Eagle Energy Trust Announces 2016 Capital Budget, 2016 Guidance and a Reduction in Monthly Distributions

Transcription

1 NEWS RELEASE FOR IMMEDIATE RELEASE: Eagle Energy Trust Annunces 2016 Capital Budget, and a Reductin in Mnthly Distributins Calgary, Alberta: December 11, 2015 (TSX: EGL.UN): Eagle Energy Trust ( Eagle r the Trust ) annunces that it has apprved a 2016 capital budget f $10.2 millin, prvided 2016 guidance and reduced its mnthly distributins frm $0.03 per unit t $0.015 per unit ($0.18 per unit annualized) Budget Highlights: A 2016 capital budget f $10.2 millin ($US 7.0 millin fr its peratins in the United States and $0.9 millin fr its peratins in Canada), with a crprate payut rati f under 100% at a WTI price as lw as $US per barrel f il prductin guidance f 3,400 t 3,800 barrels f il equivalent per day ( be/d ) (including 161 be/d f wrking interest prductin, but excluding 235 be/d f ryalty interest prductin frm Eagle s recentlyannunced prpsed acquisitin f Maple Leaf Ryalties Crp. ( Maple Leaf ), which is expected t clse shrtly after the special meeting f the Trust s unithlders t be held n January 25, 2016). A 2016 crprate payut rati f 88%, apprximately 41% undrawn n its existing $US 80 millin credit facility at the end f 2016 and a 2016 year-end prjected debt t trailing cash flw rati f apprximately 3.1x based n management s frecast pricing, freign exchange rate and mnthly distributin assumptins (1). With a lwer fr lnger view n cmmdity prices raising debt t cash flw ratis acrss the energy sectr, Eagle intends t target a respnsible median range f 2.5x t 3.5x debt t cash flw. A $3.0 millin r 23% reductin in year-ver-year general and administrative expenses. Cmmencing with the December 2015 distributin t be paid in January 2016, a distributin f $0.015 per unit per mnth ($0.18 per unit annualized). Based n the Trust s frecast f key variables, including il prices and US/Canada freign exchange rates, Eagle believes this distributin level can be sustainable while staying within acceptable bands f its key perfrmance metrics. Cmmenting n the annuncement, Richard Clark, President and Chief Executive Officer, said, In light f the nging cmmdity price uncertainty, which is a key cash flw driver, as well as ur cntinued fcus n sustainability and preservatin f financial liquidity, we have reduced ur 2016 capital budget by 37% frm 2015 levels, reduced ur mnthly distributin by 50% t $0.015 and intend t cntinue t mnitr and realign ur business t perate near r within ur cash flw. A testament t ur effrts t imprve peratinal efficiencies is that this substantial cut t the capital budget is still expected t deliver a mdest 5% t 10% increase in year-ver-year average prductin. Wayne Wisniewski, Chief Operating Officer, added, Eagle s 2016 plans include drilling five additinal wells at ur Salt Flat and Hardeman prperties t gain further recvery. Our capital prjects cntinue t maintain gd capital efficiencies and finding and develpment csts, while we cntinue t reduce ur verall csts and add quality prspects t ur inventry in this lw cmmdity price envirnment. Currently, ur drilling prgram is expected t exceed a 30% rate f return at $US WTI flat il pricing. In additin, we have the flexibility t increase capital spending in the secnd half f 2016 shuld cmmdity prices imprve. Nte: (1) The abve metrics are based n the fllwing assumptins: $US per barrel WTI il, $US 3.16 per Mcf NYMEX gas, $CAD 2.57 per Mcf AECO gas, a freign exchange rate f $US 1.00 equal t $CAD 1.33, and a mnthly distributin f $0.015 per unit ($0.18 annualized).

2 In this news release, references t Eagle include the Trust and its perating subsidiaries. Figures are presented in Canadian dllars unless therwise indicated. This news release cntains statements that are frward-lking. Investrs shuld read the Nte Regarding Frward-Lking Statements near the end f this news release. December 2015 Distributin Given the current lw cmmdity price envirnment, Eagle has reduced its distributin by 50% t $0.015 per unit per mnth ($0.18 per unit annualized) beginning with the distributin declared in December Accrdingly, the cash distributin t be paid n January 22, 2016, in respect f the mnth f December 2015, fr unithlders f recrd n December 31, 2015, will be $0.015 per trust unit. Acquisitin f Maple Leaf Ryalties Crp., and Cnversin t a Crpratin On Nvember 20, 2015, Eagle annunced that it entered int a binding agreement t acquire Maple Leaf by way f a plan f arrangement (the Arrangement ). Under the Arrangement, Eagle will acquire all f the issued and utstanding shares f Maple Leaf and cnvert int a crpratin. The existing bard and management f Eagle will becme the bard and management f the new crpratin. Subject t apprval f the Trnt Stck Exchange, the new crpratin will be listed n the Trnt Stck Exchange under the trading symbl EGL. The bard s existing plicy f declaring the dividend amunt mnthly will remain unchanged. Fr mre infrmatin abut the Arrangement, see the Trust s news release issued n Nvember 20, The Arrangement is subject t apprval f the securityhlders f Eagle and Maple Leaf. A jint infrmatin circular with respect t the Arrangement will be mailed n r abut December 21, 2015 t the securityhlders f each cmpany. The special securityhlders meetings will be held n January 25, 2016, with clsing expected t ccur shrtly thereafter. Suspensin f Nrmal Curse Issuer Bid Given that Eagle is in the prcess f cmpleting the Arrangement, Eagle has suspended its nrmal curse issuer bid until further ntice. The fllwing 2016 figures are presented bth including and excluding the prpsed acquisitin f Maple Leaf. Eagle s 2016 guidance fr its capital budget, prductin, perating csts and resulting funds flw frm peratins, debt t trailing cash flw and field netback are as fllws: (including Maple Leaf) (excluding Maple Leaf) Capital Budget $10.2 mm $10.2 mm (1) Wrking Interest Prductin 3,400 t 3,800 be/d 3,200 t 3,600 be/d (2) Operating Csts per mnth $2.2 t $2.6 mm $2.2 t $2.6 mm Funds Flw frm Operatins $20.2 mm $17.7 mm (3) Debt t Trailing Cash Flw 3.1x 3.6x Field Netback (excluding Hedges) $21.25/be $20.28/be Ntes: (1) The 2016 capital budget f $10.2 millin cnsists f $US 7.0.millin fr Eagle s peratins in the United States and $0.9 millin fr Eagle s peratins in Canada. An assumed $US WTI il price, 2016 capital budget f $10.2 millin and distributin f $0.015 per unit per mnth ($0.18 per unit annualized) results in a crprate payut rati f 88%. (2) 2016 prductin is frecast t cnsist f 88% il, 2% natural gas liquids ( NGLs ) and 10% gas. These numbers are wrking interest prductin numbers nly and exclude 235 be/d f ryalty interest vlumes that wuld be acquired pursuant t the Arrangement with Maple Leaf. (3) 2016 funds flw frm peratins is expected t be apprximately $20.2 millin (including Maple Leaf) based n the fllwing assumptins: Ntes (a) (b) average wrking interest prductin f 3,600 be/d (the mid-pint f the guidance range); pricing at $US per barrel WTI il, $US 3.16 per Mcf NYMEX gas, $CAD 2.57 per Mcf AECO and $US per barrel f NGL (NGL price is calculated as 35% f the WTI price); 2

3 (c) (d) differential t WTI is $US 3.10 discunt per barrel in Salt Flat, $US 3.50 discunt per barrel in Hardeman, $CAD discunt per barrel in Dixnville and $CAD discunt per barrel in Twining; average perating csts f $2.4 millin per mnth ($US 0.9 millin per mnth fr Eagle s peratins in the United States and $1.2 millin per mnth fr Eagle s peratins in Canada), the mid-pint f the guidance range; and (e) freign exchange rate f $US 1.00 equal t $CAD Tables shwing the sensitivity f Eagle s 2016 funds flw frm peratins t changes in cmmdity price, prductin and exchange rates are set ut belw under the heading 2016 Sensitivities Capital Budget Eagle s bard f directrs has apprved a 2016 capital budget f $10.2 millin ($US 7.0 millin in the United States and $0.9 millin in Canada), cnsisting f the fllwing: Salt Flat, Texas 3 (3.0 net) hrizntal il wells Seismic prcessing, facilities, pump changes Hardeman, Texas and Oklahma 2 (2.0 net) vertical wells Seismic prcessing, pump installs Dixnville, Alberta (nn-perated) Pipeline and facilities Twining, Alberta Facility capital The capital budget excludes crprate and prperty acquisitins, which are evaluated separately n their wn merit. Calculatins Regarding Eagle s Distributins (including Maple Leaf) (excluding Maple Leaf) Basic Payut Rati 37% 35% (1) Plus: Capital Expenditures 51% 58% Equals: Crprate Payut Rati 88% 93% (2) Debt t Trailing Cash Flw 3.1x 3.6x Ntes: (1) Eagle calculates its Basic Payut Rati as fllws: Ntes Unithlder Distributins Funds flw frm Operatins = Basic Payut Rati (2) Eagle calculates the Crprate Payut Rati as fllws: Capital Expenditures + Unithlder Distributins Funds flw frm Operatins = Crprate Payut Rati Tables shwing the sensitivity f Eagle s Crprate Payut Rati t changes in cmmdity price, prductin and exchange rates are set ut belw under the heading 2016 Sensitivities. 3

4 Underlying Asset Quality Benchmarks Oil and Gas Fundamentals (including Maple Leaf) (excluding Maple Leaf) Oil Weighting 88% 91% Gas Weighting 6 Mcf:1 bbl) 10% 7% NGL Weighting 2% 2% Ntes Operating csts per mnth $2.2 t $ 2.6 millin $2.2 t $2.6 millin (1) Field Netbacks per be $21.25 $20.28 (2) % Hedged 35% 36% (3) Ntes: (1) Operating csts are stated n a per mnth basis rather than per be due t the mstly fixed nature f the csts. (2) This figure assumes average perating csts f $2.4 millin per mnth (the mid-pint f the guidance range) at a $US WTI price. (3) Hedging supprts sustainability in a vlatile cmmdity price envirnment. Fr ,000 barrels f il per day are hedged at an average price f $US per barrel and 1,430 Mcf per day f gas is hedged at an average price f $CAD 2.97 per Mcf. In additin, Eagle has a fixed price financial swap n 1,000 barrels f il per day fixing the differential between Edmntn Light Sweet il and WTI il at $US 3.65 per barrel fr Sensitivities The fllwing tables shw the sensitivity f Eagle s 2016 funds flw frm peratins, crprate payut rati and debt t trailing cash flw t changes in cmmdity prices, prductin and exchange rates, and are based n the assumptin that the acquisitin f Maple Leaf will be cmpleted: Sensitivities t Cmmdity Price 2016 Average WTI (Prductin = 3,600 be/d) $US 45 (F/X 1.38) $US 50 (F/X 1.33) $US 55 (F/X 1.28) Funds Flw frm Operatins $18.6 $20.2 $21.1 Crprate Payut Rati 97% 88% 82% Debt t Trailing Cash Flw 3.5x 3.1x 2.9x Sensitivities t Prductin 2016 Average Prductin (be/d) WTI = $US 50 / F/X ,400 3,600 3,800 Funds Flw frm Operatins $18.6 $20.2 $21.7 Crprate Payut Rati 95% 88% 82% Debt t Trailing Cash Flw 3.4x 3.1x 2.9x Assumptins: (1) Assumes that the Maple Leaf Arrangement is cmpleted. (2) Annualized distributins are assumed t be $0.18 per unit per year. (3) Assumes 7.6 millin shares will be issued t acquire Maple Leaf in January (4) Operating csts are assumed t be $2.4 millin per mnth (mid-pint f guidance range). (5) Differential t WTI is held cnstant. (6) Freign exchange rate is ( F/X ) is assumed t be $US 1.00 equal t $CAD 1.33, unless therwise indicated in the table. 4

5 Advisries Nn-IFRS Financial Measures Statements thrughut this news release make reference t the terms funds flw frm peratins, field netback and crprate payut rati, which are nn-ifrs financial measures that d nt have a standardized meaning prescribed by IFRS and may nt be cmparable t similar measures presented by ther issuers. Management believes that these terms prvide useful infrmatin t investrs and management since such measures reflect the quality f prductin, the level f prfitability, the ability t drive grwth thrugh the funding f future capital expenditures and the sustainability f distributins t unithlders. Funds flw frm peratins is calculated befre changes in nn-cash wrking capital and abandnment expenditures. Management cnsiders funds flw frm peratins t be a key measure as it demnstrates Eagle s ability t generate the cash necessary t pay distributins, repay debt, fund decmmissining liabilities and make capital investments. Management believes that by excluding the temprary impact f changes in nn-cash perating wrking capital, funds flw frm peratins prvides a useful measure f Eagle s ability t generate cash that is nt subject t shrt-term mvements in nn-cash perating wrking capital. Field netback is calculated by subtracting ryalties and perating csts frm revenues. Crprate payut rati is calculated by dividing capital expenditures (excluding acquisitin capital) plus unithlder distributins by funds flw frm peratins. Nte Regarding Frward-Lking Statements Certain f the statements made and infrmatin cntained in this news release are frward-lking statements and frward-lking infrmatin (cllectively referred t as frward-lking statements ) within the meaning f Canadian securities laws. All statements ther than statements f histric fact are frward-lking statements. The Trust cautins investrs that imprtant factrs culd cause the Trust s actual results t differ materially frm thse prjected, r set ut, in any frward-lking statements included in this news release. In particular, and withut limitatin, this news release cntains frward-lking statements pertaining t the fllwing: the Trust s 2016 capital budget and specific uses; the Trust s expectatins regarding its 2016 full year average wrking interest prductin, perating csts and field netbacks (excluding hedges); the Trust s expectatins regarding its 2016 funds flw frm peratins, crprate payut rati and debt t trailing cash flw (including and excluding the acquisitin f Maple Leaf), and sensitivities f these metrics t cmmdity prices, prductin and exchange rates; the Trust s expectatins regarding the reductin in general and administrative expenses; the Trust s expectatins regarding the percentage that will be undrawn n its credit facility at the end f 2016; the Trust s expectatin t perate near r within its cash flw and deliver a mdest 5% t 10% increase in year-ver-year average prductin; the Trust s 2016 drilling prgram, capital prjects, drilling inventry and the drilling prgram s expected rate f return; the Trust s expectatin t increase capital spending in the secnd half f 2016 shuld cmmdity prices imprve; anticipated crude il, natural gas liquids and natural gas prductin levels; the Trust s expectatins regarding its distributin level and the sustainability f the distributin level while the Trust stays within acceptable bands f its key perfrmance metrics; the Arrangement Agreement between the Trust and Maple Leaf; and the cntinued suspensin f the Trust s nrmal curse issuer bid until further ntice. 5

6 With respect t frward-lking statements cntained in this news release, assumptins have been made regarding, amng ther things: future il, natural gas liquid and natural gas prices and weighting; future currency exchange rates; future prductin levels; future distributin levels; future acquisitins, including the Arrangement; regulatry and curt apprval f the Arrangement; estimates f anticipated future prductin as a result f the Arrangement; the Trust s 2016 capital budget, which is subject t change in light f nging results, prevailing ecnmic circumstances, cmmdity prices and industry cnditins and regulatins; nt including capital required t pursue future acquisitins in the frecasted capital expenditures; estimates f anticipated future prductin, which is based n the prpsed drilling prgram with a success rate that, in turn, is based upn histrical drilling success and an evaluatin f the particular wells t be drilled; and prjected perating csts, which are based n histrical infrmatin and anticipated changes in the cst f equipment and services. The Trust s actual results culd differ materially frm thse anticipated in these frward-lking statements as a result f the risk factrs set frth belw and thse in the Trust s Annual Infrmatin Frm ( AIF ) dated March 19, 2015 fr the year ended December 31, 2014, available n the Trust s website at and n SEDAR at vlatility f il, natural gas liquid, and natural gas prices; cmmdity supply and demand; fluctuatins in currency exchange and interest rates; inherent risks and changes in csts assciated in the develpment f petrleum prperties; timing, results and csts f drilling and prductin activities; failure t receive securityhlder, regulatry r curt apprval f the Arrangement; failure t satisfy the cnditins t clsing the Arrangement; availability f financing and capital; and new regulatins and legislatin that apply t the Trust and the peratins f its subsidiaries. Additinal risks and uncertainties affecting the Trust are cntained in the AIF under the heading Risk Factrs. As a result f these risks, actual perfrmance and financial results in 2016 and distributins may differ materially frm any prjectins f future perfrmance r results expressed r implied by these frward lking statements. The Trust s prductin rates, perating csts, field netbacks, drilling prgram, 2016 capital budget, funds flw frm peratins and distributins are subject t change in light f nging results, prevailing ecnmic circumstances, btaining regulatry apprvals, cmmdity prices and industry cnditins and regulatins. New factrs emerge frm time t time, and it is nt pssible fr management t predict all f these factrs r t assess, in advance, the impact f each such factr n the Trust s business, r the extent t which any factr, r cmbinatin f factrs, may cause actual results t differ materially frm thse cntained in any frward-lking statement. Unlike fixed incme securities, the Trust has n bligatin t distribute any fixed amunt and reductin in, r suspensin f, cash distributins may ccur that wuld reduce future yield. Undue reliance shuld nt be placed n frward-lking statements, which are inherently uncertain, are based n estimates and assumptins, and are subject t knwn and unknwn risks and uncertainties (bth general and specific) that cntribute t the pssibility that the future events r circumstances cntemplated by the frward-lking statements will nt ccur. Althugh management believes that the expectatins cnveyed by the frward-lking statements are reasnable based n infrmatin available t it n the date the frward-lking statements were made, there can be n assurance that the plans, intentins r expectatins upn which frward-lking statements are based will in fact be realized. Actual results will differ, and the difference may be material and adverse t the Trust and its unithlders. The Trust des nt undertake any bligatin, except as required by applicable securities legislatin, t update publicly 6

7 r t revise any f the included frward-lking statements, whether as a result f new infrmatin, future events r therwise. Oil and Gas Measures and Estimates This news release cntains disclsure expressed as "be" r "be/d". All il and natural gas equivalency vlumes have been derived using the cnversin rati f six thusand cubic feet ("Mcf") f natural gas t ne barrel ("bbl") f il. Equivalency measures may be misleading, particularly if used in islatin. A cnversin rati f 6 Mcf: 1 bbl is based n an energy equivalency cnversin methd primarily applicable at the burner tip and des nt represent a value equivalency at the well head. In additin, given that the value rati based n the current price f il as cmpared t natural gas is significantly different frm the energy equivalent f six t ne, utilizing a be cnversin rati f 6 Mcf:1 bbl wuld be misleading as an indicatin f value. Abut Eagle Energy Trust Eagle is an il and gas energy trust created t prvide investrs with a sustainable business while delivering stable grwth in prductin and verall grwth thrugh accretive acquisitins. Eagle s units are traded n the Trnt Stck Exchange under the symbl EGL.UN. All material infrmatin abut Eagle may be fund n its website at r under Eagle s issuer prfile at Fr further infrmatin, please cntact: Kelly Tmyn Chief Financial Officer (403) ktmyn@eagleenergytrust.cm Richard W. Clark President and Chief Executive Officer (403) rclark@eagleenergytrust.cm Eagle Energy Inc. Suite 2710, th Avenue SW Calgary, Alberta T2P 2V6 (403) (855) (tll free) inf@eagleenergytrust.cm 7