CALGARY, May 10, 2018 /CNW/ - (TSX: EGL): Eagle Energy
Inc. ("Eagle") is pleased to report its financial and operating results for the first quarter ended March 31, 2018.
As a reminder, Eagle's annual general meeting ("AGM") will be held on June 26, 2018 at
10:00 a.m. at Altius Centre, 2nd Floor, 500 - 4 Avenue SW, Calgary for shareholders of record on May 14, 2018.
When reflecting on Eagle's first quarter performance, Wayne Wisniewski, President and Chief
Executive Officer, stated, "Given our view of the growth opportunities in our North Texas asset,
we are seeking to reduce debt and corporate costs, including interest costs, to better position Eagle to capitalize on this
project. Our disposition of Salt Flat in February, resulting in a 34% reduction in debt,
was a step towards achieving that goal. In addition, we continue to make strides in reducing our general and administrative
expenses, which were 24% below first quarter 2017 levels."
Mr. Wisniewski continued, "We are pleased to report that Eagle's first horizontal well in North
Texas continues to perform above expectations. During the quarter, we drilled our second horizontal well in
North Texas at a location over 10 miles from the first horizontal well. Completion
operations are currently underway."
First Quarter 2018 Financial Results
Eagle's unaudited condensed consolidated interim financial statements and accompanying notes for the three months ended
March 31, 2018 and related management's discussion and analysis have been filed with the securities
regulators and are available online under Eagle's issuer profile at www.sedar.com and on Eagle's website at www.EagleEnergy.com.
This news release contains non-IFRS financial measures and statements that are forward-looking. Investors should read
"Non-IFRS Financial Measures" and "Note about Forward-looking Statements" near the end of this news release. Figures within
this news release are presented in Canadian dollars unless otherwise indicated.
Highlights for the Three Months ended March 31, 2018
- Disposed of the Salt Flat Field in Caldwell County, Texas for cash proceeds of
$34.4 million in early February.
- Reduced long term debt by 34% (from $US 58.2 million to $US 38.5
million) and further funded the North Texas drilling program with net proceeds from the
Salt Flat disposition.
- Drilled a second horizontal well in North Texas at a location over 10 miles from the first
horizontal well, with completion operations currently underway.
- Field netback improved by 32% on a per barrel of oil equivalent ("boe") basis (from $20.81 to $27.47 per boe) when compared to the first quarter of 2017.
- Increased funds flow from operations excluding one-time disposition costs and debt prepayment expenses by 219% (from
$1.6 million to $5.1 million) when compared to the first quarter of
2017.
- Recorded $1.7 million of funds flow from operations and $5.1
million for funds flow from operations excluding one-time disposition costs and debt prepayment expenses.
- Reduced general and administrative costs, excluding one-time disposition costs, by 24% when compared to the first quarter
of 2017.
2018 Outlook
Eagle remains focused on continuing to drill wells on its North Texas property due to its
high netbacks and opportunities for meaningful growth. This light oil development asset has approximately 25,000 net acres
under lease and is the site of Eagle's first horizontal well in North Texas, which was brought
on production in December 2017 and continues to perform above expectations. Eagle has drilled
its second horizontal well at a location over 10 miles from the first horizontal well, with completion operations currently
underway. Success on this second well would prove up additional leased acreage in the area. A third horizontal well
is planned for late 2018.
In light of our view of the growth opportunities in our North Texas asset, Eagle is seeking
to reduce debt and corporate costs, including interest costs, in order to better position itself to capitalize on this
project. Alternatives for funding growth could potentially include asset sales. The February
8, 2018 disposition of Eagle's assets in Salt Flat was an initial step towards Eagle
achieving its overall goals.
The Salt Flat disposition reduced Eagle's total corporate production by approximately 1,200
boe per day ("boe/d"). Following the Salt Flat disposition, an improved corporate
decline rate of 14% lends itself to Eagle sustaining 2018 average corporate production at post-Salt
Flat disposition levels with low capital expenditures.
The Salt Flat disposition also reduced Eagle's term loan by 34% (from $US 58.2 million to $US 38.5 million). On a go-forward basis, and excluding
one-time debt prepayment expenses relating to the disposition, lower debt levels at current interest rates will result in reduced
monthly interest costs. In addition, general and administrative expenses are expected to decrease in 2018 as Eagle
continues to focus on efficiencies and cost reduction.
Summary of Quarterly Results
|
|
|
|
|
|
|
|
|
|
Q1/2018
|
Q4/2017
|
Q3/2017
|
Q2/2017
|
Q1/2017
|
Q4/2016
|
Q3/2016
|
Q2/2016
|
($000's except for boe/d and
per share amounts)
|
|
|
|
|
|
|
|
|
Sales volumes – boe/d
|
2,974
|
3,804
|
3,749
|
3,966
|
3,767
|
3,803
|
4,085
|
4,147
|
|
|
|
|
|
|
|
|
|
Revenue, net of royalties
|
12,461
|
14,725
|
12,459
|
14,167
|
14,218
|
13,891
|
12,854
|
13,149
|
|
per boe
|
46.57
|
42.08
|
36.12
|
39.25
|
41.95
|
39.72
|
34.20
|
34.84
|
|
|
|
|
|
|
|
|
|
Operating, transportation and
marketing expenses
|
5,109
|
6,864
|
6,301
|
5,885
|
7,165
|
6,799
|
6,564
|
5,928
|
|
per boe
|
19.10
|
19.61
|
18.27
|
16.31
|
21.14
|
19.44
|
17.46
|
15.71
|
|
|
|
|
|
|
|
|
|
Field netback
|
7,352
|
7,861
|
6,158
|
8,282
|
7,053
|
7,092
|
6,290
|
7,221
|
|
per boe
|
27.47
|
22.47
|
17.85
|
22.94
|
20.81
|
20.28
|
16.74
|
19.13
|
|
|
|
|
|
|
|
|
|
Funds flow from operations
|
1,718
|
3,488
|
3,346
|
4,272
|
1,589
|
3,901
|
4,582
|
5,148
|
|
per boe
|
6.42
|
9.98
|
9.70
|
11.84
|
4.69
|
11.15
|
12.19
|
13.64
|
|
per share – basic
|
0.04
|
0.08
|
0.08
|
0.10
|
0.04
|
0.09
|
0.11
|
0.12
|
|
per share – diluted
|
0.04
|
0.08
|
0.07
|
0.10
|
0.04
|
0.09
|
0.11
|
0.12
|
|
|
|
|
|
|
|
|
|
Earnings (loss)
|
(2,568)
|
(14,293)
|
(4,711)
|
675
|
1,303
|
30,508
|
52
|
(9,288)
|
|
per share – basic
|
(0.06)
|
(0.34)
|
(0.11)
|
0.02
|
0.03
|
0.72
|
0.00
|
(0.23)
|
|
per share - diluted
|
(0.06)
|
(0.34)
|
(0.11)
|
0.02
|
0.03
|
0.72
|
0.00
|
(0.23)
|
|
|
|
|
|
|
|
|
|
Cash dividends declared
|
-
|
-
|
-
|
-
|
425
|
637
|
636
|
1,274
|
|
per issued
share
|
0.00
|
0.00
|
0.00
|
0.00
|
0.01
|
0.015
|
0.015
|
0.03
|
|
|
|
|
|
|
|
|
|
Current assets
|
14,941
|
13,869
|
11,122
|
11,847
|
18,819
|
9,302
|
9,787
|
10,618
|
Current liabilities
|
7,528
|
13,715
|
8,042
|
6,599
|
11,474
|
74,758
|
72,387
|
75,035
|
Total assets
|
174,877
|
207,314
|
213,867
|
222,155
|
233,951
|
218,199
|
190,945
|
195,044
|
Total non-current liabilities
|
70,870
|
94,312
|
92,367
|
97,086
|
104,359
|
26,202
|
31,690
|
32,397
|
Shareholders' equity
|
96,479
|
99,287
|
113,458
|
118,470
|
118,118
|
117,239
|
86,868
|
87,612
|
Shares issued
|
43,750
|
43,302
|
43,302
|
42,857
|
42,857
|
42,452
|
42,452
|
42,452
|
For the three months ended March 31, 2018, sales volumes were lower than the previous quarters
primarily due to the effect of the Salt Flat disposition, which closed on February 8, 2018, being only partially offset by additional production from wells drilled in Eagle's Twining
and North Texas areas.
First quarter 2018 field netback on a per boe basis increased 22% from the fourth quarter of 2017 due to higher commodity
prices, lower royalties and lower operating costs.
When one-time disposition costs and debt prepayment expenses ($3.4 million in total) associated
with the February 2018 Salt Flat disposition are excluded from first quarter 2018 funds flow from
operations, first quarter results show an increase of 46% (to $5.1 million from $3.5 million) from the fourth quarter of 2017. This is due to higher per boe field netbacks and a
realized foreign exchange gain on debt repayment more than offsetting a 22% decrease in sales volumes due to the
disposition.
Changes in earnings (loss) from one quarter to the next often do not move directionally or by the same amount as quarterly
changes in funds flow from operations. This is due to items of a non-cash nature that factor into the calculation of
earnings (loss), and those that are required to be fair valued at each quarter end. First quarter 2018 funds flow from
operations was 51% less than the fourth quarter of 2017, yet first quarter 2018 net income was 82% more than the fourth quarter
of 2017, primarily due to a non-cash impairment expense relating to oil and gas properties taken in the fourth quarter of
2017.
Non-IFRS Financial Measures
Statements throughout this news release make reference to the terms "field netback" and "funds flow from operations excluding
one-time disposition costs and debt prepayment expenses", which are non-IFRS financial measures that do not have a standardized
meaning prescribed by IFRS and may not be comparable to similar measures presented by other issuers.
"Field netback" is calculated by subtracting royalties, operating expenses, and transportation and marketing expenses
from revenues. This method of calculating field netback is in accordance with the standards set out in the Canadian Oil and
Gas Evaluation Handbook maintained by the Society of Petroleum Evaluation Engineers (Calgary Chapter). Management believes
that field netback provides useful information to investors and management because such a measure reflects the quality of
production and the level of profitability.
"Funds flow from operations excluding one-time disposition costs and debt prepayment expenses" is calculated by adding
back both costs associated with the disposition and the cash portion of finance expenses relating to the debt prepayment to funds
flow from operations. Management believes this measure provides useful information to investors and management because it shows
what funds flow would have been if Eagle had not incurred the one-time costs associated with the disposition of the Salt Flat properties.
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. Eagle cautions
investors that important factors could cause Eagle's actual results to differ materially from those projected, or set out, in any
forward-looking statements included in this news release.
In particular, and without limitation, this news release contains forward-looking statements pertaining to the following:
- Eagle's AGM;
- Eagle's drilling plans on its North Texas property and its expectation that additional
leased acreage would be proved up in the area if the second horizontal well is successful;
- Eagle's intentions to reduce debt and corporate costs, including interest costs;
- Eagle's expectations regarding alternatives for funding growth potentially including asset sales;
- Eagle's expectations regarding its corporate decline rate of 14% lending itself to Eagle sustaining 2018 average corporate
production at post-Salt Flat field disposition levels with low capital expenditures; and
- Eagle's expectations regarding reducing its interest costs and general and administrative expenses in 2018.
With respect to forward-looking statements contained in this news release, assumptions have been made regarding, among other
things:
- future crude oil, NGL and natural gas prices, differentials and weighting;
- future foreign exchange and interest rates;
- future capital expenditures and the ability of Eagle to obtain financing on acceptable terms;
- the ability of Eagle to complete its drilling program;
- future production estimates, which are based on the proposed drilling program with a success rate that, in turn, is based
upon historical drilling success and an evaluation of the particular wells to be drilled, among other things; and
- projected operating costs which are estimated based on historical information and anticipated changes in the cost of
equipment and services, among other things.
Eagle'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 those in Eagle's Annual Information Form dated March 20, 2018 (the
"AIF"):
- volatility of crude oil, NGL, and natural gas prices;
- commodity supply and demand;
- fluctuations in foreign exchange and interest rates;
- inherent risks and changes in costs associated with the development of petroleum properties;
- ultimate recoverability of reserves;
- timing, results and costs of drilling and production activities;
- availability and terms of financing and capital; and
- new regulations and legislation that apply to the operations of Eagle and its subsidiaries.
Additional risks and uncertainties affecting Eagle are contained in the AIF under the heading "Risk Factors".
As a result of these risks, actual performance and financial results in 2018 may differ materially from any projections of
future performance or results expressed or implied by these forward‐looking statements. Eagle's production rates, operating
and general and administrative costs, field netbacks, drilling program, capital budget, reserves and potential transactions are
subject to change in light of ongoing results, prevailing economic circumstances, obtaining regulatory approvals, commodity
prices, exchange rates, financing terms, 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
Eagle'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 Eagle and its shareholders. These statements speak only as of the date of this
news release and may not be appropriate for other purposes. Eagle 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 Inc.
Eagle is an oil and gas corporation with shares listed for trading on the Toronto Stock Exchange under the symbol "EGL".
All material information about Eagle may be found on its website at www.EagleEnergy.com or under Eagle's issuer profile at www.sedar.com.
SOURCE Eagle Energy Inc.
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