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Eagle Energy Trust Releases Third Quarter Results: Actively Pursuing Redeployment Opportunities, $69.5 Million Cash On Hand, Debt Free, And A $61.6... [Global Data Point](Global Data Point Via Acquire Media NewsEdge) Eagle Energy Trust Releases Third Quarter Results: Actively Pursuing Redeployment Opportunities, $69.5 Million Cash On Hand, Debt Free, And A $61.6 Million Unused Credit Facility Richard Clark, Eagle's President and Chief Executive Officer, stated, "Eagle exited the third quarter in a strong financial position, with $69.5 million cash on hand, no debt and a $61.6 million unused credit facility. Eagle is actively pursuing acquisitions to redeploy capital in attractive investment opportunities. Our recent announcement to seek unitholder approval to permit investment in Canadian assets would expand our range of opportunities. We will still continue to actively acquire, operate and exploit U.S. oil and gas production. We are well positioned to achieve our primary objective of providing investors with a reliable distribution paying investment." Conference Call to Discuss Third Quarter Results Richard Clark, President and Chief Executive Officer, Kelly Tomyn, Chief Financial Officer, and Wayne Wisniewski, Chief Operating Officer, will host a conference call and webcast on Friday, November 7 at 9:00 a.m. MT (11:00 a.m. ET) to discuss the third quarter results. To participate in the conference call, dial 877-291-4570 (international dial-in number 647-788-4919) approximately 10 minutes prior to the call. To view the webcast, visit http://www.gowebcasting.com/6099 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 November 21, 2014. To access the recording, call 416-621-4642 or 800-585-8367 and quote this conference ID: 24456877. An audio version will also be available on Eagle's website at www.eagleenergytrust.com. Highlights for the three months ended September 30, 2014 Over 80% of the Trust's current production is hedged at an average price of over $US 90 per barrel WTI through to June 30, 2015, and 30% is hedged for the second half of 2015 at an average price of over $US 87 per barrel WTI. Eagle disposed of its entire working interest in its Permian properties on August 29, 2014 for net proceeds of $150.1 million ($US 140 million) after closing adjustments. The Trust is in a strong financial position, with approximately $69.5 million ($US 62.0 million) cash on hand, debt free and a $61.6 million ($US 55 million) unused credit facility. Eagle suspended the Premium Distribution™ component of its Distribution Reinvestment Plan ("DRIP") and reduced the market discount from 5% to 2% on units acquired under the regular DRIP. DRIP participation is expected to be substantially reduced from 60% to the range of 5% to 8%, significantly reducing the number of units issued each month. To date, 91% of the $US 28 million capital program for 2014 has been executed with results performing to expectations. In recent news, Eagle announced that it will seek unitholder approval at a Special Meeting on November 24, 2014 to permit investment in Canadian assets to expand its range of opportunities in addition to continuing to actively acquire, operate and exploit U.S. oil and gas production in accordance with the Trust's growth strategy. Disposition 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. The Trust's working interest production following the closing of the disposition of the Permian properties was approximately 1,900 barrels of oil per day. Operations update Hardeman Properties Eagle commenced drilling its first well in Hardeman County, Texas using newly processed and interpreted 3D seismic in late September. Results of this well are expected by mid-November. Eagle commenced drilling its second Hardeman County well in late October. Eagle continues to evaluate the newly processed seismic data to de-risk additional drilling opportunities. While primarily targeting Mississippian carbonates, an opportunity also exists for Pennsylvanian and Ordovician production. Eagle began operating its first Hardeman property in January 2014 and its second Hardeman property in March 2014. From the time Eagle assumed operations, costs have been reduced on both properties and continue to trend downward as a result of reduced water disposal and power costs. These two components represent approximately 80% of field operating costs. Eagle has been optimizing water disposal techniques with the overall vision to have all water piped to Eagle owned and operated disposal wells across the field. Eagle plans to drill a salt water disposal well in 2015 pending permits and rig availability. Propane is utilized at wells remotely situated from the electricity grid. To reduce costs, Eagle acquired and repaired an inactive natural gas sharing system and recompleted a natural gas well to displace propane as fuel. Other initiatives include well-site electrification, the installation of additional natural gas sharing lines and relocating existing natural gas powered generators to further optimize fuel usage. Salt Flat Properties Eagle completed and placed one well on production at Salt Flat during the quarter. This well was a "sidetrack" well, and was a successful pilot project undertaken by Eagle to show that, in some cases, production can be added at a lower cost by drilling less expensive "sidetrack" wells instead of drilling new wells. Eagle continues to optimize pump size and power usage in the field and, earlier in the year, installed eight horizontal pumps with good success. In aggregate, the results of the Salt Flat capital program have exceeded expectations. Year-over-year field operating expense reductions continue at Salt Flat with expenses expected to be 5% to 7% lower than in 2013. On a dollar basis, Eagle expects year-over-year field operating expense savings of approximately $US 1.0 million. Eagle has negotiated a new power contract for all of its operated assets. This new contract is below five cents per kilowatt hour and will ensure that electrical costs do not fluctuate for the next three years. This is particularly important since electricity constitutes more than half of Salt Flat's operating costs. During the third quarter, Eagle conducted a high density 3D seismic program at Salt Flat with the intention of developing additional well locations. The program encompassed 8.3 square miles and was completed on time and on budget. The data is presently being processed, with interpretation to commence late in the fourth quarter. Outlook With the August 29, 2014 disposition of its entire working interest in its Permian properties, Eagle announced that it had withdrawn its current guidance and that it expected to provide revised guidance after the sale proceeds are re-deployed. The Trust's working interest production following the disposition of the Permian properties was approximately 1,900 barrels of oil per day. Following the disposition, Eagle has approximately $69.5 million ($US 62.0 million) of cash on hand and a $61.6 million ($US 55 million) unused credit facility. Eagle will be holding a Special Meeting of unitholders on November 24, 2014 to vote on a special resolution to amend the investment restrictions in Eagle's Trust Indenture to permit the acquisition of Canadian energy assets. Eagle's management and directors have significant experience acquiring and developing energy assets in Canada. Management believes opportunities in Canada are as attractive as opportunities in the U.S. because market conditions in Canada's oil and gas sector have resulted in Canadian oil and gas assets being available at attractive prices. Management expects pricing differentials to continue to narrow over the coming years with the expansion of liquefied natural gas, rail and pipeline infrastructure. Management also believes that investing in Canada will mitigate the Trust's commodity price, foreign exchange and interest rate risk through diversification. Field netback and funds flow from operations are non-IFRS measures. Working interest sales volumes for the third quarter of 2014 averaged 2,859 boe/d (82% oil, 9% natural gas liquids, 9% natural gas), 6% below September 30, 2013 average sales volumes and 14% below the second quarter 2014 average sales volumes. Third quarter 2014 sales volumes are lower because they only include production from the Permian properties up to the August 29, 2014 disposition date. The Trust's working interest sales volume following the disposition of the Permian properties was approximately 1,900 boe/d. For the three months ended September 30, 2014, sales revenue decreased by 12% when compared to the prior year's comparative quarter and by 18% when compared to the second quarter of 2014. The decrease is attributable to lower volumes as the Permian properties were sold on August 29, 2014, as well as to lower realized oil prices resulting from the decline in the WTI benchmark price. There is a quality differential between the benchmark WTI price and the $US price realized by the Trust. Eagle enters into field marketing contracts to obtain the most favourable pricing. Management monitors pricing regularly and endeavours to maximize realized sales prices while minimizing counterparty risk. For the Salt Flat properties, the field marketing contracts use Louisiana Light Sweet ("LLS") as a benchmark reference price instead of WTI. From May through to November, Eagle's marketing contract holds all other field pricing adjustments fixed and allows the LLS-WTI differential to float. For Hardeman properties, the field marketing contracts from May through November use WTI as a reference price. These contracts hold all other field pricing adjustments fixed. Based on current estimated working interest production, Eagle is hedged at approximately 87% for the fourth quarter of 2014 at a weighted average price of $US 93.19 per barrel WTI. The Trust is also hedged at approximately 80% for the first half of 2015 at a weighted average price of $US 90.72 per barrel WTI, and at approximately 30% for the second half of 2015 at a weighted average price of $US 87.09 per barrel WTI. 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, third quarter 2014 funds flow from operations decreased 29% from the second quarter while Eagle reported a positive earnings swing of $31.3 million for the same period. This occurred for the following reasons. Firstly, a weaker forward commodity price environment increased the fair market valuation of Eagle's forward commodity contracts. Secondly, an impairment was recognized in the second quarter on Eagle's oil and gas properties in relation to the disposition of the Permian properties. Lastly, the lower unit price at the end of the third quarter of 2014 caused a higher unit-based compensation recovery to be recorded upon performing a fair market valuation of future unit-based payments. As of September 30, 2014, the Trust had approximately $69.5 million ($US 62.0 million) cash on hand, no debt and $61.6 million ($US 55 million) credit facility. During the third quarter of 2014, the Trust spent $1.8 million on drilling, completions, tie-ins and recompletions. Of this total, $0.6 million was for drilling and tie-in of one Salt Flat well, $0.7 million was for drilling preparation work on two Hardeman wells (which are currently underway), and $0.5 million was for recompleting existing Hardeman wells. Additionally, $0.3 million was for seismic processing for the Hardeman properties and preparation for the seismic shoot on the Salt Flat 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 will continue to actively pursue acquisitions in the U.S. and seek unitholder approval on November 24, 2014 to expand into Canada. Unitholders Rights Plan Adopted Eagle also announced today that the board of directors of the administrator of the Trust (the "Board") has approved the adoption of a unitholder rights plan (the "Rights Plan"). The Rights Plan has been adopted by the Board to allow the Board to respond appropriately to an unsolicited take-over bid. The Rights Plan is intended to discourage coercive or unfair take-over bids and gives the Board time to pursue alternatives to maximize unitholder value, if appropriate, in the event of an unsolicited take-over bid. Eagle is not adopting the Rights Plan in response to any specific proposal to acquire control of its outstanding units. The Rights Plan is similar to other plans recently adopted by several Canadian companies. The rights issued under the Rights Plan will become exercisable only when a person, including any party related to it, acquires or announces its intention to acquire 20% or more of the outstanding units of the Trust without complying with the "Permitted Bid" provisions of the Plan or without approval of the Board. Should such acquisition occur, each right will, upon exercise, entitle a right holder other than the acquiring person or related persons to purchase units of the Trust at a discount to the market price at the time. Under the Plan, a "Permitted Bid" is a bid made to all unitholders of the Trust and is open for acceptance for not less than 60 days. If, at the end of such 60 day period, at least 50% of the outstanding units, other than those owned by the offeror or certain related parties, have been tendered, the offeror may take up and pay for the units but must extend the bid for a further 10 days to allow other unitholders to tender. The Board has the discretion to defer the time at which the rights become exercisable and to waive the application of the Rights Plan. Although effective as of today, the Rights Plan is subject to Toronto Stock Exchange ("TSX") approval. It will also be required to be ratified by the unitholders of Eagle within six months of its adoption. If the Rights Plan is not ratified by the unitholders, the Rights plan and any rights issued pursuant to it will terminate. If the Rights Plan is ratified, it will continue in effect until the third annual meeting of unitholders thereafter. A copy of the Rights Plan will be available under the Trust's profile on SEDAR at www.sedar.com. Normal Course Issuer Bid The Trust also announced today its intention to seek TSX approval for a normal course issuer bid ("NCIB"). Purchases of units for cancellation will be made, subject to the Trust's ongoing capital requirements. Such purchases over a 12 month period will not exceed 2,828,041 units, or approximately 8% of the Trust's current outstanding units. The Trust will file a notice of intention to make an NCIB with the TSX. This bid would commence following TSX acceptance of the notice and continue for up to one year. Purchases would be made through the facilities of the TSX and other Canadian marketplace in accordance with the requirements of the TSX. The Trust intends to establish an automatic program under which its broker would repurchase the Trust's units pursuant to the NCIB within a defined set of criteria that the Trust would not vary or suspend. The Trust would be able to purchase up to 33,238 units during any trading day, which represents 25% of the Trust's average daily trading volume on the TSX over the past six months. This limitation does not apply to purchases made pursuant to block purchase exemptions. The price paid for the units will be the market price at the time of the purchase and the units repurchased under the NCIB will be cancelled. The Board believes that, from time to time, market conditions provide opportunities for the Trust to acquire units at attractive prices and that the purchases are an appropriate use of funds that will enhance value of the units held by the remaining unitholders. (c) 2014 GlobalData Provided by SyndiGate Media Inc. (Syndigate.info). |