CALGARY, Jan. 2, 2019 /CNW/ - (TSX : EGL): Eagle
Energy Inc. ("Eagle") provides an operational update on its
North Texas development program
and announces that it has entered into a forbearance agreement with
its lenders.
Operational Update
Wayne Wisniewski, President and
Chief Executive Officer of Eagle, stated, "We are pleased to report
updated production for the Robinson 2H, our most recent North Texas horizontal well. The initial
production rate for 30 days ("IP30") for the well was 518
barrels of oil equivalent per day ("boe/d") (414 barrels of
oil per day), which is approximately 96 boe/d (76 barrels of oil
per day) higher than the IP30 rate was for our first well drilled
in the same North Texas operating
area. The new well is presently producing on artificial lift
and is declining as per our expectations. Although IP30
production from our latest well was higher than our first well, it
is too early to determine estimated ultimate reserve
recovery. The price we receive for our oil from the
North Texas field is unaffected by
the Canadian oil differentials, with the result being a field
netback of approximately $CA 40.00 per barrel of oil in
November."
Mr. Wisniewski continued, "Unfortunately, the good news of our
latest well in North Texas is
overshadowed by the crisis of high Canadian oil differentials and
falling WTI prices at the end of the year. As a result of the
high Canadian oil differentials, we have implemented a selective
well shut-in program at our Dixonville field in order to maximize cashflow
from the property at various reduced WTI and Canadian differential
combinations. By implementing the selective shut-in program,
we are able to remain cashflow positive at the field level for the
fourth quarter. We are monitoring WTI and Canadian
differentials several times per week and responding accordingly.
Eagle is exempt from the mandatory Alberta curtailment program starting in
January of 2019."
Forbearance Agreement
Due to the persistent low WTI prices and high Canadian oil
differentials, Eagle has advised the administrative agent and
lenders (collectively, the "Lenders") under the loan and
security agreement dated March 13,
2017 among Eagle, its subsidiaries and the Lenders, as
amended (the "Loan Agreement") that Eagle may not meet one
or more of its financial covenants at year end 2018. In
anticipation of a potential event of default occurring at year end,
Eagle has entered into a limited forbearance agreement (the
"Forbearance Agreement") with the Lenders. Under the
Forbearance Agreement, the Lenders have agreed to forbear from
exercising their rights and remedies arising if Eagle fails to meet
any of its financial covenants as of December 31, 2018 until January 31, 2019 (the "Forbearance
Period") so long as no termination event has occurred during
the Forbearance Period.
A "termination event" means, in summary, a breach of a
representation, warranty, covenant or term under the Forbearance
Agreement, a default under the Loan Agreement other than the
failure to meet the financial covenants as of December 31, 2018, or any event or condition has
occurred after the effective date of the Forbearance Agreement
which has a material adverse effect as defined in the Loan
Agreement and determined by the Lenders.
Eagle continues to work with its financial advisors to
investigate, evaluate and consider possible asset sales and
restructuring alternatives available to Eagle. Eagle does not
intend to comment further regarding this review process unless a
specific transaction or other alternative is approved by the board
of directors of Eagle, the review process is concluded or it is
otherwise determined that further disclosure is appropriate or
required by law.
Advisories
Note about Initial Production Rates
The IP30 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 Eagle's
expectations regarding its North
Texas development program, production from its third
North Texas horizontal well,
operational measures taken by Eagle on its Dixonville property and expectations regarding
the impact of these measures on field level cash flow from this
property, expectations regarding Eagle's financial covenants and
other terms of the Loan Agreement; the terms of the Forbearance
Agreement; and expectations regarding Eagle's process to consider
potential asset sales and restructuring alternatives. With
respect to forward-looking statements contained in this news
release, assumptions have been made regarding expected future
production, which is based on a success rate that, in turn, is
based upon historical drilling success and an evaluation of the
particular well, among other things; anticipated operating and
capital costs and future fluctuations in those costs; future
fluctuations in oil, natural gas and natural gas liquids prices,
and reserves estimates and reservoir performance.
Eagle's actual results could differ materially from those
anticipated in these forward-looking statements as a result of the
following risk factors and those in Eagle's Annual Information Form
dated March 20, 2018 (the "AIF"):
unexpected fluctuations in oil, natural gas and natural gas
liquids prices; the inherent risks associated with the development
of petroleum properties; delays, unexpected results and costs of
drilling and production activities; and the availability and terms
of financing and capital. 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 and 2019 may differ materially from any projections
of future performance or results expressed or implied by these
forward‐looking statements. 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.