Paramount Energy has also announced that its distribution to be paid on June 15, 2009 in respect of income obtained by Paramount Energy for the month of May 2009, for unit holders of record on May 29, 2009, will be $0.05 per trust unit. The ex-distribution date is May 27, 2009. The May distribution brings cumulative distributions paid since the inception of the Trust to $13.414 per trust unit.
First Quarter Summary
— Production measured 167.1 MMcfe/d as compared with 183.8 MMcfe/d in the first quarter of 2008. The decrease is because of non-core asset dispositions, cold-weather related downtime in January, 2009 and production outages required for maintenance programs in Northeast Alberta. Paramount Energy also withheld production from new wells until April 2009 to benefit from the royalty reduction on new production announced by the provincial government in March 2009.
— Paramount Energy’s realized natural gas price decreased by 11% for the three months ended March 31, 2009 to $6.46 per Mcfe from $7.29 per Mcfe in 2008, as compared with a 21% decrease in AECO monthly Index prices from quarter to quarter. The decrease in realized gas prices was mitigated by the Trust’s commodity price risk management strategy, which contributed $14.4 million in realized hedging gains for the period.
— Paramount Energy recorded net earnings of $78.6 million for the first quarter due primarily to an unrealized gain on financial instruments of $95.1 million, as a result of the main decrease in AECO and NYMEX forward prices from December 31, 2008 to March 31, 2009. Paramount Energy’s financial instrument asset at March 31, 2009 totaled $153.8 million, a reflection of the substantial value inherent in the Paramount Energy’s hedging portfolio. As of May 5, 2009, Paramount Energy has an average of 107,380 GJ/d hedged from April 2009 to March 2011 at an average of $7.44 per GJ. The current forward natural gas price at AECO for the same period is $5.05 per GJ, resulting in a current mark-to-market value of $189.7 million.
— Funds flow decreased to $41.2 million ($0.36 per trust unit) for the three months ended March 31, 2009 from $56.2 million ($0.51 per trust unit) in the 2008 period, primarily due to lower realized prices and production levels, partly offset by decreased royalty and interest expenses.
– Distributions payable for the first quarter of 2009 totaled $0.19 per trust unit, comprised of $0.07 per trust unit paid on February 17, 2009 and March 16, 2009 and $0.05 per trust unit on April 15, 2009 representing a payout ratio of 52.2% of funds flow.
— Paramount Energy successfully concluded the implementation of a $40 million winter capital program during the first quarter of 2009 which incorporated the drilling of 38 wells (31.4 net) and over 160 recompletions and work over operations, primarily focused in the Trust’s three core areas in the Northern district. Production additions from the winter program totaled approximately 16 MMcfe/d, the majority of which were on stream as of April 1, 2009. Present production is in excess of 175 MMcfe/d.
— Paramount Energy has budgeted an additional $25 million for capital expenditures over the final three quarters of 2009, targeting land purchases and other strategic expenditures including evaluation of the Paramount Energy’s exploration acreage in west central Alberta.
— On March 31, 2009, Paramount Energy announced an offer to acquire all of the issued and outstanding common shares of Profound Energy Inc. (Profound) by way of a take-over bid, for a joint of cash and Paramount Energy trust units (the Profound offer). The profound offer values the profound shares at $1.34 per common share, for a total purchase price including assumed debt of about $112.9 million prior to closing costs. The Profound properties are located in a year-round access area within the Trust’s New Venture area in west central Alberta. The acquisition is another step in the strategic expansion of Paramount Energy’s asset base, complementing the Trust’s existing shallow gas prospect inventory with a significant number of higher impact, deep basin style resource play opportunities. The Profound assets are currently producing about 18 MMcfe/d weighted 75% to natural gas, with proved plus probable reserves of 74 Bcfe at December 31, 2008 based on Profound’s year-end external reserve report.
— Paramount Energy has also bought 9,224,310 special warrants of Profound on a private placement basis, at a price of $0.75 per special warrant for total subscription proceeds of about $6.9 million. The special warrants are convertible into common shares of Profound on a one-for-one basis. Conversion is automatic on certain events and otherwise at the option of PET. The private placement was closed on April 14, 2009.
— In order to facilitate the bank approval process for the Profound transaction the Trust has entered into an interim credit facility agreement, which includes only the lending value of Paramount Energy’s base assets at December 31, 2008, adjusted for production for the first three months of 2009, but apart from any reserve additions attributed to the Trust’s winter capital expenditure program. This lending value is currently $350 million. Should Paramount Energy be successful in acquiring all the outstanding common shares of Profound, the Trust’s lenders will then reassess the lending value of all of Paramount Energy’s assets, including the Profound properties and the results of the Trust’s 2009 winter capital program. Should Paramount Energy be unsuccessful in its takeover offer for Profound the Trust’s lenders will complete their borrowing base predetermination incorporating the results of Paramount Energy’s 2009 winter capital programs. The initial expiry time for the profound offer is June 1, 2009.
