Eagle Energy Trust Releases 2014 Annual Results and Reserves Information
(firmenpresse) - CALGARY, ALBERTA -- (Marketwired) -- 03/19/15 -- Eagle Energy Trust (TSX: EGL.UN) ("Eagle" or the "Trust") is pleased to report its financial and operating results for the three months and year ended December 31, 2014 and its 2014 reserves information.
"Our key focus in 2014 was to improve the sustainability of our business while maintaining a strong balance sheet. We believe we succeeded and that our efforts have set us apart from our peer group", said Richard Clark, the Trust's President and CEO. "In 2014, we sold our Permian asset when commodity prices were strong in August and then took advantage of the downturn in the market in December to acquire the Dixonville asset - a premier long life Canadian asset. At the same time, we reduced our debt levels by over $50 million."
Mr. Clark continued, "Our ability to transact in a timely manner, to quickly adjust our capital program to adapt to changing commodity prices, and our success at achieving cost savings through active negotiations with our suppliers, has had a significant positive impact on the sustainability of our business. Also, the recent expansion of our credit facility affords us some dry powder for future growth as accretive opportunities become available. Lastly, we replaced more than 100% of the barrels we produced in 2014, despite our capital budget being predominantly limited to sustaining capital."
The Trust's reserves data and other oil and gas information is included in its Annual Information Form ("AIF"). The audited consolidated financial statements, management's discussion and analysis and AIF have been filed with the securities regulators and are available on the Trust's website at and will be available under the Trust's issuer profile on the SEDAR website at .
Conference Call
Mr. Clark, Kelly Tomyn, Chief Financial Officer, and Wayne Wisniewski, Chief Operating Officer, will host a conference call and webcast on Friday, March 20 at 9:00 a.m. MDT (11:00 a.m. EDT) to discuss the results. To participate in the conference call, dial toll free 888-847-2288 or (678-967-4440) approximately 10 minutes prior to the call and enter the code 93147447. To listen to the call on the web, visit at the time of the call. A question and answer period will follow the call.
Two hours after the live call, a digital recording will be available for replay until midnight on April 3, 2015. To access the recording, call 800-585-8367 and quote this conference ID: 93147447. An audio version will also be available on Eagle's website at .
In this news release, references to "Eagle" include the Trust and its operating subsidiaries. This news release contains statements that are forward-looking. Investors should read the "Note regarding forward-looking statements" near the end of this news release.
Highlights for the year ended December 31, 2014
Management's 2014 objective was to reduce the overall decline rate of Eagle's assets and the capital necessary to maintain production levels. Achieving this objective increased Eagle's free cash flow and improved the sustainability of its business.
Eagle achieved the following results in 2014:
Acquisition in December 2014
On December 18, 2014, a newly formed Canadian subsidiary of the Trust closed the acquisition of a 50% non-operated working interest in producing properties near the town of Dixonville, in the Peace River area of Alberta, for $100.9 million. Through the acquisition of this premier, long-life, oil producing water-flood property, Eagle acquired interests in 112 (56 net) producing wells, 82 (41 net) injection wells and associated facilities, gathering systems and pipelines. With less than 10% average annual decline, stable production base and low sustaining capital requirement, the Dixonville asset substantially reduced Eagle's total corporate sustaining capital requirements and dropped its corporate decline rate from approximately 30% to under 20%. The acquired working interest production at the date of the acquisition was approximately 1,250 boe per day for a purchase price metric of approximately $80,000 per flowing boe/d. The effective date of the acquisition was January 1, 2015.
This acquisition was funded with $55 million of the Trust's available cash and the balance from its existing credit facility. Concurrent with the closing of the acquisition, Eagle's credit facility was expanded to $US 70 million. On February 11, 2015, the credit facility was further expanded to $US 95 million. Amounts drawn on the credit facility can be denominated in US or Canadian dollars and provide Eagle with a funding source to grow through accretive opportunities that become available.
2015 Budget and Outlook
This outlook section is intended to provide unitholders with information about Eagle's expectations as at the date hereof for production and capital expenditures for 2015. Readers are cautioned that the information may not be appropriate for any other purpose. This information constitutes forward-looking information. Readers should note the assumptions, risks and discussions under "Note about forward-looking statements" at the end of this news release.
There have been no changes to Eagle's 2015 average production forecast of 2,950 to 3,150 boe/d on a $13.7 million capital budget ($US 9.9 million for its operations in the United States and $1.4 million for its operations in Canada), as originally disclosed in its February 12, 2015 news release.
Eagle's 2015 capital and operating budget is designed to minimize the capital spend necessary to sustain production levels, and then add a designated component of growth-focused capital. 2015 is expected to be a year of volatile commodity prices and Eagle's budget has been designed to reflect these circumstances.
The 2015 capital budget of $13.7 million ($US 9.9 million in the US and $1.4 million in Canada), consists of the following:
Eagle's 2015 budget in Canada ($1.4 million) will be limited to maintenance capital at Dixonville. For its U.S. operations, Eagle's 2015 budget ($US 9.9 million) continues to focus on asset development in Texas and Oklahoma and delivering Eagle's commitment of sustainability, both at Salt Flat and at Hardeman. Eagle is evaluating seismic data from its 2014 seismic programs at Salt Flat and at Hardeman. The opportunity at Salt Flat is to better understand the faulting system in the field, and to identify reserves that have not been accessed by Eagle's existing wells and infrastructure. Eagle's focus at the Hardeman property is to continue to identify and delineate Chappell formation locations and to carry on from its successful 2014 drilling program in the area.
Eagle's 2015 guidance for its capital budget, production, operating costs and funds flow from operations is as follows:
A table showing the sensitivity of Eagle's funds flow to changes in production, exchange rates and commodity pricing is set out below under the heading "2015 Sensitivities".
Calculations regarding Eagle's distributions
Eagle calculates its payout ratios and financial strength as follows:
A table showing the sensitivity of Eagle's Corporate Payout Ratio to changes in production, exchange rates and commodity pricing is set out below under the heading "2015 Sensitivities".
2015 Sensitivities
The following tables show the sensitivity of Eagle's funds flow, corporate payout ratio and net debt to cash flow to changes in commodity price, exchange rates and production:
Operations update
The disposition of the Permian properties in Martin County, Texas and the acquisition of the Dixonville properties in Alberta significantly changed the nature of Eagle's asset base. Forecast corporate declines have dropped from approximately 30% to under 20%, with the result being a significant reduction in required sustaining capital. As commodity prices recover, the percentage of free cash flow realized by the Trust will increase.
Eagle is well positioned to achieve full year 2015 production targets of 2,950 to 3,150 boe/d. Eagle will continue to focus on operational efficiencies and capital discipline during 2015 that lead to cost reductions.
At its Hardeman properties, Eagle has implemented a number of enhancements that have resulted in production gains. Eagle is continuing its efforts to lower operating expenses, by drilling a saltwater disposal well in the southern Hardeman operating area and installing electrical infrastructure for additional cost improvements. During the fourth quarter 2014, Eagle executed a successful two-well oil drilling program, validating its development plans for the area. Eagle is undertaking an extensive geological and geophysical review of the property in order to identify and quantify future drilling opportunities in addition to the three wells included in Eagle's 2015 capital budget.
At Salt Flat, Eagle drilled two new wells, side-tracked one existing well and installed eight horizontal pumps in existing wells to increase oil production. This work resulted in Eagle's best capital efficiency to date in the Salt Flat field. Eagle completed its planned 3-D seismic program and is currently evaluating the resulting seismic data, which is expected to optimize future drill locations in addition to the three wells already included in the 2015 capital budget and potentially identify lower zones to recover additional reserves. A combination of new wellbores and sidetracks of existing wellbores could be used to target the lower benches.
Prior to the sale of its Permian properties, Eagle drilled two new wells and recompleted eight wells. Eagle sold this property effective July 1, 2014.
On December 18, 2014, Eagle acquired a 50% non-operated working interest in the Dixonville property, located near Peace River, Alberta. The Dixonville property is a horizontal well waterflood producing from the Montney "C" oil pool and is operated by the other working interest owner. The pool is characterized by low declines, a stable production base and low ongoing capital requirements. In 2014, the field experienced two line leaks and the operator shut-in the field for a period of time. As a result, capital was directed towards a pipeline remediation program which included liner installation in the emulsion gathering system. The majority of the capital required for the remediation program was incurred prior to the January 1, 2015 effective date of the acquisition. The remaining capital is forecast to occur in the first quarter of 2015, with Eagle's share included as part of the $1.4 million capital forecast in the 2015 budget.
Year-end reserves information
Eagle targets low risk, producing properties with development potential, and maintains or grows production by converting the non-producing portion of those assets into producing assets, thereby sustaining cash flow and distributions. When the Trust makes an acquisition, it expects to record 100% of the acquired proved plus probable reserves and then develop those reserves over time, ultimately moving reserves from the probable to the proved category.
The Dixonville asset is a fully developed, long-life waterflood property. Only maintenance capital is planned for 2015 and no significant new drilling or production increases are anticipated. However, as the Dixonville asset has a very low recovery factor compared to its total booked reserves, Eagle anticipates that future capital opportunities will arise which will serve to enhance the recovery factor of the field.
An independent evaluation of the Trust's U.S. reserves was conducted by Netherland, Sewell & Associates, Inc. and of the Trust's Canadian reserves by McDaniel and Associates Consultants Ltd. These reserves evaluation reports are effective December 31, 2014 and were prepared in accordance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities.
2014 year-end reserves report - highlights
The following tables summarize the independent reserves estimates and values of Eagle's reserves as at December 31, 2014:
At a 10% discount factor, proved developed producing reserves comprise 65% (2013 - 49%) of the total proved plus probable value. Total proved reserves account for 78% (2013 - 74%) of the total proved plus probable value.
Future development cost
Total future development costs are estimated at $26.2 million for total proved reserves and $43.0 million for total proved plus probable reserves. When compared to 2015 funds flows guidance of $29.5 million (based on $US 60 WTI oil price and a $1.25 FX rate), future development costs represent a conservative 0.9 years and 1.5 years of funds flow.
Reconciliation of Changes in Reserves
The following table set forth the reconciliation of the Trust's gross reserves as at December 31, 2014 in total.
Reserves performance ratios
During 2014, Eagle's capital expenditures, including acquisition capital, resulted in capital efficiency statistics as shown in the following table. Statistics which cannot be meaningfully calculated are shown as a dashed line.
Selected annual information
The following table shows selected information for the Trust's fiscal year ended December 31, 2014, December 31, 2013 and December 31, 2012.
Funds flow from operations is a non-IFRS financial measure. See "Non-IFRS financial measures".
For the three months ended December 31, 2014, sales volumes decreased 33% compared to the previous quarter because fourth quarter sales volumes reflect the full quarter impact of the Permian property disposition on August 29, 2014. Prior to the third quarter 2014, with the exception of the fourth quarter 2013, which encountered non-recurring weather related delays and non-owned infrastructure problems, production has generally increased commensurate with well tie-ins and acquisitions. See "Activity summary" and "Capital expenditures".
Funds flow from operations decreased in the fourth quarter of 2014 when compared to the prior quarter due to weaker commodity prices, the disposition of the Permian property, and additional administrative expenses typical for the fourth quarter. Fourth quarter 2014 funds flow from operations was further tempered by one-time transaction costs associated with the acquisition of the Dixonville property including the special meeting of the unitholders. Generally, in times of steady or increasing prices, funds flow from operations per boe increases when sales volumes increase and decreases when sales volumes decrease. This is because certain expenses tend to be more fixed in nature (such as operating costs, and general and administrative expenses) and do not decrease as sales volumes decrease.
Income (loss) on a quarterly basis often does not move directionally or by the same amount as movements in funds flow from operations. This is primarily due to non-cash items that factor into the calculation of income (loss), and other items which are required to be fair valued at each quarter end. By way of example, fourth quarter 2014 funds flow from operations decreased 24% from the third quarter while the absolute swing from third quarter income to a fourth quarter loss was by a much larger percentage. This occurred because an impairment charge was recognized on Eagle's oil and gas assets in relation to its Salt Flat properties. The effect of the impairment charge was slightly offset by a weaker forward commodity price environment that increased the fourth quarter fair market valuation of Eagle's forward commodity contracts, and the lower unit price at the end of the fourth quarter of 2014 that caused a higher unit-based compensation recovery to be recorded upon performing a fair market valuation of future unit-based payments.
Refer to the "Operations update" section at the beginning of this news release.
Capital expenditures
Capital spending during the quarter and year ended December 31, 2014 and December 31, 2013 was as follows:
During the fourth quarter of 2014, the Trust spent $3.7 million on drilling, completions, tie-ins and recompletions. Of this total, $3.3 million was spent to drill and tie-in two Hardeman wells and $0.4 million to recomplete existing wells in Hardeman and Salt Flat. In addition, $0.5 million was spent for seismic processing in the Hardeman properties. Refer to the "Operations update" section of this news release.
Eagle is well positioned for growth with financial flexibility and operational strength. The Trust intends to continue to actively pursue acquisitions in the U.S. and Canada.
Property acquisitions
Dixonville property
On December 18, 2014, the Trust's newly established Canadian operating subsidiary, Eagle Energy Canada Inc., acquired a 50% non-operated working interest in producing properties in the Dixonville Montney "C" oil pool located in north central Alberta for cash consideration of $100.9 million, which includes preliminary closing adjustments of $909,620. The closing adjustments are subject to change. The acquisition established a new strategic Canadian property and diversified the Trust's portfolio of petroleum assets.
Consideration consisted of cash. The acquisition has been accounted for as a business combination with the fair value of the net assets as follows:
Hardeman properties
On February 27, 2014, the Trust's U.S. operating subsidiary acquired undeveloped acreage and an average 66% working interest in producing properties in Hardeman County, Texas and in Greer, Harmon and Jackson counties, Oklahoma for cash consideration of $5.4 million. The acquisition increased Eagle's established position in Hardeman County.
Consideration consisted of cash. The acquisition has been accounted for as a business combination with the fair value of the net assets as follows:
Property disposition
Permian property
On August 29, 2014, the Trust's U.S. operating subsidiary closed the sale of its entire working interest in oil and natural gas properties in the Permian Basin, located near Midland, Texas, for net proceeds of $150.1 million ($US 140 million) after closing adjustments. Prior to its disposition the Trust recognized an impairment charge on the asset, reducing its carrying value to its net realizable value. Accordingly, no gain or loss was recorded on the sale.
Proceeds consisted of cash. The disposition has been accounted for as follows:
Non-IFRS financial measures
Statements throughout this news release make reference to the terms "field netback", "funds flow from operations", "free cash flow", "basic payout ratio" and "corporate payout ratio", which are non-International Financial Reporting Standards ("IFRS") financial measures that do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. Management believes that these terms provide useful information to investors and management since such measures reflect the quality of production, the level of profitability, the ability to drive growth through the funding of future capital expenditures and the sustainability of distributions to unitholders. "Funds flow from operations" is calculated before changes in non-cash working capital and abandonment expenditures. "Field netback" is calculated by subtracting royalties and operating costs from revenues. "Free cash flow" is calculated by subtracting capital expenditures from field netbacks for the property. "Basic payout ratio" and "corporate payout ratio" are calculated as set forth under "2015 Budget and Outlook - Calculations regarding Eagle's distributions". See the "Non-IFRS financial measures" section of the management discussion and analysis for a reconciliation of funds flow from operations and field netback to earnings (loss) for the period, the most directly comparable measure in the Trust's audited annual consolidated financial statements. Other financial data has been prepared in accordance with IFRS.
Note about forward-looking statements
Certain of the statements made and information contained in this news release are forward-looking statements and forward looking information (collectively referred to as "forward-looking statements") within the meaning of Canadian securities laws. All statements other than statements of historic fact are forward-looking statements. The Trust cautions investors that important factors could cause the Trust's actual results to differ materially from those projected, or set out, in any forward-looking statements included in this news release. Statements relating to "reserves" are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described exist in the quantities predicted or estimated and can be profitably produced in the future.
In particular, and without limitation, this news release contains forward looking statements pertaining to the following:
With respect to forward-looking statements contained in this news release, assumptions have been made regarding, among other things:
The Trust's actual results could differ materially from those anticipated in these forward-looking statements as a result of the risk factors set forth below and included in the Trust's Annual Information Form for the year ended December 31, 2014 ("AIF") available on SEDAR at :
Additional risks and uncertainties affecting the Trust are contained in the Trust's AIF under the heading "Risk Factors".
As a result of these risks, actual performance and financial results in 2015 may differ materially from any projections of future performance or results expressed or implied by these forward-looking statements. Eagle's production rates, operating costs, 2015 capital budget, funds flow, field netbacks, decline rates, reserves volumes and values, and the Trust's distributions are subject to change in light of ongoing results, prevailing economic circumstances, obtaining regulatory approvals, commodity prices, exchange rates and industry conditions and regulations. New factors emerge from time to time, and it is not possible for management to predict all of these factors or to assess, in advance, the impact of each such factor on the Trust's business, or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward looking statement.
Undue reliance should not be placed on forward-looking statements, which are inherently uncertain, are based on estimates and assumptions, and are subject to known and unknown risks and uncertainties (both general and specific) that contribute to the possibility that the future events or circumstances contemplated by the forward looking statements will not occur. Although Management believes that the expectations conveyed by the forward-looking statements are reasonable based on information available to it on the date the forward-looking statements were made, there can be no assurance that the plans, intentions or expectations upon which forward-looking statements are based will in fact be realized. Actual results will differ, and the difference may be material and adverse to the Trust and its unitholders. The Trust does not undertake any obligation, except as required by applicable securities legislation, to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise.
Note regarding barrel of oil equivalency
This news release contains disclosure expressed as "boe" or "boe/d". All oil and natural gas equivalency volumes have been derived using the conversion ratio of six thousand cubic feet ("Mcf") of natural gas to one barrel ("bbl") of oil. Equivalency measures may be misleading, particularly if used in isolation. A conversion ratio of 6 Mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the well head. In addition, given that the value ratio based on the current price of oil as compared to natural gas is significantly different from the energy equivalent of six to one, utilizing a boe conversion ratio of 6 Mcf: 1 bbl would be misleading as an indication of value.
About Eagle Energy Trust
Eagle is an oil and gas energy trust created to provide investors with a sustainable business while delivering moderate growth in production and overall growth through accretive acquisitions. Eagle's units are traded on the Toronto Stock Exchange under the symbol EGL.UN.
All material information about Eagle may be found on its website at or under Eagle's issuer profile at .
Contacts:
Eagle Energy Inc.
Kelly Tomyn
Chief Financial Officer
(403) 531-1574
Eagle Energy Inc.
Richard W. Clark
President and Chief Executive Officer
(403) 531-1575
Eagle Energy Inc.
Suite 2710, 500-4th Avenue SW
Calgary, Alberta T2P 2V6
(403) 531-1575
(855) 531-1575 (toll free)
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Datum: 20.03.2015 - 01:15 Uhr
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