CALGARY, Aug. 9, 2018 /CNW/ - (TSX: EGL): Eagle
Energy Inc. ("Eagle") is pleased to report its financial and
operating results for the second quarter ended June 30, 2018, as well as to reiterate the
previously announced sale of its Twining assets.
When reflecting on Eagle's second quarter and the Twining asset
sale announcement, Wayne Wisniewski,
President and Chief Executive Officer, stated, "Eagle continues to
execute its previously announced plan to reduce debt and corporate
costs. To the end of June, and excluding one-time costs
associated with the Salt Flat
disposition, our year to date general and administrative expenses
are 34% lower than 2017. In addition, when compared to 2017
year end, we have reduced our term loan by 34% and intend to use
the net proceeds from our Twining asset sale closing in
August 2018 to further reduce
debt."
Mr. Wisniewski continued, "We are pleased to report that we plan
to drill our third North Texas
horizontal well late in the third quarter. The well location
is approximately one mile from our initial horizontal well, a well
which has exceeded production expectations. Although our
second North Texas horizontal well
(which is located 13 miles from our initial well) did not meet our
budget expectations with a 30 day initial production rate of 70
barrels of oil equivalent per day, technical work is ongoing to
better understand the lower than expected oil cut."
Second Quarter 2018 Financial Results
Eagle's unaudited condensed consolidated interim financial
statements and accompanying notes for the three and six months
ended June 30, 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 June 30, 2018
- Field netback improved by 28% on a per barrel of oil equivalent
("boe") basis (from $22.94 to
$29.26 per boe) when compared to the
second quarter of 2017.
- General and administrative expenses to the end of June 2018, excluding one-time costs associated
with the Salt Flat disposition,
are 34% lower than 2017.
- Long term debt at the end of the second quarter is 34% lower
than at 2017 year end ($US 38.5
million compared to $US 58.2
million).
Sale of Twining Assets
On July 20, 2018, and further to
Eagle's previously announced strategy of reducing debt and interest
charges, Eagle announced that it has signed an agreement to sell
its entire interest in its oil and gas properties near Twining,
Alberta to a third party for cash
consideration of $13,820,000 before
customary post-closing adjustments (the "Sale").
- The Sale is expected to close on or about August 28, 2018.
- Eagle intends to use the net proceeds from the Sale to reduce
outstanding debt under its secured term loan and to further fund
its North Texas development
program.
- The Sale will reduce leverage, increase corporate field netback
per boe and lower Eagle's corporate decline rate.
2018 Outlook
For 2018, Eagle plans to:
- Continue to focus on drilling wells on its North Texas property with opportunities for
meaningful growth and high netbacks.
-
- Eagle holds over 25,000 net acres on contiguous leases held in
six different areas across Hardeman
County that are prospective for horizontal development.
- Eagle plans to spud its third horizontal well in the third
quarter of 2018 approximately one mile from the location of its
initial horizontal well, a well which has exceeded production
expectations.
- North Texas oil sells at par
to WTI, while many producers in the Permian face negative WTI
differentials.
- Continue to reduce debt and corporate costs, including interest
costs, in order to better position Eagle to capitalize the
North Texas development
program.
-
- Alternatives for funding growth include asset sales.
- The February 2018 Salt Flat
disposition and the July 2018
announced Sale are steps towards achieving our overall goals.
- Eagle has reduced its term loan by 34% from the end of 2017 to
the end of June 2018 (from
$US 58.2 million to $US 38.5 million) and intends to use the net
proceeds from the Sale closing in August
2018 to further reduce debt.
- On a go-forward basis, lower debt leads to reduced monthly
interest costs.
- Continue to reduce general and administrative expenses by
focusing on efficiencies and cost reduction.
-
- General and administrative expenses to the end of June 2018, excluding one-time costs associated
with the Salt Flat disposition,
are 34% lower than 2017.
Summary of Quarterly Results
|
|
|
|
|
|
|
|
|
|
Q2/2018
|
Q1/2018
|
Q4/2017
|
Q3/2017
|
Q2/2017
|
Q1/2017
|
Q4/2016
|
Q3/2016
|
($000's except for
boe/d and
per share
amounts)
|
|
|
|
|
|
|
|
|
Sales volumes –
boe/d
|
2,262
|
2,974
|
3,804
|
3,749
|
3,966
|
3,767
|
3,803
|
4,085
|
|
|
|
|
|
|
|
|
|
Revenue, net of
royalties
|
10,228
|
12,461
|
14,725
|
12,459
|
14,167
|
14,218
|
13,891
|
12,854
|
|
per boe
|
49.69
|
46.57
|
42.08
|
36.12
|
39.25
|
41.95
|
39.72
|
34.20
|
|
|
|
|
|
|
|
|
|
Operating,
transportation and
marketing
expenses
|
4,206
|
5,109
|
6,864
|
6,301
|
5,885
|
7,165
|
6,799
|
6,564
|
|
per boe
|
20.43
|
19.10
|
19.61
|
18.27
|
16.31
|
21.14
|
19.44
|
17.46
|
|
|
|
|
|
|
|
|
|
Field
netback
|
6,022
|
7,352
|
7,861
|
6,158
|
8,282
|
7,053
|
7,092
|
6,290
|
|
per boe
|
29.26
|
27.47
|
22.47
|
17.85
|
22.94
|
20.81
|
20.28
|
16.74
|
|
|
|
|
|
|
|
|
|
Funds flow from
operations
|
1,932
|
1,718(2)
|
3,488
|
3,346
|
4,272
|
1,589
|
3,901
|
4,582
|
|
per boe
|
9.39
|
6.42
|
9.98
|
9.70
|
11.84
|
4.69
|
11.15
|
12.19
|
|
per share –
basic
|
0.04
|
0.04
|
0.08
|
0.08
|
0.10
|
0.04
|
0.09
|
0.11
|
|
per share –
diluted
|
0.04
|
0.04
|
0.08
|
0.07
|
0.10
|
0.04
|
0.09
|
0.11
|
|
|
|
|
|
|
|
|
|
(Loss)
earnings
|
(15,093)
|
(2,568)
|
(14,293)
|
(4,711)
|
675
|
1,303
|
30,508
|
52
|
|
per share –
basic
|
(0.34)
|
(0.06)
|
(0.34)
|
(0.11)
|
0.02
|
0.03
|
0.72
|
0.00
|
|
per share -
diluted
|
(0.34)
|
(0.06)
|
(0.34)
|
(0.11)
|
0.02
|
0.03
|
0.72
|
0.00
|
|
|
|
|
|
|
|
|
|
Cash dividends
declared
|
-
|
-
|
-
|
-
|
-
|
425
|
637
|
636
|
|
per issued
share
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.01
|
0.015
|
0.015
|
|
|
|
|
|
|
|
|
|
Current
assets
|
10,920(1)
|
14,941
|
13,869
|
11,122
|
11,847
|
18,819
|
9,302
|
9,787
|
Current
liabilities
|
5,762(1)
|
7,528
|
13,715
|
8,042
|
6,599
|
11,474
|
74,758
|
72,387
|
Total
assets
|
159,935
|
174,877
|
207,314
|
213,867
|
222,155
|
233,951
|
218,199
|
190,945
|
Total non-current
liabilities
|
62,427
|
70,870
|
94,312
|
92,367
|
97,086
|
104,359
|
26,202
|
31,690
|
Shareholders'
equity
|
81,709
|
96,479
|
99,287
|
113,458
|
118,470
|
118,118
|
117,239
|
86,868
|
Shares
issued
|
43,750
|
43,750
|
43,302
|
43,302
|
42,857
|
42,857
|
42,452
|
42,452
|
|
|
(1)
|
Figures exclude
amounts related to assets classified as held for sale.
|
(2)
|
Includes one-time
disposition costs of $3.4 million relating to the Salt Flat
disposition.
|
For the three months ended June 30,
2018, sales volumes were lower than the previous quarters,
primarily due to the effect of the February
2018 Salt Flat disposition being only partially offset by
additional production from wells drilled in Eagle's Twining and
North Texas areas.
Second quarter 2018 field netback on a per boe basis increased
7% from the first quarter of 2018 due to higher commodity prices
and narrower oil price differentials on Canadian production. "Field
netback" is a non-IFRS financial measure. See "Non-IFRS
Financial Measures", below.
Second quarter 2018 funds flow from operations increased 12%
from the first quarter of 2018 due to higher realized prices and
lower second quarter administrative and financing expenses because
of one-time Salt Flat disposition
costs that occurred in the first quarter. A higher realized
risk management loss partially offset this increase.
Total non-current liabilities decreased as a result of debt
repayment from Salt Flat
disposition proceeds.
Changes in (loss) earnings 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 (loss)
earnings, and those that are required to be fair valued at each
quarter end. Second quarter 2018 funds flow from operations
was 6% higher than the first quarter of 2018, yet the second
quarter 2018 loss was 488% more than the first quarter of 2018 due
to a non-cash impairment expense relating to the Twining oil and
gas properties based on the sale agreement signed July 19, 2018.
Advisories
Non-IFRS Financial Measures
Statements throughout this news release make reference to the
term "field netback", which is a non-IFRS financial measure that
does 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.
Oil and Gas Advisories
The 30 day initial production rate is preliminary in nature and
may not be indicative of stabilized on-stream production
rates. Initial production results are not necessarily
indicative of long-term performance or of ultimate well recovery
rates.
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:
- the Sale, including the closing date of the Sale;
- Eagle's expected use of the net proceeds from the Sale to
reduce outstanding debt under its secured term loan and to further
fund its North Texas development
program;
- Eagle's expectation that the Sale will reduce leverage,
increase corporate field netback per boe and lower Eagle's
corporate decline rate;
- Eagle's drilling plans and expectations for development of its
North Texas property;
- Eagle's intentions to reduce debt and corporate costs,
including interest costs;
- Eagle's expectations that alternatives for funding growth
include asset sales; and
- Eagle's expectations regarding reducing 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:
- completion of the Sale;
- 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"):
- the Sale may not close as and when expected;
- 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. The Sale, 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.