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Real Estate Business Plans document sample
Document Sample
Annual General Meeting
June 23, 2010
|1
Disclaimer
Certain statements contained herein including, without limitation, financial and business prospects and financial outlook, the effect of government
announcements, proposals and legislation, plans in its Oil and Gas Division regarding hedging, wells to be drilled, expected or anticipated production rates,
timing of expected production increases, the weighting of production between different commodities, expected commodity prices, exchange rates, production
expenses, transportation costs and other costs and expenses, maintenance of productive capacity and capital expenditures; plans in the Elbow River Marketing
Limited Partnership (“Elbow River”) business regarding plans for its ongoing Liquefied Petroleum Gas (“LPG”) business; plans in the Real Estate Division for the
timing and nature of capital expenditures and the potential selling of assets; and the timing and method of financing these businesses, may be forward looking
statements. Words such as "may", "will", "should", "could", "anticipate", "believe", "expect", "intend", "plan", "potential", "continue", “targeted” and similar
expressions may be used to identify these forward looking statements. These statements reflect management's current beliefs and are based on information
currently available to management. Forward looking statements involve significant risk and uncertainties. A number of factors could cause actual results to
differ materially from the results discussed in the forward looking statements including, but not limited to, risks associated with oil and gas exploration:
development, exploitation, production, marketing and transportation, loss of markets, volatility of commodity prices, currency fluctuations, imprecision of reserve
estimates, environmental risks, competition from other producers and the inability to retain drilling rigs and other services; risks associated with its Elbow River
business including, but not limited to, counterparty risk in default, operational risks, hedging, access to credit, competitor risk, seasonality and impact of the
global recession on overall economic activity; and risks associated with the Real Estate Division including, but not limited to the impact the overall economy has
on valuations, future delinquencies, access to mortgages and impact on interest rates; as well as the risks associated with the Trust’s incorrect assessment of
the value of acquisitions, failure to realize the anticipated benefits of acquisitions, delays resulting from or inability to obtain required regulatory approvals and
ability to access sufficient capital from internal and external sources and the risk factors outlined under "Risk Factors" and elsewhere herein. As a consequence,
actual results may differ materially from those anticipated in the forward-looking statements.
Forward-looking statements or information are based on a number of factors and assumptions which have been used to develop such statements and
information but which may prove to be incorrect. Although Avenir believes that the expectations reflected in such forward-looking statements or information are
reasonable, undue reliance should not be placed on forward-looking statements because Avenir can give no assurance that such expectations will prove to be
correct. In addition to other factors and assumptions which may be identified in this document, assumptions have been made regarding, among other things:
the impact of increasing competition; the general stability of the economic and political environment in which Avenir operates; the timely receipt of any required
regulatory approvals; the ability of Avenir to obtain qualified staff, equipment and services in a timely and cost efficient manner; Divisional results; the ability of
operators to operate the field in a safe, efficient and effective manner; the ability of Avenir to obtain financing on acceptable terms; field production rates and
decline rates; the ability to replace and expand oil and natural gas reserves through acquisition, development of exploration; the timing and costs of pipeline,
storage and facility construction and expansion and the ability of Avenir to secure adequate product transportation; future oil and natural gas prices; currency,
exchange and interest rates; the regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which Avenir operates; and the
ability of Avenir to successfully market its products, fluctuations in foreign exchange or interest rates and stock market volatility, credit risk and the ability to
realize on collateral in the event of default, failure of counter parties to perform on contracts, fluctuation in the value of real property, failure to produce income or
revenue from real estate, failure of tenants to meet lease obligations, increase in property taxes and mortgage, maintenance, insurance, operating costs and
decreases in occupancy and rental rates, and fixed costs in relation to variable revenue streams. Readers are cautioned that the foregoing list of factors is not
exhausted. These forward looking statements are made as of the date hereof and Avenir assumes no obligation to update or review them to reflect new events
or circumstances except as required by applicable securities laws. Forward looking statements and other information contained herein concerning the Oil and
Gas Division, Elbow River’s business, the Real Estate Division and Avenir's general expectations concerning these industries are based on estimates prepared
by each Division’s management and from using data from publicly available industry sources as well as from reserve reports, market research and industry
analysis and on assumptions based on data and knowledge of these industries which Avenir believes to be reasonable. However, this data is inherently
imprecise, although generally indicative of relative market positions, market shares and performance characteristics. While Avenir is not aware of any
misstatements regarding any industry data presented herein, these industries involve risks and uncertainties and are subject to change based on various
factors.
|2
Avenir Quick Facts
TSX Exchange AVF.UN
Current Trust Units Outstanding 42.9 mm
Current Target Payout Ratio 75% to 80%
Current trading price per unit $5.50
Market Capitalization $235.7 mm
Current Yield 13%
|3
Avenir Trust Structure
Public Trust
AVF.UN
Operating Trust
Oil and Gas 64% Elbow River Real Estate
Marketing
31% & Other 5%
2010 Forecast Cash flow
|4
2009 Financial Highlights
%
TOTAL CONSOLIDATED SUMMARY 2009 2008 Change
FINANCIAL in 000’s except unit values
Total Revenue $878,374 $2,230,722 (61)%
Cash Flow from Operations $26,803 $25,024 7%
Cash Flow from Operations per Unit $0.64 $0.60 7%
Cash Flow from Operations (excluding bio-diesel) $47,835 $63,855 (25)%
Cash Flow from Ops, (excl. bio-diesel) per Unit $1.14 $1.53 (25)%
Cash Distributions $34,093 $41,826 (18)%
Cash Distributions per unit $0.835 $1.00 (17)%
Distribution Payout Ratio 127% 167% (24)%
Distribution Payout Ratio (excluding bio-diesel) 71% 66% 8%
Net Income $25,500 $2,513 911%
Working Capital excluding Mortgages $40,782 $59,703 (32)%
Mortgages $(25,454) $(38,688) (34)%
|5
2010 First Quarter Financial Highlights
March 31, March 31, %
TOTAL CONSOLIDATED SUMMARY 2010 2009 Change
FINANCIAL in 000’s except unit values
Total Revenue $221,310 $370,470 (40)%
Cash Flow (used in) from Operations $13,734 $(10,056) 237%
Cash Flow from Operations per Unit $0.32 $(0.24) 233%
Cash Distributions $7,647 $10,452 (27)%
Cash Distributions per unit $0.18 $0.25 (28)%
Distribution Payout Ratio 56% 204% 73%
Net Income (loss) $(9,546) $(7,621) (25)%
Working Capital excluding Mortgages $26,356 $40,037 (34)%
Mortgages $25,268 $38,454 (34)%
|6
Oil and Gas Division – 2009 Highlights
2009 average production of 3,406 BOE/d vs. 3,339 BOE/d in 2008.
Production split was 58% Natural Gas and 42% Oil & NGL.
2009 Capex of $11 million; participated in drilling 14 (5.1 net) wells.
Second Horizontal Cadomin well drilled at Noel.
Established significant land position in Noel.
Completed corporate acquisition of Ridgeback Energy Ltd.
FD&A of $14.58/BOE P+P on $45.7MM of capital.
Replaced 252% of production in 2009.
YE Reserves for 2009:
8,110 Mboe P+P producing (77%)
2,392 Mboe P+PUD and NP (23%)
Total P+P = 10,503 Mboe (RLI = 8.5 years)
YE 2008 Total P+P = 8,611Mboe
|7
Natural Gas Hedging Program
For 2010 the Trust has hedged 52% at $6.59/GJ AECO.
2500
2010 Average Nat Gas Production – 2050 BOE/d
2000
Nat Gas Hedged BOE/d
1500
BOE/d
58% Hedged
50%
1000 $6.48 $6.62 42%
$6.74
$6.49
500
8%
$5.80
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|8
Oil Hedging Program
For 2010 the Trust has hedged 33% at an average collar price of
Cdn$76.76/bbl by Cdn$91.21/bbl at Edmonton.
1600
2010 Average Oil & NGL Production – 1450 BOE/d
1400
Oil & NGL Hedged BOE/d
1200
1000
BOE/d
800
600 36%
29%
400
$78.54 $83.61
$85.03
14%
200
$90.05
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|9
Oil and Gas Outlook
Continue to target balance
of oil and gas production.
Exploration &
development of both
Cadomin and Nikanassin
at Noel.
Oil opportunities in Alberta
and Sask.
Look to participate in 33
gross wells (11.2 net).
Current 2010 estimated
production is 3,500
BOE/d.
Identify acquisitions based
on available debt of
$45million.
| 10
Oil and Gas Exploration and Development - Noel
Resource Play – Basin Centered Gas in Northeast B.C.
11,530 gross hectares (39 gross sections) of Cadomin mineral
rights in the Noel and Kelly Lakes areas.
Potential 88 drilling locations (72 net) with estimated 260 BCF of
recoverable gas in place.
Estimated total field development cost of $360 MM net to AOC
with F&D of $1.75/mcf.
Project economics are 25% rate of return at current AECO
forecasts.
| 11
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File: BC_NoelCadSituation.MAP Datum: NAD27 Projection: Stereographic Center: N55.25043 W120.42311 Created in AccuMap™, a product of IHS
| 12
Elbow River Marketing LP
Elbow River is a wholesale marketer, transporter and supplier of Butane, Natural
Gasoline, Propane, Ethanol, Asphalt, Gas Oil, Fuel oil and other misc.
products.
Current Business:
LPG business is a mature and well established business.
Elbow transacts within continental North America with counterparties that are well
established.
Gross margins are typically hedged with swaps on a matched volume and
settlement timing basis.
Maximize arbitrage opportunities due to market relationships and knowledge.
Strategic storage positions throughout North America allow rapid access to
favourable markets.
Long-term rail car leases provide for a tactical advantage in capturing spot
opportunities.
Long standing relationships with all major rail carriers.
Reduced exposure to foreign currency risk due to ability to closely match payments
and receipts.
| 13
Elbow River Historical Cash Flow
(Years ended
March 31) LPG Ethanol Subtotal Bio-diesel Total
Cash Flow 2006 $ 10,689,475 $ 1,775,499 $ 12,464,974 $– $ 12,464,974
Cash Flow 2007 $ 13,484,501 $ 4,158,451 $ 17,642,952 $ 1,386,855 $ 19,029,807
Cash Flow 2008 $ 9,332,529 $ 817,243 $ 10,149,772 $ 6,254,015 $ 16,403,787
Cash Flow 2009 $ 29,896,260 $ 993,337 $ 30,889,597 ($ 78,686,940) ($ 47,797,343)
Cash Flow 2010 $ 17,240,974 $ 1,650,730 $ 18,891,704 $ 3,758,044 $ 22,649,748
Cash Flow Total
All Years $ 80,643,739 $ 9,395,260 $ 90,038,999 ($ 67,288,026) $ 22,750,973
Annual average $ 18,007,800
Average excluding high and low $ 16,333,210
| 14
Elbow River Target Budget for Product Types
12% 7%
13%
Butane
Condensate
Ethanol
10%
Propane
Other
58%
| 15
Elbow River Bio-diesel Losses 2008/2009
Exposures to bio-diesel business and risks ended on March 31, 2009.
Losses resulted due to a combination of:
Exceptionally disproportionate cross commodity physical and
financial volatility where traditional hedging relationships proved
ineffective.
Global economic collapse.
Global bio-diesel market collapse.
Higher than anticipated exit costs.
Bad debt.
Additional geopolitical factors.
Since the exit from bio-diesel Elbow has eliminated exposures to
international markets outside North America and to weak
counterparties.
| 16
Moving Forward – LPG Growth Opportunities
Elbow LPG business provides approximately $15 million cash flow with no
reinvestment required.
Annual “contract season” term deals provide sustained baseline cash flow.
Trading expertise within volatile niche markets provides for profit
maximization of various arbitrage opportunities.
Continually expand relationships with existing customers.
Maximize quality counterparty credit which directly impacts increased
cash flow.
Ethanol is being grown in order to take advantage of niche opportunities.
Potential expansion related to oil sands activity.
Possible asset acquisitions allowing for increased trading opportunities.
Prospective involvement in US resource and shale plays.
| 17
Real Estate Division
Property Manager: MDC Property Services Ltd.
Property Leasable Sq Ft
2 - Commercial Properties (ON) 183,000
15 - Landmark Portfolio 155,465
17 Properties 338,465
Asset Class by Area
Sold KFC portfolio June 11, 2010 for net gain of
approximately $1.0 mm. Industrial
100% leased. 46% 54% Retail
Single purpose commercial real estate.
Estimated Funds from Operations $1.9 mm
(post KFC sale).
Total mortgages of $15.9 mm after KFC sale.
| 18
Operational Outlook
Oil & Gas:
Forecast of approx. 3,500 BOE/d for 2010 based on $16 to 18 million in
capital. Capex split evenly between oil and gas.
Target $28 to $30 million annual cash flow.
Oil development in N.W. Alberta and Saskatchewan.
Continued exploitation of the Cadomin in Noel as natural gas prices afford.
Potential acquisitions to take advantage of strong balance sheet of AOC.
Elbow River:
Target $15 million annual cash flow.
Market volatility creates LPG arbitrage opportunities.
Potential growth through ethanol marketing; expansion related to oil sands
activity; opportunities within the refining chain and possible asset
acquisitions.
Real Estate:
Dispose of portfolio.
Continues to be fully leased in the interim.
| 19
Go-Forward 2010 2011
The considerations:
Recognized current Unitholders expect a distribution/yield.
Continued opportunity and demand for yield vehicles in the market.
Looked at maximizing value through merger, sale or privatization but difficult due to
diverse assets.
Unable to compete with REITS in real estate post 2010.
Expected low natural gas pricing beyond 2010.
The Trust’s largest short-term growth opportunity is natural gas at Noel with
numerous smaller oil opportunities.
Very strong balance sheet with undrawn bank lines in Oil and Gas Division.
Elbow River’s business provides approximately $15 million per year in cash flow
with little or no reinvestment.
Need to focus on core competencies as capital is scarce for smaller market cap
entities.
Need to provide Unitholders with certainty as to conversion plan and go-forward
dividend level.
| 20
Go-Forward 2010 2011
The plan:
Engage broker and sell the balance of the real estate portfolio.
Focus on energy sector.
Convert to high-yield dividend-paying corporation on or before December 31, 2010.
For 2010 or until corporate conversion, maintain current distribution of $0.06/unit
per month ($0.72/unit annualized).
- Based on current commodity and operational forecasts.
In 2011 or upon conversion to a corporation, adjust dividend to $0.045/share per
month ($0.54/share annualized).
- After tax, for top marginal tax rates, individuals are slightly better off with the
adjusted dividend vs. current distribution.
- Improves sustainability by reducing target payout ratio to 50% - 60%.
- Ensures payout ratio including capital expenditure is below 100%.
- Provides a buffer in low natural gas price environment.
Provides for a sustainable dividend ($0.045/share post conversion) and modest
growth (5% or greater depending on natural gas prices).
| 21
Energy Trust Comparables
| 22
Summary
High-yield dividend-paying corporation providing modest growth.
Focused in the energy sector.
Strong balance sheet with no debt and undrawn bank lines available to
take advantage of smaller niche growth opportunities.
| 23
Team
Corporate Energy Business Unit
William Gallacher, P. Eng., President & CEO Grant Leslie, P. Eng., COO, Energy
Gary Dundas, CMA, MBA, VP Finance & CFO Bob Guy, VP Production
Michelle O’Grady, CA, Controller Tim Watters, VP Exploration
Debbie Carter, Controller, Energy
Stuart King, CA, Financial Reporting Controller
Jill Koskimaki, BBA, Manager of Bus. Dev.
Elbow River Marketing Limited
Partnership
Directors Ed Malcolm, President
William Gallacher (Mgmt)
Arie Prins, CFO
Gary Dundas (Mgmt)
Dennis Balderston (Outside) Real Estate Business Unit
David Butler (Outside) Advisors: MDC Property Services Ltd.
Stuart Chow, Chair Reserves (Outside)
Jeff Kohn (Outside)
Alan Moon, Chair Corp. Gov. (Outside)
William Patterson, Chair Audit (Outside)
| 24
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