Eagle Energy Inc.
TSX : EGL

Eagle Energy Inc.

March 16, 2017 21:47 ET

Eagle Energy Inc. Announces 2016 Annual Results and Reserves Information

CALGARY, ALBERTA--(Marketwired - March 16, 2017) - Eagle Energy Inc. (TSX:EGL) ("Eagle") is pleased to report its financial and operating results and its reserves information for the year ended December 31, 2016.

Richard Clark, Chief Executive Officer, commented, "Eagle closed out 2016 with strong reserve metrics, production exceeding the upper end of our guidance range, monthly operating costs at the lower end of our guidance range and ending debt levels as expected. In addition, with our March 13, 2017 announcement of a new four year secured term loan with White Oak Global Advisors, LLC, we have expanded our borrowing capacity by 24% and established a foundation upon which we can execute our new growth strategy over the next four years and accelerate the development of our low risk drilling inventory."

Eagle's reserves data and other oil and gas information is included in its Annual Information Form dated March 16, 2017 for the year ended December 31, 2016 ("AIF"). The audited consolidated 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.

Highlights for the Year ended December 31, 2016

Eagle achieved the following results in 2016:

  • A total proved reserve replacement ratio of 184% and a total proved plus probable reserve replacement ratio of 272%.
  • Total proved plus probable finding, development and acquisition costs (including changes in future development costs) of $7.16 per barrel of oil equivalent ("boe").
  • An 18% year-over-year increase in the net present value of proved plus probable reserves (discounted at 10%), with minimal capital investment and within a lower forward pricing environment.
  • Average production increased by 18% year-over-year to 3,972 barrels of oil equivalent per day ("boe/d") (84% oil, 3% natural gas liquids ("NGLs") and 13% natural gas).
  • A 12% year-over-year reduction in per boe operating costs (inclusive of transportation).
  • Funds flow from operations of $15.8 million ($10.87 per boe or $0.38 per share) and ending net debt of $59 million.

On March 13, 2017, Eagle announced an increase to its borrowing capacity by way of a new four year secured term loan and its 2017 capital budget, production and operating cost guidance. In addition, as Eagle embarks on a more growth-oriented strategy, it announced a suspension of its dividend following the payment of its February dividend. The February dividend of $0.005 per common share that was previously declared on February 15, 2017 for shareholders of record on February 28, 2017 will still be paid on March 23, 2017.

Term Loan Financing - $CA 87 million ($US 65 million) - closed March 13, 2017

  • Eagle has expanded its borrowing capacity by 24% to approximately $87 million ($US 65 million), which establishes a foundation for Eagle to execute its new growth strategy over the next four years and accelerate the development of its low risk drilling inventory.
  • Eagle has replaced its entire $70 million authorized bank credit facility with a new four year secured term loan from White Oak Global Advisors, LLC ("White Oak") which provides up to $87 million (the current Canadian dollar equivalent of $US 65 million) of financing. Headquartered in San Francisco, White Oak is an SEC-registered investment adviser with assets under management of approximately $US 3 billion and affords Eagle a partner that has the capacity to provide additional financing to fund future acquisitions.
  • At closing, Eagle drew approximately $82 million (the current Canadian dollar equivalent of $US 61.5 million) and can draw the remaining $US 3.5 million prior to the first anniversary of closing.
  • Based on Eagle's 2016 ending net debt of $59 million and execution of its approved 2017 budget, Eagle expects 2017 ending net debt to be $71.2 million, thus affording Eagle approximately $13 million in combined working capital and undrawn term loan availability at the end of 2017 (see "2017 Outlook").
  • Eagle's expanded credit base, coupled with its 2017 expected funds flow from operations (see "2017 Outlook") has allowed a four-fold increase in the capital budget from 2016. Expected growth in year-over-year fourth quarter average production is 8%, but more impactful will be the exploitation of substantial, internally-identified drilling opportunities in Eagle's Hardeman and Twining fields that the 2017 capital budget is expected to provide.

Highlights of 2017 Budget

On March 13, 2017, Eagle announced its 2017 budget, with the following highlights:

  • 2017 capital budget of $22.8 million ($US 12.5 million for its operations in the United States and $6.6 million for its operations in Canada). Included in the $US 12.5 million capital budget is $US 3.5 million for land acquisitions on seismically-defined play trends in Eagle's Hardeman area, which will provide a platform for economic production growth in future years.
  • 2017 production guidance of 3,800 to 4,000 boe/d (including working interest and royalty interest volumes), resulting in 8% year-over-year fourth quarter production growth. Eagle's proved developed producing corporate decline rate is approximately 18% per annum.
  • 2017 field netbacks of $25.78 / boe (based on the assumptions as set out below under the heading "2017 Outlook").
  • 2017 monthly operating cost guidance (inclusive of transportation) of $2.1 million to $2.3 million per month, resulting in per boe operating costs of $19.04 (figure based on the mid-range guidance level of $2.2 million per month).
  • 2017 funds flow from operations of $16.0 million ($0.38 per share), consistent with 2016 levels and incorporating a 16% forecast decrease year-over-year of general and administrative expenses.
  • 2017 ending net debt of $71.2 million, affording Eagle approximately $13 million in combined working capital and undrawn term loan availability at the end of 2017 (based on the assumptions as set out below under the heading "2017 Outlook").

2017 Outlook

This outlook section is intended to provide shareholders with information about Eagle's expectations for capital expenditures, production and operating costs for 2017. Readers are cautioned that the information may not be appropriate for any other purpose. This information constitutes forward-looking information. Readers should note the assumptions, risks and discussions under "Note about Forward-Looking Statements" at the end of this news release.

Eagle's 2017 guidance for its capital budget, average production and monthly operating costs together with resulting funds flow from operations, ending net debt and field netback (excluding hedges) (based on management's assumptions) remains unchanged from what Eagle previously announced on March 13, 2017 and is as follows:

2017 Guidance Notes
Capital Budget $22.8 mm (1)
Average Production 3,800 to 4,000 boe/d (2)
Operating Expenses per month $2.1 to $2.3 mm (3)
Funds Flow from Operations $16.0 mm (4)
Ending Net Debt $71.2 mm
Field Netback (excluding hedges) $25.78 / boe (5)

Notes:

(1) The 2017 capital budget of $22.8 million consists of $US 12.5 million for Eagle's operations in the United States and $6.6 million for Eagle's operations in Canada.
(2) 2017 production is forecast to consist of 84% oil, 3% NGLs and 13% natural gas. These numbers include working interest and royalty interest volumes.
(3) Operating expense guidance is stated on a per month basis rather than per boe basis due to the mostly fixed nature of the costs.
(4) 2017 funds flow from operations is expected to be approximately $16.0 million based on the following assumptions:
(a) average production of 3,900 boe/d (the mid-point of the guidance range);
(b) pricing at $US 55.46 per barrel WTI oil, $US 3.36 per Mcf NYMEX gas, $CA 2.79 per Mcf AECO and $US 19.41 per barrel of NGL (NGL price is calculated as 35% of the WTI price);
(c) differential to WTI is $US 3.18 discount per barrel in Salt Flat, $US 3.50 discount per barrel in Hardeman, $CA 11.50 discount per barrel in Dixonville and $CA 8.00 discount per barrel in Twining;
(d) average operating costs of $2.2 million per month ($US 0.8 million per month for Eagle's operations in the United States and $1.2 million per month for Eagle's operations in Canada), the mid-point of the guidance range; and
(e) a foreign exchange rate of $US 1.00 equal to $CA 1.30.
(5) This figure assumes average operating costs of $2.2 million per month (the mid-point of the guidance range) and a $US 55.46 WTI price. Field netback is a non-IFRS financial measure. Refer to the section below titled "Non-IFRS Financial Measures".

Tables showing the sensitivity of Eagle's 2017 funds flow from operations to changes in commodity prices, production and foreign exchange rates are set out below under "2017 Sensitivities".

2017 Sensitivities

The following tables show the sensitivity of Eagle's 2017 funds flow from operations to changes in commodity prices, production and foreign exchange ("FX") rates:

Funds Flow from Operations 2017 Average Production (3,900 boe/d)
Sensitivity to Commodity Price FX 1.25 FX 1.30 FX 1.35
$US 45.00 WTI $13.7 mm $14.9 mm $16.0 mm
$US 55.00 WTI $14.9 mm $16.0 mm $17.2 mm
$US 65.00 WTI $15.0 mm $16.1 mm $17.4 mm
Sensitivity to Production 2017 Average Production (3,900 boe/d)
(WTI $US 55.00, FX 1.30)
3,800 3,900 4,000
Funds Flow from Operations ($CA) $15.1 mm $16.0 mm $17.0 mm

Assumptions:

(1) Operating costs are assumed to be $2.2 million per month (mid-point of guidance range).
(2) Differential to WTI is held constant.
(3) The foreign exchange rate is assumed to be $US 1.00 equal to $CA 1.30, unless otherwise indicated in the table.

Updated Dividend Strategy

Concurrent with embarking on a more growth oriented strategy, on March 13, 2017, Eagle announced the suspension of its dividend following the payment of its February dividend. The February dividend of $0.005 per common share of Eagle that was previously declared on February 15, 2017 for shareholders of record on February 28, 2017 will still be paid on March 23, 2017.

Previously, Eagle focused on a sustainable business model with capital expenditures using less than 100% of its annual cash flow to deliver total returns to its shareholders through both dividends and modest production growth. However, Eagle's capital budget for 2017, a year in which Eagle plans to build the platform for future reserves and production growth, requires 145% of Eagle's 2017 expected cash flow. This decision makes the payment of a dividend neither sustainable nor sensible. When Eagle has successfully implemented this capital intensive phase of its growth, the Board may consider reinstating an appropriate dividend.

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, 2016 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.

2016 Year-End Reserves Report - Highlights

  • Increased year-over-year proved developed producing reserves by 2%, total proved reserves by 9% and total proved plus probable reserves by 13%.
  • Grew total proved plus probable reserves to approximately 20.9 million boe (68% proved, 52% proved producing).
  • 92% of the proved developed producing reserves are light oil.
  • Achieved total proved plus probable finding, development and acquisition costs (including changes in future development costs) of $7.16 per boe.
  • Maintained Eagle's proved plus probable reserve life index above 14 years and replaced 184% of its reserves on a proved basis.

The following tables summarize the independent reserves estimates and values of Eagle's reserves as at December 31, 2016:

Summary of Reserves

Canadian Operations Company Gross(1)
Reserves Categories Crude Oil Natural Gas Liquids Natural Gas Total Oil Equivalent 2016 Total Oil Equivalent 2015
(Mbbls) (Mbbls) (MMcf) (Mboe) (Mboe)
Proved
Developed producing 7,258 108 3,666 7,976 8,247
Developed non-producing 61 15 449 150 139
Undeveloped 833 58 1,765 1,185 787
Total proved 8,152 180 5,880 9,311 9,173
Total probable 3,856 118 3,774 4,602 4,174
Total proved plus probable 12,007 297 9,653 13,914 13,347
US Operations Company Gross(1)
Reserves Categories Crude Oil Natural Gas Liquids Natural Gas Total Oil Equivalent 2016 Total Oil Equivalent 2015
(Mbbls) (Mbbls) (MMcf) (Mboe) (Mboe)
Proved
Developed producing 2,851 53 329 2,959 2,501
Developed non-producing 400 16 79 429 348
Undeveloped 1,339 75 371 1,475 1,007
Total proved 4,590 144 778 4,864 3,856
Total probable 1,905 125 618 2,132 1,358
Total proved plus probable 6,494 269 1,396 6,996 5,214
Total Company Operations Company Gross(1)
Reserves Categories Crude Oil Natural Gas Liquids Natural Gas Total Oil Equivalent 2016 Total Oil Equivalent 2015
(Mbbls) (Mbbls) (MMcf) (Mboe) (Mboe)
Proved
Developed producing 10,109 161 3,994 10,935 10,748
Developed non-producing 461 31 528 579 487
Undeveloped 2,172 133 2,136 2,660 1,793
Total proved 12,741 324 6,658 14,175 13,028
Total probable 5,760 242 4,392 6,735 5,533
Total proved plus probable 18,502 567 11,050 20,910 18,561

Notes:

(1) Company gross reserves are Eagle's total working interest share before the deduction of any royalties and without including any of Eagle's royalty interests.
(2) Totals may not add due to rounding.

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)
Reserves Category 0% 5% 10% 15% 20%
$CA ($000's) ($000's) ($000's) ($000's) ($000's)
Proved
Developed producing 203,164 129,239 92,883 72,510 59,796
Developed non-producing 2,471 1,937 1,490 1,159 919
Undeveloped 20,770 13,252 8,659 5,678 3,638
Total proved 226,405 144,428 103,032 79,347 64,353
Total probable 152,563 65,425 36,994 24,688 18,114
Total proved plus probable 378,969 209,854 140,026 104,035 82,467
US Operations Net Present Value of Future Net Revenue
Before Income Taxes Discounted at (%/year)
Reserves Category 0% 5% 10% 15% 20%
$US ($000's) ($000's) ($000's) ($000's) ($000's)
Proved
Developed producing 82,388 59,325 47,900 40,847 35,950
Developed non-producing 18,748 9,994 6,915 5,440 4,558
Undeveloped 30,666 22,750 17,187 13,129 10,083
Total proved 131,803 92,069 72,002 59,416 50,591
Total probable 68,170 46,992 34,551 26,620 21,260
Total proved plus probable 199,972 139,061 106,553 86,036 71,851
Total Company Operations Net Present Value of Future Net Revenue
Before Income Taxes Discounted at (%/year)
Reserves Category 0% 5% 10% 15% 20%
$CA ($000's) ($000's) ($000's) ($000's) ($000's)
Proved
Developed producing 303,952 202,673 152,684 123,845 105,222
Developed non-producing 24,961 14,095 9,997 7,905 6,607
Undeveloped 56,761 39,851 28,648 20,840 15,172
Total proved 385,674 256,619 191,329 152,591 127,000
Total probable 234,039 121,874 78,711 56,991 44,041
Total proved plus probable 619,714 378,493 270,039 209,852 171,041

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) The U.S. operations numbers have been converted into Canadian dollars using the following foreign exchange rates: 2017 - $CA 1.00 equal to $US 0.750; 2018 - $CA 1.00 equal to $US 0.775; 2019 - $CA 1.00 equal to $US 0.800; 2020 - $CA 1.00 equal to $US 0.825; 2021 and thereafter - $CA 1.00 equal to $US 0.850 (as per McDaniel & Associates Consultants Ltd. January 1, 2017 price deck forecast).
(3) Totals may not add due to rounding.

At a 10% discount factor, proved developed producing reserves comprise 57% (2015 - 61%) of the total proved plus probable value. Total proved reserves account for 71% (2015 - 75%) of the total proved plus probable value.

Future Development Costs ("FDC")

Total future development costs are estimated at $41.7 million for total proved and $62.3 million for total proved plus probable reserves. When compared to 2017 funds flow from operations guidance of $16.0 million (see the "2017 Outlook" section of this news release for assumptions), future development costs represent 2.6 years and 3.9 years of funds flow from operations, respectively.

Reserves Performance Ratios

During 2016, Eagle's capital expenditures, including acquisition capital, resulted in capital efficiency statistics as shown in the following table.

2016 2015
Proved Proved plus
Probable
Proved Proved plus
Probable
Reserves (Mboe) 14,175 20,910 13,028 18,561
Capital Expenditures ($M)
Exploration and Development ("E&D")(1)(8) 5,771 5,771 14,134 14,134
Acquisition(2)(8) 5,144 5,144 30,970 30,970
Total Capital Expenditures 10,915 10,915 45,104 45,104
Field Netbacks ($/boe)(3)
Current Year 16.12 16.12 19.30 19.30
Finding, Development and Acquisition ("FD&A") Costs(4)(8)
Change in Future Development Costs ("FDC") ($M) 11,219 15,691 8,652 8,006
Reserve Additions (Mboes) 2,515 3,717 2,880 3,788
FD&A Costs including changes in FDC ($/boe)(4) 8.80 7.16 18.66 14.02
FD&A Costs excluding changes in FDC ($/boe)(4) 4.34 2.94 15.66 11.91
Recycle Ratio(5)(8) 1.83 2.25 1.03 1.38
Reserves Replacement(6)(8) 184% 272% 234% 307%
Reserves Life Index (yrs)(7)(8) 10.4 15.3 10.4 14.9

Notes:

(1) E&D is equal to expenditures for "exploration and evaluation" plus "oil and gas properties" from the Consolidated Cash Flow Statement.
(2) Acquisition refers to the January 2016 acquisition of Maple Leaf Royalties Corporation and the 2015 acquisition of the Twining properties. See note 6 of the Audited Consolidated Annual Financial Statements.
(3) Field netbacks are calculated by subtracting royalties, operating expenses, and transportation and marketing expenses from revenues, which are from the Consolidated Statement of Earnings (Loss) and Comprehensive Earnings (Loss). Field netback is a non-IFRS financial measure. See "Non-IFRS Financial Measures".
(4) Eagle calculates FD&A costs incorporating both the costs and associated reserve additions related to E&D and acquisitions during the year. Eagle believes that FD&A costs provide useful information to investors because it is a measure of the cost to locate new reserves and the ongoing expense of extracting petroleum throughout the lifecycle of the reserves.
(5) Recycle ratio is calculated by dividing field netback per boe by FD&A costs including changes in FDC per boe. Eagle believes that the recycle ratio provides useful information to investors because it is a measure of a company's production efficiency based on its FD&A costs.
(6) Reserves Replacement is calculated by dividing reserve additions by total working interest production for the year, which, in 2016, is based on average working interest production of 3,740 boe/d (2015 - 3,358 boe/d).
(7) Reserves Life Index is calculated by dividing reserves by total working interest production for the year, which, in 2016, is based on average working interest production of 3,740 boe/d (2015 - 3,358 boe/d).
(8) Eagle cautions readers as to the reliability of these capital efficiency statistics as these measures do not have any standardized meaning and may not be comparable to similar measures presented by other issuers.

Selected Annual Information

The following table shows selected information for Eagle's fiscal years ended December 31, 2016, December 31, 2015 and December 31, 2014.

Years ended December 31 2016 2015 2014
($000's except per share amounts and production)
Sales volumes - boe/d 3,972 3,358 2,782
Revenue, net of royalties 48,993 48,121 67,175
Field netback 23,437 23,659 50,522
Funds flow from operations 15,798 30,738 33,958
per share - basic 0.38 0.88 1.01
per share - diluted 0.38 0.88 1.00
Earnings (loss) 9,559 (76,046 ) (48,028 )
per share - basic 0.23 (2.18 ) (1.43 )
per share - diluted 0.23 (2.18 ) (1.55 )
Current assets 9,302 19,767 33,245
Current liabilities 74,758 9,397 10,720
Total assets 218,199 208,572 257,172
Total non-current liabilities 26,202 92,616 57,547
Shareholders' equity 117,239 106,559 188,905
Dividends declared 3,821 12,040 33,524
per issued share 0.09 0.35 0.99
Shares issued 42,452 34,863 35,017

Summary of Quarterly Results

Q4/2016 Q3/2016 Q2/2016 Q1/2016 Q4/2015 Q3/2015 Q2/2015 Q1/2015
($000's except for boe/d and per share amounts)
Sales volumes - boe/d 3,803 4,085 4,147 3,854 3,783 3,607 3,034 2,995
Revenue, net of royalties 13,891 12,854 13,149 9,099 11,603 13,428 12,884 10,206
per boe 39.72 34.20 34.84 25.94 33.34 40.46 46.66 37.86
Operating expenses 6,799 6,564 5,928 6,265 6,356 6,473 5,171 5,978
per boe 19.44 17.46 15.71 17.86 18.26 19.50 18.73 22.18
Field netback 7,092 6,290 7,221 2,834 5,246 6,956 7,713 3,744
per boe 20.28 16.74 19.13 8.08 15.08 20.96 27.94 13.89
Funds flow from operations 3,901 4,582 5,148 2,167 5,147 7,332 10,532 7,727
per boe 11.15 12.19 13.64 6.18 14.79 22.09 38.14 28.67
per share - basic 0.09 0.11 0.12 0.05 0.15 0.21 0.30 0.22
per share - diluted 0.09 0.11 0.12 0.05 0.15 0.21 0.30 0.22
Earnings (loss) 30,508 52 (9,288 ) (11,713 ) (23,198 ) (51,784 ) (6,541 ) 5,477
per share - basic 0.72 0.00 (0.23 ) (0.29 ) (0.67 ) (1.48 ) (0.19 ) 0.16
per share - diluted 0.72 0.00 (0.23 ) (0.29 ) (0.67 ) (1.48 ) (0.19 ) 0.16
Cash dividends paid 637 636 1,274 1,584 2,614 3,143 3,130 3,153
per issued share 0.015 0.015 0.03 0.04 0.07 0.09 0.09 0.09
Current assets 9,302 9,787 10,618 12,829 19,767 21,862 13,382 31,459
Current liabilities 74,758 72,387 75,035 5,472 9,397 8,033 7,754 8,642
Total assets 218,199 190,945 195,044 199,708 208,572 228,959 245,009 265,342
Total non-current liabilities 26,202 31,690 32,397 96,317 92,616 91,316 52,012 60,835
Shareholders' equity 117,239 86,868 87,612 97,919 106,559 129,611 185,243 195,865
Shares issued 42,452 42,452 42,452 42,452 34,863 34,893 34,961 35,023

During the third quarter of 2016, sales volumes included initial production from wells in Canada and the U.S. that were restarted. The production levelled off during the three months ended December 31, 2016, causing a decrease in sales volumes when compared to the previous quarter.

Despite a quarter-over-quarter decrease in production, field netback increased in the fourth quarter primarily due to higher commodity prices. Funds flow from operations decreased in the fourth quarter of 2016 due to decreased production, increased administrative expenses related to year end costs including audit and reserves and a lower risk management gain due to the higher WTI price. Generally, in times of increasing prices, funds flow from operations increases faster than increases in sales volumes because certain expenses tend to be more fixed in nature, such as general and administrative expenses, and do not change with sales volumes.

Earnings (loss) on a quarterly basis often do not move directionally or by the same amount as movements in funds flow from operations. This is primarily due to items of a non-cash nature that factor into the calculation of earnings (loss), and those that are required to be fair valued at each quarter end. In the fourth quarter of 2016, Eagle recognized an impairment recovery, net of impairment charges, of approximately $34 million.

Advisories

Non-IFRS Financial Measures

Statements throughout this news release make reference to the term "field netback".

"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 loan with White Oak, including terms relating to future drawings;
  • Eagle's expectations regarding its business strategy and that the loan from White Oak establishes a foundation for Eagle to execute a growth strategy over the next four years and accelerate the development of its low risk drilling inventory;
  • Eagle's expectation that 2017 ending net debt will be $71.2 million, thus affording Eagle approximately $13 million in combined working capital and undrawn term loan availability at the end of 2017;
  • Eagle's estimated volumes and values of reserves;
  • Future development costs associated with reserves;
  • Eagle's 2017 capital budgets, specific uses and relationship to 2017 expected cash flow;
  • Eagle's expectations regarding its 2017 full year average production, monthly operating costs, field netbacks (excluding hedges) and proved developed producing corporate decline rate;
  • Eagle's expectation that year-over-year fourth quarter average production will increase and that its 2017 capital budget will enable it to exploit substantial, internally-identified drilling opportunities in Eagle's Hardeman and Twining fields;
  • Eagle's expectations regarding its 2017 funds flow from operations and sensitivity of this metric to commodity prices, production and foreign exchange rates;
  • Eagle's expectations regarding the reduction in 2017 general and administrative expenses;
  • Anticipated crude oil, natural gas liquids and natural gas production weighting; and
  • Eagle's expectations regarding its dividend strategy.

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 rates;
  • future production levels;
  • future recoverability of reserves and the accuracy of Eagle's reserves volumes and values;
  • future dividend levels;
  • future capital expenditures and the ability of Eagle to obtain financing on acceptable terms for its capital projects, operations and future acquisitions;
  • Eagle's 2017 capital budget, which is subject to change in light of ongoing results, prevailing economic circumstances, commodity prices and industry conditions and regulations;
  • not including capital required to pursue future acquisitions in the forecasted capital expenditures;
  • the ability of Eagle to complete new acquisitions;
  • 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 based on historical information and anticipated changes of 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 the AIF:

  • 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 in the development of petroleum properties;
  • ultimate recoverability of reserves;
  • timing, results and costs of drilling and production activities;
  • availability of financing and capital; and
  • new regulations and legislation that apply to Eagle and the operations of 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 2017 may differ materially from any projections of future performance or results expressed or implied by these forward‐looking statements. Eagle's production rates, operating costs, field netbacks, drilling program, 2017 capital budget, funds flow from operations and reserves are subject to change in light of ongoing results, prevailing economic circumstances, obtaining regulatory approvals, commodity prices 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.

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