Provident Energy (PVX: chart, web, Y!) released financials for Q1 this past Thursday, and noted that they would keep the distribution at $0.06 CDN for the coming month.

Some highlights for the quarter:

- Unitholder distributions in the first quarter of 2009 were $0.21 per unit resulting in a payout ratio of 65 percent, compared to the 70 percent payout in the first quarter of 2008 when Provident distributed $0.36 per unit.

- Provident maintained its financial flexibility during the first quarter with senior bank debt of $496 million (47 percent credit facility utilization), while total net debt was $749 million (including subordinated convertible debentures and net working capital), resulting in a net debt to trailing four quarters funds flow from continuing operations ratio of 1.6 times.

- Provident Midstream sold approximately 141,700 barrels per day (bpd) of natural gas liquids (NGL) in the first quarter of 2009, an increase of 4 percent from approximately 136,300 bpd in the first quarter of 2008 due primarily to the growing demand for condensate in the Redwater West business.

- Provident Midstream generated earnings before interest, taxes, depletion, depreciation, accretion and other non-cash items (EBITDA) of $70 million in the first quarter of 2009, down 8 percent from $76 million in the first quarter of 2008 due to lower NGL sale prices partially offset by lower feedstock prices, higher sales volumes and an $11 million realized gain from the commodity price risk management program.

- Provident Upstream produced approximately 24,600 barrels of oil equivalent per day (boed) in the first quarter of 2009, down 11 percent from 27,600 boed in the first quarter of 2008 due to naturally occurring production declines and the impact of the reduced 2009 capital program with spending focused on long term initiatives.

- Provident Upstream generated funds flow from operations of $23 million, down 68 percent from $71 million in the same quarter of 2008. This decline is due to lower production volumes and lower field operating netbacks (reflecting a substantial drop in oil and natural gas prices), partially offset by a $9 million realized gain from the commodity price risk management program.  -Source

On the downside, funds flow from operations was down 35% compared to Q1 of 2008.  Naturally, commodity prices have a lot to do with that, so it’s not necessarily indicative of faltering company strategy.

Corner Office Comments

I’m fairly pleased with the results of the first quarter operations, and I think natural gas prices, along with crude will start to strengthen into the summer, bolstering these numbers a bit more.

The payout ratio is starting to come back down a bit, which in this environment isn’t a bad thing.  The distribution cut is frustrating, but it’s one you’d have to expect when commodities are on the lamb.

The share price is starting to head back up hill, and I’ve started buying more shares below $6 to help average my overall cost down.  As the price continues to rise, I’ll sell off some shares in an effort to diversify out of the energy sector.

Investing, Royalty Trusts Provident Energy, PVX, Royalty Trusts

I had a hunch that this was coming, I just wasn’t sure when.  Provident Energy (PVX: chart, web, Y!) cut its distribution to $0.06 CAD or roughly $0.05 USD per share.

Naturally this is due to deflated crude oil prices, and a less than appealing outlook on the commodity price for the rest of 2009.

The company says that the reduction in the distribution, and the outlined capital program reflects the business objectives which “emphasize sustainability, fiscal prudence, and particularly in the current economic climate, preservation of balance sheet strength.”

They further state that the monthly distribution will continue to be set based on the company’s monthly rolling forecast.

The drop in the distribution brings the yield back in a more reasonable %13 return rate, but I continue to wonder if the cut was sufficient, or if there will be more in store in the coming months.

Corner Office Comments

I believe that crude oil is oversold, and may start to see the swing back to the upside after the OPEC meeting next month.

I don’t think the distribution cut was unreasonable, and I still feel that Provident is one of the better run Canadian Royalty Trusts out there, with a conservative outlook on both the energy and financial industry.

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Investing CANROY, distribution, Provident Energy, PVX, Royalty Trusts

Yesterday Provident Energy (PVX: chart, web, Y!) entered an agreement to buy out a privately held company with oil assets in southeast Saskatchewan for $79 million in shares.

The short end of this is that PVX is spending money to increase reserves, and add to their daily production. In fact, they’ll add 1,300 barrels per day of production, nearly all of which is crude. Provident’s proved plus probable reserves are estimated at 3.6 million barrels of oil.

“This acquisition provides excellent strategic and economic value to Provident, improving the quality and supporting the sustainability of our existing southeast Saskatchewan assets,” said Provident President and Chief Executive Officer Tom Buchanan. -Source

A side benefit to this is that 17,900 net acres of undeveloped land are part of the deal, and 100 gross drilling opportunities wait in the wings. To top it all off, the operating costs of the existing wells are under $5.00 per barrel.

This is a sweetheart deal for Provident in terms of reserves and increased production, and if you’re conservative, this is a 4 year payout on a $79 million in stock.

Not bad. Provident lost $0.33 per share today on the news combined with retreating crude prices… If I weren’t so overweight in the stock already, it would be an attractive time to pick some more up.

This smaller acquisition is on the heels of the Capital Energy Resources deal back in May.

Energy, Investing, Oil & Gas, Royalty Trusts, Stock Thoughts CANROYS, oil and gas, Provident Energy, PVX, Royalty Trusts, Stocks