Eagle Energy Trust (the "Trust") (TSX:EGL.UN) is pleased to report its financial
and operating results for its initial fiscal year ended December 31, 2010. In
addition, the Trust reports that it has filed its Annual Information Form
("AIF"), which includes the Trust's reserves data and other oil and gas
information for the period ended December 31, 2010. The audited consolidated
financial statements, management's discussion and analysis and AIF have been
filed with the securities regulators and are available under the Trust's issuer
profile on the SEDAR website at www.sedar.com and 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.
Significant Activities of the Trust since its formation
From its formation on July 20, 2010 until the closing of its initial public
offering on November 24, 2010, the Trust did not have any active operations.
During this period, funds were disbursed for start-up and administrative
activities, costs related to the upcoming issuance of trust units, expenditures
related to the acquisition of the Salt Flat field and establishment of a bank
credit facility. To assist in funding these expenditures, the Trust issued
approximately $1.6 million of convertible notes through a private placement to
directors, officers and other persons. These convertible notes were converted
into units of the Trust upon closing of the initial public offering.
On November 24, 2010, the Trust, directly or indirectly through its subsidiaries:
-- Closed its initial public offering of 13,000,000 trust units at a price
of $10.00 per unit, for gross cash proceeds of $130,000,000.
Subsequently, the underwriters also exercised their full over-allotment
option, which resulted in the purchase of 1,950,000 additional units at
the offering price of $10.00 per unit and increased total gross cash
proceeds of the offering to $149,500,000.
-- Acquired an average 73% working interest in the Salt Flat field, a light
oil property located in south central Texas, for total consideration of
$127,100,000 including closing adjustments. This acquisition had an
effective date of June 1, 2010 and a closing date of November 24, 2010.
Consideration consisted of cash and 2,000,000 trust units valued at
$20,000,000.
-- Established an $US 8,000,000 credit facility with a U.S. affiliate of a
Canadian chartered bank. As of December 31, 2010 there were no amounts
outstanding under the facility nor have there been any draws made under
this facility to date.
Although the Trust's 2010 income statement includes only the Salt Flat field
operations from the closing date of the acquisition (November 24, 2010), capital
investment had been ongoing for the benefit of the Trust prior to the closing,
with resulting increases in oil production from the effective date of the
acquisition (June 1, 2010). Working interest sales volumes from the closing date
of the acquisition averaged 726 bbls per day (100% light oil), while the 2010
year end exit rate was 1,300 bbls per day. Production growth, net to the Trust,
was approximately 1,000 bbls per day from the June 1, 2010 acquisition effective
date to year end 2010.
As of year end 2010, the Trust's wholly-owned subsidiary in the U.S. had
finished drilling its 12th horizontal well in the Salt Flat field drilling
program, achieving a 100% success rate. Nine of these wells have been tied in,
with the remaining wells expected to be on stream during the second quarter of
2011.
On January 17, 2011 the Trust paid its first distribution to unitholders for the
initial period from November 24 to December 31, 2010 in the amount of $1,916,432
($0.1064 per unit). Subsequent monthly distributions, at a rate of $0.0875 per
unit, were paid on February 15 and March 15, 2011. The Trust has now implemented
a regular distribution reinvestment program and a Premium Distribution(TM)
program, both of which become effective for the next distribution payment
scheduled for April 21, 2011.
Selected Information for the Trust's Initial Fiscal Year
The following table shows selected information for the Trust's initial fiscal
year. These results are not an indicative trend of future performance due to the
short inclusion period of the Salt Flat field operations, non-recurring
administrative costs related to the start-up of the Trust, one-time transaction
expenses incurred for the acquisition of the Salt Flat field and initial
expenses related to unit based compensation and debt conversion.
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Initial fiscal year ended December 31, 2010
($ except per unit amounts and production)
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Production - bbls per day (100% light oil) 726
Revenue, net of royalties 1,366,494
Loss for the period (3,213,531)
per unit - basic & diluted (0.81)
Current assets 33,102,821
Current liabilities (including distribution declared) 9,061,984
Total assets 159,868,227
Total non-current liabilities 724,833
Unitholders' equity 150,081,410
Cash distribution declared 1,916,432
per issued unit 0.1064
Units outstanding for accounting purposes 17,624,081(1)
Units issued 18,011,581
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Note:
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.
Outlook
As outlined in a January 20, 2011 press release by the Trust, the Board of
Directors has approved a 2011 capital budget of $US 22.9 million. The Trust,
indirectly through its subsidiaries, intends to invest these funds in drilling
21 horizontal production wells, five salt water disposal wells, as well as
related infrastructure projects that are expected to reduce operating costs and
increase operational efficiencies. As a result, the Trust expects to achieve
2011 company interest average production ranging from 1,900 to 2,100 bbls per
day of light oil and operating costs, including transportation, ranging from
$10.00 to $11.50 per barrel.
Currently the sixth well of the 2011 capital program is being drilled. Overall,
this marks the 20th well that has been drilled since the June 1, 2010 effective
acquisition date of the Salt Flat field. Year to date 2011, one well has been
tied in and 10 more are scheduled to be tied in shortly, including three that
are expected to be on production early in the second quarter.
The capital budget excludes corporate and property acquisitions, which are
separately considered and evaluated. The amount and allocation of the Trust's
2011 capital budget is dependent upon results achieved and is subject to review
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
This press release contains forward-looking statements 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.
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.
Eagle Energy Trust is a new 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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