CALGARY, Aug. 2 /PRNewswire-FirstCall/ -- Canetic Resources Trust
("Canetic" or the "Trust" or "We") (CNE.UN-TSX; CNE-NYSE) is
pleased to announce its financial and operating results for the six
months ended June 30, 2006. We have also announced today that
Canetic has entered into a definitive agreement to acquire natural
gas and oil assets from a private company as well as an equity and
convertible debenture financing. Highlights of the second quarter
include: - Production for the first half of the year averaged
71,392 boe/d, excluding StarPoint volumes for the first four days
of January prior to the date of the merger. Production for the
second quarter averaged 70,061 boe/d. Approximately 1,500 boe/d was
temporarily lost during the quarter due to weather conditions,
unplanned turnarounds, break- up and a short term compressor
failure at Golden Spike. - Funds flow from operations for the
second quarter increased 130 percent to $185.1 million as compared
to $80.5 million for the same period in 2005. Funds flow from
operations increased 135 percent to $379.8 million for the six
months ended June 30, 2006, up from $161.3 million in the same
period in 2005. - Monthly distributions were maintained at $0.23
per unit resulting in a payout ratio of 72 percent for the first
six months of 2006 and 75 percent for the second quarter. This
represents 45 consecutive months of sustained or increased
distributions for former Acclaim unitholders and 18 consecutive
months for former StarPoint unitholders. - During the quarter,
Canetic was active in the exploitation of its assets, incurring
$85.8 million in development expenditures while participating in
the drilling of 68 gross wells with a 96 percent success rate. The
program resulted in 34 gross (10.7 net) gas wells, 29 gross (14.8
net) oil wells, 2 gross (2.0 net) service wells and 3 gross (1.0
net) dry and abandoned wells. The merger of Acclaim and StarPoint
has been accounted for as a purchase by Acclaim and accordingly,
the comparative figures are those of Acclaim for the same period of
2005. Additionally, as the merger occurred January 5, 2006, all
financial and operating results of the StarPoint properties have
been excluded for the first four days of the quarter. Canetic will
host a conference call and question and answer session at 3:00 p.m.
MST (5:00 p.m. EST) on Wednesday, August 2, 2006. The conference
call will be chaired by Mr. Paul Charron, President and CEO. The
call will also be available via webcast from Canetic Resources
Trust's website (http://www.canetictrust.com/) and from the VCall
website (http://www.vcall.com/). Canetic Resources Second Quarter
Results Conference Call: Toll-Free across North America:
1-877-888-3855 and within the Toronto area: 416-695-5261. A
recorded playback of the call will also be made available until
August 31, 2006: Toll-free across North America: 1-888-509-0081 and
within the Toronto area: 416-695-5275 (627992 verbal passcode).
2006 HIGHLIGHTS Three Months Ended Six Months Ended June 30 June 30
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($millions except per unit amounts) 2006 2005 change 2006(1) 2005
change
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FINANCIAL Gross revenue 341.2 177.5 92% 691.6 348.7 98% Funds flow
from operations 185.1 80.5 130% 379.8 161.3 135% Per unit -
basic(2) 0.92 0.92 - 1.89 1.85 2% Per unit - diluted(2) 0.89 0.91
-2% 1.84 1.83 1% Net earnings 82.9 27.5 201% 142.1 10.6 1,241% Per
unit - basic(2) 0.41 0.31 32% 0.71 0.12 492% Per unit - diluted(2)
0.40 0.31 29% 0.69 0.12 475% Distributions 139.2 51.2 172% 272.1
101.9 167% Per unit(2) 0.6900 .5850 18% 1.3800 1.170 18%
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Capital expenditures Development expenditures 85.8 35.8 140% 152.8
61.9 147% Net capital expenditures 104.6 42.3 147% 171.7 67.1 156%
Total assets 4,899.6 1,504.3 226% 4,899.6 1,504.3 226% Long-term
debt 893.8 329.1 172% 893.8 329.1 172% Net debt (excluding
financial derivatives) 926.6 306.2 203% 926.6 306.2 203%
Unitholders' equity 3,247.5 710.3 357% 3,247.5 710.3 357%
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Weighted average trust units outstanding (000s)(2) 201,998 87,572
131% 201,370 87,148 131% Trust units outstanding at period end
(000s)(2) 202,535 87,699 131% 202,535 87,699 131%
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OPERATING Production Natural gas (mmcf/d) 166.0 100.6 65% 171.0
102.3 67% Crude oil (bbl/d) 37,348 17,947 108% 37,486 18,492 103%
Natural gas liquids (bbl/d) 5,043 5,302 -5% 5,401 5,499 -2% Barrel
of oil equivalent (boe/d) @ 6:1 70,061 40,017 75% 71,392 41,046 74%
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Average prices Natural gas ($/mcf) 5.97 7.76 -23% 7.49 7.39 1%
Natural gas ($/mcf) (including financial instruments) 6.80 7.62
-11% 7.99 7.34 9% Crude oil ($/bbl) 67.29 54.53 23% 60.82 52.77 15%
Crude oil ($/bbl) (including financial instruments) 61.97 45.26 37%
56.53 44.81 26% Natural gas liquids ($/bbl) 48.90 35.99 36% 47.82
35.44 35%
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Drilling activity Natural gas 34 6 - 95 21 - Oil 29 13 - 67 17 -
Standing/service 2 - - 4 - - Dry and abandoned 3 1 - 5 1 -
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Total gross wells 68 20 - 171 39 -
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Total net wells 28.5 13.4 - 81.9 18.6 -
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Success rate (%) 96% 95% - 97% 97% -
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(1) Includes the financial and operating results of StarPoint
Energy Trust from the date of the merger, January 5, 2006. (2) All
units of Acclaim up to the merger on January 5, 2006 have been
restated using the exchange ratio of 0.8333 of a Canetic trust unit
for each Acclaim trust unit. PRESIDENT'S MESSAGE Canetic provided
solid operational and financial results for the second consecutive
quarter since combining Acclaim and Starpoint to form Canetic, on
January 5, 2006. During the quarter we reported 70,061 boe/d of
production and $185.1 million of funds flow from operations.
Revenue and funds flow from operations were impacted by increasing
crude oil prices, attributable to increased political concerns over
the security of global oil supplies, while natural gas prices
decreased as a result of high natural gas inventories entering the
summer injection season. Canetic continued to be active
operationally, participating in the drilling of 68 wells with a 96
percent success rate. We also completed over 300 optimization and
facility projects. We also announced today, in a separate news
release, a strategic gas weighted acquisition in northeastern
British Columbia and central Alberta. These are high quality assets
with significant development potential, characterized by large gas
in place pools. FINANCIAL RESULTS The merger of Acclaim and
StarPoint has been accounted for as a purchase of StarPoint by
Acclaim. Accordingly, the financial and operating results of
StarPoint have been included from the date of acquisition, January
5, 2006. The comparative results for 2005 are those of Acclaim
only. All disclosures of units and per unit amounts of Acclaim up
to the merger on January 5, 2006 have been restated using the
exchange ratio of 0.8333 of a Canetic unit for each Acclaim unit.
For the three months ended June 30, 2006, Canetic revenue increased
92 percent, funds flow from operations increased 130 percent and
production levels were up 75 percent compared to the same period in
2005 due to the merger of Acclaim and StarPoint and continued
strong commodity prices. Canetic's gross revenue for the second
quarter of 2006 totalled $341.2 million, up 92 percent from $177.5
million reported by Acclaim in the second quarter of 2005. Gross
revenue of $691.6 million for the first six months of 2006 was
almost double that reported for the same period in 2005, directly
related to the production associated with the Starpoint merger and
strong commodity prices. Funds flow from operations increased to
$185.1 million or $0.92 per basic unit for the second quarter of
2006, an increase of 130 percent from $80.5 million or $0.92 per
basic unit, for the same period in 2005. Year to date, funds flow
from operations increased 135 percent to $379.8 million, compared
to $161.3 million in 2005. Our 2006 year to date funds flow from
operations includes a loss on realized financial derivatives of
$13.7 million as compared to a loss of $27.6 million for the same
period in 2005. The increase in funds flow from operations is due
to higher production levels associated with the StarPoint merger
and higher commodity prices. Net earnings for the three months
ended June 30, 2006 totalled $82.9 million or $0.41 per basic unit
compared to $27.5 million or $0.31 per basic unit for the same
period in 2005. The variation in net earnings is primarily a result
of depletion rates, the provision for future taxes and financial
derivative gains and losses. The price of West Texas Intermediate
(WTI) crude averaged US$70.70 per barrel during the second quarter
of 2006, up 11 percent from the average price of US$63.53 per
barrel for the first quarter of 2006. The Trust received an average
crude oil price, before adjustments for financial instruments, of
$67.29 per barrel as compared to $54.53 per barrel for the
comparable period in 2005. Canetic's corporate average oil price
differential narrowed slightly in relation to the benchmark NYMEX
WTI futures contracts in the second quarter compared to the first
quarter of 2006. This narrowing is attributable to improvements in
heavy oil differentials, to which Canetic has exposure for a
portion of its crude oil production. The Trust's corporate average
price for natural gas, before adjustments for financial
instruments, for the second quarter of 2006 was $5.97 per thousand
cubic feet as compared to $7.76 per thousand cubic feet for the
same period in 2005. Our average natural gas price was $7.49/mcf
for the first six months of 2006 as compared to $7.39/mcf for the
same period in 2005. Capital spending on development activities for
the six months ended June 30, 2006 totalled $152.8 million, 147
percent greater than the $61.9 million incurred in the same period
in 2005. Our capital program has been very successful year to date
resulting in 95 gross (40.2 net) gas wells, 67 gross (37.1 net) oil
wells, 4 gross (2.1 net) service wells and 5 gross (2.5 net) wells
to be abandoned. This represents a 97 percent success rate. REVIEW
OF OPERATIONS During the quarter, Canetic participated in the
drilling of 68 gross (28.5 net) wells. Canetic operated 20 gross
(16.5 net) wells while its partners operated 48 gross (12.0 net)
wells. Canetic invested a total of $85.8 million of capital during
the second quarter including $40.2 million for drilling, $16.5
million for facilities and well site equipment, $23.5 million for
workovers, recompletions and optimization, $5.0 million for land
and $0.6 million for geological expenditures. Production for the
first half of the year averaged 71,392 boe/d. Production for the
quarter averaged 70,061 boe/d which was approximately 1,500 boe/d
less than expected. Production volumes in the Peace River, Drayton
Valley and Acheson areas were down by 500 boe/d in the quarter for
unplanned turnarounds. These volumes have all been recovered as the
turnarounds are now complete. Production was also impacted by a
major mechanical failure at the Golden Spike compression facility,
resulting in a loss of 500 boe/d for the quarter. The repairs were
completed during the quarter and the volumes have been recovered.
An additional 500 boe/d was temporarily lost during the quarter due
to spring break-up and poor weather conditions, primarily affecting
our Border Plains area. The majority of these volumes were
recovered by the end of the quarter with the remaining volumes
coming back on stream in July 2006. Current production is
approximately 72,500 boe/d with 2,000 boe/d behind pipe. Operating
costs increased slightly to $8.80 per boe in the second quarter of
2006 from those reported in the first quarter of 2006 of $8.49 per
boe. Operating costs in the second quarter are generally higher,
reflecting the annual payment of property taxes, plant turnarounds
and maintenance costs which are incurred in May and June. Unit
costs were also impacted by lower production volumes. Extensive
well maintenance and workover programs continue to be undertaken to
maximize production and optimize plant utilization. As we continue
to experience higher field service costs throughout our asset base,
considerable effort and focus is being given to operational
efficiencies which will control operating costs on a
unit-of-production basis. To date, Canetic has been successful in
maintaining control of our operating costs in a difficult operating
environment and will continue to focus on doing so. In the first
half of 2006, our total well count climbed to 51 gross (43.7 net)
operated wells and 120 gross (38.2 net) non-operated wells, for a
total of 171 gross (81.9 net) wells, resulting in 67 gross (37.1
net) oil wells, 95 gross (39.8 net) gas wells, 4 gross (2.1 net)
service wells and 5 gross (2.5 net) wells for abandonment. We were
97 percent successful in our first half drilling program.
Optimization continues to be a key part of our development program.
During the quarter, Canetic executed over 320 optimization and
facility events. The second quarter of 2006 was highlighted by
activity in the following areas: - In the Rocky area, Canetic
participated in the drilling of 11 gross (6.1 net) wells during the
second quarter, 7 of which were operated. Year to date, Canetic has
participated in 25 gross (13.9 net) wells in this area with a 96
percent success rate resulting in 3 gross (2.3 net) oil wells and
21 gross (10.7 net) gas wells. We plan to drill an additional 15 to
20 gas wells prior to year end. In the second quarter, Canetic
decided to invest $15 million at Willesden Green in the
construction of a 100 percent owned natural gas plant that will
have initial capacity of 20.0 mmcf/d and will be fully operational
in the first quarter of 2007. This facility will allow Canetic to
tie-in all of its behind pipe natural gas (currently estimated at
3-5 mmcf/d) and to pursue an aggressive gas drilling program in
Willesden Green during the last quarter of 2006 and throughout 2007
as we anticipate strengthening natural gas prices going into the
winter. - In the Southern area, Canetic drilled 12 gross (3.1 net)
wells. Year to date, we have drilled 19 gross (6.3 net) wells with
an 84 percent success rate and have plans to drill an additional 25
to 30 wells. Canetic has identified seventeen 100 percent working
interest oil locations to be drilled as part of the third quarter
drilling program at Rosemary, Alderson and Suffield West. Canetic
is deferring current opportunities related to our shallow gas
program in inventory in light of the short term weakness in natural
gas prices. - In the Border Plains area, which consists of the
Trust's heavy oil assets at Lloydminster and light oil assets at
Provost and Dodsland, Canetic drilled a total of 12 gross (6.4 net)
wells resulting in 9 gross (4.0 net) oil wells, 1 gross (0.4 net)
gas well and 2 (2.0 net) water disposal wells. Year to date we have
drilled 18 gross (10.4 net) wells with a 100 percent success rate.
Canetic has identified eight 100 percent working interest locations
to be drilled during the third quarter due to a recent narrowing of
heavy oil differentials. These wells will target the Sparky,
McLaren and Lloydminster formations. - Coalbed methane ("CBM")
projects continue to be an increasing capital component within
Canetic's portfolio of opportunities. During the second quarter,
Canetic participated in 14 gross (4.1 net) CBM wells, bringing our
year to date total to 39 gross (15.7 net) CBM wells with a 100
percent success rate. Four horizontal wells were drilled during the
quarter at our Corbett Creek Upper Mannville CBM prospect within
our South Central area, resulting in 4 gross (1.7 net) CBM wells.
Canetic currently has four joint ventures and 36,000 net acres
including a 100 percent working interest in 13,440 acres of
undeveloped land in this area. Recent drilling activity has
provided impressive results with wells coming onstream at over
1,000 mcf/d. Year to date, under these joint ventures, we have
participated in 7 gross (3.1 net) CBM wells and our outlook is to
drill an additional three to five wells for the remainder of 2006.
Consistent with our shallow gas program, Canetic is deferring its
100 percent locations until natural gas prices strengthen.
Subsequent to the end of the quarter, Canetic kicked off a 50 well
CBM program at Big Bend which is expected to be completed by year
end with sales volumes gradually coming onstream by the end of the
first quarter of 2007. - In the Williston Basin, Canetic
participated in the drilling of 8 gross (5.7 net) oil wells during
the quarter, operating 6 of the 8 wells drilled and targeting the
Alida, Frobisher and Midale formations in southeast Saskatchewan.
All 8 oil wells were tied in and on production prior to the quarter
end. Totals for the first half of 2006 were 36 gross (23.1 net) oil
wells with a 100 percent success rate. Our outlook is to drill an
additional 15 to 20 oil wells prior to year end. The program
continues to exceed expectations in terms of production, reserves
additions, cycle times from drilling to onstream and netbacks. - In
the South Central area, we plan to continue to be very active
through the balance of 2006, focused primarily on uphole
opportunities in the Acheson area. Canetic's ongoing optimization
activity during the quarter produced strong results in the Acheson
area. Our 24.0 mmcf/d facility is currently close to capacity and
we will continue to add behind pipe volume through optimization and
the drill bit as we endeavour to remain at capacity for the
foreseeable future. - In the Peace River Arch area, Canetic
participated in 3 gross (0.9 net) wells, all non-operated during
the quarter, bringing our year to date totals to 12 gross (4.8 net)
wells with a 100 percent success rate. We anticipate drilling
another 10 to 15 locations in this area prior to year end by
focusing our operated drilling at Pouce Coupe, LaGlace and Clarke
Lake. Our program to date has surpassed expectations in terms of
production and reserve additions and we are optimistic about the
upcoming program. Canetic and its joint venture partner rig
released 2 gross (0.9 net) gas wells at Blackhawk in the second
quarter, one of which was spudded in the first quarter. Both wells
targeted the Cadomin as the primary horizon with shallower
Cretaceous targets as the secondary horizons. Both wells were
successful, resulting in 1 Cadomin producer and 1 co-mingled
Cadomin/Fahler producer and have been tied in and are currently on
production. It is anticipated that an additional 2 to 4 wells will
be drilled in this area, prior to year end, with at least one of
these wells targeting the deeper Doig formation. The second quarter
is historically a challenging period for the industry as the
weather conditions make it more difficult to move rigs, complete
wells and tie-in production volumes, resulting in a reduction in
Canetic's activity compared to the first quarter of 2006. We also
note that, over the past two years, non-operated activity has been
particularly robust in the first quarter versus the remainder of
the year. On a positive note, we believe drilling equipment is
becoming more readily available as competitors reduce their gas
drilling activity. Canetic currently has three active rigs and will
take that number to four or five rigs by the middle of the third
quarter. We have plans to participate in the drilling of more than
200 wells, of which approximately 100 are operated, during the
remainder of 2006. Canetic will continue to focus the drilling
program on high production rate conventional oil and gas plays in
areas where infrastructure is readily accessible such as Acheson,
Suffield West, Alderson, Pouce Coupe and south east Saskatchewan.
Many of our shallow gas and CBM opportunities will be deferred
until infrastructure is added, as is the case at Willesden Green,
or the price of gas rebounds from recent lows, as is the case for
our southern Alberta shallow gas and Corbett Creek CBM project.
CASH DISTRIBUTIONS & TAXABILITY Canetic paid distributions of
$139.2 million during the quarter or $0.69 per Trust unit. This
represents a payout ratio of 75 percent. This represents 45
consecutive months of sustained or increased distributions to
former Acclaim unitholders and 18 consecutive months for former
Starpoint unitholders. Based on our current business and financial
model, and including the impact of the concurrently announced
acquisition, Canetic continues to estimate that for 2006 income tax
purposes, our distributions will be comprised of 5 to 15 percent
return of capital and 85 to 95 percent income for Canadian
investors. For US investors, we estimate that our distributions for
2006 will be zero to 10 percent return of capital and 90 to 100
percent qualifying dividend income as computed under US income tax
law. This tax estimate is based on information available to
Management as of August 2, 2006, and is subject to change based on
a variety of circumstances including, but not limited to, commodity
prices, acquisitions and tax and royalty rates. Actual taxable and
return of capital amounts will be provided in early 2007. COMMODITY
PRICE RISK MANAGEMENT The price of West Texas Intermediate (WTI)
crude averaged US$67.14 per barrel during the first half of 2006
which is a 30 percent increase over the comparable period in 2005
of US$51.53 per barrel. WTI averaged US$70.70 in the second quarter
of 2006 which was an 11 percent increase over the first quarter
price of US$63.53. Canetic's average crude oil price before
adjustments for hedging was $67.29 per barrel in the second quarter
of 2006 compared to $54.53 per barrel for the comparable period in
2005. WTI's substantial price increase in the second quarter is
attributable to increased political concerns over the security of
global crude oil supplies coupled with the continued strong
economic growth in China and southeast Asia. During the second
quarter, concerns over potential production losses from Iran
resulting from their uranium enrichment program were magnified
because of real production losses from increasing sectarian
violence in Iraq and Nigeria. Whether the risk to crude oil
production is real or perceived, the current balance between global
supply and demand is far tighter than the historical norm resulting
in volatile crude oil prices. The most commonly quoted benchmark
price for Canadian natural gas is the AECO Daily Index which
averaged $6.76 per thousand cubic feet during the first half of
2006, down 5 percent from the average price of $7.13 per thousand
cubic feet during the same period in 2005. The AECO Daily Index
averaged $6.00 per thousand cubic feet in the second quarter of
2006, down from $7.52 per thousand cubic feet in the first quarter.
North America has experienced two successive warm winters which has
resulted in natural gas inventories entering the summer injection
season at their highest level ever for this time of year. Forward
prices for next winter and beyond are still historically strong,
however, this summer's inventory overhang is impacting current spot
prices as unutilized storage capacity is becoming tight. Although
the current situation reminds us that natural gas prices are not
immune to being impacted by seasonal anomalies, the long term
outlook for natural gas is that it is a scarce commodity in North
America with potential for sustainable attractive prices. Canetic
has an active hedging program that is intended to reduce exposure
to price volatility through the use of financial derivatives.
Canetic will hedge the price exposure on up to 50% of its
production through the use of swaps, collars or other structures
that provide firm floor prices while maintaining some participation
to price increases. In addition to our hedging activities, Canetic
attempts to reduce exposure to price volatility by splitting our
physical natural gas sales evenly between daily index pricing and
monthly index pricing terms. OUTLOOK For the balance of 2006, we
will continue to actively exploit our asset base with plans to
participate in the drilling of over 200 wells in the second half of
2006. Although our production volumes in the second quarter were
slightly less than anticipated, given the level of activity planned
for the balance of 2006, we continue to expect our production to
average between 72,000 and 74,000 boe/d, excluding the impact of
the acquisition announced today. We are excited about the announced
acquisition. This transaction is consistent with our strategy of
acquiring high quality assets that improve our asset base. We
believe this is the ideal time to acquire natural gas assets to
provide Canetic with a more balanced production mix. This
acquisition is accretive to cash flow, reserves, production and net
asset value per unit and includes significant development
opportunities. We have begun a thorough review of the inventory of
opportunities as well as initiating the integration process. We
look forward to reporting our success on this acquisition and our
ongoing operational activities. Canetic's complete Financial
Statements and Notes and Management Discussion and Analysis are
available on Canetic's website at http://www.canetictrust.com/ or
on SEDAR at http://www.sedar.com/ or on EDGAR at
http://www.edgar.com/. ADVISORY Forward-Looking Statements Certain
information in this press release constitutes forward-looking
statements under applicable securities law. Any statements that are
contained in this press release that are not statements of
historical fact may be deemed to be forward-looking statements.
Forward-looking statements are often identified by terms such as
"may", "should", "anticipate", "expects" and similar expressions.
Forward-looking statements in this press release include, but are
not limited to, statements with respect to the production, cash
flows, payout ratios, distributions, operating costs, commodity
prices and operational activities. Forward-looking statements
necessarily involve known and unknown risks, including, without
limitation, risks associated with oil and gas exploration,
development, exploitation, production, marketing and
transportation; loss of markets; volatility of commodity prices;
currency fluctuations; variations in interest rates; geopolitical
instability; variability in consumer demand for oil, natural gas
and natural gas liquids; variability in heavy oil differentials;
variations in royalty rates; imprecision of reserve estimates;
environmental risks; competition; incorrect assessment of the value
of acquisitions; failure to realize the anticipated benefits of
acquisitions; failure to complete drilling, maintenance and
optimization programs due to bad weather, shortages of labour or
equipment or other factors beyond the control of the trust;
inability to access sufficient capital from internal and external
sources; changes in legislation, including but not limited to
income tax and environmental laws and regulatory matters; as a
consequence, actual results may differ materially from those
anticipated in the forward-looking statements. Readers are
cautioned that the foregoing list of factors is not exhaustive.
Additional information on these and other factors that could affect
Canetic's operations or financial results are included in Canetic's
reports on file with Canadian and U.S. securities regulatory
authorities and may be accessed through the SEDAR website
(http://www.sedar.com/), the EDGAR website (http://www.edgar.com/),
Canetic's website (http://www.canetictrust.com/) or by contacting
Canetic. Furthermore, the forward-looking statements contained in
this news release are made as of the date of this news release, and
Canetic does not undertake any obligation to update publicly or to
revise any of the included forward-looking statements, whether as a
result of new information, future events or otherwise, except as
expressly required by securities law. All references are to
Canadian dollars unless otherwise indicated. Where reserves or
production are stated on a barrel of oil equivalent (boe) basis,
natural gas volumes have been converted to a barrel of oil
equivalent (boe) at a ratio of 6,000 cubic feet of natural gas to
one barrel of oil. This conversion ratio is based upon an energy
equivalent conversion method primarily applicable at the burner tip
and does not represent value equivalence at the wellhead. Boe may
be misleading, particularly if used in isolation. Non-GAAP Measures
Management uses the term "funds flow from operations", which we
define as cash flow from operating activities before deducting
non-cash working capital and asset retirement costs incurred to
analyze operating performance and leverage. We use the term "net
debt", which we define as long-term debt and working capital, to
analyze liquidity and capital resources. We use the term "payout
ratio", which we define as cash distributions to unitholders
divided by funds flow from operations, to analyze financial and
operating performance. We use the terms "operating and cash
netbacks" to analyze margin and cash flow on each barrel of oil
equivalent ("boe") production. Operating and cash netbacks should
not be viewed as an alternative to cash from operating activities,
net earnings per trust unit or other measures of financial
performance calculated in accordance with GAAP. We use the term
"total capitalization", which we define as net debt including
convertible debentures plus the market value of issued equity, to
analyze leverage. Total capitalization is not intended to represent
the total funds from equity and debt received by the Trust. These
measures as presented do not have any standardized meaning
prescribed by Canadian GAAP and therefore, they may not be
comparable with calculations of similar measures for other
companies or trusts. Additional Information Additional information
regarding the Trust and its business operations, including the
Trust's annual information form for the period ended December 31,
2005, is available on the Trust's SEDAR company profile at
http://www.sedar.com/, the EDGAR company profile at
http://www.edgar.com/ or Canetic's website at
http://www.canetictrust.com/. CONSOLIDATED BALANCE SHEETS June 30,
December 31, unaudited ($000s) 2006 2005
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ASSETS Current Assets Accounts receivable $ 229,834 $ 140,907
Prepaid expenses and deposits 20,216 11,630
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250,050 152,537 Property, plant and equipment, net 3,712,253
1,317,917 Goodwill 936,869 87,954 Deferred financing charges, net
of amortization 454 689 Deferred costs - 12,000
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Total assets $ 4,899,626 $ 1,571,097
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LIABILITIES AND UNITHOLDERS' EQUITY Current Liabilities Accounts
payable and accrued liabilities $ 236,276 $ 157,368 Distributions
payable 46,582 17,834 Financial derivative liability 53,239 22,965
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336,097 198,167 Bank debt 893,792 309,146 Convertible debentures
36,850 16,289 Financial derivative liability 28,968 8,763 Future
income taxes 233,336 202,110 Asset retirement obligations 123,035
68,235
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1,652,078 802,710 Non-controlling interest - 3,804 UNITHOLDERS'
EQUITY Capital 3,742,896 1,087,459 Convertible debentures 4,495 -
Contributed surplus - 40,836 Accumulated earnings 303,939 161,869
Accumulated distributions (803,782) (525,581)
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3,247,548 764,583
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Total liabilities and unitholders' equity $ 4,899,626 $ 1,571,097
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CONSOLIDATED STATEMENTS OF EARNINGS AND ACCUMULATED EARNINGS Three
months ended Six months ended June 30 June 30
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unaudited ($000s except per unit amounts) 2006 2005 2006 2005
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REVENUE Petroleum and natural gas sales $ 341,205 $ 177,501 $
691,551 $ 348,702 Royalty expense (net of Alberta Royalty Tax
Credit) (65,095) (37,120) (132,219) (74,294)
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276,110 140,381 559,332 274,408
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EXPENSES Operating 56,082 29,260 111,647 59,300 Transportation
4,292 2,224 8,736 4,319 General and administrative 11,422 5,206
19,293 10,001 Interest on bank debt 11,103 3,687 20,289 6,644
Interest on convertible debentures 1,456 1,475 2,116 3,029
Unit-based compensation 11,697 2,695 18,670 5,127 Depletion,
depreciation and amortization 149,972 57,578 300,490 115,869
Accretion of asset retirement obligations 2,457 1,173 4,908 2,346
Realized loss on financial derivatives 5,646 16,471 13,675 27,571
Unrealized loss (gain) on financial derivatives (2,372) (5,983)
(7,306) 50,156
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251,755 113,786 492,518 284,362
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Earnings (loss) before taxes 24,355 26,595 66,814 (9,954) Provision
for capital taxes 1,056 1,093 3,782 1,776 Future income tax
recovery (59,576) (1,971) (79,038) (22,378)
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NET EARNINGS 82,875 27,473 142,070 10,648 Accumulated earnings,
beginning of period 221,064 79,196 161,869 96,021
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Accumulated earnings, end of period $ 303,939 $ 106,669 $ 303,939 $
106,669
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Net earnings per unit (2005 restated) Basic $ 0.41 $ 0.31 $ 0.71 $
0.12 Diluted $ 0.40 $ 0.31 $ 0.69 $ 0.12 Weighted average units
outstanding (2005 restated) Basic 201,998 87,572 201,370 87,148
Diluted 207,142 88,749 206,894 88,319
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CONSOLIDATED STATEMENTS OF CASH FLOWS Three months ended Six months
ended June 30 June 30
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unaudited ($000s) 2006 2005 2006 2005
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CASH FLOWS RELATED TO THE FOLLOWING ACTIVITIES: OPERATING
ACTIVITIES Net earnings $ 82,875 $ 27,473 $ 142,070 $ 10,648
Adjustments for: Unit-based compensation 11,697 2,246 18,670 4,678
Depletion, depreciation and amortization 149,972 57,578 300,490
115,869 Accretion 2,457 1,173 4,908 2,346 Unrealized loss (gain) on
financial derivatives (2,372) (5,983) (7,306) 50,156 Future income
tax recovery (59,576) (1,971) (79,038) (22,378) Asset retirement
costs incurred (2,468) (1,990) (5,924) (2,250) Changes in non-cash
operating working capital 57,080 11,854 (26,693) (43,231)
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239,665 90,380 347,177 115,838
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FINANCING ACTIVITIES Proceeds from bank debt 59,975 (5,690) 150,523
45,265 Proceeds from issuance of units, net of issue costs 12,011
2,722 16,350 5,059 Distributions to unitholders (139,236) (51,242)
(272,115) (101,919) Changes in non-cash financing working capital -
99 - 298
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(67,250) (54,111) (105,242) (51,297)
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172,417 36,269 241,937 64,541
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INVESTING ACTIVITIES Acquisition of petroleum and natural gas
properties (23,869) (8,726) (23,869) (8,726) Disposition of
petroleum and natural gas properties - 2,777 - 4,610 Corporate
acquisitions, net of cash (36,000) - (36,000) - Capital
expenditures (88,487) (36,309) (155,852) (63,033) Changes in
non-cash investing working capital (24,061) 5,989 (26,216) 2,608
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Cash used in investing activities (172,417) (36,269) (241,937)
(64,541)
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Cash beginning and end of period $ - $ - $ - $ -
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The Trust paid the following cash amounts: Interest paid $ 13,453 $
4,060 $ 26,895 $ 9,052 Capital taxes paid $ 4,029 $ 1,582 $ 10,475
$ 1,582
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To request a free copy of this organization's annual report, please
go to http://www.newswire.ca/ and click on Tools for Investors.
DATASOURCE: Canetic Resources Trust CONTACT: Investor Relations,
(403) 539-6300 or toll-free in North America 1-877-539-6300, ,
http://www.canetictrust.com/
Copyright