Whiting USA Trust II (NYSE: WHZ) announced the second Trust distribution in 2014, which relates to net profits generated during the first quarterly payment period of 2014.
Unitholders of record on May 20, 2014 will receive a distribution of $0.670762 per unit, which is payable on or before May 30, 2014.
Volumes, average sales prices and net profits for the quarterly payment period were:
| Sales volumes: | |||||
| Oil (Bbl)(1) | 297,248 | ||||
| Natural gas (Mcf) | 528,361 | ||||
| Total (BOE) | 385,308 | ||||
| Average sales prices: | |||||
| Oil (per Bbl)(1) | $ | 86.77 | |||
| Natural gas (per Mcf)(2) | $ | 6.16 | |||
Gross proceeds: | |||||
| Oil sales(1) | $ | 25,792,026 | |||
| Natural gas sales | 3,254,627 | ||||
| Total gross proceeds | $ | 29,046,653 | |||
| Costs: | |||||
| Lease operating expenses(3) | $ | 10,950,361 | |||
| Production taxes | 1,528,483 | ||||
| Development costs | 2,573,164 | ||||
| Cash settlement (gains) losses on commodity derivatives(4) | - | ||||
| Total costs | $ | 15,052,008 | |||
Net profits | $ | 13,994,645 | |||
| Percentage allocable to Trust’s Net Profits Interest | 90 | % | |||
Total cash available for the Trust | $ | 12,595,181 | |||
| Provision for estimated Trust expenses | (250,000 | ) | |||
| Montana state income taxes withheld | (3,157 | ) | |||
| Net cash proceeds available for distribution | $ | 12,342,024 | |||
Trust units outstanding | 18,400,000 | ||||
| Cash distribution per Trust unit | $ | 0.670762 | |||
| (1) | Oil includes natural gas liquids. | |
| (2) | The average sales price of natural gas for the gas production months within the distribution period exceeded the average NYMEX gas prices for those same months within the period due to the “liquids rich” content of a portion of the natural gas volumes produced by the underlying properties. | |
| (3) | The Trust’s underlying properties experienced an increase in lease operating expenses on a per BOE basis during the first quarterly payment period of 2014 due to i) production declines occurring at a faster rate than corresponding decreases in fixed and semi-variable costs attributable to the underlying properties, and ii) the timing of invoice payments on non-operated properties. | |
| (4) | There were no realized gains or losses on hedge settlements during the first quarterly payment period of 2014. All costless collar hedge contracts terminate as of December 31, 2014. Consequently, for all distributions after the February 2015 distribution, there will be no further cash settlement gains or losses on commodity hedges, and the Trust will have increased exposure to oil and natural gas price volatility. | |
The Trust’s net profits interest represents the right to receive 90% of the net proceeds from Whiting Petroleum Corporation’s interests in certain existing oil and natural gas properties located primarily in the Rocky Mountains, Permian Basin, Gulf Coast and Mid-Continent regions of the United States.
The net profits interest will terminate on the later to occur of (1) December 31, 2021, or (2) the time when 11.79 MMBOE (which amount is equivalent to 10.61 MMBOE attributable to the net profits interest) have been produced from the underlying properties and sold, and the Trust will soon thereafter wind up its affairs and terminate, after which it will pay no further distributions. As described in the Trust’s public filings, since the assets of the Trust are depleting assets, a portion of each cash distribution paid on the Trust units should be considered by investors as a return of capital, with the remainder being considered as a return on investment. Consequently, the market price of the Trust units will decline to zero shortly after the net profits interest termination date, which is currently estimated to be December 31, 2021.
As of March 31, 2014, on a cumulative accrual basis, 3.55 MMBOE (33%) of the Trust’s total 10.61 MMBOE have been produced and sold. Based on the Trust’s reserve report for the underlying properties as of December 31, 2013, the 11.79 MMBOE of reserves (10.61 MMBOE to the 90% net profits interest) are projected to be produced from the underlying properties prior to December 31, 2021, and the net profits interest would therefore terminate on December 31, 2021. Additionally, the year-end reserve report reflects an expected annualized decline rate of approximately 8.4% between 2014 and 2021. However, cash distributions to unitholders may decline at a faster rate than the rate of production due to fixed and semi-variable costs attributable to the underlying properties, or if expected future development is delayed, reduced or cancelled.
This press release contains forward-looking statements, including all statements made in this press release other than statements of historical fact. No assurances can be given that such statements will prove to be correct. The announced distributable amount is based, in part, on the amount of cash received or expected to be received by the Trust from Whiting Petroleum Corporation pursuant to the net profits interest with respect to the relevant quarterly period. Any differences in actual cash receipts by the Trust could affect this distributable amount. Other important factors that could cause actual results to differ materially include expenses of the Trust, fluctuations in oil and natural gas prices, uncertainty of estimates of oil and natural gas reserves and production, risks inherent in the operation, production and development of oil and gas properties, and future production and development costs. Statements made in this press release are qualified by the cautionary statements made in this press release. The Trustee does not intend, and assumes no obligation, to update any of the statements included in this press release.
Contacts:
The Bank of New York Mellon Trust
Company, N.A., as Trustee
Mary Jo Davis, 512-236-6545
http://WhitingWHZ.investorhq.businesswire.com/
