Enerplus had another strong lead-off quarter in 2006 with both record production volumes and drilling activity. Our combined oil and natural gas production for the quarter averaged 85,392 BOE/day, setting a new high for Enerplus as a result of the ongoing strength of our operations in the United States and Canada. Our development program also achieved record levels in the quarter as we participated in the drilling of 289 wells (124.3 net) with a 100% success rate. We are well on track to meet our full year 2006 capital expenditures guidance of $485 million, having spent $129 million in the first quarter. The capital program concentrated on Bakken oil in Montana, coalbed methane in Alberta, tight shallow gas in southern Alberta and Saskatchewan, and the Athabasca oil sands in northern Alberta as we remain focused on the development of our resource plays.
Cash distributions paid in the quarter to our Canadian unitholders totaled $1.26 per unit and US$1.11 per unit to our U.S. unitholders. This represents a 20% increase in distributions for Canadian unitholders and a 31% increase for U.S. unitholders over the same period last year and is a result of our increased production volumes associated with our acquisition and development activities and increased commodity prices. We were able to retain over $61 million to fund our capital development program resulting in a payout ratio of 71% for the quarter.
Throughout the first quarter realized oil prices were reasonably consistent, averaging 16% higher than prices in the first quarter of 2005. Realized natural gas prices however declined throughout the first quarter of 2006. This decline in natural gas prices is believed to be largely the result of significant gas inventory builds through the warm winter experienced in North America. Overall, we believe the long-term supply/demand balance for both commodities remains tight. Oil prices in particular are impacted by growing global demand and supply disruptions in politically volatile producing regions. In this regard, we have seen increasing oil prices on the world stage and a widening gap between the price of oil and natural gas versus historical averages. While we believe the current natural gas price weakness may prove temporary, the duration of this lower gas price environment will be dependent upon the ability of the North American supply/demand system to rebalance itself. At this point in time, there is a great deal of uncertainty around the direction prices will go, however, there do not appear to be any long-term supply solutions for either commodity.
We continue to move forward on the development of the Joslyn oil sands lease with the operator, Deer Creek Energy Ltd., a wholly-owned subsidiary of Total E&P Canada ("Total"). As mentioned in our annual report, Total filed an application for the North Mine and we commissioned an interim reserves/resources report from our independent reserve engineers. This report quantified the recoverable resource associated with the mining potential for the lease and when combined with our existing booked reserves for SAGD, results in a best estimate of total recoverable resource for the lease in the order of 2 billion barrels (300 million barrels net to Enerplus). The best estimate of surface mineable gross bitumen recoverable resources of 1.7 billion barrels recognizes the North Mine as well as other mining areas. We continue to move forward with the first commercial SAGD phase of the project and additional work is underway to further define the opportunities for both SAGD and mining development on this lease. Reserves will be booked to the various potential projects as we advance these projects and resolve outstanding uncertainties on specific project design and timing issues.
In February, we opened our new office in Denver, Colorado which is responsible for the day-to-day operation of our Sleeping Giant project in Montana. The office is also managing the development of our land base in the Williston Basin and assisting our Calgary office in the pursuit of future growth and acquisition opportunities in the United States.
On March 20, we issued 4.37 million trust units through an equity issue that raised gross proceeds of $253.5 million at $58.00 per unit. The issue was very well received by the Canadian marketplace and was sold on a “bought deal” basis. The net proceeds of the offering were initially used to repay outstanding indebtedness and will help fund our capital expenditures program.
The Canadian oil and gas industry continues to face many challenges, not the least of which is the shortage of skilled workers. Rising oil and natural gas prices have spurred the competition for qualified, experienced professionals and have added to the complexity of our business. In a proactive effort to address this future manpower issue, Enerplus has partnered with the Southern Alberta Institute of Technology (“SAIT Polytechnic”) to create the Enerplus Innovation Centre, a new centre in the Trades and Technology Complex that will specialize in applied research and innovation. In addition to increasing the number of student seats by 2,735 and apprenticeship seats by 6,000, 60% of the applied research activities will focus on oil and gas development.
We are well underway for another successful year in 2006 with strong production volumes, robust commodity prices, a healthy balance sheet and the most extensive development prospect inventory in our 20 year history.
Gordon J. Kerr
President & Chief Executive Officer