Eagle Energy Inc. Announces Second Quarter 2018 Results and Previously Announced Sale of Twining Assets

August 9, 2018 CNW

CALGARY, Aug. 9, 2018 /CNW/ – (TSX: EGL): Eagle Energy Inc. (“Eagle“) is pleased to report its financial and operating results for the second quarter ended June 30, 2018, as well as to reiterate the previously announced sale of its Twining assets.

When reflecting on Eagle’s second quarter and the Twining asset sale announcement, Wayne Wisniewski, President and Chief Executive Officer, stated, “Eagle continues to execute its previously announced plan to reduce debt and corporate costs. To the end of June, and excluding one-time costs associated with the Salt Flat disposition, our year to date general and administrative expenses are 34% lower than 2017. In addition, when compared to 2017 year end, we have reduced our term loan by 34% and intend to use the net proceeds from our Twining asset sale closing in August 2018 to further reduce debt.”

Mr. Wisniewski continued, “We are pleased to report that we plan to drill our third North Texas horizontal well late in the third quarter. The well location is approximately one mile from our initial horizontal well, a well which has exceeded production expectations. Although our second North Texas horizontal well (which is located 13 miles from our initial well) did not meet our budget expectations with a 30 day initial production rate of 70 barrels of oil equivalent per day, technical work is ongoing to better understand the lower than expected oil cut.”

Second Quarter 2018 Financial Results

Eagle’s unaudited condensed consolidated interim financial statements and accompanying notes for the three and six months ended June 30, 2018 and related management’s discussion and analysis have been filed with the securities regulators and are available online under Eagle’s issuer profile 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 “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 Three Months ended June 30, 2018

Field netback improved by 28% on a per barrel of oil equivalent (“boe“) basis (from $22.94 to $29.26 per boe) when compared to the second quarter of 2017.
General and administrative expenses to the end of June 2018, excluding one-time costs associated with the Salt Flatdisposition, are 34% lower than 2017.
Long term debt at the end of the second quarter is 34% lower than at 2017 year end ($US 38.5 million compared to $US 58.2 million).

Sale of Twining Assets

On July 20, 2018, and further to Eagle’s previously announced strategy of reducing debt and interest charges, Eagle announced that it has signed an agreement to sell its entire interest in its oil and gas properties near Twining, Alberta to a third party for cash consideration of $13,820,000 before customary post-closing adjustments (the “Sale“).

The Sale is expected to close on or about August 28, 2018.
Eagle intends to use the net proceeds from the Sale to reduce outstanding debt under its secured term loan and to further fund its North Texas development program.
The Sale will reduce leverage, increase corporate field netback per boe and lower Eagle’s corporate decline rate.

2018 Outlook

For 2018, Eagle plans to:

Continue to focus on drilling wells on its North Texas property with opportunities for meaningful growth and high netbacks.
- Eagle holds over 25,000 net acres on contiguous leases held in six different areas across Hardeman County that are prospective for horizontal development.
- Eagle plans to spud its third horizontal well in the third quarter of 2018 approximately one mile from the location of its initial horizontal well, a well which has exceeded production expectations.
- North Texas oil sells at par to WTI, while many producers in the Permian face negative WTI differentials.
Continue to reduce debt and corporate costs, including interest costs, in order to better position Eagle to capitalize the North Texas development program.
- Alternatives for funding growth include asset sales.
- The February 2018 Salt Flat disposition and the July 2018 announced Sale are steps towards achieving our overall goals.
- Eagle has reduced its term loan by 34% from the end of 2017 to the end of June 2018 (from $US 58.2 million to $US 38.5 million) and intends to use the net proceeds from the Sale closing in August 2018 to further reduce debt.
- On a go-forward basis, lower debt leads to reduced monthly interest costs.
Continue to reduce general and administrative expenses by focusing on efficiencies and cost reduction.
- General and administrative expenses to the end of June 2018, excluding one-time costs associated with the Salt Flat disposition, are 34% lower than 2017.

Summary of Quarterly Results


		Q2/2018	Q1/2018	Q4/2017	Q3/2017	Q2/2017	Q1/2017	Q4/2016	Q3/2016
($000’s except for boe/d and per share amounts)
Sales volumes – boe/d		2,262	2,974	3,804	3,749	3,966	3,767	3,803	4,085

Revenue, net of royalties		10,228	12,461	14,725	12,459	14,167	14,218	13,891	12,854
	per boe	49.69	46.57	42.08	36.12	39.25	41.95	39.72	34.20

Operating, transportation and marketing expenses		4,206	5,109	6,864	6,301	5,885	7,165	6,799	6,564
	per boe	20.43	19.10	19.61	18.27	16.31	21.14	19.44	17.46

Field netback		6,022	7,352	7,861	6,158	8,282	7,053	7,092	6,290
	per boe	29.26	27.47	22.47	17.85	22.94	20.81	20.28	16.74

Funds flow from operations		1,932	1,718⁽²⁾	3,488	3,346	4,272	1,589	3,901	4,582
	per boe	9.39	6.42	9.98	9.70	11.84	4.69	11.15	12.19
	per share – basic	0.04	0.04	0.08	0.08	0.10	0.04	0.09	0.11
	per share – diluted	0.04	0.04	0.08	0.07	0.10	0.04	0.09	0.11

(Loss) earnings		(15,093)	(2,568)	(14,293)	(4,711)	675	1,303	30,508	52
	per share – basic	(0.34)	(0.06)	(0.34)	(0.11)	0.02	0.03	0.72	0.00
	per share – diluted	(0.34)	(0.06)	(0.34)	(0.11)	0.02	0.03	0.72	0.00

Cash dividends declared		–	–	–	–	–	425	637	636
	per issued share	0.00	0.00	0.00	0.00	0.00	0.01	0.015	0.015

Current assets		10,920⁽¹⁾	14,941	13,869	11,122	11,847	18,819	9,302	9,787
Current liabilities		5,762⁽¹⁾	7,528	13,715	8,042	6,599	11,474	74,758	72,387
Total assets		159,935	174,877	207,314	213,867	222,155	233,951	218,199	190,945
Total non-current liabilities		62,427	70,870	94,312	92,367	97,086	104,359	26,202	31,690
Shareholders’ equity		81,709	96,479	99,287	113,458	118,470	118,118	117,239	86,868
Shares issued		43,750	43,750	43,302	43,302	42,857	42,857	42,452	42,452


(1)	Figures exclude amounts related to assets classified as held for sale.
(2)	Includes one-time disposition costs of $3.4 million relating to the Salt Flat disposition.

For the three months ended June 30, 2018, sales volumes were lower than the previous quarters, primarily due to the effect of the February 2018 Salt Flat disposition being only partially offset by additional production from wells drilled in Eagle’s Twining and North Texas areas.

Second quarter 2018 field netback on a per boe basis increased 7% from the first quarter of 2018 due to higher commodity prices and narrower oil price differentials on Canadian production. “Field netback” is a non-IFRS financial measure. See “Non-IFRS Financial Measures”, below.

Second quarter 2018 funds flow from operations increased 12% from the first quarter of 2018 due to higher realized prices and lower second quarter administrative and financing expenses because of one-time Salt Flat disposition costs that occurred in the first quarter. A higher realized risk management loss partially offset this increase.

Total non-current liabilities decreased as a result of debt repayment from Salt Flat disposition proceeds.

Changes in (loss) earnings from one quarter to the next often do not move directionally or by the same amount as quarterly changes in funds flow from operations. This is due to items of a non-cash nature that factor into the calculation of (loss) earnings, and those that are required to be fair valued at each quarter end. Second quarter 2018 funds flow from operations was 6% higher than the first quarter of 2018, yet the second quarter 2018 loss was 488% more than the first quarter of 2018 due to a non-cash impairment expense relating to the Twining oil and gas properties based on the sale agreement signed July 19, 2018.