Maple Leaf Memo
Most (if not all) oil and gas royalty trusts use financial contracts or derivatives to mitigate exposure to commodity prices. Energy producers can hedge production by entering into financial agreements, which provide the producer with minimum price assurance on produced volumes. They can also hedge foreign exchange and interest-rate exposure and power usage.
Hedging activities are typically designed to protect unitholder return on investment; provide for minimum monthly cash distributions to unitholders; employ a portfolio approach to hedging by entering into a number of small positions that build upon each other; participate in commodity price upturns to the greatest extent possible, while limiting exposure to price downturns; and to ensure profitability of specific oil and gas properties that are more sensitive to changes in market conditions.
A well-defined hedging policy can smooth out the ride during volatile periods in the energy market. The most-effective programs employ clearly identified targets for hedging specific percentages of exposure at target prices.
Ideally, an energy producer’s strategy includes clear goals (such as revenue protection, cost control and attainment of desired return on investment targets for specific projects). The most-effective programs analyze the specific exposures to employ a variety of swaps, futures and options-based hedge solutions.
Commodity producers face the difficult task of balancing shareholder desire for commodity price exposure with the need to protect against a decline in price. For energy trusts, striking the correct balance is all about providing cash flow certainty and, therefore, distribution stability.
It’s no easy feat to protect against adverse price movements while retaining the benefits of exposure to potentially higher prices. A balanced mix of hedging strategies can reduce exposure, protect high returns and allow for the additional exposure that shareholders desire.
A company can choose a variety of ways to sell its production. It can sell at current prices, or in the futures market, or it can even choose to hold product back if it feels prices have gotten too low to enable the company to make a profit. And while there’s some risk in these strategies, energy companies enjoy a great deal of flexibility in setting the terms of their product sales.
Not all energy trusts are created equal in terms of their ability to effectively hedge their production. Look for those that don’t carry much debt. The less debt a company has to pay off, the more flexibility it has in deciding when and at what price to sell its production.
Huge energy companies like ExxonMobil are obligated to supply product to their affiliates on a daily basis. Therefore, their hedging activities are constrained when compared with the strategies that can be used by smaller, pure exploration and production (E&P) companies.
The E&P trusts can literally choose to sell most or all of their production to the highest bidder. They can even sell the whole company to a bigger outfit if they so choose, usually at a price that makes their unitholders smile.
The need to efficiently manage exposure to fluctuating commodity prices is clearly one of the greatest challenges facing oil and gas trusts. Forward crude prices are extremely difficult to predict and subject to rapid, significant change.
But unitholders obviously prefer companies that perform as planned, and an effective hedging program can stabilize cash flow, reduce costs of capital and secure long-term company objectives—like sustaining and growing distributions.
The Roundup
Below is a summary of first quarter earnings reports for Canadian Edge Portfolio recommendations.
Conservative Portfolio
Algonquin Power Income Fund (APF.UN, AGQNF) generated revenue of CD49.5 million during the first quarter of 2007, basically flat compared to a year ago. But net earnings fell to CD6.2 million (8 cents Canadian per unit) from CD7.3 million (11 cents Canadian per unit) the previous year.
The earnings decrease was due to increased interest expense, deduction of earnings related to non-controlling minority interest, lower energy rates at the Windsor Locks facility stemming from lower natural gas prices, and lower interest and dividend income from Algonquin’s investment portfolio. Results for the comparable 2006 period included a one-time event.
Cash available for distribution was CD15.1 million (22 cents Canadian per unit), down from CD16.3 million (23 cents Canadian per unit); Algonquin distributed 23 cents Canadian per unit during the quarter, the same level as in 2006. Algonquin Power Income Fund is a buy up to USD9.
AltaGas Income Trust (ALA.UN, ATGFF) reported net income of CD24.6 million (43 cents Canadian per unit) for the first quarter of 2007, down from CD28.6 million (52 cents Canadian per unit) in the year-ago period. AltaGas generated cash from operations of CD46.1 million (81 cents Canadian per unit), up from CD25.7 million (47 cents Canadian per unit) for the same period in 2006.
Funds from operations were CD38.2 million (67 cents Canadian per unit) compared to CD41 million (75 cents Canadian per unit) during the first quarter of 2006. AltaGas’ debt-to-total capitalization ratio was 32.3 percent as at March 31, 2007, down from 33.4 percent at the end of 2006.
AltaGas is investing CD90 million in the construction of a natural gas pipeline to carry 90 million cubic feet per day (MMCF/d) from the Noel region of British Columbia to a 90 MMCF/d sour gas expansion of its Pouce Coupe gas-processing facility in Alberta by mid-2008. The trust also announced the acquisition of 14.4 megawatts of power generation capacity, boosting its gas-fired generation under operation by more than 55 percent at a cost of CD8 million. Buy AltaGas Income Trust up to USD26.
Arctic Glacier Income Fund (AG.UN, AGUNF) boosted sales by more than 80 percent, but its first quarter loss deepened to CD10.9 million (30 cents Canadian per unit) from CD4.4 million (16 cents Canadian per unit) a year ago. Cost of sales, selling, general and administration expenses swelled to CD32.6 million from CD19 million.
Interest costs rose to CD5 million from CD1.1 million. Sales in the January-March period, usually a slack demand quarter for ice, totaled CD26.4 million, up from CD14.7 million a year ago.
Arctic Glacier typically generates 10 percent of its annual sales during the first three months of the year but incurs a full 25 percent of annual fixed costs. Buy Arctic Glacier Income Fund up to USD12.
Atlantic Power Corp’s (ATP.UN, ATPWF) acquisition of the Path 15 project and better performance at existing projects led to a 25 percent increase in project revenue to CD67.3 million in the first quarter of 2007. Cash flow available for distribution increased to CD20.8 million (36 cents Canadian per Income Participating Security) from CD10.2 million (CD0.27 per Income Participating Security) in the first quarter 2006.
Atlantic declared 27 cents per Income Participating Security (IPS) in distributions for the period. Atlantic generated a project loss of CD34.9 million in the first quarter, which included noncash mark-to-market losses of CD48.4 million related to changes in the fair value of the Chambers PPA and Onondaga’s swap and index hedge agreements.
Excluding this noncash accounting adjustment, project income was CD13.5 million for the first quarter compared to CD10.8 million in the prior year period. The net loss for the three months ended March 31, 2007, was CD49.7 million (81 cents Canadian per IPS).
Not including the mark-to-market losses, the net loss would have been CD1.3 million (2 cents Canadian per IPS). Atlantic Power Corp is a buy up to USD11.
Bell Aliant Regional Communications Income Fund
(BA.UN, BLIAF) posted net income of CD94.7 million for the first
quarter of 2007 on a 3.6 percent year-over-year rise in revenue to
CD851.4 million. Earnings before taxes, depreciation and amortization
(EBITDA) for the three months was CD349.5 million, down from CD352.9
million in the first quarter of 2006.
The number of local customers was 3.287 million at the end of March, a decrease from 3.364 million a year ago. But high-speed Internet subscribers increased from 510,000 to 620,500, after 32,279 subscribers were added in the first quarter.
Wireless users subscribing to regional providers Telebec and NorthernTel numbered 86,147 at the end of the period, up from 69,780 a year ago. Buy Bell Aliant Income Fund up to USD30.
Boralex Power Income Fund (BPT.UN, BLXJF) generated revenue of CD33.9 million for the first quarter of 2007; EBITDA amounted to CD21.8 million, compared to $22.3 million in the first quarter of 2006. The fund also reported net earnings of $12.7 million for the first three months of 2007.
Basic and diluted net earnings per unit amounted to 21 cents Canadian for the first quarter of 2007, compared to 22 cents Canadian in 2006. Total hydroelectric power generation was 13.5 percent above the historical average but 8.2 percent lower than the first quarter of 2006. Hydroelectric reported revenue from energy sales of CD13.9 million and EBITDA of CD11.8 million.
The wood-residue thermal power stations reported revenue of CD11.9 million in the first quarter of 2007, up CD600,000, and EBITDA of CD7.8 million, an increase of 18 percent from CD6.6 million in the first quarter of 2006. The natural gas cogeneration power station generated revenue of CD8.1 million in the first quarter of 2007, down 3.4 percent year over year. The decrease is partly due to a breakdown in one of its two turbines late in the quarter. The facility is now operating normally.
Boralex continues to solicit proposals leading to a potential sale of or merger, as announced March 2, 2007. Buy Boralex Power Income Fund up to USD9.50.
Keyera Facilities Income Fund (KEY.UN, KEYUF) reported a 24 percent year-over-year increase in net earnings to CD19 million and a 43 percent rise in distributable cash flow to CD36.5 million (60 cents Canadian per unit). Distributions to unitholders totaled CD21.8 million (35.7 cents Canadian per unit).
Double-digit growth in the gathering and processing and natural gas liquids (NGL) infrastructure segments offset a relatively weak performance in the marketing business after a record performance during the first quarter of 2006. Keyera also announced a 5 percent distribution increase to 12.5 cents Canadian per unit effective with the May payment due June 15. Keyera Facilities Income Fund is a buy up to USD18.
Macquarie Power & Infrastructure Income Fund’s (MPT.UN, MCQPF) asset mix produced distributable cash of CD12.1 million (40.2 cents Canadian per unit) during the first quarter of 2007, up from CD10.8 million (35.9 cents Canadian per unit) in the year-ago period.
Cardinal, the fund’s wholly owned natural-gas-fired cogeneration plant, generated revenue of CD28.9 million, up from CD27.7 million a year ago. Electricity sales were slightly ahead of 2006 levels, while rates increased by 4.4 percent from the same period last year. Operating costs were lower by 8.8 percent.
Leisureworld, Macquarie’s long-term care facility, boosted revenue by 8.1 percent and income from operations by 3.5 percent on improved occupancy levels, “optimization of preferred bed mix,” and an increase in government funding. Macquarie distributed 25.7 cents Canadian per unit during the quarter for a 64 percent payout ratio. Macquarie Power & Infrastructure Income Fund is a buy up to USD12.
Northern Property REIT (NPR.UN, NPRUF) reported total rental property revenue for the first quarter of CD22.79 million, a 26.7 percent increase from CD17.98 million a year ago. Net operating income increased 46 percent to CD14.18 million from CD10.31 million.
Distributable income for the quarter rose to CD7.96 million, up 30.9 percent from the same quarter a year earlier. Combined market and renovation vacancy loss declined from 4.3 percent during the same quarter a year earlier to 3.8 percent.
Northern Property closed on the acquisitions of an industrial
warehouse in Fort St. John and 281 apartment units in Fort Nelson,
British Columbia, during the quarter; closing on four seniors
facilities in Newfoundland for CD23 million is expected by the end of
May. Northern Property REIT is a buy up to USD24.
Pembina Pipeline Income Fund
(PIF.UN, PMBIF) reported net earnings for first quarter 2007 of CD29.4
million, up 46 percent from CD20.2 million a year ago. The fund
distributed 33 cents Canadian per unit during the quarter for total
cash distributions of CD42.1 million, up 16 percent from a year ago.
Total throughput, including both the conventional pipelines and the Syncrude Pipeline, averaged 761,200 barrels per day during the first quarter of 2007. The conventional pipelines transported an average of 459,400 barrels per day during the quarter, up slightly from year-ago levels. The conventional pipelines contributed CD62.0 million in revenue and CD37.9 million in operating income, up 10 percent and 13 percent, respectively, over the same period last year.
The oil sands segment contributed CD14.5 million in revenue, down 2 percent, and CD9.5 million in operating income, up 4 percent from the CD9.1 million recorded in the first quarter of 2006. Pembina’s midstream operations generated CD19.9 million in revenue and CD17.8 million in net operating income, a 93 percent increase for both revenue and net operating income. Buy Pembina Pipeline Income Fund up to USD16.
RioCan REIT (REI.UN, RIOCF) reported net earnings of CD37.4 million (18 cents Canadian per unit), down from CD38.9 million (20 cents Canadian per unit) for the comparable period in 2006. Total rental revenue was CD164.96 million, up 16 percent from CD142.34 million a year ago.
Distributable income for the period was CD72.86 million (35.5 cents Canadian per unit), up slightly from CD68.25 million (34.7 cents Canadian per unit) during the first quarter of 2006. Funds from operations was CD71.34 million (35 cents Canadian per unit), compared to CD68.68 million (35 cents Canadian per unit).
Portfolio occupancy was 97.1 percent as of March 31, 2007. During the first quarter, RioCan acquired Yonge Eglinton Centre, the largest single property acquisition in its history, for CD223 million. At the end of the first quarter, almost 6.5 million square feet was under development, of which RioCan’s interest was approximately 2.9 million square feet.
In addition to the 6.5 million square feet of current developments, an additional 4.4 million square feet is in the development pipeline. At March 31, 2007, RioCan’s leverage ratio is just under 55 percent of historical cost, leaving approximately CD677 million of room for additional debt capital. RioCan REIT is a buy up to USD24.
TimberWest Forest Corp (TWF.UN, TWTUF) generated distributable cash of CD26.9 million (35 cents Canadian per unit) during the first quarter of 2007, down from CD31.5 million (41 cents Canadian per unit) a year ago. The 2006 figure reflects an additional CD5.5 million because of real estate sales.
Log sales volumes fell to 823,100 meters from 889,200 meters during the first quarter of 2006 because of weakness in the US housing market; TimberWest realized CD95 per meter, compared to CD96 per meter a year ago, a relatively strong result in light of the weak market south of the border.
Domestic sales continued to be strong. EBITDA for the three months ended March 31, 2007, were CD30.3 million (39 cents Canadian per unit), compared to CD27.5 million (35 cents Canadian per unit) a year earlier.
TimberWest generated net earnings for quarter of CD3.7 million (5 cents Canadian per unit), up from CD2.9 million (4 cents Canadian per unit) during the same period in 2006. Buy TimberWest Forest Corp up to USD14.
Yellow Pages Income Fund (YLO.UN, YLWPF) reported first quarter net income of CD120.9 million (23 cents Canadian per unit), a 42 percent jump from CD85.2 million (17 cents Canadian per unit) a year earlier. Income from operations reached CD159.4 million, up from CD108.9 million during the first quarter of 2006.
Adjusted revenue increased 29 percent to CD385.1 million from CD299.3 million, boosted by the MTS Media acquisition. Yellow Pages distributed CD144.6 million (27 cents Canadian per unit), up from CD123.8 million (25 cents Canadian per unit) in the first quarter of 2006. Revenue in the directories business rose by 5.5 percent, and adjusted margin reached 59 percent.
The company continues to use its strong brand, customer loyalty and existing infrastructure to grow its online business. Yellow Pages Income Fund is a buy up to USD14.
Aggressive Portfolio
ARC Energy Trust (AET.UN, AETUF) realized cash flow from operations during the first quarter of CD183.8 million (88 cents Canadian per unit), down from CD191.2 million (94 cents Canadian per unit) in the comparable period of 2006. Net income was CD73 million, down from CD95.9 million in 2006.
Production averaged 64,175 barrels of oil equivalent per day (BOE/d) during the first quarter, down slightly from 64,600 BOE/d a year ago but up from 63,663 BOE/d in the fourth quarter of 2006. The 4 percent decrease in first quarter 2007 cash flow was due to lower production volumes, a slightly lower average realized price and increased operating costs. Those factors were partially offset by higher cash hedging gains in the recently concluded quarter.
ARC spent CD77.5 million on capital development in the first quarter, in line with 2006 levels; the trust drilled 42 gross (32 net) wells with a 90 percent success rate. It funded 74 percent of the capital program with cash flow.
ARC will maintain a 20-cents-Canadian-per-unit distribution through the second quarter. The first quarter payout ratio was 67 percent. ARC Energy Trust is a buy up to USD22.
Enerplus Resources (ERF.UN, NYSE: ERF) reported net income of CD107.9 million (88 cents Canadian per unit), down from CD127.3 million (CD1.08 per unit) during the first quarter of 2006. (Enerplus realized CD19 million in the first quarter of 2006 from an asset sale.) Cash flow from operating activities came in at CD193.2 million (CD1.57 per unit), compared to CD189.3 million (CD1.60 per unit) a year ago.
Natural gas accounted for 53 percent of Enerplus’ first quarter production, level with the year-ago figure. Enerplus’ average selling price of CD7.21 per thousand cubic feet (MCF) for the first quarter was down 13 percent from the year-ago level of CD8.33 per MCF. Production volumes averaged approximately 86,000 BOE/d, up slightly over the first quarter of 2006 and in line with 2007 full-year guidance of 85,000 BOE/d.
Cash flow from operations was slightly ahead of last year at CD193.2 million compared to CD189.3 million in the first quarter of 2006. Monthly cash distributions to unitholders were 42 cents Canadian per unit, consistent with levels for the past 19 months. Operating costs ran ahead of guidance at CD8.53 per BOE, but Enerplus still expects full-year 2007 operating costs of CD8.45 per BOE.
A yearlong decrease in industrywide capital expenditures has started to push drilling and oilfield services costs down. The payout ratio for the quarter was 82 percent, compared to 79 percent for the first quarter of 2006. Debt-to-cash flow held steady at a 0.8 times.
Success in Enerplus’ Bakken operations has prompted the trust to shift CD30 million from the planned capital expenditure program for conventional Canadian projects to US-based oil development. Enerplus Resources is a buy up to USD50.
Newalta Income Fund (NAL.UN, NALUF) was hit by the rollback in drilling activity as revenue improved 15 percent to CD117.8 million but net earnings slipped 25 percent during the first quarter from CD17.4 million (56 cents Canadian per unit) to CD13 million (33 cents Canadian per unit).
Funds from operations decreased 23 percent to CD22.5; on a per-unit basis, funds from operations were down 39 percent to 57 cents Canadian from 93 cents Canadian during the first quarter of 2006. Cash available for growth and distributions in the first quarter declined 20 percent to CD21.6 million compared to CD27.2 million for the same period in 2006.
Newalta paid total distributions of CD18.7 million during the first quarter; the fund paid 18.5 cents Canadian per unit, up from 16.5 cents Canadian per unit a year ago. Cash distributed to unitholders was 83 percent of funds from operations and 87 percent of cash available for growth and distributions.
Maintenance capital expenditures in the quarter were CD700,000 compared to CD1.8 million in 2006 and are estimated to remain on budget at CD28.0 million for the year. Growth capital expenditures in the quarter were CD14.1 million, compared to CD12.0 million in 2006. Buy Newalta Income Fund up to USD30.
Paramount Energy Trust (PMT.UN, PMGYF) reported a CD39.3 million (46 cents Canadian per unit) net loss for the first quarter of 2007 primarily because of CD48.5 million mark-to-market losses in its hedging program. The unrealized losses shouldn’t threaten the trust’s distribution.
Paramount is now scaling back its May-October and November-March 2008 hedges, resulting in increased cash flow for the second quarter. Unwinding the positions will also provide exposure to strengthening natural gas prices heading into late 2007/early 2008.
Average net sales production decreased 6 percent to 141.7 million cubic feet per day (MMCF/d) from 151.5 MMCF/d for the first quarter of 2006. Natural declines in Paramount’s three core areas in northeast Alberta caused the decrease, but the trust spent CD63 million during the past quarter drilling 84 wells and yielding 77 (for a 92 percent success rate); that activity should boost second quarter production.
Production additions from the winter program totaled approximately 17.2 MMCF/d, with an additional 8.6 MMCF/d of potential increases by early 2008. Paramount generated revenue of CD114 million during the first quarter, up from CD112.6 a year ago. Cash flow was CD65.6 million (76 cents Canadian per unit), up 7 percent from CD61.1 million (74 cents Canadian per unit).
Distributions totaled CD41.3 million (48 cents Canadian per unit), down from CD59.9 million (72 cents Canadian per unit) during the first quarter of 2006. Paramount reduced its payout ratio to 62.9 percent from 98.1 percent year over year. Buy Paramount Energy Trust up to USD12.
Penn West Energy Trust (PWT.UN, NYSE: PWE) generated cash flow of CD311 million (CD1.31 per unit) during the first quarter of 2007, up 28 percent from CD243 million (CD1.49 per unit) a year ago. Results were driven largely by the Petrofund merger.
Net income decreased to CD96 million (41 cents Canadian per unit) from CD144 million (88 cents Canadian per unit), mainly because of higher depletion charges (also a result of the Petrofund merger), a reduction of unrealized gains on commodity contracts and higher financing costs. Production averaged 128,447 BOE/d during the first quarter, up from 96,713 BOE/d a year ago.
Penn West invested CD216 million on capital development, including CD17 million of net property acquisitions and 61 net wells drilled at a 95 percent success rate. Penn West Energy Trust is a buy up to USD33.
Peyto Energy Trust (PEY.UN, PEYUF) reported first quarter funds from operations totaled CD78.4 million (74 cents Canadian per unit), as compared to CD78.6 million (76 cents Canadian per unit) during the same period in 2006.
Peyto drilled and cased 13 gross (10 net, or 78 percent net ownership) wells in the quarter, completed 22 gross (17 net) gas zones and brought 16 gross (11 net) zones on stream. Average production declined from 22,550 BOE/d in the fourth quarter 2006 to 21,305 BOE/d in the first quarter 2007.
Quarterly production was comprised of 106 MMCF/d of natural gas and 3,607 barrels per day of oil and natural gas liquids. Operating costs for the first quarter 2007 were CD2.84 per BOE, up CD1.03 per BOE for the same period in 2006.
Distributions per unit increased by 5 percent from the first quarter of 2006, while the cash payout ratio remained low at 57 percent compared to 53 percent in the first quarter of 2006. A total of CD44.4 million (42 cents Canadian per unit) was distributed to unitholders in the first quarter. Peyto Energy Trust is a buy up to USD22.
Precision Drilling Trust (PD.UN, NYSE: PDS) reported a 29 percent drop in its first quarter profit on a slowdown in the natural gas space. Precision reported net income of CD158.1 million (CD1.26 per unit), down from CD224.2 (CD1.79 per unit) in the first quarter of 2006.
Revenue was off 23 percent to CD411 million. Revenue in the contract drilling services segment dropped 27 percent, and the completion and production services segment decreased 15 percent.
Canadian drilling rig operating days declined 29 percent to 11,785 days from 16,694 during the first quarter of 2006. Service rig operating hours dropped 20 percent from the first quarter of 2006 to 132,411 hours. Its assets are still solid enough to attract takeover interest; Precision Drilling is a buy up to USD30.
Provident Energy Trust (PVE.UN, NYSE: PVX) generated cash flow of CD97 million (46 cents Canadian per unit) during the first quarter, up from CD79 million (42 cents Canadian per unit) a year ago. Net earnings of CD50 million (24 cents Canadian per unit) were up 85 percent on a per-unit basis compared to CD24 million (13 cents Canadian per unit) in the first quarter of 2006. The increase was attributable to improved midstream margins and unrealized hedging gains.
Distributions declared in the quarter totaled CD76 million (36 cents Canadian per unit) compared to CD68 million (36 cents Canadian per unit) in 2006. Provident’s payout ratio of cash flow from operations was 82 percent compared to 87 percent in the same period a year earlier.
Production increased 3 percent to 32,400 BOE/d from 31,600 BOE/d in the first quarter of 2006. The production was weighted 47 percent natural gas, 48 percent light/medium oil and natural gas liquids, and 5 percent heavy oil. Provident’s risk-management program is designed to reduce volatility in cash flow and to protect a base level of distributions, while at the same time providing an opportunity to participate in stronger commodity markets.
Approximately 50 percent of expected production is hedged for 2007. In the midstream business unit, hedging is used to protect margins on the extraction and sale of natural gas liquids. Currently, 80 percent of the margin-related volume is hedged for the next two years, gradually dropping to 50 percent by 2011. Buy Provident Energy Trust up to USD13.
Trinidad Energy Services Income Trust (TDG.UN, TDGNF) reported a first quarter profit of CD41.9 million (49 cents Canadian per unit), up from a year-earlier CD40 million (48 cents Canadian per unit). Revenue for the three months ended March 31 jumped to CD206.2 million from CD162.9 million.
Trinidad paid CD28.7 million (34 cents Canadian per unit) in distributions during the period, up from CD21.4 million (26 cents Canadian per unit) a year ago. Overall reductions in the Canadian drilling market caused a 27.2 percent decline in the average industry utilization from the comparable quarter in the prior year, but Trinidad, while impacted by the softer market, was shielded through its focus on deeper drilling and longer-term contracts.
Although overall utilization levels declined in the first quarter of 2007 to an average of 69 percent, Trinidad continued to exceed the market by 16.9 percent. US operations continued to grow throughout the first quarter of 2007, and the deployment of the rigs currently committed under long-term, take-or-pay contracts continues to be a primary focus of operations in the US.
Throughout the quarter, an additional six rigs were released, increasing the total rig count to 37 at the end of March 2007. Trinidad Energy Services Income Trust is a buy up to USD16.
Vermilion Energy Trust (VET.UN, VETMF) reported a decline in funds from operations to CD75.9 million (CD1.06 per unit) in the first quarter of 2007 from CD89.6 million (CD1.27 per unit) because of higher income taxes.
Recorded production of 29,090 BOE/d represents an increase of 11 percent compared to 26,241 BOE/d in the first quarter of 2006. Production volumes were 1 percent lower than fourth quarter 2006 production of 29,452 BOE/d primarily because of production interruptions in France.
Vermilion distributed 51 cents Canadian per unit during the quarter for a payout ratio of 44 percent. Net debt at the end of the first quarter was approximately CD346 million, equivalent to 1.1 times annualized first quarter cash flow. Buy Vermilion Energy Trust up to USD31.