CALGARY, March 21, 2019 /CNW/ - (TSX: EGL): Eagle
Energy Inc. ("Eagle") today reports its financial and
operating results and its reserves information for the year ended
December 31, 2018.
When reflecting on 2018, Wayne
Wisniewski, President and Chief Executive Officer, stated,
"Eagle continues to execute its previously announced plan to reduce
debt and corporate costs. Our 2018 full year administrative
expenses, excluding one-time costs associated with the Salt Flat and Twining dispositions, are 11%
lower than our 2017 levels. We have undertaken cost cutting
initiatives including reducing our staff headcount by 27% over the
year and reducing our number of contractors by five. Overall,
we estimate our 2019 full year administrative expenses to be 28%
lower than 2018 levels. In addition, when compared to 2017
year-end, we have reduced our term loan at year end by 48%."
Mr. Wisniewski continued, "We continue to work with our
financial advisors to investigate, evaluate and consider possible
asset sales and restructuring alternatives. Given the
improvement in commodity prices since the end of 2018 and an
upcoming sale of our Texas
overriding royalty interests, we have decided to forego entering
into another forbearance agreement with our lender at this time to
replace the one that expired January 31,
2019. We feel this affords us the maximum flexibility
in managing our business and avoids incurring additional fees and
conditions associated with a forbearance agreement."
Eagle's reserves data and other oil and gas information is
included in its Annual Information Form dated March 21, 2019 for the year ended December 31, 2018 ("AIF"). Eagle's
audited consolidated annual financial statements, management's
discussion and analysis and AIF have been filed with the securities
regulators and are available online under Eagle's issuer profile on
SEDAR 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
the sections titled "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.
2018 Year in Review
Eagle achieved the following results in 2018:
- A 23% increase in year-over-year field netback, to $25.83 per boe.
- A 48% reduction in year-end debt (from $US 58.2 million to $US
30.4 million).
- An 11% reduction in administrative expenses, excluding one-time
costs associated with property dispositions.
- Undertook cost cutting initiatives that are estimated to reduce
2019 administrative expenses (excluding any one-time costs that may
be associated with future asset dispositions) to $6.3 million, or $2.5
million below 2018.
- Posted reserve replacement ratios of 363% and 75% on a proved
plus probable and proved basis, respectively.
Asset Sales, Debt Reduction and Ongoing Measures to address a
Going Concern Uncertainty
- On February 8, 2018, Eagle sold
its oil and gas interests in Salt
Flat, located in Caldwell County,
Texas for approximately $34.4
million cash and used the net proceeds from the sale to
reduce its term loan by 34% (from $US 58.2
million to $US 38.5 million)
and to further fund its drilling program in North Texas.
- On August 28, 2018, Eagle sold
its oil and gas interests in the Twining area of Alberta, Canada for approximately $13.3 million cash and used the net proceeds from
the sale to reduce its term loan by an additional 14% (from
$US 38.5 million to $US 30.4 million) and to further fund its
drilling program in North
Texas.
At December 31, 2018, the
following circumstances cause material uncertainties that may cast
significant doubt regarding Eagle's ability to continue as a going
concern:
- Eagle had a working capital deficiency of $40.0 million.
- Eagle's estimate of future cash flows from operating activities
over the next twelve months is not sufficient to repay the loan
principal, which is classified as a current liability.
- Eagle was in default of one of its four financial covenants
under the four-year secured term loan from its U.S.-based lender
(the "Loan Agreement"). Violation of any financial covenant
constitutes an immediate event of default under the Loan Agreement.
As a result, Eagle's debt has been reclassified from a non-current
to a current liability.
- Lower WTI oil prices during the fourth quarter of 2018 relative
to the third quarter, combined with unprecedented wide oil price
differentials in Alberta, led to
lower fourth quarter 2018 funds flow. This caused Eagle to be in
default of one of its cash flow related financial covenants, the
Consolidated Fixed Charge Coverage Ratio.
- There is no assurance that Eagle will not be in violation of
one or more financial covenants in future quarters.
Eagle has undertaken several cost-cutting measures to reduce
administrative and operating expenses, such as reducing its staff
headcount by 27% over the year, reducing its number of contractors
by five, negotiating better pricing with contractors and listing
its Calgary office space for
sublease.
In December 2018, as a result of
falling WTI prices and high Canadian oil differentials, Eagle
implemented a selective well shut-in program in Canada to maximize cash flow and was able to
remain cash flow positive at the field level for the fourth quarter
of 2018.
For 2019, as WTI strengthens and the Canadian oil differentials
narrow, Eagle has restored production levels to increase field
level cash flow. Eagle continues to evaluate exposure to
market risks from fluctuations in commodity prices and has entered
into risk management contracts to reduce commodity price
risks.
Eagle currently has curtailed all capital spending for 2019 and
continues to work with its financial advisors to investigate,
evaluate and consider possible asset sales and restructuring
alternatives.
Eagle's ability to meet its ongoing financial liabilities,
including liabilities relating to its loan agreement, and to
continue as a going concern, is dependent upon the ongoing support
from its lender and its ability to fund the repayment of its debt
by generating positive cash flows from operations, securing funding
from additional debt or equity financing, disposing of assets or
making other arrangements. There is no certainty that such
initiatives will be successful.
Since 2018 year end, Eagle has undertaken the
following:
- On March 6, 2019, Eagle signed a
purchase and sale agreement to sell 100% of certain minor
overriding royalty interests in Texas (the "ORRI Sale") for estimated
proceeds of $US 1.7 million, subject
to customary closing adjustments. Closing is expected to occur on
March 29, 2019 and will improve
Eagle's capacity to fund its outstanding obligations.
- On March 12, 2019, Eagle entered
into a fixed price financial swap on 450 barrels of oil per day for
the period of April 1 to September 30,
2019 at a WTI price of $US
57.81 per barrel in order to mitigate the risk that
fluctuating commodity prices have on generating positive cash flows
from operations.
- On March 15, 2019, the lender
finalized its semi-annual borrowing base redetermination, based on
December 31, 2018 reserves, and the
borrowing base was set at $US 30.6
million (which adequately covers the current outstanding
debt balance of $US 30.4
million).
- On March 18, 2019, Eagle and its
lender entered into a Limited Consent and Seventh Amendment to the
Loan Agreement (the "Consent") under which the lender
consented to the ORRI Sale and made certain amendments to the Loan
Agreement. One of the amendments excludes 2018 consolidated
financial statements from constituting an event of default due to
them having a going concern note.
- As previously announced, the limited forbearance agreement
between Eagle and its lender expired on January 31, 2019. Eagle was in violation of one
of its four financial covenants at December
31, 2018 year end, which constitutes an event of default
under the Loan Agreement. Eagle has continued to work diligently
and constructively with its lender since the expiration of the
forbearance agreement.
- Given the improvement in commodity prices since the end of
2018, Eagle's ongoing work with its financial advisors in
investigating, evaluating and considering possible asset sales and
restructuring alternatives, and its recently signed ORRI Sale,
Eagle has made the decision to forego entering into another
forbearance agreement with its lender at this time. Eagle feels
this affords it the maximum flexibility to manage its business and
avoids incurring additional fees and conditions associated with a
forbearance agreement.
- Under the Consent, the lender has not waived, and has expressly
retained, all of its rights and remedies to which it is entitled
under the Loan Agreement as a result of the event of default
described above. Notwithstanding the default, the lender has not,
as of the date hereof, exercised any of its available remedies, but
there can be no assurance that it will not do so in the
future.
2018 Year-end Reserves Information
An independent evaluation of Eagle's U.S. reserves was conducted
by Netherland, Sewell & Associates, Inc. and of Eagle's
Canadian reserves by McDaniel & Associates Consultants
Ltd. These reserves evaluation reports are effective
December 31, 2018 and were prepared
in accordance with National Instrument 51-101 Standards of
Disclosure for Oil and Gas Activities. Details regarding
Eagle's reserves and oil and gas assets are set forth in Eagle's
AIF.
2018 Year-End Reserves Report – Overview (based on Company
Gross reserves)
- Property divestitures on both sides of the border (Salt Flat assets in Texas and Twining assets in Alberta) were the primary focus, resulting in
a year-over-year reduction in debt of 48%.
- Achieved year-end proved plus probable reserves of 16 million
boe (60% total proved, 50% proved developed producing).
- Crude oil comprises 97% of proved developed producing
reserves.
- Posted reserve replacement ratios of 363% and 75% on a proved
plus probable and proved basis, respectively.(1) (3)
- Increased the reserve life indices to 27.1 years and 16.5 years
on a proved plus probable and proved basis, respectively.(2)
(3)
Notes:
|
|
(1)
|
Reserve replacement
ratio is calculated by dividing company gross reserve additions by
working interest production for the year, which, in 2018, is based
on average working interest production of 1,622 boe per day
("boe/d") after the sale of Salt Flat and Twining (2017 - 3,598
boe/d). This metric expresses the amount of reserves added to
a company's reserve base during the year as compared to the amount
of oil and gas produced. It shows whether a company is
increasing reserves or depleting them.
|
|
|
(2)
|
Reserve life index is
calculated by dividing company gross reserves by working interest
production for the year, which, in 2018, is based on average
working interest production of 1,622 boe/d after the sale of Salt
Flat and Twining (2017 - 3,598 boe/d). This metric expresses
how long a company's reserves will last at the current production
rate with no additions to reserves.
|
|
|
(3)
|
Eagle cautions
readers that the reserve replacement ratio and reserve life index
are metrics that do not have any standardized meaning and may not
be comparable to similar metrics presented by other
issuers.
|
The following tables summarize the independent reserves
estimates and values of Eagle's reserves as at December 31, 2018. Totals may not add due
to rounding.
Summary of Reserves
|
|
Canadian
Operations
|
Company
Gross(1)
|
Reserves
Categories
|
Crude
Oil
|
Natural Gas
Liquids
|
Natural
Gas
|
Total Oil
Equivalent 2017
|
Total Oil
Equivalent 2016
|
|
(Mbbls)
|
(Mbbls)
|
(MMcf)
|
(Mboe)
|
(Mboe)
|
Proved
|
|
|
|
|
|
Developed
producing
|
6,354
|
21
|
961
|
6,536
|
7,643
|
Developed
non-producing
|
-
|
-
|
-
|
-
|
156
|
Undeveloped
|
-
|
-
|
-
|
-
|
2,793
|
Total
proved
|
6,354
|
21
|
961
|
6,536
|
10,593
|
Total
probable
|
2,243
|
7
|
272
|
2,296
|
4,463
|
Total proved plus
probable
|
8,598
|
28
|
1,234
|
8,831
|
15,055
|
|
|
|
|
|
|
|
|
|
US
Operations
|
Company
Gross(1)
|
Reserves
Categories
|
Crude
Oil
|
Natural Gas
Liquids
|
Natural
Gas
|
Total Oil
Equivalent 2017
|
Total Oil
Equivalent 2016
|
|
(Mbbls)
|
(Mbbls)
|
(MMcf)
|
(Mboe)
|
(Mboe)
|
Proved
|
|
|
|
|
|
Developed
producing
|
1,337
|
41
|
351
|
1,436
|
3,145
|
Developed
non-producing
|
223
|
16
|
140
|
262
|
344
|
Undeveloped
|
1,130
|
166
|
1,426
|
1,533
|
1,759
|
Total
proved
|
2,689
|
223
|
1,917
|
3,231
|
5,248
|
Total
probable
|
3,002
|
403
|
3,465
|
3,983
|
2,892
|
Total proved plus
probable
|
5,690
|
627
|
5,382
|
7,214
|
8,140
|
|
|
|
|
|
|
|
|
|
Total Company
Operations
|
Company
Gross(1)
|
Reserves
Categories
|
Crude
Oil
|
Natural Gas
Liquids
|
Natural
Gas
|
Total Oil
Equivalent 2017
|
Total Oil
Equivalent 2016
|
|
(Mbbls)
|
(Mbbls)
|
(MMcf)
|
(Mboe)
|
(Mboe)
|
Proved
|
|
|
|
|
|
Developed
producing
|
7,691
|
62
|
1,312
|
7,972
|
10,789
|
Developed
non-producing
|
223
|
16
|
140
|
262
|
500
|
Undeveloped
|
1,130
|
166
|
1,426
|
1,533
|
4,552
|
Total
proved
|
9,043
|
245
|
2,878
|
9,767
|
15,841
|
Total
probable
|
5,245
|
410
|
3,737
|
6,278
|
7,355
|
Total proved plus
probable
|
14,288
|
655
|
6,615
|
16,045
|
23,196
|
|
|
|
|
|
|
|
Note:
|
(1)
|
Company gross
reserves are Eagle's total working interest share before the
deduction of any royalties and exclude Eagle's royalty
interests.
|
Summary of Net Present Value of Future Net Revenue of
Reserves
|
|
|
Canadian
Operations
|
|
Net Present Value
of Future Net Revenue
Before Income
Taxes Discounted at (%/year)(1)
|
Reserves
Category
|
|
0%
|
5%
|
10%
|
15%
|
20%
|
$CA
|
|
($000's)
|
($000's)
|
($000's)
|
($000's)
|
($000's)
|
Proved
|
|
|
|
|
|
|
Developed
producing
|
|
181,393
|
103,242
|
68,994
|
51,090
|
40,409
|
Developed
non-producing
|
|
-
|
-
|
-
|
-
|
-
|
Undeveloped
|
|
-
|
-
|
-
|
-
|
-
|
Total
proved
|
|
181,393
|
103,242
|
68,994
|
51,090
|
40,409
|
Total
probable
|
|
82,627
|
23,723
|
9,945
|
5,407
|
3,441
|
Total proved plus
probable
|
|
264,021
|
126,965
|
78,939
|
56,496
|
43,850
|
|
|
|
|
|
|
|
|
|
|
|
US
Operations
|
|
Net Present Value
of Future Net Revenue
Before Income
Taxes Discounted at (%/year)(1)
|
Reserves
Category
|
|
0%
|
5%
|
10%
|
15%
|
20%
|
$US
|
|
($000's)
|
($000's)
|
($000's)
|
($000's)
|
($000's)
|
Proved
|
|
|
|
|
|
|
Developed
producing
|
|
48,521
|
32,461
|
24,627
|
20,067
|
17,090
|
Developed
non-producing
|
|
9,847
|
5,222
|
3,717
|
3,001
|
2,545
|
Undeveloped
|
|
25,656
|
17,641
|
15,527
|
9,071
|
6,634
|
Total
proved
|
|
84,024
|
55,325
|
40,871
|
32,138
|
26,270
|
Total
probable
|
|
113,807
|
68,892
|
46,372
|
33,354
|
25,115
|
Total proved plus
probable
|
|
197,831
|
124,217
|
87,242
|
65,492
|
51,385
|
|
|
|
|
|
|
|
|
|
|
Total Company
Operations
|
|
Net Present Value
of Future Net Revenue
Before Income
Taxes Discounted at (%/year)(1)(2)
|
Reserves
Category
|
|
0%
|
5%
|
10%
|
15%
|
20%
|
$CA
|
|
($000's)
|
($000's)
|
($000's)
|
($000's)
|
($000's)
|
Proved
|
|
|
|
|
|
|
Developed
producing
|
|
242,117
|
144,064
|
100,095
|
76,523
|
62,137
|
Developed
non-producing
|
|
12,248
|
6,520
|
4,652
|
3,761
|
3,193
|
Undeveloped
|
|
31,687
|
21,765
|
15,433
|
11,154
|
8,138
|
Total
proved
|
|
286,052
|
172,349
|
120,180
|
91,438
|
73,468
|
Total
probable
|
|
223,686
|
109,183
|
67,516
|
46,849
|
34,670
|
Total proved plus
probable
|
|
509,738
|
281,532
|
187,696
|
138,287
|
108,138
|
|
|
|
|
|
|
|
|
|
Notes:
|
(1)
|
It should not be
assumed that the net present values of estimated future net revenue
shown above are representative of the fair market value of the
reserves. There is no assurance that the underlying price and
costs assumptions will be attained and variances could be
material. The recovery and estimates of reserves provided in
this news release are estimates only and there is no guarantee that
the estimated reserves will be recovered. Actual reserves may
be greater than or less than the estimates provided.
|
|
|
(2)
|
To calculate the
Total Company Operations, the amounts for the U.S. operations have
been converted into Canadian dollars using the following foreign
exchange rates: 2019 - $CA 1.00 equal to $US 0.757; 2020 -
$CA 1.00 equal to $US 0.782; 2021- $CA 1.00 equal to $US 0.797;
2022 - $CA 1.00 equal to $US 0.803; 2023 - $CA 1.00 equal to $US
0.807, 2023 and thereafter - $CA 1.00 equal to $US 0.808 (as per
the average of the exchange rate for the forecast prices of
McDaniel & Associates Consultants Ltd., GLJ Petroleum
Consultants Ltd. and Sproule Associated Limited as of January 1,
2019.)
|
Selected Annual Information
The following table shows selected information for Eagle's
fiscal years ended December 31, 2018,
December 31, 2017 and December 31, 2016.
|
|
Years ended
December 31
|
2018
|
2017
|
2016
|
($000's except per
share amounts and production)
|
|
|
|
Sales volumes –
boe/d
|
2,258
|
3,821
|
3,972
|
|
|
|
|
Revenue, net of
royalties
|
37,296
|
55,569
|
48,993
|
Field
netback
|
21,285
|
29,354
|
23,437
|
|
|
|
|
Funds flow from
operations
|
6,334
|
12,695
|
15,798
|
per share – basic and
diluted
|
0.14
|
0.30
|
0.38
|
|
|
|
|
(Loss)
earnings
|
(25,470)
|
(17,349)
|
9,559
|
per share – basic and
diluted
|
(0.58)
|
(0.40)
|
0.23
|
|
|
|
|
Current
assets
|
7,751
|
13,869
|
9,302
|
Current
liabilities
|
45,395
|
13,715
|
74,595
|
|
|
|
|
Total
assets
|
136,674
|
207,314
|
218,036
|
Total non-current
liabilities
|
16,658
|
94,312
|
26,202
|
Shareholders'
equity
|
74,621
|
99,287
|
117,239
|
|
|
|
|
Dividends
declared
|
-
|
425
|
3,821
|
per issued
share
|
0.00
|
0.01
|
0.09
|
|
|
|
|
Shares
issued
|
44,244
|
43,302
|
42,452
|
Summary of Quarterly Results
|
|
|
Q4/2018
|
Q3/2018
|
Q2/2018
|
Q1/2018
|
Q4/2017
|
Q3/2017
|
Q2/2017
|
Q1/2017
|
($000's except for
boe/d and
per share amounts)
|
|
|
|
|
|
|
|
|
Sales volumes –
boe/d
|
1,852
|
1,958
|
2,262
|
2,974
|
3,804
|
3,749
|
3,966
|
3,767
|
|
|
|
|
|
|
|
|
|
Revenue, net of
royalties
|
5,577
|
9,010
|
10,228
|
12,461
|
14,725
|
12,459
|
14,167
|
14,218
|
per boe
|
32.73
|
50.01
|
49.69
|
46.57
|
42.08
|
36.12
|
39.25
|
41.95
|
|
|
|
|
|
|
|
|
|
Operating,
transportation and marketing expenses
|
2,730
|
3,946
|
4,206
|
5,109
|
6,864
|
6,301
|
5,885
|
7,165
|
per boe
|
16.02
|
21.91
|
20.43
|
19.10
|
19.61
|
18.27
|
16.31
|
21.14
|
|
|
|
|
|
|
|
|
|
Field
netback(1)
|
2,847
|
5,064
|
6,022
|
7,352
|
7,861
|
6,158
|
8,282
|
7,053
|
per boe
|
16.71
|
28.10
|
29.26
|
27.47
|
22.47
|
17.85
|
22.94
|
20.81
|
|
|
|
|
|
|
|
|
|
Funds flow from
operations
|
1,062
|
1,622(2)
|
1,932
|
1,718(3)
|
3,488
|
3,346
|
4,272
|
1,589
|
per boe
|
6.23
|
9.00
|
9.39
|
6.42
|
9.98
|
9.70
|
11.84
|
4.69
|
per share –
basic
|
0.02
|
0.04
|
0.04
|
0.04
|
0.08
|
0.08
|
0.10
|
0.04
|
per share –
diluted
|
0.02
|
0.04
|
0.04
|
0.04
|
0.08
|
0.07
|
0.10
|
0.04
|
|
|
|
|
|
|
|
|
|
(Loss)
earnings
|
(5,922)
|
(1,887)
|
(15,093)
|
(2,568)
|
(14,293)
|
(4,711)
|
675
|
1,303
|
per share –
basic
|
(0.13)
|
(0.04)
|
(0.34)
|
(0.06)
|
(0.34)
|
(0.11)
|
0.02
|
0.03
|
per share -
diluted
|
(0.13)
|
(0.04)
|
(0.34)
|
(0.06)
|
(0.34)
|
(0.11)
|
0.02
|
0.03
|
|
|
|
|
|
|
|
|
|
Cash dividends
declared
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
425
|
per issued
share
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.01
|
|
|
|
|
|
|
|
|
|
Current
assets
|
7,751
|
13,270
|
10,920
|
14,941
|
13,869
|
11,122
|
11,847
|
18,819
|
Current
liabilities
|
43,395
|
9,686
|
5,762
|
7,528
|
13,715
|
8,042
|
6,599
|
11,474
|
Total
assets
|
136,674
|
141,264
|
159,935
|
174,877
|
207,314
|
213,867
|
222,155
|
233,951
|
Total non-current
liabilities
|
16,658
|
51,886
|
62,427
|
70,870
|
94,312
|
92,367
|
97,086
|
104,359
|
Shareholders'
equity
|
74,621
|
79,692
|
81,709
|
96,479
|
99,287
|
113,458
|
118,470
|
118,118
|
Shares
issued
|
44,244
|
44,244
|
43,750
|
43,750
|
43,302
|
43,302
|
42,857
|
42,857
|
|
Notes:
|
(1)
|
Field netback is a
Non-IFRS financial measure. See "Advisories – Non-IFRS
Financial Measures".
|
(2)
|
Includes one-time
disposition costs of $0.7 million relating to the Twining
disposition.
|
(3)
|
Includes one-time
disposition costs of $3.4 million relating to the Salt Flat
disposition
|
During the fourth quarter of 2018, sales volumes decreased 5%
when compared to the third quarter. Production from the
North Texas properties increased
by 176 boe/d due to the third well of the 2018 drilling program
starting production. Production from the Canadian properties
decreased by 282 boe/d primarily due to the disposition of the
Twining properties at the end of August, as well as the selective
well shut in process that was initiated in Dixonville in response to the low commodity
price environment.
During the fourth quarter of 2018, field netback decreased 44%
when compared to the third quarter due to lower production and a
35% decrease in realized prices net of royalties, which was
consistent with the WTI price decrease and the dramatically wider
price differentials on Canadian oil. When compared to the
third quarter, the negative effect on field netback of lower prices
was partially offset by a 31% decrease in operating, transportation
and marketing expenses in the fourth quarter, as Eagle raised
production from one well in North
Texas and initiated a selective well shut in program in
Dixonville.
For the Dixonville properties
in Canada, the realized price in
the fourth quarter of 2018 was $26.74
per boe as compared to $52.86 per boe
in the fourth quarter of 2017. This 49% quarter-over-quarter
realized price decrease occurred despite an 8% WTI price increase,
and was due to wider Canadian oil price differentials. For
the full year of 2018, the realized price averaged $55.39 per boe as compared to $48.61 per boe for the prior year. The wider
Canadian oil price differentials held this year-over-year realized
price increase to only 14% versus a 31% increase in the WTI
price.
During the latter part of the fourth quarter, an unprecedented
widening in oil price differentials caused a significant decrease
in field netbacks in the Dixonville area. The differential
between $CA WTI and Eagle's received price was $58.86 per barrel in December, resulting in a
December realized oil price of $4.60
per barrel. As a result of the low pricing in December, Eagle
proactively initiated a selective well shut-in program, which
reduced workover expenditures. This, in turn, lowered
production, but resulted in Dixonville being cash flow positive at a field
level during the fourth quarter of 2018.
Funds flow from operations decreased 35% from the third quarter
of 2018. This was primarily due to 44% lower fourth quarter
field netbacks being partially offset by a realized risk management
gain of $1.3 million in the fourth
quarter.
(Loss) earnings on a quarterly basis often do not move
directionally or by the same amounts as 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. Fourth
quarter 2018 funds flow from operations decreased by 35% from the
third quarter of 2018, yet the fourth quarter net income was 214%
less than the third quarter of 2018 primarily as a result of a
$5.3 million impairment expense
realized in the fourth quarter relating to Dixonville.
Current assets decreased quarter-over-quarter due to a lower
December revenue forming part of the December accounts receivable
balance at year end, while September revenue, which formed part of
the September accounts receivable balance, was higher due to
stronger September oil prices.
Current liabilities increased in the fourth quarter when
compared to the third quarter due to the reclassification of
Eagle's debt from a non-current liability to a current
liability.
Advisories
Non-IFRS Financial Measures
Statements throughout this news release make reference to the
terms "field netback" which is a non-IFRS financial measures 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.
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 expectations regarding its ability to meet its
financial liabilities, including liabilities relating to the Loan
Agreement, and to continue as a going concern being dependent upon
the ongoing support from its lender and its ability to fund the
repayment of its debt by generating positive cash flows from
operations, securing funding from additional debt or equity
financing, disposing of assets or making other arrangements;
- Eagle's intentions to reduce debt and corporate costs,
including interest costs;
- Eagle's expectations regarding its general and administrative
expenses in 2019;
- Eagle's estimated volumes and values of reserves;
- Eagle's expectations regarding capital expenditures in
2019;
- Future development costs associated with reserves;
- Eagle's hedging program and contracts;
- Anticipated crude oil, natural gas liquids and natural gas
pricing and production weighting;
- Eagle's expectation that its future cash flows from operating
activities over the next twelve months is not sufficient to repay
the loan principal;and
- Eagle's expectations regarding possible asset sales and
restructuring alternatives and the closing of the ORRI sale.
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 production levels;
- future capital expenditures and the ability of Eagle to obtain
financing on acceptable terms;
- 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;
- projected operating costs, which are estimated based on
historical information and anticipated changes in the cost of
equipment and services, among other things; and
- ongoing support of Eagle by its lender.
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 the AIF:
- the exercise by Eagle's lender of its rights and remedies under
the Loan Agreement as a result of Eagle not being in compliance
with all of the covenants under the Loan Agreement;
- volatility of prices and differentials for crude oil, NGLs and
natural gas;
- 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 2019 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. Statements relating to "reserves"
or "resources" are deemed to be forward-looking statements, as they
involve the implied assessment, based on certain estimates and
assumptions, and that the resources and reserves described can be
profitably produced in the future. 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.