On December 1, 2012 Peyto disposed of some minor non-core Open Range assets in the Waskahigan area for total proceeds of $20.9 million reflected in the previous capital summary as a disposition and gain on disposition.
Production for Q4 2012 was up 26% from Q4 2011 to 49,754 boe/d including 299 mmcf/d of natural gas and 5,286 bbl/d of oil and natural gas liquids. Fourth quarter production was less than expected, however, due to an unanticipated outage at Peyto's Oldman gas processing facility. The cause of the outage was a faulty piece of equipment installed during the new Oldman Deep Cut plant expansion. The defective equipment prevented the operation of approximately two thirds, or 80 mmcf/d, of the processing capacity at the facility. This equipment has been repaired and the impacted processing capacity was brought back online on January 7, 2013 with the Deep Cut plant operation commencing January 25, 2013. Approximately 10,700 boe/d of net production was offline for the final 13 days in December.
Peyto's natural gas price in the fourth quarter 2012 of $3.45/mcf was 18% lower than the previous year, while the realized oil and natural gas liquids price of $73.01/bbl was 17% lower. These prices combined for a realized price of $4.38/mcfe including $0.13/mcfe of realized hedging gain. Q4 2012 total cash costs of $1.10/mcfe included $0.34/mcfe for royalties, $0.31/mcfe for operating costs, $0.11/mcfe for transportation, $0.02/mcfe for G&A and $0.32/mcfe for interest. Realized prices less cash costs resulted in cash netbacks for the quarter of $3.28/mcfe or a 75% operating margin.
Peyto incurred a one-time tax charge of $1.9 million or $0.12/mcfe in the quarter due to the reassessment of Peyto's 2003 Alberta income tax return. The reassessment related to the treatment of the payout of stock options for income tax purposes upon conversion to an income trust in 2003. The federal reassessment was paid to Canada Revenue Agency in 2008, however, the Alberta Government subsequently reassessed the 2003 Alberta income tax return in January, 2013 which was paid in the same month and accrued as a one-time charge in the 2012 financial results.
The current natural gas price outlook is substantially better than this time last year. Although storage volumes are at the high end of historical levels, growing demand and flat to declining North American natural gas supply is supporting prices at $3.00/GJ CND$ and $3.50/MMBTU US$. With current supplies matching demand, weather should continue to play a significant role in future prices. In addition, natural gas is playing an increasing role for summer power generation, particularly in light of the current projections for decreased hydro power this coming spring and ongoing retirement of coal fired power plants.
Natural gas liquids prices have, in general, remained substantially higher than the equivalent price in gaseous form. Recent industry trends to extract more Propane and Ethane from the natural gas production have increase supplies and filled available liquefied petroleum gas ("LPG") fractionation plant capacity. This has put significant downward pressure on the price for these specific products which will likely continue for the near future. The majority of Peyto's LPG is under long term contract for transportation and fractionation.
Approximately 50% of Peyto's natural gas production in the fourth quarter had been pre-sold in forward sales done over the previous year at an average price of $3.17/GJ. The remaining balance of production was subject to AECO monthly spot prices that averaged $2.90/GJ. On a blended basis, Peyto's realized gas price was $3.04/GJ or $3.45/mcf, reflective of Peyto's high heat content natural gas production.
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