EXHIBIT 6
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PRIMEWEST ENERGY TRUST
THIRD QUARER INTERIM REPORT
P R I M E W E S T
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2001
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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 STABLE, PREDICTABLE AND SUSTAINABLE CASH
DISTRIBUTIONS MONTHLY, WITHIN THE CONTEXT OF A COMMODITY-BASED BUSINESS
ENVIRONMENT.
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PRIMEWEST ENERGY TRUST ANNOUNCES THIRD QUARTER RESULTS AND POSITIONS BALANCE
SHEET FOR GROWTH
CALGARY, NOVEMBER 22, 2001 (TSE: PWI.UN; PWX) -- PrimeWest Energy Trust
(PrimeWest) today announced unaudited interim operating and financial results
for the third quarter.
Cashflow for the third quarter totalled $55.9 million ($0.47 per trust unit
fully diluted); reflecting solid financial performance due to hedging gains.
Distributions for the third quarter totalled $0.61 per trust unit, which was
supplemented by a distributions reserve accumulated in prior periods when
cashflow was under-distributed by PrimeWest. For the nine-month period ended
September 30, 2001, $1.87 per trust unit has been distributed to unitholders, up
60% from the $1.17 per trust unit distributed in the corresponding period in
2000.
Reflecting a softening commodity price environment, distributions commencing
September 15, 2001 (paid October 15th) were reduced to $0.17 per trust unit, a
level that is more in line with PrimeWest's financial results for the third
quarter, and representing a 30% yield on the November 14, 2001 closing price of
$6.89 per unit.
BALANCE SHEET POSITIONED
PrimeWest's non-core property disposition program, combined with the recently
completed equity issue, will serve to reduce PrimeWest's long-term debt by
approximately $140 million. Taking into effect these debt reduction activities
would result in a debt-to-trailing cashflow (third quarter annualized) of 0.76
times.
It is in periods of commodity price uncertainty such as we are currently
experiencing that a conservative balance sheet will be of greatest value to
unitholders. Declining price environments usually result in new acquisition
opportunities becoming available, and PrimeWest is well positioned to take
advantage of these opportunities as they arise.
PRIMEWEST'S COMMODITY RISK MANAGEMENT PROGRAM AND STRONG BALANCE SHEET HAVE
POSITIONED US TO DELIVER MORE STABLE DISTRIBUTIONS IN A VOLATILE COMMODITY
MARKET AND ACT UPON ACQUISITION OPPORTUNITIES AS THEY MAY ARISE.
COMMODITY HEDGING GAINS HELP SAFEGUARD CASHFLOW
PrimeWest's commodity risk management programs have resulted in approximately
65% of crude oil production and 72% of natural gas production over the next 12
months being hedged at prices materially above current market values. In
aggregate, the mark-to-market value of these instruments as at November 19, 2001
(being the value which would be realized by PrimeWest should the contracts be
closed out) is $71.7 million, or $0.60 per trust unit. PrimeWest believes its
commodity risk management programs provides significant unitholder benefits in
that PrimeWest will produce more stable distributions as commodity prices
fluctuate.
CELEBRATING PRIMEWEST'S FIFTH ANNIVERSARY
On October 16, 2001, PrimeWest celebrated the fifth anniversary of its Initial
Public Offering in 1996. Over these five years, PrimeWest has demonstrated the
following accomplishments:
o PrimeWest's market capitalization has increased from $249 million to
approximately $1 billion, improving unitholder liquidity and providing
competitive strength. PrimeWest is now the 4th largest royalty trust in
North America.
o To the end of the third quarter, PrimeWest has generated $7.94 per trust
unit of cashflow and delivered unitholders $7.34 per trust unit in
distributions, exceeding the initial public offering forecast by 49% and
38% respectively.
o PrimeWest has provided a total unitholder return (unit price plus
distributions re-invested) since inception of 78% (12% compounded
annually), significantly exceeding both the TSE 300 Index (38% or 7%
compounded annually) and the TSE Oil and Gas Producers Index (32% or 6%
compounded annually) by a significant margin.
o Production has increased from 9,610 BOE per day in the last quarter, 1996
to 33,849 BOE per day in the third quarter 2001, representing a compound
annual growth rate of 29%.
o Established reserves have increased from 49.8 million BOE at inception, to
125.6 million BOE following the Cypress Energy acquisition, representing a
compound annual growth rate of 26%.
o PrimeWest has significantly improved the quality of its asset base, as
measured by investor netback (the cashflow per BOE available to be
distributed to unitholders, net of all field costs such as royalties and
operating costs, and corporate costs such as debt servicing and general and
administration expenses, management fees and contributions to PrimeWest's
reclamation fund).
o Since 2000, PrimeWest's realized operating netback has been among the
highest of all Canadian royalty trusts. Achieved in part by a significant
reduction in cost structures relative to other royalty trusts over the past
five years, a high netback provides greater downside protection in a
declining commodity price environment and reduces distribution volatility
through a commodity cycle.
THE KEY AIM OF OUR RISK MANAGEMENT STRATEGY - TO PROVIDE AN ELEMENT OF STABILITY
AND PREDICTABILITY TO OUR MONTHLY DISTRIBUTIONS.
PRIMEWEST ENERGY TRUST 2 3rd QUARTER REPORT
OPERATING & FINANCIAL
HIGHLIGHTS
OPERATING HIGHLIGHTS THREE MONTHS ENDED SEPTEMBER 30 NINE MONTHS ENDED SEPTEMBER 30
------------------------------------- -------------------------------------
2001 2000 CHANGE 2001 2000 CHANGE
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Daily sales volumes
Crude oil (barrels) 11,216 7,087 59% 9,901 6,299 57%
Natural gas liquids (barrels) 2,414 1,521 59% 2,217 1,440 54%
Natural gas (thousand cubic feet) 121,316 52,102 133% 99,799 49,549 101%
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Total (barrels of oil equivalent) (1) 33,849 17,292 96% 28,751 15,997 80%
Average selling prices
Crude oil ($/bbl) 33.15 39.23 (16%) 32.82 36.10 (9%)
Natural gas liquids ($/bbl) 28.71 35.46 (19%) 34.08 32.40 5%
Natural gas ($/Mcf) 5.32 4.20 27% 6.56 3.74 75%
Operating netback ($/BOE)
Revenues 31.91 31.95 -- 36.66 29.03 26%
Royalties, net of ARTC (5.22) (6.12) (15%) (7.59) (5.40) 41%
Operating expenses (5.69) (5.13) 11% (5.32) (5.03) 6%
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Operating netback 21.00 20.70 1% 23.75 18.60 28%
(1) Gas converted to a barrel of oil equivalent at a 6:1 conversion factor.
FINANCIAL HIGHLIGHTS THREE MONTHS ENDED SEPTEMBER 30 NINE MONTHS ENDED SEPTEMBER 30
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(THOUSANDS OF DOLLARS EXCEPT PER-BOE 2001 2000 CHANGE 2001 2000 CHANGE
AND PER-TRUST-UNIT AMOUNTS)
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Operating revenues, net of royalties 83,105 41,091 103% 228,068 103,561 120%
per BOE 26.69 25.83 (3%) 29.05 23.63 23%
per trust unit (fully diluted) 0.69 0.87 (21%) 2.40 2.50 (4%)
Operating expenses 17,719 8,156 117% 41,763 22,069 89%
per BOE 5.69 5.13 11% 5.32 5.03 6%
per trust unit 0.15 0.17 (12%) 0.44 0.53 (17%)
Cash G&A expenses 2,794 715 291% 7,863 3,080 155%
per BOE 0.90 0.45 100% 1.00 0.70 43%
per trust unit 0.02 0.02 -- 0.08 0.07 14%
Cash management fees 1,633 846 93% 4,764 2,112 126%
per BOE 0.52 0.53 (2%) 0.61 0.48 27%
per trust unit 0.01 0.02 (50%) 0.05 0.05 --
Financing costs 3,997 1,807 121% 10,627 4,692 127%
per BOE 1.28 1.14 12% 1.35 1.07 26%
per trust unit 0.03 0.04 (25%) 0.11 0.11 --
Cash flow from operations 55,907 29,157 92% 161,264 71,197 126%
per BOE 17.94 18.33 (2%) 20.54 16.24 27%
per trust unit 0.47 0.62 (24%) 1.69 1.72 (2%)
Cash distributed to unitholders 69,764 22,702 207% 180,836 48,544 273%
per trust unit 0.61 0.48 27% 1.87 1.17 60%
SEPTEMBER 30, June 30, March 31,
(THOUSANDS OF DOLLARS) 2001 2001 2001
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Net debt (long-term debt net of working capital) 310,355 290,233 333,354
per trust unit (fully diluted) 2.58 2.40 3.04
Debt-to-current-cashflow (annualized) 1.39 1.17 1.84
PRIMEWEST ENERGY TRUST 3 3rd QUARTER REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A)
The following is management's discussion and analysis about PrimeWest's
operating and financial results for the third quarter of 2001 compared to the
second quarter of 2001 and the third quarter of 2000, and 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, 2000 and 1999, together with the
accompanying notes. These are included in pages 17 through 42 of PrimeWest's
2000 annual report to unitholders.
We are using a 6:1 ratio for converting natural gas (Mcf) to barrels of oil
equivalent (BOE).
RESULTS OF OPERATIONS
o PRODUCTION VOLUMES - Production volumes for the quarter averaged 33,849 BOE
per day, up from 17,292 BOE in the third quarter of 2000 due to new volumes
from the Cypress acquisition late in the first quarter of 2001, as well as
production additions related to our capital development programs.
Relative to second quarter 2001, production volumes were off 1,504 BOE per
day or 4%. Successful addition of development volumes in the quarter were
offset by a number of operational factors and property divestments.
Operational factors included previously announced weather-related delays in
bringing on-stream new production volumes principally in the Dawson area,
declines related to flush production from new gas wells, water breakthrough
on several low rate shallow-gas wells in the Dawson area, scheduled
facility maintenance and turnaround activity and curtailments due to a fire
at BP's Fort Saskatchewan facility. The resolution of these operational
issues is not expected to result in an increase in overall production in
the fourth quarter. In addition, the divestment of several non-core assets
were also closed at various times during the quarter, representing total
productivity of 1,036 BOE per day.
During the quarter, 1,816 BOE per day or 5% of total daily production came
from Gross Overriding Royalty (GORR) interests (mostly from former Reserve
Royalty lands). Of this total, 859 BOE per day was crude oil production,
848 BOE per day was natural gas production, and 109 BOE per day was natural
gas liquids production. The decrease in crude oil GORR volumes, relative to
the second quarter, resulted from the divestment of 100 barrels per day
production.
o COMMODITY PRICES - During the quarter, the average West Texas Intermediate
(WTI) crude oil price was US$26.76 per barrel compared with US$27.96 in the
second quarter of 2001 and US$31.58 per barrel for the third quarter of
2000. Despite the drop in WTI oil prices, the average realized sales price
for oil was virtually unchanged from the second quarter of 2001, at
Cdn$33.15 per barrel, due to narrowing crude oil quality differentials and
a lower Canadian dollar. Realized oil prices include $0.14 per barrel
opportunity loss due to crude oil hedging activities.
WE HAVE A BALANCED STRATEGY OF FINANCIAL PRUDENCE - MANAGING OUR CURRENT CAPITAL
STRUCTURE WHILE PROVIDING FOR THE FUTURE.
PRIMEWEST ENERGY TRUST 4 3rd QUARTER REPORT
North American natural gas prices continued to slide during the quarter,
both on the New York Mercantile Exchange (NYMEX) and in the Alberta markets
(AECO), compared with the second quarter of 2001. The continued decline in
gas prices was the result of a slow down in North American demand causing a
sharp build in natural gas inventories. The average daily AECO spot price
was $3.25 per thousand cubic feet (Mcf) compared with $6.02 for the second
quarter of 2001 and $5.26 for the same quarter in 2000.
Factoring in the hedging that PrimeWest had in place on its natural gas
volumes, PrimeWest's average realized gas price for the third quarter 2001
was Cdn$5.32 per Mcf compared with Cdn$6.21 per Mcf for the second quarter
of 2001 and Cdn$4.20 per Mcf for the same quarter in 2000. The improvement
in the realized gas price attributable to natural gas hedging activities
was $1.62 per Mcf during the quarter.
The average selling price PrimeWest received in the third quarter for all
products combined was $31.91 per BOE, compared with $35.94 per BOE in the
second quarter of 2001 and $31.95 per BOE in the third quarter of 2000.
COMMODITY RISK MANAGEMENT
Our risk management strategy is 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, to support transaction economics
associated with material acquisitions and protect our capital structure when
commodity prices cycle downwards while maintaining exposure to upside in
commodity prices.
PrimeWest uses a number of hedging structures in its program, many of which are
often `option'- or `put'-based.
A `put' allows PrimeWest the right to sell production at the then prevailing
market price, subject to a floor price represented by the strike price
attributed to the `put'.
These structures have the advantage of mitigating downside exposure while
providing substantial upside participation in commodity prices. In essence, they
provide a form of insurance.
During the third quarter, PrimeWest entered into a number of additional
commodity risk management contracts, particularly in respect of 2002 crude oil
volumes and 2003 natural gas volumes, and exercised a number of pre-existing
natural gas swaption agreements in respect of the 2001/2002 contract year.
Specifically, PrimeWest:
o exercised its right, under pre-existing swaption agreements, to fix the
price of 47,400 Mcfd natural gas sales at $7.12 per Mcf for the period
November 1, 2001 to March 31, 2002, and $5.28 per Mcf thereafter until
October 31, 2002;
o fixed the price on 7,100 Mcfd natural gas sales at $4.20 per Mcf for the
period October 1, 2001 to October 31, 2003;
OUR RISK MANAGEMENT STRATEGY IS DESIGNED TO SUPPORT OUR DISTRIBUTION RATES, TO
SUPPORT TRANSACTION ECONOMICS AND TO PROTECT OUR CAPITAL STRUCTURE.
PRIMEWEST ENERGY TRUST 5 3rd QUARTER REPORT
o fixed the price of an additional 2,400 Mcfd natural gas sales at $4.08 per
Mcf for the period January 1, 2002 to October 31, 2003;
o entered into a costless collar for 4,700 Mcfd natural gas sales, for the
period November 1, 2002 to March 31, 2003, having an AECO floor price of
$4.22 per Mcf and a ceiling price of $5.96 per Mcf. For the period April 1,
2003 to October 31, 2003, this volume is then fixed priced at $4.75 per
Mcf;
o entered into a costless three-way option on 4,700 Mcfd for the period
November 1, 2002 to March 31, 2003 by buying a $4.48 per Mcf put and
selling a $3.17 per Mcf put and a $6.59 per Mcf call. For the period April
1, 2003 to October 31, 2003 the same volume and option was entered into by
buying a $4.48 per Mcf put and selling a $3.17 per Mcf put and a $6.26 per
Mcf call;
o fixed the price of an additional 2,000 barrels per day of 2002 crude oil
sales on a quarterly basis, at WTI prices of US$27.37 per barrel in the
first quarter, US$26.23 per barrel in the second quarter, US$25.22 per
barrel in the third quarter and US$24.45 per barrel in the fourth quarter;
and
o entered into a costless collar for an additional 1,000 barrels per day
crude oil sales, for the period January 1, 2002 to December 31, 2002,
having a WTI floor price of US$20.00 per barrel and a ceiling price of
US$25.15 per barrel.
Combined with previously announced commodity risk management activities,
approximately 65% of crude oil production and 72% of natural gas production for
the next 12 months has now been hedged at prices materially above current market
values as at November 19, 2001.
As of November 19, 2001, the mark-to-market value of all commodity risk
management instruments in place (including fourth quarter estimated settlements)
was $71.7 million or $0.60 per trust unit. In respect of crude oil hedging
instruments, the estimated value is $22.7 million and in respect of natural gas
hedging instruments, the estimated value is $49 million.
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 are the sensitivities of cashflow to changes in commodity prices
prior to and after giving effect to PrimeWest's current hedge positions.
Unhedged Providing for hedging
--------------------------------
2001-Q4 2002
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Oil - US$1.00 WTI/bbl change $0.05/unit minor effect $0.03/unit
Gas - $0.10/Mcf change $0.03/unit minor effect $0.01/unit
THE MARK-TO-MARKET VALUATION OF HEDGING INSTRUMENTS WAS $71.7 MILLION AS AT
NOVEMBER 19, 2001.
PRIMEWEST ENERGY TRUST 6 3rd QUARTER REPORT
The following tables of blended prices show the expected effect of hedging
transactions for the next four quarters.
CRUDE OIL (AS AT NOVEMBER 19, 2001)
(AS AN APPROXIMATE PERCENTAGE OF TOTAL
ANTICIPATED CRUDE OIL PRODUCTION AFTER QUARTER ENDING QUARTER ENDING QUARTER ENDING QUARTER ENDING
ROYALTIES) DEC. 31, 2001 MAR. 31, 2002 JUN. 30, 2002 SEP. 30, 2002
- --------------------------------------------------------- -------------- -------------- --------------
Volumes hedged, fixed price (2) 84% 55% 55% 33%
Volumes hedged, collared (2) 0% 11% 11% 11%
(U.S. DOLLARS PER BARREL) PRIMEWEST PRIMEWEST PRIMEWEST PRIMEWEST
IF WTI IS: RECEIVES (1) RECEIVES (1) RECEIVES (1) RECEIVES (1)
- ---------------------------------------- ------------ ------------ ------------ ------------
28.00 27.55 26.57 26.34 26.70
26.00 27.23 25.90 25.65 25.58
24.00 26.91 25.10 24.84 24.33
22.00 26.59 24.21 23.93 22.99
20.00 26.27 23.32 23.03 21.64
18.00 25.95 22.65 22.34 20.30
16.00 25.63 21.98 21.65 18.96
14.00 25.31 21.31 20.96 17.62
(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. Collared volumes have a put and
call strike.
(3) Hedged volumes prior to asset dispositions, announced but not yet closed.
NATURAL GAS (AS AT NOVEMBER 19, 2001)
(AS AN APPROXIMATE PERCENTAGE OF TOTAL
ANTICIPATED CRUDE OIL PRODUCTION AFTER QUARTER ENDING QUARTER ENDING QUARTER ENDING QUARTER ENDING
ROYALTIES) DEC. 31, 2001 MAR. 31, 2002 JUN. 30, 2002 SEP. 30, 2002
- --------------------------------------------------------- -------------- -------------- --------------
Volumes hedged, fixed price (2) 85% 67% 67% 67%
Volumes hedged, insured (3) 1% 0% 0% 0%
(U.S. DOLLARS PER BARREL) PRIMEWEST PRIMEWEST PRIMEWEST PRIMEWEST
IF AECO IS: RECEIVES (1) RECEIVES (1) RECEIVES (1) RECEIVES (1)
- ---------------------------------------- ------------ ------------ ------------ ------------
7.00 6.55 6.58 5.62 5.62
6.00 6.35 6.25 5.29 5.29
5.00 6.01 5.92 4.95 4.95
4.00 5.86 5.58 4.62 4.62
3.00 5.72 5.25 4.29 4.29
2.00 5.58 4.92 3.95 3.95
(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 price and term. Insured volumes
include puts.
(3) Natural gas sold through aggregators is assumed to receive AECO prices.
(4) Hedged volumes prior to asset dispositions, announced but not yet closed.
PRIMEWEST ENERGY TRUST 7 3rd QUARTER REPORT
o REVENUES - Revenues from the sale of crude oil, natural gas and natural gas
liquids for the third quarter were $99.0 million, up 95% over the same
period in 2000 due to higher natural gas prices and higher production
volumes. Compared with the second quarter of 2001, revenues were down 14%
due to lower prices for both natural gas and oil as well as lower
production volumes. Included in revenue for the quarter were hedging gains
of $17.9 million or $0.15 per trust unit.
o CASHFLOW - Cashflow from operations was $55.9 million ($0.47 per trust unit
fully diluted) for the quarter compared with $61.8 million ($0.56 per trust
unit) in the second quarter of 2001 and $29.2 million ($0.62 per trust
unit) posted in the third quarter of 2000. The decline on a per unit basis
reflects the impact of lower natural gas and oil prices as well as lower
production volumes and higher operating costs, offset by lower royalty
expense and hedging gains.
o ROYALTIES - Crown and other royalties, net of ARTC, were $16.3 million
during the third quarter, down sharply from $27.7 million in the second
quarter of 2001, and up from $9.7 million in the third quarter of 2000. The
average royalty rate for the quarter was 16%, down from 24% in the second
quarter due to lower natural gas prices and hedging gains, which do not
attract royalties.
o OPERATING EXPENSES - Operating expenses were $17.7 million for the third
quarter or $5.69 per BOE, compared to $15.7 million ($4.88 per BOE) in the
second quarter of 2001 and $8.2 million ($5.13 per BOE) in the third
quarter of 2000. The increase in aggregate expenses from the prior year
reflects the combined operations of Cypress and PrimeWest. Operating costs
increased quarter-over-quarter due to a carry forward of $1.3 million
($0.42 per BOE) of costs related to the second quarter, a number of
turnarounds conducted during the third quarter as well as the ongoing
effect of an out-of-the-money power cost hedges entered into in January and
June 2001. These hedges, fixing the cost of power at $87 to $115 per KWh,
had a settlement cost of $0.9 million ($0.29 per BOE) in the third quarter
and a mark-to-market loss of $0.7 million for the balance of the term. The
power cost hedge expires at the end of the year.
o OPERATING NETBACK - PrimeWest's third-quarter operating netback (before
G&A, management fees and interest expense) was $21.00 per BOE, down 7% from
$22.47 per BOE in the second quarter of 2001 and up from $20.70 per BOE in
the corresponding period in 2000. The netback has declined
quarter-over-quarter due to lower commodity prices, lower production
volumes and increased operating costs, offset by lower royalty expenses and
hedging gains.
o CASH GENERAL AND ADMINISTRATIVE EXPENSES - Cash G&A expenses, net of
overhead recoveries, were $2.8 million or $0.90 per BOE for the quarter,
unchanged from the second quarter of 2001 and up $2.1 million from the same
period in 2000. Year -over-year, the increase in cash G&A reflects the
combined operations of Cypress and PrimeWest.
o NON-CASH GENERAL AND ADMINISTRATIVE EXPENSES - Non-cash G&A expenses,
representing the cost associated with the Trust's long-term incentive
program,
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.
PRIMEWEST ENERGY TRUST 8 3rd QUARTER REPORT
provides for a recovery of $6.1 million in the third quarter, down sharply
from a charge of $2.3 million in the second quarter of 2001 and a charge of
$2.2 million for the corresponding period in 2000. The fall reflects the
decline in PrimeWest's unit price quarter-over-quarter and compared to the
prior year. The charge or recovery 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 distributions reinvested) and are subject to achieving a 5% per annum
hurdle rate before any liability for payouts accrue. This is a non-cash
charge in that payouts are settled by the issuance of trust units upon
exercise.
o MANAGEMENT FEES - Cash and non-cash management fees decreased to $2.0
million ($0.65 per BOE) for the quarter from $2.4 million ($0.74 per BOE)
in the second quarter of 2001. For the corresponding period in 2000,
management fees totalled $1.1 million. Cash management fees are calculated
as 2.5% of net production revenue, which was down quarter-over-quarter but
up compared to the prior year. Non-cash management fees, totalling $0.13
per BOE for the quarter, represent incentive trust units issued during the
quarter.
o INTEREST EXPENSE - Interest expense was $4.0 million in the third quarter
compared with $5.1 million in the second quarter of 2001 and $1.8 million
in the corresponding period of 2000. Lower interest costs
quarter-over-quarter reflect falling interest rates while the increase
compared to the prior year reflect higher debt levels year-over-year.
o DEPLETION, DEPRECIATION AND AMORTIZATION (DD&A) AND FUTURE INCOME TAXES -
The third-quarter 2001 DD&A rate was $15.68 per BOE compared with a
second-quarter 2001 rate of $15.63 per BOE. The high DD&A rate is due to
recognition of a large future tax liability and corresponding increase to
capital assets on the acquisition of Cypress. This future tax liability
pertains to the fact that the tax pools acquired pursuant to Cypress were
substantially less than the book basis of the assets acquired. While this
will not result in cash taxes payable (or a reduction in distributions
payable) as the ultimate liability for tax is borne by the unitholders,
higher DD&A and higher income tax recoveries will result over time, netting
to a nil effect on the statement of income.
o LIQUIDITY AND CAPITAL RESOURCES - Capital expenditures, excluding corporate
acquisitions, totalled $30.1 million during the quarter, compared with
second-quarter 2001 capital expenditures of $17.2 million, and $6.2 million
during the corresponding period in 2000. At September 30, 2001, long-term
debt net of working capital totals $310 million and the Trust had
unutilized credit of approximately $40 million on September 30, 2001.
Subsequent to the quarter end, PrimeWest closed an equity issue totalling
$70 million and disposed of a number of non-core properties. These are
discussed later in this report.
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.
PRIMEWEST ENERGY TRUST 9 3rd QUARTER REPORT
DEVELOPMENT PROGRAM UPDATE
PrimeWest had an active third quarter with a total of 26 wells drilled and cased
reflecting a success rate of 100%.
The Dawson/Stowe area was the most active, where drilling activities commenced
after the completion of an all weather road into the area, allowing
approximately 1,000 BOE per day of previously shut-in production to be brought
on-stream late in the third quarter and early in the fourth quarter, 2001. A
total of 12 wells were spudded in the quarter, with 10 cased and 2 still
drilling.
In Boundary Lake, PrimeWest continued with a highly successful development
program, drilling and casing another 3 oilwells. This brings year-to-date
drilling to 11 oilwells. This asset is now producing at record levels.
Within southeastern Alberta, at Brant/Farrow and Grand Forks, an active
development cycle continues with a total of 11 wells spudded. Ten wells were
cased through the quarter and 1 remains drilling.
In the Thorsby/Caroline area, 3 wells were spudded and 2 were cased through the
quarter. One remains drilling.
On the non-operated front, production commenced in November from a test well
(PrimeWest 40% interest) in the Whiskey Creek area. Initial production rates of
9,500 Mcf per day were achieved. The well is currently producing 5,300 Mcf per
day natural gas and 340 barrels per day liquids while plant operational problems
are addressed. Three development drilling locations are planned, the first of
which is currently drilling.
PrimeWest anticipates an active fourth quarter with plans to drill an additional
20-25 wells. Development activities will be focused in the Dawson/Stowe, Thorsby
and southeastern Alberta areas.
ASSET RATIONALIZATION PROGRAM UPDATE
During the third quarter, PrimeWest divested of a number of small non-core
properties, representing production of 1,036 BOE per day for proceeds of $24
million. In the fourth quarter, PrimeWest further agreed to divest additional
properties representing 1,800 BOE per day for proceeds of $54 million; such
divestments are expected to close by year-end. In aggregate, the disposition
program, totalling $78 million, has achieved the targets set forth in August
2001 and will serve to improve PrimeWest's overall reserve life and operating
cost structure. PrimeWest will continue a program of divesting small non-core
assets into 2002. These divestments will result in continued strengthening of
PrimeWest's balance sheet, and provide a more focused asset base having a lower
cost structure and longer reserve life.
EQUITY OFFERING
On November 15, 2001, PrimeWest closed a bought-deal equity financing with an
underwriting syndicate lead by Scotia Capital Inc. and CIBC World Markets Inc.
whereby PrimeWest sold 9.9 million trust units at $7.10 per trust unit,
resulting in $70.3 million of gross proceeds ($66.6 million net proceeds) prior
to any exercise of the over-allotment
PRIMEWEST HAD AN ACTIVE AND SUCCESSFUL THIRD QUARTER DRILLING PROGRAM.
PRIMEWEST ENERGY TRUST 10 3rd QUARTER REPORT
option. The net proceeds will be used initially to reduce the indebtedness of
PrimeWest, and thereafter used to fund future acquisitions and capital
expenditures and for general corporate purposes.
OUTLOOK
Due to slowing North America and world economic activity, exacerbated by the
tragic events on September 11, the near-term outlook for crude oil and natural
gas prices is highly uncertain.
As of November 19, 2001, crude oil prompt month futures prices have declined to
WTI $US18.50 per barrel, well below OPEC's price band of $22.00 to $28.00 per
barrel. Substantial concern exists regarding OPEC's resolve to implement
production cuts and to gain support from non-OPEC producers to maintain prices
within its targeted range. Offsetting these concerns is the potential for supply
disruptions due to anti-terrorist activities and a weakening Canadian dollar,
which recently reached historical lows (crude oil prices are denominated in U.S.
dollars).
While natural gas prices have recovered slightly from the lows seen in
September, they remain significantly below levels seen earlier this year. With
gas store inventory levels high, near-term gas prices will be highly dependant
on weather conditions as we enter the winter heating season.
Over the medium- to longer-term, increased North American economic activity
combined with a supply response from reduced gas drilling activities and
industry's inability to replace production declines may have a positive impact
on natural gas prices. PrimeWest's natural gas weighting provides the highest
exposure to natural gas among the large-cap royalty trusts.
PrimeWest's commodity risk management programs have resulted in approximately
84% of remaining 2001 and 55% of 2002 crude oil production, and 86% of remaining
2001 and 58% of 2002 natural gas production being hedged at prices materially
above the current forward market values. While these instruments will mitigate
the impact of reduced commodity prices, commodity prices must recover in order
for PrimeWest to maintain the current level of distributions.
PrimeWest's conservative distribution policy in prior periods and 2000 combined
with an active commodity risk management program, has afforded it some
flexibility to manage distributions in a declining commodity price environment.
It is in periods of commodity price uncertainty that we are now experiencing
that such initiatives will be of the greatest value to unitholders. In addition,
recent steps taken such as the new equity issue and non-core property
disposition programs, will position PrimeWest with one of the strongest balance
sheets in the large-cap royalty trust sector. Experience has shown that it is in
declining price environments that new acquisition opportunities generally become
available to well financed entities with strong balance sheets. PrimeWest is
positioned to take advantage of such opportunities as they develop to pursue
accretive acquisitions for the benefit of its unitholders.
CONTINUED VOLATILITY IN SHORT-TERM COMMODITY PRICES IS EXPECTED, HOWEVER
PRIMEWEST REMAINS OPTIMISTIC IN LONGER-TERM GAS PRICE RECOVERY.
PRIMEWEST ENERGY TRUST 11 3rd QUARTER REPORT
DISTRIBUTION REINVESTMENT (DRIP) DISCOUNT
PrimeWest's Distribution Reinvestment and Optional Trust Unit Purchase Plan
enables participants to reinvest their monthly cash distributions and/or
purchase additional trust units directly, at a 5% discount to the 20-day
weighted average monthly market price.
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. 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.
THIRD QUARTER CONFERENCE CALL AND WEBCAST
PrimeWest will be conducting a conference call and Webcast for interested
analysts, brokers, investors and media representatives about its third quarter
results and outlook at 10:00 a.m. Mountain time (12:00 p.m. Eastern time) on
Friday, November 23, 2001.
Callers may dial 1-866-246-6373 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 148040 followed by the pound (#) key.
Interested users of the Internet are invited to go to
www.newswire.ca/webcast/pages/PrimeWestEnergy20011123/ for the live Webcast
and/or replay or access the Webcast at the PrimeWest Web site,
WWW.PRIMEWESTENERGY.COM.
On behalf of the Board of Directors:
November 22, 2001
Kent J. MacIntyre
Vice-chairman and
Chief Executive Officer
PRIMEWEST ENERGY TRUST 12 3rd QUARTER REPORT
CONSOLIDATED
BALANCE SHEETS
AS AT AS AT
SEPTEMBER 30, DECEMBER 31,
2001 2000
(THOUSANDS OF DOLLARS) (UNAUDITED)
- -------------------------------------------------------------------------------------- ---------------
ASSETS
Current assets
Accounts receivable 54,912 35,064
Prepaid expenses and inventory 13,765 3,400
Assets held for sale 12,569 -
---------------- ---------------
81,246 38,464
Cash reserved for site restoration and reclamation 602 398
Capital assets 1,515,187 395,376
---------------- ---------------
1,597,035 434,238
================ ===============
LIABILITIES AND UNITHOLDERS' EQUITY
Current liabilities
Bank overdraft 7,059 834
Accounts payable and accrued liabilities 60,112 25,781
Accrued distributions to unitholders 18,538 9,961
Due to related company 5,799 2,052
Current portion of long-term debt 93 106
---------------- ---------------
91,601 38,734
Long-term debt 300,000 78,940
Long-term incentive liability 5,536 8,930
Future income taxes 358,616 16,596
Site restoration and reclamation provision 6,908 1,958
---------------- ---------------
762,661 145,158
UNITHOLDERS' EQUITY
Net capital contributions 1,081,635 435,342
Accumulated income 125,286 43,014
Accumulated cash distributions (367,354) (186,518)
Accumulated dividends (5,193) (2,758)
---------------- ---------------
834,374 289,080
---------------- ---------------
1,597,035 434,238
================ ===============
CONSOLIDATED STATEMENTS OF
UNITHOLDERS' EQUITY
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
2001 2000
(THOUSANDS OF DOLLARS) (UNAUDITED)
- ----------------------------------------------------------------------------------------- ---------------
Unitholders' equity, beginning of the period, as previously reported 289,080 200,040
Adjustment to unitholders' equity at beginning of period to adopt
new future income tax standard -- (10,218)
Net income for the period 82,272 55,612
Net capital contributions 646,293 124,291
Cash distributions (180,836) (79,033)
Dividends (2,435) (1,612)
---------------- ---------------
Unitholders' equity, end of the period 834,374 289,080
================ ===============
PRIMEWEST ENERGY TRUST 13 3rd QUARTER REPORT
CONSOLIDATED STATEMENTS OF
CASH FLOW
(UNAUDITED)
THREE MONTHS ENDED SEPT. 30 NINE MONTHS ENDED SEPT. 30
-------------------------------- ------------------------------
(THOUSANDS OF DOLLARS) 2001 2000 2001 2000
- ---------------------------------------------------------------------- ------------- ------------ ------------
OPERATING ACTIVITIES
Net income for the period 23,850 14,660 82,272 32,772
Add: Items not involving cash from operations
Depletion, depreciation and amortization 48,863 12,077 110,562 31,215
Non-cash general and administrative (6,146) 2,201 1,343 6,713
Non-cash management fees 390 219 1,401 497
Future income taxes (recovery) (11,050) - (34,313) -
-------------- ------------- ------------ ------------
Cash flow from operations 55,907 29,157 161,265 71,197
-------------- ------------- ------------ ------------
Change in non-cash working capital (26,138) (3,870) (23,877) 1,104
-------------- ------------- ------------ ------------
29,769 25,287 137,388 72,301
-------------- ------------- ------------ ------------
FINANCING ACTIVITIES
-------------- ------------- ------------ ------------
Proceeds from issue of trust units (net of costs) 4,277 39,172 100,242 38,686
Cash distributions to unitholders (69,764) (22,702) (180,836) (48,544)
Dividends (709) (392) (2,435) (852)
Increase (decrease) in long-term debt (35,025) 5,338 42,046 (7,905)
Change in non-cash working capital (5,235) 1,647 8,422 3,928
-------------- ------------- ------------ ------------
(106,456) 23,063 (32,561) (14,687)
-------------- ------------- ------------ ------------
INVESTING ACTIVITIES
Expenditures on capital assets (30,082) (6,170) (53,645) (13,923)
Corporate acquisitions (1,758) - (82,600) -
Acquisition of capital assets (1,136) (30,747) (1,656) (36,081)
Proceeds on disposal of capital assets 23,447 - 28,965 849
Decrease (increase) in cash reserved for future site
restoration and reclamation (192) (886) (204) (677)
Expenditures on site restoration and reclamation (1,031) (1,002) (1,912) (1,834)
Proceeds on disposition of short-term investments - - - 174
-------------- ------------- ------------ ------------
(10,752) (38,805) (111,052) (51,492)
-------------- ------------- ------------ ------------
INCREASE (DECREASE) IN CASH FOR THE PERIOD (87,439) 9,545 (6,225) 6,122
CASH, (BANK OVERDRAFT) BEGINNING 80,380 2,080 (834) 5,503
OF THE PERIOD
-------------- ------------- ------------ ------------
CASH, (BANK OVERDRAFT) END OF THE PERIOD (7,059) 11,625 (7,059) 11,625
============== ============= ============ ============
CASH INTEREST PAID 3,963 1,552 10,692 5,015
============== ============= ============ ============
PRIMEWEST ENERGY TRUST 14 3rd QUARTER REPORT
CONSOLIDATED STATEMENTS OF
INCOME AND CASH AVAILABLE
FOR DISTRIBUTION
(UNAUDITED)
THREE MONTHS ENDED SEPT. 30 NINE MONTHS ENDED SEPT. 30
------------------------------- -------------------------------
(THOUSANDS OF DOLLARS, EXCEPT FOR PER-TRUST-UNIT
AND NUMBER OF UNITS) 2001 2000 2001 2000
- --------------------------------------------------------------------- -------------- -------------- -------------
REVENUES
Sales of crude oil, natural gas and natural gas 98,987 50,698 287,136 126,971
liquids
Crown and other royalties, net of ARTC (16,265) (9,741) (59,566) (23,668)
Other income 383 134 498 258
-------------- -------------- -------------- -------------
83,105 41,091 228,068 103,561
-------------- -------------- -------------- -------------
EXPENSES
Operating 17,719 8,155 41,763 22,069
Cash general and administrative 2,794 715 7,863 3,080
Non-cash general and administrative (6,146) 2,201 1,343 6,713
Interest 3,997 1,807 10,627 4,692
Cash management fees 1,633 846 4,764 2,112
Non-cash management fees 390 219 1,401 497
Depletion, depreciation and amortization 48,863 12,077 110,562 31,215
-------------- -------------- -------------- -------------
69,250 26,020 178,323 70,378
-------------- -------------- -------------- -------------
Net income before taxes for the period 13,855 15,071 49,745 33,183
-------------- -------------- -------------- -------------
Capital taxes 1,055 411 1,786 411
Future income taxes (recovery) (11,050) - (34,313) -
-------------- -------------- -------------- -------------
(9,995) 411 (32,527) 411
-------------- -------------- -------------- -------------
Net income for the period 23,850 14,660 82,272 32,772
============== ============== ============== =============
Add back (deduct) amounts to reconcile to distribution:
Drawdown of (Increase in) undistributed reserve 15,561 (4,332) 23,927 (19,582)
Depletion, depreciation and amortization 48,863 12,077 110,562 31,215
Contribution to reclamation fund (999) (1,894) (2,529) (2,581)
Non-cash general and administrative (6,146) 2,201 1,343 6,713
Management fees paid in trust units 390 219 1,401 497
Future income taxes (recovery) (11,050) - (34,313) -
-------------- -------------- -------------- -------------
46,619 8,271 100,391 16,262
-------------- -------------- -------------- -------------
CASH AVAILABLE FOR DISTRIBUTION 70,469 22,931 182,663 49,034
============== ============== ============== =============
Cash available to trust unitholders (99%) 69,764 22,702 180,836 48,544
============== ============== ============== =============
Cash available for distribution per trust unit 0.61 0.48 1.87 1.17
============== ============== ============== =============
Net income per trust unit 0.20 0.31 0.86 0.77
============== ============== ============== =============
Fully diluted net income per trust unit 0.20 0.30 0.85 0.77
============== ============== ============== =============
Trust units and exchangeable shares issued and
outstanding 120,260,653 50,605,482 120,260,653 50,605,482
Weighted average trust units and exchangeable shares
outstanding (fully diluted) 120,114,892 47,296,165 95,407,057 41,490,922
PRIMEWEST ENERGY TRUST 15 3rd QUARTER REPORT
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
(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 17 through 42
of the Trust's 2000 annual report and should be read in conjunction with these
interim financial statements.
2) ACQUISITION OF CYPRESS ENERGY INC.
On March 29, 2001, PrimeWest Oil & Gas Corp., a subsidiary company of PrimeWest
Energy Trust, completed the acquisition of all of the issued and outstanding
shares of Cypress Energy Inc. ("Cypress") pursuant to a takeover bid. In
aggregate, PrimeWest issued 50.2 million trust units, 5.2 million exchangeable
shares of PrimeWest Oil & Gas Corp. and paid $59.2 million in cash. Subsequent
to the transaction, Cypress and PrimeWest Oil & Gas Corp. were amalgamated. The
acquisition was accounted for using the purchase method of accounting with net
assets acquired and consideration paid as follows:
Net assets acquired at assigned values
Petroleum and natural gas assets $ 1,201,485
Working capital assumed (19,174)
Long-term debt assumed (179,000)
Site restoration provision (4,307)
Future income taxes (376,334)
- --------------------------------------------------------------------------------
$ 622,670
================================================================================
Consideration paid:
Cash $ 59,235
Trust units issued 489,815
Exchangeable shares issued 50,254
Costs associated with acquisition (1) 23,366
- --------------------------------------------------------------------------------
$ 622,670
================================================================================
(1) Included in the costs associated with acquisition is an acquisition
fee to PrimeWest Management Inc. in the amount of $11.9 million.
3) CAPITAL ASSETS
In accordance with its stated accounting policies, PrimeWest has performed a
ceiling test using commodity prices as at the measurement date of September 30,
2001. Using September 30, 2001 commodity prices of AECO $2.11 per Mcf for
natural gas and WTI US$23.40 per barrel of oil would result in a ceiling test
deficiency of $254 million. However, using average prices for the month of
September would result in a slight cushion and using more recent prices on
October 31, 2001 of AECO $4.45 per Mcf for natural gas and WTI US$21.77 per
barrel for oil would result in a significant cushion.
Accordingly, as the deficiency is considered temporary in nature, no write down
has been recorded.
PRIMEWEST ENERGY TRUST 16 3rd QUARTER REPORT
4) LONG-TERM DEBT
During the first quarter of 2001 and in conjunction with the acquisition of
Cypress Energy Inc., PrimeWest entered into a revised loan agreement with its
lender. The revised agreement increased PrimeWest's total facility to $400
million as follows:
Revolving term loan $ 325,000
Operating loan 25,000
Bridge loan (cancelled July 10, 2001) 50,000
- --------------------------------------------------------------------
$ 400,000
- --------------------------------------------------------------------
As of October 10, 2001, $300 million was drawn under the facility. The term/
operating loan 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 least one other time during the
year. 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. During the revolving phase, the facility has no specific terms of
repayment. If the lender converts the loan to a non-revolving facility, the
amounts outstanding under the facility become repayable over a three-year
period, on a unit of production basis.
The bridge facility was cancelled at the request of the Company on July 10, 2001
reducing the total facility to $350 million.
Advances under the revolving and operating loan facility are made in the form of
either 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 cashflow. In the case of prime
rate loans, interest is generally charged at the bank's prime rate. Advances
under the Bridge facility are only in the form of prime rate loans. PrimeWest
also has letters of credit outstanding in the amount of $2.1 million.
Collateral for the facilities is provided for by a floating charge debenture
covering all existing and after acquired property in the principal amount of
$500 million and an unconditional full liability guarantee from each borrower
under the facility.
5) 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, 2000 50,982,093 $ 428,000
Issued to acquire Cypress Energy Inc. 50,237,417 489,815
Issued pursuant to equity offering 9,890,000 94,900
Issue costs - (5,173)
Issued pursuant to Long Term Incentive Plan 516,861 4,737
Issued pursuant to Dividend Reinvestment Plan 1,168,765 10,514
Issued for payment for management fees 139,527 1,246
Issued on exchange of exchangeable shares 2,323,710 19,620
- ---------------------------------------------------------------- --------------
Balance at September 30, 2001 115,258,373 $ 1,043,659
================================================================ ==============
The weighted average number of trust units and exchangeable shares outstanding
for the quarter was 120,114,892. For purposes of calculating fully diluted net
income and cashflow, 847,956 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 ENERGY TRUST 17 3rd QUARTER REPORT
PRIMEWEST OIL & GAS CORP.
In connection with the Cypress acquisition, PrimeWest Oil & Gas Corp. 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 October 15, 2001, was 1.18648:1.
Exchangeable shares # OF SHARES AMOUNT
- ------------------------------------------------------------ --------------
Balance at December 31, 2000 -- --
Issued to acquire Cypress Energy Inc. 5,154,225 $ 50,254
Exchanged for trust units (1,780,193) (17,357)
- ------------------------------------------------------------ --------------
Balance at September 30, 2001 3,374,032 $ 32,897
============================================================ ==============
PRIMEWEST RESOURCES LTD.
In connection with the acquisition of Venator Petroleum Company Limited,
PrimeWest Resources Ltd. 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 paid, divided by the
closing Trust unit price on the distribution payment date. The exchange ratio at
October 15, 2001 was 1.29834:1.
Exchangeable shares # OF SHARES AMOUNT
- ------------------------------------------------------------ --------------
Balance at December 31, 2000 1,112,370 $ 7,342
Exchanged for trust units (342,881) (2,263)
- ------------------------------------------------------------ --------------
Balance at September 30, 2001 769,489 $ 5,079
============================================================ ==============
6) 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 six 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.
PRIMEWEST ENERGY TRUST 18 3rd QUARTER REPORT
UARS ISSUED AND CURRENT RETURN TOTAL TRUST UNIT
AS AT SEPTEMBER 30, 2001 OUTSTANDING UARS VESTED PER UAR LIABILITY DILUTION
- --------------------------------------------- --------------- --------------- ------------- ------------
1996 grants 526,875 526,875 $ 2.90 $ 1,522 235,580
1997 grants 343,604 343,604 2.47 849 131,475
1998 grants 553,475 412,281 5.18 2,136 330,673
1999 grants 604,832 254,664 3.36 856 123,403
2000 grants 984,626 230,482 0.75 173 26,825
2001 grants 1,387,601 19,598 - - -
- --------------------------------------------- --------------- --------------- ------------- ------------
4,401,013 1,787,504 $ 3.10 $ 5,536 847,956
============================================= =============== =============== ============= ============
Cumulative to Sept. 30, 2001, 1,509,064 UARs have been exercised resulting in
the issuance of 759,031 trust units from treasury.
PRIMEWEST ENERGY TRUST 19 3rd QUARTER REPORT
TRADING PERFORMANCE
FOR THE QUARTER ENDED SEP. 30/01 JUN. 30/01 MAR. 31/01 DEC. 31/00 SEPT. 30/00
- -------------------------------------------------------------- ----------- ----------- ---------- -----------
TRUST UNIT PRICES (DOLLARS PER TRUST UNIT)
High 8.77 10.54 9.90 9.30 8.50
Low 6.42 8.45 8.72 8.45 8.35
Close 6.46 8.85 9.00 8.95 8.40
Volume traded (MILLIONS OF UNITS) 37.10 60.42 21.64 7.73 9.58
Number of trust units outstanding 115.3 113.6 100.6 51.0 50.6
(MILLIONS OF UNITS)
Including exchangeable shares 120.1 119.1 108.5 52.2 52.0
(ISSUED IN RESPECT OF VENATOR AND
CYPRESS ACQUISITIONS)
Distribution paid per trust unit $0.61 $0.66 $0.60 $0.60 $0.48
========== =========== =========== ========== ===========
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.
[PRIMEWEST LOGI]
FOR FURTHER INFORMATION PLEASE CONTACT
INVESTOR RELATIONS AND COMMUNICATIONS
TOLL-FREE AT 1-877-968-7878
4700, 150-6 AVENUE SW CALGARY, ALBERTA T2P 3Y7
PHONE 403-234-6600 FAX 403-266-2825 TOLL-FREE 1-877-968-7878