Eagle Energy Trust

Eagle Energy Trust

August 12, 2011 09:00 ET

Eagle Energy Trust Releases Second Quarter Financial Information, Updated Reserve Report and Revised Capital Program

CALGARY, ALBERTA--(Marketwire - Aug. 12, 2011) - Eagle Energy Trust (the "Trust") (TSX:EGL.UN) is pleased to report its financial and operating results for the second quarter 2011 as well as an updated reserve report and revised capital program. The Trust's unaudited consolidated interim financial statements for the six months ended June 30, 2011 and related management's discussion and analysis have been filed with the securities regulators and will be available shortly under the Trust's issuer profile on the SEDAR website at www.sedar.com, and are available on the Trust's website at www.EagleEnergyTrust.com.

This press release contains statements that are forward looking. Investors should read the "Note about Forward-Looking Statements" at the end of this press release.

Figures within this press release are presented in Canadian dollars unless otherwise indicated

Highlights for the Three Month Period Ended June 30, 2011

  • No bank debt, an expanded $US 15 million credit facility available and working capital of $12.8 million, which provides the Trust with substantial financial resources to execute its business plan.
  • Income of $1.7 million or $0.10 per unit.
  • Funds flow from operations of $5.0 million, equating to $45.51 per bbl or $0.28 per unit.
  • Average working interest sales volumes of 1,214 bbls per day of light oil, with field netbacks of $57.42 per bbl.
  • An updated reserve report showing:
  • Total proved plus probable reserves at June 30, 2011 of 7.6 million barrels (45% of which are proved), an increase of 8% from December 31, 2010 levels.
  • Total proved plus probable reserves additions, net of technical revisions, of 1,115,000 barrels over the 13 months since the June 1, 2010 effective date of Eagle US's acquisition of its interest in the Salt Flat field, resulting in Eagle US replacing 319% of its volumes produced from June 1, 2010 to June 30, 2011.
  • A US$28 million, or 16%, increase in proved plus probable reserves value (discounted at 10%) since December 31, 2010, after having produced 250,000 bbls.
  • Nine (7.2 net) horizontal oil wells drilled in the Salt Flat Field during the quarter, with a 100% success rate, and one (0.80) salt water disposal well.
  • Two (1.6 net) wells brought on-stream in April, one (0.8 net) well brought on-stream in June.
  • 17 horizontal oil wells remaining to be tied in and put on production. Facilities allowing production expected to be in place by early September for substantially all wells, allowing them to be put on production by the beginning of October.
  • Unitholder distributions of $0.26 per unit for the quarter ($0.0875 per unit per month).

Summary of Quarterly Results

($ except for bbls per day amount) YTD 2011 Q2/2011 Q1/2011
Sales volumes – bbls per day (100% light oil) 1,241 1,214 1,269
Revenue, net of royalties 14,439,997 7,304,580 7,135,417
per bbl 64.27 66.10 62.49
Funds flow from operations
per bbl
per unit – basic & diluted
Income (loss)
per unit – basic & diluted
) 1,703,134
Cash distributions declared
per issued unit
Current assets 20,067,295 20,067,295 27,919,736
Current liabilities 7,298,958 7,298,958 11,712,277
Total assets 150,350,547 150,350,547 154,137,632
Total non-current liabilities 4,495,664 4,495,664 2,893,127
Unitholders' equity 138,555,925 138,555,925 139,532,228
Units outstanding for accounting purposes 17,894,470(1 ) 17,894,470(1 ) 17,624,081(1 )
Units issued 18,281,970 18,281,970 18,011,581


  1. Units outstanding for accounting purposes excludes 387,500 units issued due to the performance conditions that have to be met to enable such units to be released from escrow.

Updated Reserves Report Highlights

To fulfill a mid-year requirement of the credit facility of the Trust's wholly-owned subsidiary ("Eagle US"), GLJ Petroleum Consultants Ltd. ("GLJ") was commissioned to prepare a reserves evaluation report effective as at June 30, 2011. The report was prepared in accordance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities and the COGE Handbook standards.

  • Total proved plus probable reserves at June 30, 2011 are approximately 7.6 million barrels (45% of which are proved), representing an increase of 8% from December 31, 2010 levels.
  • Total proved plus probable reserves additions, net of technical revisions, of approximately 1,115,000 barrels over the 13 months since the June 1, 2010 effective date of Eagle US's acquisition of its interest in the Salt Flat field, resulting in Eagle US replacing 319% of its volumes produced from June 1, 2010 to June 30, 2011.
  • A US$28 million, or 16%, increase in proved plus probable reserves value (discounted at 10%) since December 31, 2010, after having produced 250,000 bbls.
  • A current proved plus probable reserve life index of 17.2 years based on second quarter 2011 working interest average sales volumes of 1,214 bbls/day.
  • 100% of the reserves are light oil.

The following tables summarize the independent reserves estimates and values as at June 30, 2011:

Summary of Oil Reserves

Reserves Category Company Gross(1 ) Company Net
(Mbbl ) (Mbbl )
Developed Producing 1,071 806
Developed Non-Producing 1,342 1,006
Undeveloped 1,040 780
Total Proved 3,453 2,592
Probable 4,166 3,125
Total Proved Plus Probable 7,620 5,718


  1. Company gross reserves are Eagle US's total working interest share before the deduction of any royalties and without including any royalty interest of Eagle US.

Summary of Net Present Value of Future Net Revenue of Oil Reserves

Reserves Category
Net Present Value of Future Net Revenue
Before Income Taxes Discounted at (%/year) (1)(2)(3)(4
0% 5 % 10 % 15 % 20 %
(US$000) (US$000 ) (US$000 ) (US$000 ) (US$000 )
Developed Producing 53,016 44,319 38,385 34,106 30,880
Developed Non-Producing 60,451 49,217 41,850 36,680 32,850
Undeveloped 30,551 23,515 18,657 15,132 12,469
Total Proved 144,018 117,051 98,891 85,917 76,199
Probable 199,311 138,359 102.248 79,216 63,611
Total Proved Plus Probable 343,329 255,411 201,140 165,133 139,810


  1. Estimates of after-tax future net revenue are not presented because neither Eagle US nor the Trust will be subject to taxes in Canada.
  2. It should not be assumed that the present values of estimated future net revenue shown above are representative of the fair market value of the reserves. There is no assurance that such price and costs assumptions will be attained and variances could be material. The recovery and reserves estimates of crude oil reserves provided in this press release are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual crude oil reserves may be greater than or less than the estimates provided in this press release.
  3. Present values of estimated future net revenue shown above are based on GLJ's escalated price forecast as of July 1, 2011, which assumes a base 2011 oil price of US$98.65/bbl.
  4. Totals may not add due to rounding.

Production Update

While the drilling program is progressing at a steady pace, with Eagle US currently drilling its 21st well (comprised of 18 horizontal oil wells and 3 salt water disposal wells) of our expected 28 well (21 horizontal oil wells and 7 salt water disposal wells) Salt Flat Field 2011 program, short-term delays have been experienced in bringing wells on production.

Production from the Salt Flat Field requires the disposal of salt water which is produced in association with the oil. The most efficient way to dispose of this salt water is within the Salt Flat Field, as opposed to trucking to an offsite disposal facility. Salt water is injected via salt water disposal ("SWD") wells into a lower zone of the Edwards formation, using surface disposal pumps. While Eagle US normally obtains permits to drill horizontal oil wells within a few days, permits to re-inject water into a SWD well are currently taking from 3 to 5 months to obtain due to high volumes of drilling activity throughout the State of Texas. In 2010, SWD well permits were normally issued within 1 to 2 months.

The slow turnaround in issuing regulatory approvals to drill SWD wells has resulted in Eagle US having an inventory of 17 horizontal oil wells yet to be tied in and put on production. Drilling permits for the 7 salt water disposal wells have been submitted. To date, Eagle has received permits to drill 4 of the SWD wells. It is anticipated that the 4 SWD permits which have been obtained will allow Eagle to tie in the majority of the 17 horizontal oil wells which are not on production at this time. Batteries have been built for the majority of these horizontal wells, with the balance currently being constructed. It is expected that the necessary production facilities for substantially all wells will be in place by early September, thus allowing Eagle to put them on production by the beginning of October.


The Board of Directors has approved a revised 2011 capital budget of $US 28.0 million, representing a $US 5.1 million increase from the original budget approved in January. The additional investment can be categorized as follows: (i) $US 1.4 million for two additional SWD wells (for a total of 7 SWD wells) due to changes to the drilling locations of some horizontal oil wells; (ii) $US 0.6 million to retrofit vapor recovery units at existing batteries for elimination of flaring and greenhouse gas emissions; (iii) $US 1.4 million of additional capital on projects which originated in 2010; and (iv) $US 1.7 million relating to increased drilling costs as a result of the rising cost of services and additional directional drilling costs.

Despite tie-in delays, the Trust is maintaining its previously stated 2011 guidance of working interest average light oil production ranging from 1,900 to 2,100 bbls per day. The Trust's estimate of 2011 average operating costs, including transportation, ranging from $10.00 to $11.50 per barrel, remains unchanged.

The capital budget excludes additional asset acquisitions, which will be separately considered and evaluated as circumstances arise. The amount and allocation of the Trust's 2011 capital budget is dependent upon results achieved and is subject to review by Management and the Board of Directors on an ongoing basis throughout the year.

The Trust will continue to execute, indirectly through its subsidiaries, its integrated business plan to acquire and develop high quality, long life oil and gas properties in the United States.

Note About Forward-Looking Statements

Certain of the statements made and information contained in this press 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.

Forward‐looking statements include those pertaining to the Trust's 2011 capital budget, its subsidiary's drilling program, and anticipated production and operating costs. In estimating its 2011 capital budget, drilling program, and production and operating costs, management has made assumptions relating to, among other things, anticipated future production from the Salt Flat field, future commodity prices, future US/Canadian dollar exchange rates, the regulatory framework governing taxes and environmental matters in the U.S., the ability to market future production from the Salt Flat field, future capital expenditures and the geological and engineering reserves estimates in respect of the Salt Flat field. These assumptions necessarily involve known and unknown risks and uncertainties inherent in the oil and gas industry such as geological, technical, drilling and processing problems, the volatility of oil and gas prices, commodity supply and demand, fluctuations in currency and interest rates, and other business risks that are set out in the Trust's AIF under the heading "Risk Factors".

As a result of these risks, actual performance and financial results in 2011 may differ materially from any projections of future performance or results expressed or implied by these forward‐looking statements. The Trust's 2011 capital budget is subject to change in light of ongoing results, prevailing economic circumstances, commodity prices and industry conditions and regulations. Accordingly, readers are cautioned that events or circumstances could cause results to differ materially from those set out in this press release. 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 the operations of the Trust's subsidiaries, 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.

Statements relating to "reserves" are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described exist in the quantities predicted or estimated and can be profitably produced in the future. This press release contains forward-looking statements pertaining to, and which rely on assumptions as to, the volumes and estimated value of Eagle US's proved and probable reserves, forecasted production levels, future oil prices and the expected timing of tying in the remaining wells. These forward-looking statements are based on the Trust's current beliefs as well as assumptions made by, and information currently available to, the Trust, including the accuracy of the estimates of Eagle US's reserve volumes, future commodity prices and costs assumptions, future production levels, the ability to obtain equipment in a timely manner to carry out development activities, the ability to market oil successfully, and the ability to obtain financing on acceptable terms to fund Eagle US's planned expenditures. Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.

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 the Trust and its unitholders.

About Eagle

Eagle Energy Trust is an energy trust created to provide investors with a publicly traded, oil and natural gas focused, distribution producing investment with favourable tax treatment relative to taxable Canadian corporations.

Richard W. Clark

President and Chief Executive Officer

All material information pertaining to Eagle Energy Trust may be found under the Trust's issuer profile at www.sedar.com and on the Trust's website at www.EagleEnergyTrust.com.

The Trust's units are traded on the Toronto Stock Exchange under the symbol EGL.UN.

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