Parallel Energy Trust (TSX:PLT.UN)(TSX:PLT.DB) ("Parallel" or the "Trust") today announced its capital expenditure plans, and production and cash flow guidance for 2014.Based on the midpoint of the Trust's 2014 production guidance, Parallel will have increased the gross production of its asset base by more than 25 per cent since the Trust's initial public offering and increased Parallel's net production by more than 50 per cent on a production per unit basis.
Cash Flow Guidance
Based on the above production guidance and other assumptions described below, Parallel estimates cash flow of approximately $46 million for 2014. This guidance is based on estimated commodity prices for 2014 of US$95.00 per bbl of WTI, US$4.00 per mcf of NYMEX natural gas and an average natural gas liquids price of 45 per cent of the WTI price. This cash flow guidance also assumes an estimated exchange rate of $1.04 Canadian dollar to U.S. dollar. Parallel's commodity mix and all other costs are expected to be consistent with the Trust's 2013 results.
Payout Ratios
Based on the Trust's 2014 capital plans, its production and cash flow guidance, and estimated commodity prices, Parallel's basic payout ratio (calculated as declared distributions of $0.05 per unit per month divided by funds from operations) is expected to be approximately 70 per cent in 2014. The Trust's total payout ratio (calculated as declared distributions of $0.05 per unit per month plus capital expenditures divided by funds from operations) is expected to be less than 100 per cent in 2014. As a result, Parallel continues to view its current distribution as being sustainable.
Parallel also has a distribution reinvestment program and Premium DRIP(TM) program in place. The Trust expects that the average annual participation rate in its distribution reinvestment programs will be approximately 15 per cent in 2014.
Bank Debt
As previously announced, Parallel's existing bank facility of US$190 million was reconfirmed by the Trust's lenders during the semi-annual review in October 2013. The facility was drawn at approximately US$157 million as of October 31, 2013, which results in US$33 million of availability under the bank facility. Based on the Trust's 2014 capital plans, and production and cash flow guidance, Parallel estimates it will continue to reduce its bank debt in 2014 through the use of excess cash flow and moderate participation in the distribution reinvestment programs.
The Trust currently has $63 million of convertible debentures due on June 30, 2017 and the Trust recognizes that it will require the financial flexibility to refinance these debentures at maturity. To provide this financial flexibility, the Trust's long term debt reduction goal is to have sufficient availability under its bank facility to pay off the convertible debentures prior to the maturity date. Therefore, given that Parallel has over three and a half years to meet its debt reduction goal and that the Trust has a unique asset base (which is comprised of very low decline fields in the 8 to 10 per cent range and capital efficiencies of approximately $20,000 per flowing boe/day) the Trust believes that it has a number of alternatives available to meet its goal.
President's Message
"In 2013 we restructured Parallel from the top-down and introduced a new corporate strategy designed to improve our competitive position as a distribution-paying income trust. This strategy initially included three high-level goals. Our first goal was to provide our investors with a sustainable monthly distribution that, when combined with our capital expenditure program, would be fully funded within our available cash flow. Our second goal was to improve our operations and stabilize our full year average daily production levels above 7,000 barrels per day. Our third goal was to reduce our current level of bank debt and improve our financial flexibility," explains Rick Alexander, President and CEO of Parallel. "Throughout 2013 we have made significant progress on all three of these goals and I am pleased to say that we are now seeing the positive results of our corporate strategy. After reviewing our progress in 2013 and looking at our long term goals, Parallel's Board and senior management continue to endorse this strategy."
