PrimeWest Energy Trust announces increased distribution and closing of Calpine
acquisition and bought deal financing
CALGARY, ALBERTA--(CCNMatthews - Sep. 02, 2004) - PrimeWest Energy Trust
(TSX:PWI.UN) (TSX:PWX) (NYSE:PWI) (PrimeWest) today announces the concurrent
closing of an acquisition of Calpine assets and Calpine Natural Gas Trust units,
and the previously announced equity financing, composed of units and convertible
unsecured subordinated debentures. With the successful closing of this
acquisition and financing, PrimeWest is pleased to declare that the distribution
payable October 15th, 2004 will increase by $0.025 per trust unit to $0.30
Canadian per trust unit payable to unitholders of record on September 22nd,
2004. The ex-distribution date will be September 20th, 2004. Using a Canadian
dollar to U.S. dollar exchange ratio of 1.32, this distribution amount will be
approximately U.S.$0.227 per unit. The actual U.S. dollar equivalent
distribution will be based upon the U.S./Canadian exchange rate applied on the
payment date net of applicable Canadian withholding taxes.
The acquisition agreement with Calpine includes the purchase of all of the
petroleum and natural gas assets owned by Calpine Energy Holdings Limited and
Calpine Canada Natural Gas Partnership, including a 25% interest in Calpine
Natural Gas Trust, for total consideration of $806 million. PrimeWest believes
this transaction adds high quality, long life assets, with significant
development potential to PrimeWest, at a price that PrimeWest believes will
generate an attractive return for investors. Consistent with its hedging policy
of protecting acquisition economics, PrimeWest has hedged a portion of the
acquired natural gas production, with costless collars having a floor price of
$6.33 per thousand cubic feet (mcf) and ceiling prices ranging from $7.49 to
$12.13 per mcf over terms ending as late as March 31, 2006. A more detailed
description of the hedge profile can be found at the end of this release.
The previously announced equity financing of 10,300,000 Trust Units at $24.40
per trust unit was adjusted as a result of the underwriters exercising their
option to acquire an additional 2,000,000 trust units at a price of $24.40 per
trust unit, increasing the gross proceeds of this unit offering from $251.3
million to $300.1 million. In addition, $150 million of five-year, and $100
million of seven-year convertible unsecured subordinated debentures were also
sold through the underwriting syndicate. The five-year debentures bear a coupon
rate of 7.5 percent per annum, payable semi-annually, and are convertible at
$26.50 per trust unit. The seven-year debentures bear a coupon rate of 7.75
percent per annum, payable semi-annually, and are also convertible at $26.50 per
trust unit. The total net proceeds from the offering of units and convertible
debentures were approximately $525 million and were used to pay a portion of the
purchase price for the assets and trust units acquired from Calpine. The
remainder of the cost of the acquisition was financed through the deployment of
senior debt facilities.
PrimeWest's senior debt facilities have been increased to $625 million from the
previous level of $400 million. At the time of closing this transaction, this
facility is expected to be drawn to approximately $480 million, leaving adequate
capacity for planned capital expenditures. As part of its asset divestment
program, PrimeWest expects to receive cash proceeds of up to $100 million to add
to its capacity to fund future investment.
With the acquisition of the Calpine assets complete, PrimeWest expects its full
year 2004 production to be approximately 35,500 barrels of oil equivalent (BOE)
per day (with natural gas volumes being converted to BOE at a conversion factor
of 6 mcf/BOE) representing a 5,000 BOE per day increase from our previous
outlook. Operating expenses are anticipated to be $6.65 per BOE versus our
previous estimate of $6.75 per BOE for the full year. Full year capital
expenditures are expected to increase by $35 million to $125 million for
development opportunities for 2004.
The table below details the natural gas costless collar hedge transactions put
in place using a standard conversion of 1.055 gigajoules (GJ) per thousand cubic
feet (mcf). Based on the actual heat content premium of the natural gas being
acquired, the floor price will be $6.82 per mcf in each transaction, and the
ceiling price will range from $8.07 per mcf to $13.07 per mcf.
/T/
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Volume AECO Price
Period (mmcf/d) (Cdn$/mcf)
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Oct 2004 - Dec 2004 10 6.33/8.20
Oct 2004 - Dec 2004 10 6.33/7.91
Oct 2004 - Dec 2004 10 6.33/7.68
Oct 2004 - Dec 2004 10 6.33/8.19
Oct 2004 - Dec 2004 10 6.33/8.65
Jan 2005 - Mar 2005 10 6.33/11.18
Jan 2005 - Mar 2005 10 6.33/10.76
Jan 2005 - Mar 2005 10 6.33/10.55
Jan 2005 - Mar 2005 10 6.33/12.13
Apr 2005 - Jun 2005 10 6.33/7.75
Apr 2005 - Jun 2005 10 6.33/7.63
Apr 2005 - Jun 2005 10 6.33/7.49
Apr 2005 - Jun 2005 10 6.33/7.84
Apr 2005 - Jun 2005 5 6.33/7.85
Jul 2005 - Sep 2005 10 6.33/7.81
Jul 2005 - Sep 2005 10 6.33/7.66
Jul 2005 - Sep 2005 10 6.33/7.53
Jul 2005 - Sep 2005 10 6.33/7.86
Jul 2005 - Sep 2005 2.4 6.33/7.88
Oct 2005 - Dec 2005 10 6.33/8.97
Oct 2005 - Dec 2005 10 6.33/8.71
Oct 2005 - Dec 2005 10 6.33/8.60
Oct 2005 - Dec 2005 10 6.33/8.96
Jan 2006 - Mar 2006 10 6.33/10.55
Jan 2006 - Mar 2006 10 6.33/10.22
Jan 2006 - Mar 2006 10 6.33/9.96
Jan 2006 - Mar 2006 5 6.33/10.42
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/T/
PrimeWest is a Calgary-based conventional oil and gas royalty trust that
actively acquires, develops, produces, and sells natural gas, crude oil, and
natural gas liquids for the generation of monthly cash distributions to
unitholders. Trust units of PrimeWest are traded on the Toronto Stock Exchange
(TSX) under the symbol "PWI.UN" and on the New York Stock Exchange under the
symbol "PWI". Exchangeable shares of PrimeWest Energy Inc. are listed on the TSX
under the symbol "PWX". Upon closing, the five-year convertible debentures will
trade on the TSX under the symbol "PWI.DB.A" and the seven-year convertible
debentures will trade under the symbol "PWI.DB.B".
In the interest of providing PrimeWest unitholders with information regarding
these acquisitions, this news release may contain forward-looking information
that represents management's view of PrimeWest's internal projections,
expectations, and beliefs concerning, among other things, future operating
results and various components thereto including but not limited to production
volumes, natural gas, crude oil and NGL commodity prices, operating G & A and
capital costs, and PrimeWest's future economic performance. The projections,
estimates and beliefs contained in such forward-looking statements necessarily
involve known and unknown risks and uncertainties which may cause PrimeWest's
actual performance and financial results in future periods to differ materially
from any estimates or projections of future performance or results implied by
such forward-looking statements. These risks and uncertainties include, among
other things, such risks and uncertainties described above and in PrimeWest's
filings with the Canadian and U.S. securities authorities. Accordingly,
PrimeWest unitholders and potential investors are cautioned that events or
circumstances could cause actual results to differ materially from those
predicted.
The use of barrels of oil equivalent (BOE) may be misleading, particularly if
used in isolation. A BOE conversion ratio of 6 mcf/BOE is based on an energy
equivalence conversion method primarily applicable at the burner tip and does
not represent a value equivalency at the wellhead.
Learn more about PrimeWest on our Web site, www.primewestenergy.com.
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