EXHIBIT 2
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PRIMEWEST
ENERGY TRUST
QUARTERLY REPORT
FOURTH QUARTER 2000
PRIMEWEST ENERGY TRUST POSTS BEST-EVER YEAR,
EXPECTS TO PAY RECORD DISTRIBUTIONS IN 2001
CALGARY, APRIL 11, 2001 (TSE: PWI.UN) -- PrimeWest Energy Trust (PrimeWest)
today announced operating and financial results for the fourth quarter and year
ended December 31, 2000. Fourth-quarter cash flow from operations was $0.80 per
trust unit, ($0.77 per trust unit fully diluted) of which $0.60 per trust unit
was distributed. Full-year cash flow was $2.51 per trust unit ($2.44 fully
diluted) of which $1.77 was paid (a record, up 61% from 1999).
Fourth-quarter cash flow of $40.9 million was a record for the Trust, up from
$29.2 million in the third quarter of 2000 and $13.3 million over the
comparative period in 1999. Full-year cash flow of $112.1 million also was a
record, climbing by 173% over 1999.
2000 HIGHLIGHTS
Other full-year highlights include:
o Record average daily production of 16,237 BOE, up 8% from 1999.
o Record operating netback of $21.27 per BOE, up 116% over 1999.
o Operating expenses of $5.08 per BOE, down 3% from 1999.
o Cash G&A expenses of $0.70 per BOE, down 28% over 1999.
o Distributions represented 71% of available cash flow, a conservative
payout ratio, relative to our peers.
o Net debt of $1.52 per trust unit, down 37% over 1999.
o Total unitholder return of 67.8% per trust unit, up from 56.3% in 1999.
DISTRIBUTION DECLARATION, EXTENSION AND INCREASE
The May payment, totalling $0.22 per trust unit ($0.10 regular plus $0.12
special), will be made on May 15, 2001, to all unitholders of record on April
30, 2001. PrimeWest expects to pay a total of $0.22 per trust unit per month at
least through January 2002, bringing expected full-year 2001 distributions to
$2.58 per trust unit, a 45% increase over 2000 distribution levels.
OPERATING HIGHLIGHTS
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THREE MONTHS YEAR ENDED
ENDED DECEMBER 31 DECEMBER 31
------------------------------------ ----------------------------------------
2000 1999 CHANGE 2000 1999 CHANGE
----------- ------------ ----------- ------------ ----------- ---------------
DAILY SALES VOLUMES
Crude oil (barrels) 7,422 5,919 25% 6,582 5,958 10%
Natural gas liquids (barrels) 1,610 1,360 18% 1,483 1,293 15%
Natural gas (thousand cubic feet) 47,491 48,365 (2%) 49,032 46,457 6%
----------- ------------ ------------ -----------
Total (barrels of oil equivalent) 16,949 15,346 10% 16,237 14,995 8%
AVERAGE SELLING PRICES
Crude oil ($/bbl) 38.13 25.79 48% 36.67 21.69 69%
Natural gas liquids ($/bbl) 39.80 26.13 52% 34.42 19.09 80%
Natural gas ($/Mcf) 7.43 2.90 156% 4.65 2.51 85%
OPERATING NETBACK ($/BOE)
Revenues 41.36 20.99 97% 32.36 18.20 78%
Royalties, net of ARTC (7.37) (4.19) 76% (5.92) (3.14) 88%
Operating expenses (5.20) (5.19) - (5.08) (5.23) (3%)
----------- ------------
------------ -----------
Operating netback 28.79 11.62 148% 21.27 9.83 116%
=========== ============ ============ ===========
(1) Gas converted to a barrel of oil equivalent at a 6:1 conversion factor
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FINANCIAL HIGHLIGHTS
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(THOUSANDS OF DOLLARS EXCEPT PER-BOE AND THREE MONTHS YEAR ENDED
PER-TRUST-UNIT AMOUNTS) ENDED DECEMBER 31 DECEMBER 31
------------------------------------ ------------------------------------
2000 1999 Change 2000 1999 Change
----------- ----------- ----------- ----------- ------------ -----------
Operating revenues, net of royalties 52,999 23,716 123% 156,561 81,282 93%
per BOE 33.99 16.81 102% 26.34 14.85 77%
per trust unit 1.04 0.66 58% 3.51 2.39 47%
Operating expenses 8,106 7,325 11% 30,175 28,609 5%
per BOE 5.20 5.19 - 5.08 5.23 (3%)
per trust unit 0.16 0.20 (20%) 0.68 0.84 (19%)
Cash G&A expenses 1,060 1,415 (25%) 4,140 5,321 (22%)
per BOE 0.68 1.00 (32%) 0.70 0.97 (28%)
per trust unit 0.02 0.04 (50%) 0.09 0.16 (44%)
Cash management fees 1,165 427 173% 3,277 1,386 136%
per BOE 0.75 0.30 150% 0.55 0.25 120%
per trust unit 0.02 0.01 100% 0.07 0.04 75%
Financing costs 1,667 1,244 34% 6,359 4,885 30%
per BOE 1.07 0.88 23% 1.07 0.89 20%
per trust unit 0.03 0.03 - 0.14 0.14 -
Cash flow from operations 40,862 13,306 207% 112,062 41,081 173%
per BOE 26.21 9.42 178% 18.86 7.51 151%
per trust unit 0.80 0.37 116% 2.51 1.21 107%
Cash distributed to unitholders 30,489 12,547 143% 79,033 37,351 112%
per trust unit 0.60 0.35 71% 1.77 1.10 61%
payout ratio 75% 94% (20%) 71% 91% (22%)
----------- ----------- ----------- ----------- ------------ -----------
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(THOUSANDS OF DOLLARS) DECEMBER 31, December 31, Change
2000 1999
------------------------ -----------------------
Net debt (long-term debt net of working capital) 79,194 85,856 (8%)
per trust unit (fully diluted) 1.52 2.40 (37%)
Debt-to-current-cash flow (annualized) 0.48 1.61 (70%)
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MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A)
The following discussion is management's discussion and analysis about
PrimeWest's operating and financial results for the fourth quarter of 2000 and
previous periods, and the Trust's future outlook based on currently available
information.
Beginning with this quarterly report, we are using a 6:1 ratio for converting
natural gas (Mcf) to barrels of oil equivalent (BOE). In prior years, PrimeWest
was using a 10:1 ratio.
RESULTS OF OPERATIONS
o Production volumes for the quarter averaged 16,949 barrels of oil
equivalent (BOE) per day, down slightly from 17,291 BOE in the third
quarter of 2000 due to some downtime at the Crossfield gas plant.
Production volumes are up from 15,346 BOE in the fourth quarter of 1999
due to new volumes from the Trust's two acquisitions earlier in the year
as well as production additions from the capital development program.
Our exit rate was over 17,500 BOE per day.
During the quarter, 1,981 BOE per day or 12% of total daily production came from
Gross Overriding Royalty (GORR) interests (mostly from former Reserve Royalty
lands). Of this total, 1,083 BOE per day was crude oil production, 815 BOE per
day was natural gas production, and 83 BOE per day was natural gas liquids
production.
o We participated in 26 separate development projects during the quarter,
as part of an operating strategy that is focussed on project
diversification and an increased emphasis on technology and stewardship.
Our fourth-quarter projects included: the drilling and completion of
four wells at Laprise and Grand Forks; the re-completion and/or
work-over of 22 wells. We also abandoned and/or reclaimed two wells. The
Crossfield natural gas plant was down for 10 days in the fourth quarter
to complete a plant automation and de-bottlenecking project to expand
plant capacity and processing efficiency.
The combined result of these development activities was the addition of
approximately 842 BOE per day of production.
o During the quarter, world oil prices remained extremely strong. The
average West Texas Intermediate (WTI) crude oil price was US$31.86 per
barrel compared with US$31.58 in the third quarter of 2000 and US$24.51
per barrel for the fourth quarter of 1999. North American natural gas
prices rose sharply again, both on the New York Mercantile Exchange
(NYMEX) and in the Alberta markets compared with the third quarter of
2000 and the same period in 1999.
The average AECO price was $7.43 per thousand cubic feet (Mcf) compared with
$5.26 for the third quarter of 2000 and $3.56 for the same quarter in 1999.
o The average selling price PrimeWest received in the fourth quarter for
all products combined increased to $41.36 per BOE compared with $31.95
per BOE in the third quarter of 2000 and $20.99 per BOE in the fourth
quarter of 1999.
RISK MANAGEMENT
Our risk management strategy is designed to not speculate on future commodity
price performance. Rather, our objectives are to support the distribution rate
expectations that we set forth to the market; lock in transaction economics
associated with material acquisitions; and protect our capital structure should
commodity prices cycle downwards.
PrimeWest uses a number of hedging structures in its program, many of which are
`option'- or `put'-based. These have the advantage of mitigating downside
exposure while providing substantial upside participation in commodity prices.
In essence, they provide a form of insurance.
As at April 10, 2001, hedging structures for the nine-month period ending
December 31, 2001 represented about 80% of total anticipated full-year crude oil
production after royalties and approximately 42% of total anticipated full-year
natural gas production.
PrimeWest continually monitors the markets for both crude oil and natural gas
and makes considered risk-management decisions regularly. The effect of these
hedging transactions will continue to be reported quarterly.
The following tables of blended prices show the expected effect of hedging
transactions for 2001.
CRUDE OIL (AS AT APRIL 10, 2001)
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(AS AN APPROXIMATE PERCENTAGE QUARTER ENDING QUARTER ENDING QUARTER ENDING QUARTER ENDING
OF TOTAL ANTICIPATED CRUDE OIL MAR. 31, 2001 JUN. 30, 2001 SEP. 30, 2001 DEC. 31, 2001
PRODUCTION AFTER ROYALTIES)
-------------------- -------------------- --------------------- --------------------
VOLUME HEDGED, FIXED PRICE 0% 45% 45% 45%
VOLUME HEDGED, INSURED 58% 51% 51% 51%
(U.S. DOLLARS PER BARREL) PRIMEWEST PRIMEWEST PRIMEWEST PRIMEWEST
IF WTI IS: RECEIVES(1) RECEIVES(1) RECEIVES(1) RECEIVES
-------------------- -------------------- --------------------- --------------------
30.00 30.00 28.54 28.57 28.72
28.00 28.26 27.64 27.65 27.69
26.00 27.12 26.57 26.55 26.55
24.00 26.33 25.95 25.90 25.84
22.00 25.53 25.83 25.74 25.55
20.00 24.05 25.71 25.57 25.27
(1) The blended prices PrimeWest would expect to receive. These prices are
a weighted average blend of prices received on hedged volumes and
prevailing market prices received for unhedged sales.
(2) Fixed price (swap) is for a specified term. Insured volumes include
puts and put swaptions.
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NATURAL GAS (AS APRIL 10, 2001)
APPROXIMATELY 44% OF 2001 GAS VOLUMES IS MARKETED THROUGH AGGREGATORS, WITH THE
REMAINING 56% MARKETED DIRECTLY BY PRIMEWEST IN THE ALBERTA SHORT- AND LONG-TERM
MARKETS. VOLUMES SOLD THROUGH AGGREGATORS RECEIVE PRICES THAT ARE DERIVED FROM A
NUMBER OF MARKETS ACROSS NORTH AMERICA. THE FOLLOWING TABLE REFERS ONLY TO THE
PRODUCTION THAT PRIMEWEST SELLS DIRECTLY.
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(AS AN APPROXIMATE PERCENTAGE OF QUARTER ENDING QUARTER ENDING QUARTER ENDING QUARTER ENDING
DIRECT MARKETED VOLUMES) MAR. 31, 2001 JUN. 30, 2001 SEP. 30, 2001 DEC. 31, 2001
-------------------- -------------------- --------------------- --------------------
VOLUMES HEDGED, FIXED PRICE 9% 22% 22% 11%
VOLUMES HEDGED, INSURED 69% 51% 39% 43%
(CANADIAN DOLLARS PER MCF) PRIMEWEST PRIMEWEST PRIMEWEST PRIMEWEST
IF AECO IS: RECEIVES(1) RECEIVES(1) RECEIVES(1) RECEIVES(1)
-------------------- -------------------- --------------------- --------------------
8.50 8.26 8.26 8.27 8.40
8.00 7.89 7.88 7.88 7.95
7.50 7.51 7.49 7.49 7.51
7.00 7.14 7.10 7.10 7.10
6.50 6.77 6.82 6.74 6.82
6.00 6.40 6.65 6.50 6.58
(1) The blended prices PrimeWest would expect to receive on gas it markets
directly. These prices are a weighted average blend of prices received
on hedged volumes and prevailing market prices received for unhedged
sales.
(2) Fixed price (swap) is for a specified term. Insured volumes include
puts and put swaptions.
- --------------------------------------------------------------------------------
REVENUES - Revenues from the sales of crude oil, natural gas and natural gas
liquids for the fourth quarter were $64.4 million, up 100% over the same period
in 1999 due to higher commodity prices and higher production volumes.
Opportunity losses from hedging activities for the period were $2.7 million or
$0.05 per trust unit.
o CASH FLOW - Cash flow from operations was $40.9 million ($0.80 per trust
unit) for the quarter compared with $29.2 million ($0.62 per trust unit)
in the third quarter of 2000 and $13.3 million ($0.37 per trust unit)
posted in the fourth quarter of 1999. These increases are due to higher
commodity prices, higher production volumes and lower costs.
o ROYALTIES - Crown and other royalties, net of ARTC, were $11.5 million
during the fourth quarter, up from $9.7 million in the third quarter of
2000, and up from $5.9 million in the fourth quarter of 1999 reflecting
the effect of higher commodity prices. The average royalty rate for the
quarter was 17.8%, down from 19.1% in the third quarter due to the
booking of gas cost allowance credits. Year over year, the royalty rate
has increased from 17.5% for 1999 to 18.4% for 2000 due to higher
commodity prices offset by the fact that the Reserve Royalty GORR
volumes do not attract royalties.
o OPERATING EXPENSES - Operating expenses were $8.1 million for the fourth
quarter or $5.20 per BOE, down slightly in aggregate from $8.2 million
in the third quarter. Compared with the corresponding period in 1999,
fourth quarter operating expenses were up 11% in aggregate but unchanged
on a BOE basis. Power costs, a large component of operating expenses,
rose by 9.3% in aggregate and 12% per BOE from the third quarter.
o OPERATING NETBACK - PrimeWest's fourth-quarter operating netback (before
G&A, management fees and interest expense) was $28.79 per BOE, up from
$20.70 per BOE in the third quarter of 2000 and $11.62 per BOE in the
corresponding period in 1999. These increases were due to higher
commodity prices and lower operating costs, offset by higher crown and
other royalties.
o CASH GENERAL AND ADMINISTRATIVE EXPENSES - Cash G&A expenses, net of
overhead recoveries, were $1.1 million or $0.68 per BOE for the quarter,
up $0.4 million from the third quarter of 2000 and down $0.4 million
from the same period in 1999. The reduction of cash G&A is mainly due to
higher overhead recoveries and lower costs.
o NON-CASH GENERAL AND ADMINISTRATIVE EXPENSES - Non-cash G&A expenses,
representing the cost associated with the Trust's long-term incentive
program, were $3.6 million in the fourth quarter, up from $2.2 million
in the third quarter of 2000 and up from $0.3 million for the
corresponding period in 1999. The expense represents the change in the
liability for vested and `in the money' awards as at the end of the
period. Awards under the program are a function of total unitholder
return (unit price plus reinvested distributions) and are subject to a
5% per annum hurdle rate. This is a non-cash charge in that payouts are
made by the issuance of trust units upon exercise.
o MANAGEMENT FEES - Cash and non-cash management fees increased to $1.4
million for the quarter as compared with $1.1 million in the third
quarter of 2000 and $0.5 million for the corresponding period in 1999.
Management fees are mainly based on net production revenue, which itself
is highly dependent on volumes produced and commodity prices received.
o INTEREST EXPENSE - Interest expense was $1.7 million in the fourth
quarter compared with $1.8 million in the third quarter of 2000 and $1.2
million in the corresponding period of 1999.
o DEPLETION, DEPRECIATION AND AMORTIZATION (DD&A) - The fourth-quarter
2000 DD&A rate was $7.47 per BOE compared with a third-quarter rate of
$7.59 per BOE and with a 1999 rate of $6.34 per BOE. DD&A expense has
increased commensurate with the higher value of the Reserve Royalty GORR
reserves compared with reserves that are burdened with royalties and
operating expenses as well as reserve revisions booked at the end of
1999.
o LIQUIDITY AND CAPITAL RESOURCES - Capital expenditures, excluding
acquisitions, totalled $11.2 million during the quarter, compared with
third-quarter 2000 capital expenditures, of $6.2 million, and $16.5
million during the corresponding period in 1999.
Net debt (long-term debt net of working capital) at December 31, 2000 was $79.2
million or $1.52 per trust unit. This compares with $77.5 million or $1.53 per
trust unit at September 30, 2000 and $85.9 million or $2.40 per trust unit at
year-end 1999.
RESERVES SUMMARY
Based on an independent reserves evaluation by the firm of Gilbert Laustsen Jung
Associates Ltd. (GLJ), PrimeWest's total proved reserves were 57.1 million BOE
at January 1, 2001. During the year, 13.0 million BOE were added to proven
reserves through acquisitions and development work. Offsetting this increase,
proved reserves were reduced by 2000 production of 5.9 million BOE resulting in
a net increase in proved reserves of 6.1 million BOE year over year. Development
drilling, coupled with net acquisitions, replaced produced reserves by 220%.
Established reserves rose by 9% to 69.6 million BOE.
The following is a summary of PrimeWest's reserves at January 1, 2001:
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January 1, January 1,
Natural gas 2001 total 2000 total
Crude oil Natural gas liquids reserves reserve
(Mbbl) (MMcf) (Mbbl) (MBOE) (MBOE)
- -------------------------------------------------------------------------------------------------------------------
Proved producing 17,804 162,133 4,074 48,900 45,326
Total proved 20,166 192,590 4,885 57,149 50,963
Probable 8,405 80,286 3,072 24,855 25,350
Total proved plus
probable 28,571 272,846 7,957 82,004 76,313
Established 24,369 232,725 6,421 69,577 63,638
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Total proved reserves as a percentage of established reserves increased from 80% at January 1, 2000 to 82% at
January 1, 2001.
NET ASSET VALUE - Net asset value is a measure of the net value of PrimeWest's underlying assets - crude oil,
natural gas and natural gas liquids reserves. Reserve value is based on consultant average escalating commodity
price forecasts, prior to provision for income taxes, interest costs, general and administrative costs and
management fees, but after providing for estimated royalties, operating costs, other income, capital costs and
abandonment costs. The net asset value includes the value of unproved lands, working capital, funds held for
reclamation, and it deducts debt outstanding.
Based on the GLJ evaluation of PrimeWest's established reserves, discounted at 10%, PrimeWest's net asset value was
$10.55 per trust unit at January 1, 2001, up 49% from the prior year.
Present value of reserves
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Discounted @ Discounted @ Discounted Discounted @
January 1, 2001 0% 10% at 12% 15%
- ----------------------------------------------------------------------------------------------------------------------
(MILLIONS OF DOLLARS)
Proved producing 784.0 484.7 453.7 415.5
Total proved 907.7 549.6 512.4 466.6
Probable 401.6 147.9 129.0 107.4
Total proved and probable
1,309.3 697.5 614.3 574.0
Established 1,108.5 623.5 576.8 520.3
Established
January 1, 2000 624.1 327.6 299.4 265.4
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Net asset value
- ----------------------------------------------------------------------------------------------------------------------
January 1, January 1, January 1,
2001 2000 1999
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(MILLIONS OF DOLLARS, EXCEPT PER-TRUST-UNIT)
Established reserves
(discounted @ 10%) 623.0 328.0 313.0
Unproved lands 17.2 10.2 10.6
Other assets 0.1 6.9 4.2
Long-term debt (78.9) (92.2) (73.0)
----------------------------------------------
Total net asset value 561.4 252.9 254.8
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Per trust unit $10.55 $7.07 $7.72
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DEVELOPMENTS
SUMMARY OF OPERATIONS - During 2000, PrimeWest executed on all four of its
strategies - financial prudence, risk management, operating excellence and asset
growth.
Financial prudence - At year-end, PrimeWest had a debt-to-trailing--
12-month-cash-flow ratio of 0.7:1, and a trailing-debt-to-current-cash-flow
ratio of 0.5:1. These ratios provide substantial financial flexibility. We paid
a record level of distributions, and also have built an undistributed
distribution reserve of $29.3 million ($0.56 per trust unit), which we have used
to manage our debt prudently and to provide future distribution stability.
Risk management - PrimeWest layered in a series of forward-market sales
contracts to protect the 10-cent base distribution rate during 2000, and provide
support to the special distribution rate, which, commencing May 15, 2001, is at
12 cents per trust unit per month for a total distribution of $0.22 monthly.
Operating excellence - We reduced operating costs and worked steadily to temper
the natural rate of production decline. For 2000, base production (not including
acquired volumes) was held to 97% of 1999 production levels.
Asset growth - We had two successful acquisitions this year - Venator Petroleum
and Reserve Royalty Corporation.
2000 DISTRIBUTION SUMMARY AND TAXABILITY - Full-year distributions declared in
2000 were $1.77 per trust unit, and calendar year payments were $1.67 per trust
unit. Forty-seven percent of distributions received by unitholders in 2000 was a
tax-deferred return of capital and 53% was taxable as other income.
CYPRESS ENERGY ACQUISITION SUCCESSFULLY CLOSED - On March 29, 2001, PrimeWest
announced the successful completion of the acquisition of Cypress Energy Inc.,
whereby approximately 97% of the outstanding Cypress shares were tendered to the
offer. PrimeWest acquired the remaining shares under the compulsory acquisition
provisions of Canadian corporate law. Accordingly, PrimeWest issued 50.2 million
trust units, 5.44 million exchangeable shares (which are convertible into trust
units) and paid $58.4 million in cash in exchange for all the issued and
outstanding Cypress shares. In addition, the debt of Cypress was assumed.
PRIMEWEST/CYPRESS ENERGY INTEGRATION UPDATE - The integration of Cypress
Energy's operations into those of PrimeWest is moving forward according to plan.
In advance of the expiry of the offer for Cypress, PrimeWest retained an
external project management team to assist in the management of transition and
integration processes. A transition team has been assembled, consisting of
employees from both companies. The physical integration is expected to be
completed by May 30, 2001.
Head office space for the combined organization has been secured and the
conversion of Cypress systems into those of PrimeWest is well advanced. Of a
total of 60 Cypress and Ranchero employees, 29 have agreed to join PrimeWest.
Unitholders will benefit from the resulting economies of scale in general and
administrative expenses, expected to be in the order of $3 million annually.
A detailed review of the combined PrimeWest and Cypress asset base is currently
being conducted to develop an enhanced 2001 capital development and property
rationalization programs. This review is scheduled to be completed by May 31,
2001.
2001 DISTRIBUTION OUTLOOK - As previously announced, PrimeWest's special
distribution rate has been increased by 20%, from 10 cents to 12 cents per
month, as a result of the cash flow and net asset value accretion attributed to
the Cypress Energy Transaction.
Accordingly, the May cash distribution payment, totalling $0.22 per trust unit
($0.10 regular plus $0.12 special), will be made on May 15, 2001, to all
unitholders of record on April 30, 2001. With the regular and special
distributions in April, PrimeWest will have paid a total of $2.19 per trust unit
during the previous 12-month period (June 2000 through May 2001), and $6.29 per
trust unit since inception. The ex-distribution date for the May payment is
April 26, 2001.
PrimeWest expects to continue its $0.22 distribution rate until at least the
December 2001 declared distribution for payment in January 2002. This would
result in a record $2.56 per trust unit distribution for 2001.
DISTRIBUTION REINVESTMENT DISCOUNT - PrimeWest's Distribution Reinvestment Plan
enables participants to reinvest their monthly cash distributions and
automatically purchase additional trust units directly, at a 5% discount to the
prevailing market value, without incurring brokerage fees or other expenses.
For further information or to join this plan, contact our Plan Agent,
Computershare Trust Company of Canada, at 1-800-564-6253. PrimeWest Energy Trust
welcomes questions from unitholders and potential investors; call Investor
Relations at 403-234-6600 or toll-free in Canada 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:
April 10, 2001
Kent J. MacIntyre
Vice-chairman and
Chief Executive Officer
PRIMEWEST ENERGY TRUST
CONSOLIDATED BALANCE SHEETS
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(THOUSANDS OF DOLLARS) DECEMBER 31, December 31,
2000 1999
----------------- ------------------
ASSETS
Current assets
Cash and short-term investments - 5,504
Accounts receivable 35,064 21,810
Portfolio investments - 174
Prepaid expenses 3,400 2,452
----------------- ------------------
38,464 29,940
Cash reserved for site restoration and reclamation 398 1,060
Capital assets 395,376 289,210
----------------- ------------------
434,238 320,210
================= ==================
LIABILITIES AND UNITHOLDERS' EQUITY
Current liabilities
Bank overdraft 834 -
Accounts payable and accrued liabilities 25,781 18,675
Accrued distributions to unitholders 9,961 3,555
Due to related company 2,052 1,280
Current portion of long-term debt 106 106
----------------- ------------------
38,734 23,616
Long-term debt 78,940 92,180
Long-term incentive liability 8,930 475
Future income taxes 16,596 -
Site restoration and reclamation provision 1,958 3,899
----------------- ------------------
145,158 120,170
UNITHOLDERS' EQUITY
Net capital contributions 435,342 311,049
Accumulated income (loss) 43,014 (2,379)
Accumulated cash distributions (186,518) (107,485)
Accumulated dividends (2,758) (1,145)
----------------- ------------------
289,080 200,040
----------------- ------------------
434,238 320,210
================= ==================
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PRIMEWEST ENERGY TRUST
CONSOLIDATED STATEMENTS OF UNITHOLDERS' EQUITY
- --------------------------------------------------------------------------------------------------------
(THOUSANDS OF DOLLARS) DECEMBER 31, December 31,
2000 1999
Unitholders' equity, beginning of the period, as
previously reported 200,040 213,214
Adjustment to unitholders' equity at beginning
of period to adopt new future income tax standard (10,218) -
Net income for the period 55,612 5,985
Net capital contributions 124,291 18,598
Cash distributions (79,033) (37,351)
Dividends (1,612) (406)
----------------- ------------------
Unitholders' equity, end of the period 289,080 200,040
----------------- ------------------
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PRIMEWEST ENERGY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOW
- -----------------------------------------------------------------------------------------------------------------------------
(THOUSANDS OF DOLLARS) THREE MONTHS YEAR ENDED
ENDED DECEMBER 31 DECEMBER 31
------------------------------ ------------------------------
2000 1999 2000 1999
--------------- -------------- -------------- --------------
OPERATING ACTIVITIES
Net income for the period 22,839 4,017 55,612 5,985
Add: Items not involving cash from operations
Depletion, depreciation and amortization 11,649 9,063 42,865 34,699
Attempted acquisition costs expensed - 7 - 1,145
Investment income - (187) - (1,780)
Non-cash general and administrative 3,583 287 10,296 586
Non-cash management fees 234 119 731 446
Future income taxes 2,558 - 2,558 -
--------------- -------------- -------------- --------------
Cash flow from operations 40,863 13,306 112,062 41,081
Change in non-cash working capital (7,423) (2,861) (7,599) (7,457)
--------------- -------------- -------------- --------------
33,440 10,445 104,463 33,624
--------------- -------------- -------------- --------------
FINANCING ACTIVITIES
Proceeds from issue of trust units (net of costs) 900 18,265 39,896 18,830
Acquisition of trust units pursuant to normal
course issuer bid - - (926) (755)
Cash distributions to unitholders (30,489) (12,547) (79,033) (37,351)
Dividends (760) (108) (1,612) (406)
Increase (decrease) in long-term debt (5,334) 6,495 (41,449) 19,173
Change in non-cash working capital 1,747 211 6,291 1,540
--------------- -------------- -------------- --------------
(33,936) 12,316 (76,833) 1,031
--------------- -------------- -------------- --------------
INVESTING ACTIVITIES
Expenditures on capital assets (11,250) (16,496) (25,791) (14,170)
Acquisition of capital assets (330) (1,166) (6,306) (24,648)
Proceeds on disposal of capital assets 5 698 855 5,909
Decrease (increase) in cash reserved for future site
restoration and reclamation 1,339 1,454 661 721
Expenditures on site restoration and reclamation (1,727) (1,291) (3,561) (1,835)
Proceeds on disposition of short-term investments - 17 174 4,818
Attempted acquisition costs - (7) - (1,145)
--------------- -------------- -------------- --------------
(11,963) (16,791) (33,968) (30,350)
--------------- -------------- -------------- --------------
Increase (decrease) in cash for the period (12,459) 5,970 (6,338) 4,305
Cash, (bank overdraft) beginning of the period 11,625 (466) 5,504 1,199
--------------- -------------- -------------- --------------
Cash, (bank overdraft) end of the period (834) 5,504 (834) 5,504
=============== ============== ============== ==============
Cash interest paid 1,858 1,597 6,872 4,867
=============== ============== ============== ==============
Cash taxes paid 38 - 453 -
=============== ============== ============== ==============
- -----------------------------------------------------------------------------------------------------------------------------
PRIMEWEST ENERGY TRUST
CONSOLIDATED STATEMENTS OF INCOME AND
CASH AVAILABLE FOR DISTRIBUTION
- -----------------------------------------------------------------------------------------------------------------------------
(THOUSANDS OF DOLLARS, EXCEPT FOR PER-TRUST-UNIT AND NUMBER THREE MONTHS YEAR ENDED
OF UNITS) ENDED DECEMBER 31 DECEMBER 31
2000 1999 2000 1999
-------------- --------------- -------------- --------------
REVENUES
Sales of crude oil, natural gas and natural gas 64,367 29,569 191,339 98,247
liquids
Crown and other royalties, net of ARTC (11,489) (5,907) (35,157) (17,182)
Other income 121 242 379 1,998
-------------- --------------- -------------- --------------
52,999 23,904 156,561 83,063
-------------- --------------- -------------- --------------
EXPENSES
Operating 8,106 7,325 30,175 28,609
Cash general and administrative 1,060 1,415 4,140 5,321
Non-cash general and administrative 3,583 287 10,295 586
Interest 1,667 1,244 6,359 4,885
Attempted takeover costs - 7 - 1,146
Cash management fees 1,165 427 3,277 1,386
Non-cash management fees 234 119 731 446
Depletion, depreciation and amortization 11,649 9,063 42,865 34,699
-------------- --------------- -------------- --------------
27,464 19,887 97,842 77,078
-------------- --------------- -------------- --------------
NET INCOME BEFORE TAXES FOR THE PERIOD 25,535 4,017 58,719 5,985
-------------- --------------- -------------- --------------
-------------- --------------- -------------- --------------
Capital taxes 138 - 549 -
Future income taxes 2,558 - 2,558 -
-------------- --------------- -------------- --------------
-------------- --------------- -------------- --------------
2,696 - 3,107 -
-------------- --------------- -------------- --------------
-------------- --------------- -------------- --------------
NET INCOME FOR THE PERIOD 22,839 4,017 55,612 5,985
============== =============== ============== ==============
Add back (deduct) amounts to reconcile to distribution:
Undistributed reserve (9,674) (393) (29,266) (2,485)
Attempted takeover costs, net of income - (180) - (635)
Depletion, depreciation and amortization 11,649 9,063 42,865 34,699
Contribution to reclamation fund (392) (239) (2,964) (868)
Non-cash general and administrative 3,583 287 10,295 586
Management fees paid in trust units 234 119 731 446
Future income taxes 2,558 - 2,558 -
-------------- --------------- -------------- --------------
7,958 8,657 24,219 31,743
-------------- --------------- -------------- --------------
CASH AVAILABLE FOR DISTRIBUTION 30,797 12,674 79,831 37,728
============== =============== ============== ==============
Cash available to trust unitholders (99%) 30,489 12,547 79,033 37,351
============== =============== ============== ==============
Cash available for distribution per trust unit 0.60 0.35 1.77 1.10
============== =============== ============== ==============
Net income per trust unit 0.45 0.11 1.25 0.18
============== =============== ============== ==============
Fully diluted net income per trust unit 0.43 0.11 1.21 0.18
============== =============== ============== ==============
Trust units issued and outstanding 50,982,093 35,768,801 50,982,093 35,768,801
Weighted average trust units outstanding 50,814,922 35,849,989 44,651,600 33,965,152
=============================================================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2000
(1) Acquisition of Venator Petroleum Company Limited
On April 19, 2000, PrimeWest Resources Ltd., a subsidiary company of PrimeWest
Energy Inc., completed the acquisition of all of the issued and outstanding
shares of Venator Petroleum Company Limited ("Venator") on a share for share
exchange. PrimeWest issued 0.65 trust units or 0.65 exchangeable shares of
PrimeWest Resources Ltd. for each Venator share. In aggregate, 2.4 million trust
units and 2.0 million exchangeable shares were issued for total consideration,
including debt assumed, of $31.24 million. Subsequent to the transaction,
Venator was dissolved and all of its assets distributed to PrimeWest. The
acquisition was accounted for using the purchase method of accounting.
(2) Exchangeable Shares of PrimeWest Resources Ltd.
In connection with the Venator acquisition, PrimeWest Resources Ltd. amended its
articles to create an unlimited number of exchangeable shares. The exchangeable
shares are exchangeable into PrimeWest trust units at anytime up to April 18,
2005, based on an exchange ratio that adjusts each time PrimeWest makes a
distribution to unitholders. In certain circumstances, PrimeWest has the right
to require redemption prior to that date. Dividends are paid to holders of
record based on the estimated taxable portion of the monthly distribution paid.
The exchange ratio, which was 1:1 on the date the transaction closed, is based
on the total monthly distribution paid less the dividend paid, divided by the
closing unit price on the distribution payment date. The exchange ratio,
effective January 15, 2001 is 1.1042:1 and as at December 31, 2000 there were
1.1 million exchangeable shares outstanding.
(3) Acquisition of Reserve Royalty Corporation
On July 27, 2000, PrimeWest Royalty Corp., a subsidiary of PrimeWest Energy
Inc., completed the acquisition of all of the issued and outstanding shares of
Reserve Royalty Corporation on a unit for share exchange. PrimeWest issued 0.657
trust units for each Reserve Royalty share. In aggregate, 6.67 million trust
units were issued for total consideration, including debt assumed, of $83.7
million. Subsequent to the transaction, Reserve Royalty was amalgamated into
PrimeWest Royalty Corp. and the majority of the assets transferred to the Trust.
The purchase method was used to account for the transaction.
TRADING PERFORMANCE
- -----------------------------------------------------------------------------------------------------------------------------
FOR THE QUARTER ENDED
DEC. 31/00 SEPT. 30/00 JUN. 30/00 MAR. 31/00 DEC. 31/99
--------------- ---------------- --------------- --------------- ---------------
TRUST UNIT PRICES
(DOLLARS PER TRUST UNIT)
High 9.30 8.50 8.10 7.40 7.10
Low 8.45 8.35 6.30 6.30 6.15
Close 8.95 8.40 8.05 6.40 6.65
Volume traded (MILLIONS OF UNITS) 7.73 9.58 7.96 4.64 3.24
Number of trust units outstanding (MILLIONS
OF UNITS) 51.0 50.6 38.8 35.9 35.8
Including exchangeable shares (ISSUED IN 52.2 52.0 40.2 35.9 35.8
RESPECT OF VENATOR ACQUISITION)
Distribution paid per trust unit $0.60 $0.48 $0.39 $0.30 $0.35
--------------- ---------------- --------------- --------------- ---------------
Exchange ratio for exchangeable
shares 1.0933 1.0708 1.0352 - -
--------------- ---------------- --------------- --------------- ---------------
- -----------------------------------------------------------------------------------------------------------------------------
FORWARD-LOOKING STATEMENTS - This news release contains forward-looking
statements with respect to PrimeWest. Some of these statements include words to
indicate that management `intends', `expects', or `believes' that an outcome
will occur. Because forward-looking statements address future events and
conditions, they involve risks and uncertainties that could cause actual results
to differ materially from those contemplated by the forward-looking statements.
These risks and uncertainties include commodity price levels and crude oil
quality differentials, production levels, new information about the
recoverability of reserves, and operating and other costs. They also include
other risks detailed from time to time in the publicly filed disclosure
documents and securities commissions reports of PrimeWest.
KENT MACINTYRE SUSAN DUNCAN SCOTT RANSON
Vice-chairman Vice-president, Investor Relations
and Chief Executive Officer Finance and Communications
403-234-6601 403-234-6619 403-234-6644
[LOGO]
PRIMEWEST
ENERGY TRUST
e-mail: investor@primewestenergy.com
www.primewestenergy.com
[SIDE HIGHLIGHTS TAKEN FROM ELSEWHERE IN THE TEXT]
Beginning with this quarterly report, we are using a 6:1 ratio for converting
natural gas (Mcf) to barrels of oil equivalent (BOE). In prior years, PrimeWest
was using 10:1 ratio.
TSE TRADING SYMBOL PWI.UN
We have a balanced strategy of financial prudence - managing our current
capital structure while providing for the future.
We have a balanced strategy of financial prudence - managing our current
capital structure while providing for the future.
The key aim of our risk management strategy - to provide an element of stability
and predictability to our monthly distributions, while maintaining the
opportunity to capture benefit from strong prices.
Our operating excellence strategy: pursue a conservative program of property
development focused on lowering operating costs and arresting the natural
production declines in mature producing properties.
Asset replenishment -- another key to the long-term stability of PrimeWest and
its cash distributions to unitholders. We work to increase the size, diversity
and quality of our asset base.
During 2000, PrimeWest executed on all four of its strategies - financial
prudence, risk management, operating excellence and asset growth.