ THOUSANDS)
Mar. 31, Dec. 31, Mar. 31,
Three months ended 2002 2001 2001
- ------------------------------------------------------------------------------- -------- --------
Operating expenses 14,393 17,188 8,340
Per BOE $5.10 $5.69 $5.49
======== ========= ========
Operating expenses decreased 16% compared to the fourth quarter of 2001. The
principal drivers for this reduction were the implementation of successful cost
reduction initiatives, lower power costs and the disposition of high operating
cost properties in the fourth quarter of 2001.
The increase compared to the first quarter of 2001 is a result of increased
volumes from the Cypress acquisition and a change in asset mix due to lower
operating cost properties acquired through Cypress.
OPERATING EXPENSES OUTLOOK
Operating expenses are expected to increase in the second quarter of 2002 as a
result of costs associated with turnarounds at Laprise and Crossfield, as well
as increased power costs relative to the first quarter.
OPERATING MARGIN
($ PER BOE)
Mar. 31, Dec. 31, Mar. 31,
Three months ended 2002 2001 2001
- ------------------------------------------------------------------------------- -------- --------
Sales price and other revenue (including hedging) 28.37 30.50 47.86
Royalties 3.78 4.50 10.31
Operating costs 5.10 5.69 5.49
-------- -------- --------
Operating margin 19.49 20.31 32.06
======== ======== ========
Operating margin fell 4% from quarter-to-quarter reflecting lower commodity
prices, only partially offset by cost reductions and hedging gains.
Margins were much higher in the first quarter of 2001 as a result very strong
natural gas and natural gas liquids prices.
6 |
PRIMEWEST ENERGY TRUST
MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A) [GRAPHIC OMMITTED]
================================================================================
CASH G&A EXPENSES AND MANAGEMENT FEES
($ THOUSANDS)
Mar. 31, Dec. 31, Mar. 31,
Three months ended 2002 2001 2001
- ------------------------------------------------------------------------------- -------- --------
Cash G&A Expenses 2,635 2,532 2,273
Per BOE $ 0.93 $ 0.84 $ 1.50
Cash Management Fees 1,418 1,666 1,269
Per BOE $ 0.50 $ 0.55 $ 0.84
======== ======== ========
Reduced management fees reflect lower net production revenue
quarter-over-quarter.
Per BOE costs are much lower than the first quarter of 2001 both as a result
higher volumes attributable to the Cypress acquisition as well as the impact of
lower commodity prices on management fees.
NON-CASH G&A EXPENSES AND MANAGEMENT FEES
($ THOUSANDS)
Mar. 31, Dec. 31, Mar. 31,
Three months ended 2002 2001 2001
- ------------------------------------------------------------------------------- -------- --------
Non-cash G&A expenses 5,351 2,815 5,195
Non-cash management fees 479 419 483
-------- -------- --------
Total 5,830 3,234 5,678
======== ======== ========
Per BOE $ 2.07 $ 1.07 $ 3.74
======== ======== ========
The major component of non-cash G&A expenses relates to Unit Appreciation Rights
(UARs) under the Trust's long-term incentive program.
The increase in non-cash G&A expenses comparing the first quarter of 2002 to the
fourth quarter of 2001 reflects the strong performance in unit price
appreciation in the first quarter from $6.36 at the end of 2001 to $7.20 at
March 29, 2002 and to the implementation of the new CICA accounting standard
3870 effective January 1, 2002, whereby vested and unvested UARs are included in
the calculation of non-cash G&A expenses. Previously, only the vested UARs were
included. The effect of this change was to increase non-cash G&A expenses in the
first quarter of 2002 by $2.0 million.
Non-cash G&A expenses in the first quarter of 2001 reflect a higher Trust Unit
price driven by very strong oil and gas prices.
INTEREST EXPENSE
($ THOUSANDS)
Mar. 31, Dec. 31, Mar. 31,
Three months ended 2002 2001 2001
- ------------------------------------------------------------------------------- -------- --------
Interest expense 2,053 3,171 1,516
Period end debt level 234,415 225,466 333,354
Debt per trust unit $ 1.77 $ 1.72 $ 3.04
Average cost of debt - % 4.0% 4.4% 7.1%
============ ============ ========
Interest expense declined quarter-over-quarter on lower interest rates and lower
debt through the quarter.
The Cypress acquisition was closed on March 29, 2001, adding incremental debt at
quarter end that was not reflected in first quarter 2001 interest expense.
7 |
PRIMEWEST ENERGY TRUST
MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A) [GRAPHIC OMMITTED]
================================================================================
LIQUIDITY AND CAPITAL RESOURCES
($ THOUSANDS)
Mar. 31, Dec. 31, Mar. 31,
Three months ended 2002 2001 2001
- ------------------------------------------------------------------------------- --------- ---------
Long-term debt 136,670 195,000 320,037
Working capital deficit 97,745 30,466 13,317
Net debt 234,415 225,466 333,354
Market value of Trust Units and exchangeable shares outstanding 954,722 834,053 976,500
Total capitalization 1,189,137 1,059,519 1,309,854
Net debt as a % of total capitalization 19.71% 21.30% 25.45%
==================================
Net debt increased in the quarter reflecting capital spending of $24.9 million
which was partially funded from cash flow, minor asset sales proceeds of $2.1
million and proceeds from the DRIP and Optional Trust Unit Purchase programs.
Net debt is significantly lower than the first quarter of 2001 as a result of
equity issued in the last nine months of 2001 to de-lever the balance sheet,
along with the application of proceeds from non-core asset sales.
The working capital deficit has increased in the first quarter of 2002 due to
the implementation of CICA Emerging Issues Committee Bulletin 122 effective
January 1, 2002. The new accounting policy reclassifies a portion of debt from
long-term to current when the lender has the option to convert to a
non-revolving facility. $68.3 million has been reclassified from long-term debt
to current portion of long-term debt. It is not anticipated that the lender will
exercise the option to convert to a non-revolving facility.
CAPITAL SPENDING
($ THOUSANDS)
Mar. 31, Dec. 31, Mar. 31,
Three months ended 2002 2001 2001
- ------------------------------------------------------------------------------- -------- --------
24,874 30,561 6,863
======== ======== ========
Capital spending during the first quarter of 2002 is in line with the Trust's
commitment to invest approximately $40 million in the first half of 2002 in
development activities.
The 2001 figures reflect a total capital program for that year of approximately
$80 million.
CAPITAL SPENDING OUTLOOK
The 2002 capital program has been increased from $40 million for the first half
of the year to $70 million for the full year. It is anticipated that this
additional spending of $30 million will take place late in the third quarter and
throughout the fourth quarter of 2002.
PrimeWest expects that internally generated retained cash flow, proceeds from
the DRIP and the Optional Trust Unit Purchase programs plus unutilized credit
facilities will be sufficient to fund the 2002 capital program, assuming no
material adverse developments in commodity prices.
8 |
PRIMEWEST ENERGY TRUST
MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A) [GRAPHIC OMMITTED]
================================================================================
HEDGING PROGRAM
Approximate percentage of anticipated production volumes hedged through April
30, 2002; net of anticipated royalties, reflecting full production declines with
no offsetting additions:
2002 2003
---- ----
Crude Oil 66% 26%
Natural Gas 69% 50%
The mark-to-market valuation of these hedges was a $7.5 million gain at March
31, 2002 and a $11.8 million loss at April 30, 2002. A summary of contracts in
place as at April 30, 2002 are as follows:
CRUDE OIL
Volume WTI Price
Period (bbl/d) Type (U.S.$/bbl)
- ------------------------------------------------------------------------------------------------------------
January - June 2002 1,000 Swap 25.14
January - June 2002 1,000 Swap 25.50
January - December 2002 1,000 Swap 24.58
May - June 2002 2,000 Swap 26.23
July - September 2002 2,000 Swap 25.22
October - December 2002 2,000 Swap 24.45
January - December 2002 1,000 Costless Collar 20.00/25.15
July - December 2002 1,000 3 Way 17.00 / 20.50 / 24.95
January - December 2003 1,000 3 Way 17.00 / 20.50 / 25.50
January - June 2003 1,000 3 Way 18.50 / 22.50 / 27.70
July - December 2003 1,000 3 Way 18.50 / 22.50 / 27.20
NATURAL GAS
Volume AECO Price
Period (MMcf/d) Type (Cdn$/Mcf)
- ------------------------------------------------------------------------------------------------------------
May - October 2002 4.7 Fixed Price 6.50
May - October 2002 18.9 Swap 5.28
May - October 2002 18.9 Swap 5.28
May - October 2002 9.5 Swap 4.39
November 2002 - March 2003 4.7 Costless Collar 4.22 by 5.96
November 2002 - March 2003 4.7 3 Way 3.17 / 4.48 / 6.59
November 2002 - March 2003 4.7 3 Way 3.17 / 3.96 / 5.46
November 2002 - March 2003 4.7 3 Way 4.22 / 5.28 / 7.04
November 2002 - March 2003 4.7 Swap 5.43
April - October 2003 4.7 Fixed Price 4.75
April - October 2003 4.7 Swap 5.05
April - October 2003 4.7 3 Way 3.17 / 4.48 / 6.26
April - October 2003 4.7 3 Way 3.17 / 3.96 / 5.39
April - October 2003 4.7 3 Way 3.69 / 4.75 / 6.65
November 2002 - October 2004 9.5 3 Way 3.17 / 4.22 / 6.09
9 |
PRIMEWEST ENERGY TRUST
MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A) [GRAPHIC OMMITTED]
================================================================================
Volume AECO Price
Period (MMcf/d) Type (Cdn$/Mcf)
- ------------------------------------------------------------------------------------------------------------
January 2002 - October 2003 4.7 Swap 3.98
January 2002 - October 2003 4.7 Swap 4.17
A three-way option is like a traditional collar, except that PrimeWest has
resold the put at a lower price. Utilizing the first crude oil contract above as
an example, PrimeWest has sold a call at $25.50, purchased a put at $20.50, and
resold the put at $17.00. Should the market price drop below $20.50 PrimeWest
will receive $20.50 until the price is less than $17.00, at which time PrimeWest
would then receive market price plus $3.50. However, should market prices rise
above $25.50, PrimeWest would receive a maximum of $25.50. Should the market
price remain between $20.50 and $25.50, PrimeWest would receive the market
price.
DISTRIBUTIONS
PrimeWest has distributed $0.10 per unit on each of January 15, February 15,
March 15, April 15, and May 15, 2002. PrimeWest has previously announced it will
distribute, barring material adverse developments, $0.10 per unit on June 14 and
July 15, 2002.
The level of distribution for the third quarter is expected to be announced late
in the second quarter.
DISTRIBUTION REINVESTMENT (DRIP) DISCOUNT
PrimeWest's Distribution Reinvestment and Optional Trust Unit Purchase Plan
(Plan) enables participants to reinvest their monthly cash distributions and/or
purchase additional Trust Units at a 5% discount to the 20-day weighted average
monthly market price. There is a $100,000 per calendar year limit to the
purchase of additional Trust Units.
To join the Plan, you must be a registered unitholder or have your units in an
account that allows participation. Not all brokerage firms and banks will allow
you to participate. Please check directly with your account representative as to
their participation.
For further information or to join this Plan, contact our Plan Agent,
Computershare Trust Company of Canada, at 1-800-332-0095.
FIRST QUARTER CONFERENCE CALL AND WEBCAST
PrimeWest will be conducting a conference call and Webcast for interested
analysts, brokers, investors and media representatives about its first quarter
results and outlook at 10:00 a.m. Mountain time (12:00 p.m. Eastern time) on
Friday, May 17, 2002.
Callers may dial 1-888-881-4892 a few minutes prior to start and request the
PrimeWest conference call. The call also will be available for replay by dialing
1-877-289-8525, and entering pass code 188267 followed by the pound (#) key.
Interested users of the Internet are invited to go to
WWW.NEWSWIRE.CA/webcast/pages /PrimeWestEnergy20020517/ for the live Webcast
and/or replay or access the Webcast at the PrimeWest Web site,
WWW.PRIMEWESTENERGY.COM.
10 |
PRIMEWEST ENERGY TRUST
MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A) [GRAPHIC OMMITTED]
================================================================================
QUESTIONS
PrimeWest Energy Trust welcomes questions from unitholders and potential
investors; call Investor Relations at 403-234-6600 or toll-free at
1-877-968-7878; or visit us on the Internet at our Web site,
WWW.PRIMEWESTENERGY.COM.
On behalf of the Board of Directors:
May 16, 2002
Kent J. MacIntyre
Vice-chairman and
Chief Executive Officer
11 |
PRIMEWEST ENERGY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED) [GRAPHIC OMITTED]
================================================================================
AS AT AS AT
MAR. 31, DEC. 31,
(THOUSANDS OF DOLLARS) 2002 2001
- ---------------------------------------------------------------------------------- -----------
ASSETS
Current assets
Accounts receivable $ 46,610 $ 55,465
Prepaid expenses and inventory 8,457 11,200
----------- -----------
55,067 66,665
Cash reserved for site restoration and reclamation 766 755
Capital assets 1,426,422 1,448,661
----------- -----------
$ 1,482,255 $ 1,516,081
=========== ===========
LIABILITIES AND UNITHOLDERS' EQUITY
Current liabilities
Bank overdraft $ 3,921 $ 14,613
Accounts payable and accrued liabilities 57,308 59,944
Accrued distributions to unitholders 12,026 11,980
Due to related company 11,186 10,108
Current portion of long-term debt (NOTE 3) 68,371 67
----------- -----------
152,812 96,712
Long-term debt (NOTE 3) 136,670 195,000
Future income taxes 353,195 362,595
Site restoration and reclamation provision 6,361 6,113
----------- -----------
649,038 660,420
UNITHOLDERS' EQUITY
Net capital contributions (NOTE 4) $ 1,159,527 $ 1,152,551
Capital issued but not distributed 1,195 419
Long-term incentive plan equity (NOTE 5) 10,301 7,932
Accumulated income 128,526 122,550
Accumulated cash distributions (459,114) (420,983)
Accumulated dividends (7,218) (6,808)
----------- -----------
833,217 855,661
----------- -----------
$ 1,482,255 $ 1,516,081
=========== ===========
CONSOLIDATED STATEMENTS OF UNITHOLDERS' EQUITY (UNAUDITED)
For the three months ended March 31
(THOUSANDS OF DOLLARS) 2002 2001
- ------------------------------------------------------------------------------------ --------------
Unitholders' equity, beginning of the period, as previously reported $ 855,661 $ $298,245
Net income for the period 5,976 24,190
Net capital contributions 6,976 547,808
Capital issued but not distributed 776 247
Long-term incentive plan equity 2,369 2,186
Cash distributions (38,131) (40,783)
Dividends (410) (740)
-------------- --------------
Unitholders' equity, end of the period $ 833,217 $ 831,153
============== ==============
12 |
PRIMEWEST ENERGY TRUST
CONSOLIDATED STATEMENTS OF CASHFLOW (UNAUDITED) [GRAPHIC OMMITTED]
================================================================================
For the three months ended March 31
(THOUSANDS OF DOLLARS) 2002 2001
- -------------------------------------------------------------------------------- -----------
OPERATING ACTIVITIES
Net income for the period $ 5,976 $ 24,190
Add: Items not involving cash from operations
Depletion, depreciation and amortization 45,895 11,420
Non-cash general and administrative 5,351 5,195
Non-cash management fees 479 483
Future income taxes (recovery) (9,400) 2,246
---------- -----------
Cash flow from operations 48,301 43,534
Change in non-cash working capital 10,041 10,386
---------- -----------
58,342 53,920
---------- -----------
FINANCING ACTIVITIES
Proceeds from issue of Trust Units (net of costs) 3,576 1,711
Cash distributions to unitholders (38,085) (40,783)
Dividends - (740)
Increase in long-term debt 9,974 62,096
Change in non-cash working capital 305 9,503
---------- -----------
(24,230) 31,787
---------- -----------
INVESTING ACTIVITIES
Expenditures on capital assets (24,874) (6,863)
Corporate acquisitions - (76,641)
Proceeds on disposal of capital assets 2,181 3,332
Decrease (increase) in cash reserved for future site
restoration and reclamation (11) 392
Expenditures on site restoration and reclamation (716) (780)
---------- -----------
(23,420) (80,560)
---------- -----------
INCREASE IN CASH FOR THE PERIOD 10,692 5,147
BANK OVERDRAFT BEGINNING OF THE PERIOD (14,613) (834)
---------- -----------
CASH, (BANK OVERDRAFT) END OF THE PERIOD $ (3,921) $ 4,313
========== ===========
CASH INTEREST PAID $ 1,765 $ 1,514
========== ===========
13 |
PRIMEWEST ENERGY TRUST
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) [GRAPHIC OMITTED]
================================================================================
For the three months ended March 31
(THOUSANDS OF DOLLARS, EXCEPT FOR PER-TRUST-UNIT AND NUMBER OF UNITS) 2002 2001
- -------------------------------------------------------------------------------- ----------
REVENUES
Sales of crude oil, natural gas and natural gas liquids $ 79,991 $ 72,539
Crown and other royalties, net of ARTC (10,666) (15,651)
Other income 117 102
--------- ----------
69,442 56,990
--------- ----------
EXPENSES
Operating 14,393 8,340
Cash general and administrative 2,635 2,273
Non-cash general and administrative 5,351 5,195
Interest 2,053 1,516
Cash management fees 1,418 1,269
Non-cash management fees 479 483
Depletion, depreciation and amortization 45,895 11,420
--------- ----------
72,224 30,496
--------- ----------
Income (loss) before taxes for the period (2,782) 26,494
--------- ----------
Capital taxes 642 58
Future income taxes (recovery) (9,400) 2,246
--------- ----------
(8,758) 2,304
--------- ----------
Net income for the period $ 5,976 $ 24,190
========= ==========
Net income per Trust Unit $ 0.05 $ 0.45
========= ==========
Diluted net income per Trust Unit $ 0.04 $ 0.44
========= ==========
CONSOLIDATED STATEMENTS OF CASH DISTRIBUTIONS (UNAUDITED)
For the three months ended March 31
(THOUSANDS OF DOLLARS, EXCEPT FOR PER-TRUST-UNIT AND NUMBER OF UNITS) 2002 2001
- ------------------------------------------------------------------------------------ ---------------
Net income for the period $ 5,976 $ 24,190
Add back (deduct) amounts to reconcile to distribution:
Increase in reserve (8,737) (1,841)
Depletion, depreciation and amortization 45,895 11,420
Contribution to reclamation fund (1,048) (498)
Non-cash general and administrative 5,351 5,195
Management fees paid in Trust Units 479 483
Future income taxes (recovery) (9,400) 2,246
------------- ---------------
$ 32,540 $ 17,005
------------- ---------------
$ 38,516 $ 41,195
============= ===============
Cash Distributions to Trust Unitholders (99%) $ 38,131 $ 40,783
============= ===============
Cash Distributions per Trust Unit $ 0.30 $ 0.60
============= ===============
Trust Units and exchangeable shares issued and outstanding 132,600,310 102,026,326
Weighted average Trust Units and exchangeable shares outstanding
(diluted) 133,252,052 53,846,155
14 |
PRIMEWEST ENERGY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) [GRAPHIC OMITTED]
================================================================================
for the Quarter Ended March 31, 2002
(THOUSANDS OF DOLLARS EXCEPT TRUST UNIT/SHARE AMOUNTS)
1) SIGNIFICANT ACCOUNTING POLICIES
These interim consolidated financial statements of PrimeWest Energy Trust have
been prepared in accordance with Canadian generally accepted accounting
principles. The specific accounting principles used are described in the annual
consolidated financial statements of the Trust appearing on pages 36 through 53
of the Trust's 2001 annual report and should be read in conjunction with these
interim financial statements.
2) AMALGAMATION
Effective January 1, 2002, PrimeWest Oil & Gas Corp. and PrimeWest Energy Inc.
and its subsidiaries amalgamated and were continued as PrimeWest Energy Inc.
Subsequent to the amalgamation, the common shares of PrimeWest Energy Inc. are
89% owned by the Trust and 11% by PrimeWest Management Inc. The Trust continues
to own a royalty entitling it to receive 99% of the net cash flows generated by
PrimeWest Energy Inc. The beneficiaries of the Trust are the holders of Trust
Units.
3) LONG-TERM DEBT
PrimeWest Energy Inc. and the Trust (as co-borrowers) have a combined revolving
credit facility in the amount of $350 million, with a borrowing base at March
31, 2002 of $350 million. The facility consists of a revolving term loan of $325
million and an operating facility of $25 million. In addition to amounts
outstanding under the facility as indicated in the table below, PrimeWest Energy
Inc. has outstanding letters of credit in the amount of $2.8 million. Collateral
for the credit facility is provided by a floating-charge debenture covering all
existing and after acquired property in the principal amount of $500 million.
Each borrower under the facility has also provided an unconditional full
liability guarantee in respect of amounts borrowed under the facility.
Revolving credit facility utilized - current $ 63,330
- long-term 136,670
Capital lease obligation 41
-----------
$ 205,041
===========
Advances under the revolving and operating loan facility are made in the form of
Banker's Acceptances (BA's), prime rate loans or letters of credit. In the case
of BA's, interest is a function of the BA rate plus a stamping fee based on the
Trust's current ratio of debt-to-cash flow. In the case of prime rate loans,
interest is generally charged at the bank's prime rate.
The credit facility revolves until May 31, 2002 by which time the lender will
have conducted its annual borrowing base review. The lender also has the right
to re-determine the borrowing base at one other time during the year. During the
revolving phase, the facility has no specific terms of repayment. At the end of
the revolving period, the lender has the right to extend the revolving period
for a further 364-day period or to convert the facility to a term facility. If
the lender converts to a non-revolving facility, the amounts outstanding under
the facility become repayable over a three-year period, on a unit of production
basis.
Effective January 1, 2002, PrimeWest Energy Inc. has changed the method of
accounting for the current portion of long-term debt to comply with the new CICA
Emerging Issues Committee Bulletin 122. The
15 |
PRIMEWEST ENERGY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) [GRAPHIC OMITTED]
================================================================================
amount of debt which could be required to be repaid within one year from the
balance sheet date should the lender convert to a non-revolving facility has
been included as a current liability.
4) UNITHOLDERS' EQUITY
PRIMEWEST ENERGY TRUST
The authorized capital of the Trust consists of an unlimited number of Trust
Units.
Trust Units # OF UNITS AMOUNT
- -------------------------------------------------------- ------------- ------------
Balance at December 31, 2001 125,965,607 $ 1,115,275
Issued pursuant to Long-term Incentive Plan 465,311 2,981
Issued pursuant to Dividend Reinvestment Plan 688,750 3,554
Issued for payment for management fees 65,834 419
Issued on exchange of exchangeable shares 226,400 1,308
------------- ------------
Balance at March 31, 2002 127,411,902 $ 1,123,537
============= ============
The weighted average number of Trust Units and exchangeable shares outstanding
for the quarter was 132,102,457. For purposes of calculating diluted net income,
1,149,595 units issuable pursuant to the employee long-term incentive plan were
added to the weighted average number. The per unit amount of distributions paid
or declared reflects distributions paid for units outstanding on the record
dates.
PRIMEWEST EXCHANGEABLE A SHARES
In connection with the Cypress acquisition, PrimeWest Oil & Gas Corp. (now
amalgamated with PrimeWest Energy Inc.) amended its articles to create an
unlimited number of exchangeable shares. The exchangeable shares are
exchangeable into PrimeWest Trust Units at any time up to March 29, 2003, based
on an exchange ratio that adjusts each time PrimeWest makes a distribution to
unitholders. The exchange ratio, which was 1:1 on the date the transaction
closed, is based on the total monthly distribution, divided by the closing unit
price on the distribution payment date. The exchange ratio, effective March 15,
2002, was 1.30928:1.
Exchangeable shares # OF SHARES AMOUNT
- --------------------------------------------------------------------- -------------
Balance at December 31, 2001 3,316,742 $ 32,338
Exchanged for Trust Units (65,828) (642)
------------- -------------
Balance at March 31, 2002 3,250,914 $ 31,696
============= =============
PRIMEWEST EXCHANGEABLE B SHARES
In connection with the acquisition of Venator Petroleum Company Limited,
PrimeWest Resources Ltd. (now amalgamated with PrimeWest Energy Inc.) amended
its articles to create an unlimited number of exchangeable shares. The
exchangeable shares are exchangeable into Trust Units at any time up to 5 years
after issuance, based on an exchange ratio that adjusts each time PrimeWest
makes a distribution to its unitholders. In certain circumstances, PrimeWest has
the right to force redemption prior to the 5 year expiry term. Up to June 30,
2001 dividends were paid to holders of exchangeable shares based on the
estimated taxable portion of the monthly distribution paid. The exchange ratio,
which was 1:1 on the closing date of the Venator transaction, is based on the
total monthly distribution
16 |
PRIMEWEST ENERGY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) [GRAPHIC OMITTED]
================================================================================
paid, divided by the closing Trust Unit price on the distribution payment date.
The exchange ratio at March 15, 2002 was 1.43272:1.
Exchangeable shares # OF SHARES AMOUNT
- -------------------------------------- ------------ ------------
Balance at December 31, 2001 751,532 $ 4,960
Exchanged for trust units (100,986) (666)
------------ ------------
Balance at March 31, 2002 650,546 $ 4,294
============ ============
5) TRUST UNIT INCENTIVE PLAN
Under the terms of the Trust Unit Incentive Plan, a maximum of 2,490,000 Trust
Units are reserved for issuance pursuant to the exercise of Unit Appreciation
Rights (UARs) granted to employees of the Manager. Payouts under the plan are
based on total unitholder return, calculated using both the change in the trust
unit price as well as cumulative distributions paid. The plan requires that a
hurdle return of 5% per annum be achieved before payouts accrue. UARs have a
term of up to 6 years and vest equally over a three-year period, except for the
independent members of the Board, whose UARs vest immediately. The Board of
Directors has the option of settling payouts under the plan in PrimeWest Trust
Units or in cash. To date, all payouts under the plan have been in the form of
Trust Units.
UARS ISSUED UARS CURRENT RETURN TOTAL TRUST UNIT
AS AT MARCH31, 2002 AND OUTSTANDING VESTED PER UAR EQUITY DILUTION
- ---------------------------------------- ----------- -------------- ------------- ------------
1996 grants 30,000 30,000 $ 6.62 $ 199 27,593
1997 grants 241,886 241,886 5.75 1,390 193,104
1998 grants 451,049 451,049 8.29 3,738 519,122
1999 grants 517,250 350,422 5.81 3,008 281,459
2000 grants 875,059 376,447 1.64 1,435 120,063
2001 grants 2,251,110 212,640 0.18 402 8,254
2002 grants 402,864 - 0.32 129 -
----------- ----------- -------------- ------------ ------------
4,766,615 1,662,464 $ 2.16 $ 10,301 1,149,595
=========== =========== ============== ============ ============
Cumulative to March 31, 2002, 2,360,149 UARs have been exercised resulting in
the issuance of 1,285,321 Trust Units from treasury.
Effective January 1, 2002 the method of accounting for the long-term incentive
plan was changed to comply with new CICA accounting standard 3870. The
calculation of the long-term incentive liability now includes vested and
unvested UARs. Previously, only vested UARs were included. In addition, the
long-term incentive liability has been reclassified as equity on the balance
sheet as the Trust intends to settle the liability in the form of Trust Units.
17 |
PRIMEWEST ENERGY TRUST
TRADING PERFORMANCE [GRAPHIC OMITTED]
================================================================================
FOR THE QUARTER ENDED MAR. 31/02 DEC. 31/01 SEP. 30/01 JUN. 30/01 MAR. 31/01
- ----------------------------------------------------- ---------- ---------- ---------- ----------
TRUST UNIT PRICES (DOLLARS PER TRUST UNIT)
High 7.23 7.51 8.77 10.54 9.90
Low 5.92 5.95 6.42 8.45 8.72
Close 7.20 6.36 6.46 8.85 9.00
Volume traded (MILLIONS OF UNITS) 34.48 37.59 37.10 60.42 21.64
Number of Trust Units outstanding 127.4 125.9 115.3 113.6 100.6
(MILLIONS OF UNITS)
Including exchangeable shares 132.6 131.1 120.1 119.1 108.5
(ISSUED IN RESPECT OF VENATOR AND
CYPRESS ACQUISITIONS)
Distribution paid per Trust Unit $0.30 $0.44 $0.61 $0.66 $0.60
========== ========== ========== ========== ==========
FOR FURTHER INFORMATION PLEASE CONTACT: PRIMEWEST ENERGY TRUST
INVESTOR RELATIONS AND COMMUNICATIONS 4700, 150 - 6 AVENUE SW
TOLL-FREE: 1-877-968-7878 CALGARY, ALBERTA T2P 3Y7
FAX: 403-699-7271 TELEPHONE: 403-234-6600
E-MAIL: INVESTOR@PRIMEWESTENERGY.COM FAX: 403-266-2825