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CALGARY, ALBERTA--(Marketwired - Feb 11, 2016) - In response to the significant and ongoing uncertainty and volatility in commodity prices, Eagle Energy Inc. (TSX:EGL) (the "Corporation" or "Eagle") announces a revised 2016 capital budget, a reduced monthly dividend and additional oil hedges which, in combination, provide Eagle with a corporate payout that matches cash flow at an average 2016 WTI price of $US 35.00 per barrel of oil:
Richard Clark, Eagle's President and Chief Executive Officer said, "As I stated in our original budget release in December, Eagle is focused on preserving its stability and financial liquidity in light of the ongoing commodity price uncertainty. We have revised our 2016 capital budget and reduced our dividend in consideration of the current economic cycle. This reflects the reality of living within our means at current commodity price levels and constantly monitoring our key financial metrics and assumptions."
In this news release, figures are presented in Canadian dollars unless otherwise indicated. This news release contains statements that refer to non-IFRS financial measures and are forward-looking. Please read the advisories under the headings "Non-IFRS Financial Measures" and "Note Regarding Forward-Looking Statements" near the end of this news release.
1 The above metrics are based on the following assumptions: $US 40.00 per barrel WTI oil, $US 3.16 per Mcf NYMEX gas, $CAD 2.57 per Mcf AECO gas, a foreign exchange rate of $US 1.00 equal to $CAD 1.40, and a monthly dividend of $0.01 per share ($0.12 annualized).
Reduction in February 2016 Dividend
Eagle's board of directors (the "Board") has approved a 33% reduction in the monthly dividend to $0.01 per share ($0.12 annualized) from $0.015 per share ($0.18 annualized) beginning with the February 2016 dividend, which is payable on March 23, 2016 to shareholders of record on February 29, 2016. The ex-dividend date is February 25, 2016.
Eagle's dividend has been designated as an "eligible dividend" for Canadian income tax purposes. For U.S. federal income tax purposes, Eagle's dividend is generally considered a "qualified dividend"; however, it may not be considered a "qualified dividend" in certain circumstances depending on the holder's personal situation (i.e., if an individual holder does not meet a holding period test). Where Eagle's dividend is not considered a "qualified dividend" for U.S. federal income tax purposes, it should be reported as an "ordinary dividend". Holders or potential holders should consult their own legal and tax advisors as to their particular tax consequences.
Mr. Clark said, "Dividends are important to Eagle's business model, as is our discipline of protecting our balance sheet and preserving our financial stability. In light of the volatility of commodity prices over the past year, we have varied our dividend level within shorter time frames than we otherwise would prefer. Given our company forecast for the next few months, we believe that a reduction to the dividend is prudent."
Revised 2016 Guidance
Eagle's revised 2016 guidance for its key metrics listed in the table below is as follows:
|Capital Budget||$ 5.0 mm||$ 10.2 mm||(1)|
|Working Interest Production||3,200 to 3,600 boe/d||3,400 to 3,800 boe/d||(2)|
|Operating Costs per Month||$2.2 to 2.6 mm||$2.2 to $2.6 mm||(3)|
|Funds Flow from Operations||$12.6 mm||$20.2 mm||(3)|
|Debt to Trailing Cash Flow||5.0x||3.1x|
|Field Netback (excluding Hedges)||$12.32/boe||$21.25/boe|
Tables showing the sensitivity of Eagle's 2016 funds flow from operations to changes in commodity price and production are set out below under the heading "2016 Sensitivities".
Revised 2016 Capital Budget
Eagle's Board has approved a revised 2016 capital budget of $5.0 million from $10.2 million (revised to $US 3 million for its operations in the United States and $0.8 million for its operations in Canada, previously $US 7 million for its operations in the United States and $0.9 million for its operations in Canada) consisting of the following:
The 2016 capital budget excludes future corporate and property acquisitions, which are evaluated separately on their own merit.
Calculations Regarding Eagle's Dividends
|Basic Payout Ratio||41%||37%||(1)|
|Plus: Capital Expenditures||40%||51%||(2)|
|Equals: Corporate Payout Ratio||81%||88%|
|Shareholder Dividends||=||Basic Payout Ratio|
|Funds Flow from Operations|
|Capital Expenditures + Shareholder Dividends||=||Corporate Payout Ratio|
|Funds Flow from Operations|
Tables showing the sensitivity of Eagle's corporate payout ratio to changes in commodity price and production are set out below under the heading "2016 Sensitivities".
Underlying Asset Quality Benchmarks
|Oil and Gas Fundamentals||
|Gas Weighting (@ 6 Mcf:1 bbl)||10%||10%|
|Operating costs per month||$2.2 to $ 2.6 million||$2.2 to $ 2.6 million||(1)|
|Field Netbacks per boe||$12.32||$21.25||(2)|
The following tables show the sensitivity of Eagle's 2016 funds flow from operations, corporate payout ratio and debt to trailing cash flow to changes in commodity prices and production:
Sensitivities to Commodity Price
|2016 Average WTI|
|(Production = 3,400 boe/d)|
|$US 35 (F/X 1.40)||$US 40 (F/X 1.40)||$US 45 (F/X 1.40)|
|Funds Flow from Operations||$10.6||$12.6||$14.3|
|Corporate Payout Ratio||97%||81%||72%|
|Debt to Trailing Cash Flow||6.2x||5.0x||4.3x|
Sensitivities to Production
|2016 Average Production (boe/d)|
|WTI = $US 40 / F/X 1.40|
|Funds Flow from Operations||$11.7||$12.6||$13.5|
|Corporate Payout Ratio||88%||81%||76%|
|Debt to Trailing Cash Flow||5.4x||5.0x||4.7x|
Non-IFRS Financial Measures
Statements throughout this news release make reference to the terms "funds flow from operations", "field netback", "basic payout ratio" and "corporate payout ratio", which are non-IFRS financial measures that do not have a standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other issuers. Management believes that these terms provide useful information to investors and management since such measures reflect the quality of production, the level of profitability, the ability to drive growth through the funding of future capital expenditures and the sustainability of dividends to shareholders.
|"Funds flow from operations" is calculated before changes in non-cash working capital and abandonment expenditures. Management considers funds flow from operations to be a key measure as it demonstrates Eagle's ability to generate the cash necessary to pay dividends, repay debt, fund decommissioning liabilities and make capital investments. Management believes that by excluding the temporary impact of changes in non-cash operating working capital, funds flow from operations provides a useful measure of Eagle's ability to generate cash that is not subject to short-term movements in non-cash operating working capital.|
|"Field netback" is calculated by subtracting royalties and operating costs from revenues.|
|"Basic payout ratio" is calculated by dividing shareholder dividends by funds flow from operations.|
|"Corporate payout ratio" is calculated by dividing capital expenditures (excluding acquisition capital) plus shareholder dividends by funds flow from operations.|
See the "Non-IFRS financial measures" section of Eagle's management discussion and analysis that relates to its annual financial statements for a reconciliation of funds flow from operations and field netback to earnings (loss) for the period, the most directly comparable measure in Eagle's audited annual consolidated financial statements.
Note Regarding 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. The Corporation cautions investors that important factors could cause the Corporation'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:
With respect to forward-looking statements contained in this news release, assumptions have been made regarding, 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 Eagle Energy Trust's Annual Information Form ("AIF") dated March 19, 2015 for the year ended December 31, 2014, available on the Corporation's website at www.eagleenergy.com and on SEDAR at www.sedar.com:
Additional risks and uncertainties affecting the Corporation are contained in the AIF under the heading "Risk Factors".
As a result of these risks, actual performance and financial results in 2016 and Eagle's dividends may differ materially from any projections of future performance or results expressed or implied by these forward‐looking statements. The Corporation's production rates, operating costs, field netbacks, drilling program, 2016 capital budget, funds flow from operations and dividends are subject to change in light of ongoing results, prevailing economic circumstances, commodity prices, obtaining regulatory approvals 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 the Corporation'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. Unlike fixed income securities, the Corporation has no obligation to dividend any fixed amount and reduction in, or suspension of, cash dividends may occur that would reduce future yield.
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 Corporation's and its shareholders. These statements speak only as of the date of this news release and may not be appropriate for other purposes. The Corporation 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.
Oil and Gas Measures and Estimates
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.
Eagle Energy Inc. is an oil and gas energy corporation created to provide investors with a sustainable business while delivering stable growth in production and overall growth through accretive acquisitions. Eagle Energy Inc.'s shares are traded on the Toronto Stock Exchange under the symbol "EGL."
Chief Financial Officer
Richard W. Clark
President and Chief Executive Officer
Eagle Energy Inc.
(855) 531-1575 (toll free)