Eagle Energy Trust
VISION. GROWTH. INCOME.
Investor Presentation
November 2014
Disclaimers
Disclaimer Regarding Forward Looking Statements:
This presentation includes statements that contain forward looking information (“forward-looking statements”) in respect of Eagle Energy Trust’s expectations regarding its
future operations, including the impact on Eagle’s investments, structure, taxability and distributions of investing in Canadian assets, drilling program, production, operating
costs, hedging, the amount and sustainability of distributions, tax pools, business strategy and plans for growth, among other things. These forward looking statements
involve estimates and assumptions including those relating to timing to drill and bring wells on production, production rates, operating and capital costs, marketability of
crude oil, natural gas and natural gas liquids, future commodity prices, currency exchange rates, anticipated cash flow based on estimated production, size of reserves and
reservoir performance, among other things. These estimates and assumptions necessarily involve known and unknown risks, delays, challenges and other uncertainties
inherent in the oil and gas industry including those relating to geology, production, drilling, technology, operations, human error, mechanical failures, transportation,
processing problems and poor reservoir performance, among others things, as well as the business risks discussed in the Trust’s annual information form dated March 20,
2014 under the headings “Risk Factors” and “Advisory-Forward-Looking Statements and Risk Factors”.
The forward-looking statements included in this presentation should not be unduly relied upon. Actual results may differ from the forward-looking information in this
presentation, and the difference may be material and adverse to the Trust and its unitholders. No assurance is given that the Trust’s expectations or assumptions will prove
to be correct. Accordingly, all such statements are qualified in their entirety by reference to, and are accompanied by, the information and factors discussed throughout this
presentation. These statements speak only as of the date of this presentation and may not be appropriate for other purposes. Eagle’s annual information form dated March
20, 2014 contains important detailed information about Eagle and its trust units. Copies of the annual information form may be viewed at www.sedar.com and on
Eagle’s website.
Disclaimer Regarding Oil and Gas Measures:
This presentation contains disclosure expressed as barrel of oil equivalency (“boe”) or boe per day (“boe/d”). All oil and natural gas equivalency volumes have been derived
using the conversion ratio of 6 Mcf of natural gas: 1bbl 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 wellhead. 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.
2
Mission Statement
VISION
We create wealth for investors by combining
innovation, expertise and opportunity.
GROWTH
We target a capital spend and payout ratio that sustains
moderate growth and distributes income.
INCOME
We strive to deliver predictable monthly distributions.
3
Overview
• Eagle’s strategy is to provide investors with a reliable distribution
paying investment by generating stable cashflows and managing
risk while delivering moderate growth through increasing unit
value.
• On October 20, 2014, Eagle announced that it will seek unitholder
approval 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.
• All of Eagle’s current production is in Texas and Oklahoma.
• 95% of Eagle’s current production is light oil.
• Strong balance sheet – cash on hand and debt-free.
4
Corporate Profile
Current Estimated Working Interest Production: 1,900 boe/d
Production Split:
95% light oil
Cash on Hand:
$ 69.5 million
Credit Facility Available:
$ 61.6 million
Annual Distribution:
$1.05 per unit
Tax Pools:
approx. $US 166 million
5
Market Data
Ticker Symbol:
TSX: EGL.UN
Units Outstanding (basic):
52 Week Range:
Recent price (Nov 4/14 close):
Average daily trading volume (30 day):
30 day VWAP:
Market Cap (Nov 4/14):
Directors’ & Officers’ Ownership:
Equity Research:
34.89 million
$3.38 - $8.63
$3.44
100,805 units
$4.88
$120 million
2.4% basic, 10.6% fully diluted
Scotia
NBF
Acumen
TD
6
Proposal to Invest in Canadian Assets
•
A Special Meeting of unitholders will be held on November 24, 2014 to vote
on a special resolution to permit the acquisition of Canadian energy assets.
•
Opportunities in Canada are as attractive as opportunities in the U.S.:
•
market conditions in Canada’s oil and gas sector have resulted in Canadian oil and gas assets
being available at attractive prices;
•
pricing differentials will continue to narrow over the coming years with the expansion of
liquefied natural gas, rail and pipeline infrastructure;
•
Eagle’s management and directors have significant experience acquiring and developing
energy assets in Canada;
•
investing in Canada will mitigate the Trust’s commodity price, foreign exchange and interest
rate risk through diversification.
7
Impact of Eagle Investing in Canadian Assets
•
•
Acquiring Canadian Assets will not affect Eagle’s U.S. Investments and U.S.
Sourced Distributions:
•
No effect on its U.S. operations or on the taxes on distributions from U.S. assets.
•
The Trust’s U.S. operating subsidiary will continue to actively acquire, operate and exploit U.S.
oil and gas production in accordance with the Trust’s growth strategy.
Acquiring Canadian Assets will have no Negative Effects on Eagle’s Structure
or Taxability:
•
The Trust’s proposed Canadian investments will be structured such that the Specified
investment flow-through (SIFT) trust income and distribution tax will not apply to the Trust or
its affiliates.
•
The Trust’s Canadian corporate subsidiaries will be taxed in the same manner as other
Canadian oil and gas corporations.
•
The total annual distribution will be allocated among three components and shown on the
Unitholder’s annual tax slips as:
•
other income (i.e., trust income from U.S. sources)
•
return of capital
•
dividends
8
Sale of Permian Properties
•
In August 2014, Eagle sold its Texas Permian asset for $ 150 million ($US 140
million). Eagle’s remaining U.S. properties produce approximately 1,900
barrels of oil per day.
•
As a result of the disposition, Eagle currently has $69.5 million ($US 62
million) of cash on hand, and a $61.6 million ($US 55 million) unutilized debt
facility.
•
Eagle is actively pursuing acquisitions to redeploy capital in attractive
investment opportunities.
•
Eagle has withdrawn its current guidance and expects to provide revised
guidance after an announcement is made regarding its re-deployment of the
sale proceeds.
9
Q3 2014 Highlights
•
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.
•
30% of production is hedged for the second half of 2015 at an average price
of $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.
•
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.
•
Suspended the Premium DistributionTM 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 substantially reduced from 60% to the range of 5% to 8%,
significantly reducing the number of units issued each month.
10
Q3 2014 Highlights
•
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 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.
11
Hedging Program
Eagle has price protection on more than 80% of production through June 2015.
BBL/D - OIL
Hedging Summary
•
•
•
3400
3200
3000
2800
2600
2400
2200
2000
1800
1600
1400
1200
1000
800
600
400
200
0
$US 87.90 Fixed Price
$US 90.50 x $US 94.35 Costless Collar
$US 90.10 x $US 92.00 Costless Collar
$US 85.40 Fixed Price
$US 93 x $US 95.35 Costless Collar
$US 90 x $US 94.95 Costless Collar
$US 91.15 Fixed Price
$US 91.15 Fixed Price
$US 98 Fixed Price
Based on current estimated working interest production ,Eagle is hedged at approximately 87% for Q4/2014 at a
weighted average price of $US 93.19 WTI.
Eagle is hedged at approximately 80% for the first half of 2015 at a weighted average price of $US 90.72 WTI.
Eagle is hedged at approximately 30% for the second half of 2015 at a weighted average price of $US 87.09 WTI.
12
Eagle’s Areas of Operation
•
Eagle currently holds a light oil weighted portfolio and operates properties in three areas: Salt Flat (Edwards),
Palo Pinto and Hardeman (Pennsylvanian, Mississippian and Ordovician).
13
Eagle’s Areas of Operation
Caldwell County – Salt Flat Properties
14
Eagle’s Areas of Operation
Palo Pinto County – Palo Pinto Properties
15
Eagle’s Areas of Operation
Hardeman County – Hardeman Properties
16
Eagle’s Areas of Operation
Hardeman County – Hardeman Properties
17
Operations Update
•
To date, 91% of Eagle’s 2014 capital budget has been
executed with results meeting expectations.
•
Initiatives continue to decrease operating costs in the Salt
Flat and Hardeman areas.
•
Eagle has negotiated a new power contract for all of its
operated assets.
•
Less than 5 cents per kwh.
•
3 years.
•
Electricity is approximately 50% of Salt Flat operating costs.
18
Operations Update (cont.)
Hardeman Properties
•
Completed reprocessing of 3-D seismic across part of the
acreage.
•
Added more drilling locations to inventory.
•
Began drilling first well in Hardeman in late September. Results of
this well expected mid-November.
•
Commenced drilling second well in late October.
•
Eagle continues to evaluate the newly processed and interpreted
data to de-risk additional drilling opportunities.
•
Recompleted one well, with results meeting expectations.
•
Initiatives continue to reduce water disposal and power costs,
which collectively comprise 80% of field operating costs.
•
Water hauling rates have been renegotiated and water hauling
routes optimized.
19
Operations Update (cont.)
Salt Flat Properties
•
One “sidetrack” well completed and placed on production in
Q3.
•
This well was a successful pilot project.
•
Shows that in some cases, production can be added at a lower cost
by drilling less expensive “sidetrack” wells instead of drilling new
wells.
•
Eight horizontal pumps installed with good success.
•
Salt Flat capital program has exceeded expectations.
•
Year over year field operating expense reductions continue to
be realized at Salt Flat.
•
•
Estimated year over year costs savings of approximately $US 1
million.
3-D high density seismic shoot completed.
20
Production History
4,000
Includes
production
from the
Permian
property until
its Aug. 29,
2014
disposition.
Average WI Production per Quarter (boe/d)
3,500
3,000
2,500
2,000
1,500
1,000
500
0
Q1/11
Q2/11
Q3/11
Q4/11
Q1/12
Q2/12
Q3/12
Q4/12
Q1/13
Q2/13
Q3/13
Q4/13
Q1/14
Q2/14
Q3/14
Production 1,269
1,214
995
2,023
2,169
2,400
2,825
2,986
2,928
3,022
3,052
2,994
3,010
3,341
2,859
21
Revenue & Operating Netback
Breakdown of Working Interest Revenue (Before Realized Hedges)
$120.00
$24.42
$16.39
$25.93
$17.16
$53.10
$26.19
$17.54
$54.29
$24.55
$16.79
$27.00
$12.73
$24.26
$10.22
$52.20
$24.80
$11.19
$52.58
$13.48
$46.66
$23.13
$13.78
$44.63
$21.40
$14.93
$44.96
$24.11
$26.49
$16.31
$25.57
$15.50
$23.10
$15.85
$25.51
$8.68
$60.00
$11.49
$80.00
$23.90
$100.00
$48.80
$47.58
$56.79
$54.36
$47.82
$57.42
$44.58
$20.00
$51.00
$40.00
$0.00
Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14
Operating Netback (before realized hedges)
Op Costs & Processing
Royalties & Tax
22
Crude Oil Price Comparison
120.00
110.00
100.00
90.00
80.00
70.00
60.00
WTI (NYMEX) - Cushing ($US/bbl)
•
•
Edmonton Par ($CDN/bbl)
Sep-14
Aug-14
Jul-14
Jun-14
May-14
Apr-14
Mar-14
Feb-14
Jan-14
Dec-13
Nov-13
Oct-13
Sep-13
Aug-13
Jul-13
Jun-13
May-13
Apr-13
Mar-13
Feb-13
Jan-13
Dec-12
Nov-12
Oct-12
Sep-12
Aug-12
Jul-12
Jun-12
May-12
Apr-12
Mar-12
Feb-12
Jan-12
50.00
WCS ($CDN/bbl)
Eagle’s production in Texas and Oklahoma has realized a premium sales price.
Eagle believes that Canadian pricing differentials which have been high and volatile over the past
few years but have recently narrowed, will continue to narrow over the coming years as the
expansion of liquefied natural gas, rail and pipeline infrastructure enhances Canada’s access to nonU.S. markets.
23
Highlights
•
•
•
•
•
•
•
Production is 95% oil.
Premium netbacks and competitive operating costs.
Strong balance sheet – cash on hand and debt-free.
Experienced management team and Board.
Continue to strategically acquire, operate and exploit U.S. oil
and gas production.
Poised to diversify its asset base by investing in Canadian
energy assets.
Focused on providing investors with a reliable distribution
paying investment by generating stable cash flows and
managing risk while delivering moderate growth in production
over time to enhance unitholder value.
24
CONTACT:
Richard W. Clark, President and CEO
Tel: (403) 531-1575
Kelly Tomyn, CFO
Tel: (403) 531-1574
Eagle Energy Inc.
Eagle Hydrocarbons Inc.
2710, 500 – 4th Avenue SW
3005, 333 Clay Street
Calgary, AB T2P 2V6
Houston, TX 77002
[email protected]
www.eagleenergytrust.com
TSX: EGL.UN
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APPENDIX
26
Management
Richard Clark, B.A. (Econ), LLB, Director, President and Chief Executive Officer
•
•
19 years in the legal profession as a founding partner at a boutique oil and
gas law firm, then 10 years at a Canadian national law firm, specializing in
corporate finance, securities, M&A and venture capital.
Extensive experience in the royalty trust sector.
Wayne Wisniewski, P.E., MBA, Chief Operating Officer (Houston)
•
•
30 years of oil and gas engineering and operations experience.
Last 13 years of career spent in a senior operations and engineering
management role in the Houston office of a major international E&P
company.
Kelly Tomyn, CA, Chief Financial Officer
•
•
Former VP Finance and CFO for numerous public & private companies with
over 25 years of financial experience with E&P companies.
Former controller for Shiningbank.
Continued..
27
Management
Continued…
Scott Lovett, M.Sc., MBA, P.Eng, Vice President, Corporate & Business Development
•
Over 18 years experience in the oil and gas industry, including reservoir
evaluations, acquisitions and divestments, business planning and strategic
analysis.
Eric McFadden, Vice President, Capital Markets & Business Development
•
Over 25 years of experience in the corporate finance, capital markets,
management and business development industries, including eleven years in the
energy industry
Robert Cunningham, Vice President, Commercial & Business Development (Houston)
•
Over 25 years experience in the oil and gas industry involving business
development, finance, energy banking and risk management.
James Elliott, CA, Vice President, Finance
•
Over 16 years of corporate finance and financial accounting experience, including
14 years in the oil and gas industry.
Jo-Anne Bund, B.A., LLB, General Counsel and Corporate Secretary
•
17 years of experience in corporate finance, securities, and M&A, including with
a national law firm, with a securities regulator and as corporate counsel.
28
Board of Directors
David Fitzpatrick, P.Eng., Chairman
•
Former Chief Executive Officer of Shiningbank
Bruce Gibson, CA, Chair of Audit Committee
•
Former Chief Financial Officer of Shiningbank
Warren Steckley, P.Eng., Chair of Reserves and Governance Committee
•
Former President and Chief Operating Officer, Barnwell of Canada,
Former Director of Shiningbank
Joseph Blandford, P.Eng., Chair of Compensation Committee
•
Retired Oilman, Resides in Houston, TX
Richard Clark, B.A. (Econ), LLB, Director
•
President and Chief Executive Officer of Eagle; Former Director of
Shiningbank
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