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Nature of Trust Units The trust units do not represent a traditional investment in the oil and natural gas sector and should not be viewed by investors as shares in a corporation. The trust units represent a fractional interest in the Trust. As holders of trust units, unitholders will not have the statutory rights normally associated with ownership of shares of a corporation. The Trust’s sole assets will be the royalty interests in the properties. The price per trust unit is a function of anticipated distributable income, the properties acquired by ARC and ARC’s ability to effect long-term growth in the value of the Trust. The market price of the trust units will be sensitive to a variety of market conditions including, but not limited to, interest rates and the ability of the Trust to acquire suitable oil and natural gas properties. Changes in market conditions may adversely affect the trading price of the trust units. Management and Financial Reporting Systems The Trust has continuously evolved and documented its management and internal reporting systems to provide assurance that accurate, timely internal and external information is gathered and disseminated. The Trust’s financial and operating results incorporate certain estimates including: a) estimated revenues, royalties and operating costs on production as at a specific reporting date but for which actual revenues and costs have not yet been received; b) estimated capital expenditures on projects that are in progress; and c) estimated depletion, depreciation and accretion and reported FD&A costs that are based on estimates of oil and gas reserves which the Trust expects to recover in the future. The Trust has hired individuals and consultants who have the skill set to make such estimates and ensures individuals or departments with the most knowledge of the activity are responsible for the estimate. Further, past estimates are reviewed and compared to actual results in order to make more informed decisions on future estimates. The ARC management team’s mandate includes ongoing development of procedures, standards and systems to allow ARC staff to make the best decisions possible and ensuring those decisions are in compliance with the Trust’s environmental, health and safety policies.

2004 Cash Flow Sensitivity Below is a table that shows sensitivities to pre-hedging cash flow with operational changes and changes to the business environment: Impact on Annual Cash Flow $/Unit %

Impact on Annual Distributions (2) $/Unit

Assumption

Change

$30.00

$1.00

$0.05

3.2%

$0.04

$ 5.25

$0.10

$0.03

1.6%

$0.02

$ 0.75

$0.01

$0.03

2.0%

$0.03

4.3%

1.0%

$0.02

1.0%

$0.01

Business environment Price per barrel of oil (US$WTI) (1) Price per mcf of natural gas (CDN$AECO) (1) CDN/USD exchange rate Interest rate on debt Operational Liquids production volume Gas production volumes

27,000

1.0%

$0.01

0.5%

$0.01

168,000

1.0%

$0.01

0.6%

$0.01

Operating expenses per boe

$ 7.20

1.0%

$0.01

0.4%

$0.01

G&A expenses per boe

$ 1.10

10.0%

$0.01

0.7%

$0.01

(1) Analysis does not include the effect of hedging. (2) Analysis assumes a 20 per cent holdback on distributions.

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2003  

Annual Report

2003  

Annual Report

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