Eagle Energy Trust VISION GROWTH INCOME Investor Presentation - - PowerPoint PPT Presentation

Eagle Energy Trust

VISION GROWTH INCOME

Investor Presentation

February 2014

Disclaimers

Disclaimer Regarding Forward Looking Statements:

This presentation includes statements that contain forward looking information (“forward-looking statements”) in respect of Eagle Energy Trust’s expectations regarding its future operations, drilling program, production, reserves, well type curves, corporate decline rates, operating costs, capital expenditures, debt, credit facility, payout and recycle ratios, funds flow from operations, field netbacks, hedging, the amount and sustainability of distributions, tax pools, business strategy and plans for growth, among

• ther things. These forward looking statements involve estimates and assumptions including those relating to timing to drill and bring wells on production, production rates,
• perating and capital costs, marketability of crude oil, natural gas and natural gas liquids, future commodity prices, currency exchange rates, anticipated cash flow based on

estimated production, size of reserves and reservoir performance, among other things. These estimates and assumptions necessarily involve known and unknown risks, delays, challenges and other uncertainties inherent in the oil and gas industry including those relating to geology, production, drilling, technology, operations, human error, mechanical failures, transportation, processing problems and poor reservoir performance, among others things, as well as the business risks discussed in the Trust’s annual information form dated March 22, 2013 under the headings “Risk Factors” and “Forward-Looking Statements and Risk Factors”. The forward-looking statements included in this presentation should not be unduly relied upon. Actual results may differ from the forward-looking information in this presentation, and the difference may be material and adverse to the Trust and its unitholders. No assurance is given that the Trust’s expectations or assumptions will prove to be correct. In addition, this presentation contains forward-looking statements attributed to third party industry sources. Accordingly, all such statements are qualified in their entirety by reference to, and are accompanied by, the information and factors discussed throughout this presentation. These statements speak only as of the date of this presentation and may not be appropriate for other purposes. Eagle’s annual information form dated March 22, 2013 contains important detailed information about Eagle and its trust units. Copies of the annual information form may be viewed at www.sedar.com and on Eagle’s website.

Disclaimer Regarding Oil and Gas Measures:

This presentation contains disclosure expressed as barrel of oil equivalency (“boe”) or boe per day (“boe/d”). All oil and natural gas equivalency volumes have been derived using the conversion ratio of 6 Mcf of natural gas: 1bbl 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 wellhead. 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

• f 6 Mcf: 1 bbl would be misleading as an indication of value.

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Mission Statement

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VISION To create wealth for Eagle’s investors by combining innovation, expertise and opportunity.

GROWTH

Eagle’s targeted lower payout ratio allows the company to sustain moderate growth as well as distribute income.

INCOME

To deliver predictable monthly distributions.

Strategy

• Acquire and operate petroleum assets with predictable

cash flows and low risk unexploited potential

• Initially ramp-up investment to grow production
• Reach a sustainable level within two to three years

when less than 50% of the asset’s cash flow needs to be reinvested to replace declines

• Deliver moderate annual growth

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Overview

• Eagle Energy Trust provides investors with a publicly traded, oil

focused reliable distribution paying investment, with favourable tax treatment relative to taxable Canadian corporations.

• Eagle pays out a portion of its available cash to unitholders on a

monthly basis to provide attractive income.

• 100% of Eagle’s production is in Texas.
• 94% of Eagle’s production is light oil and NGLs.
• Eagle holds a light oil weighted portfolio and operates in four

properties in Texas: Salt Flat (Edwards), Permian (Wolfberry), Palo Pinto and Hardeman (Holmes, Mississippi Chappel and Conglomerate).

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Corporate Overview

January 2014 Working Interest Production: 3,000 boe/d Production Guidance – full year 2014 : 3,250 - 3,450 boe/d (average) Production Split: 94% light oil and NGLs Credit Facility: $US 90 million Annual Distribution: $1.05 per unit Current Yield (1)(2): 12.7% Tax Pools:

• approx. $306 million

(1) Based on the closing price of $8.30 on February 19, 2014. (2) Unlike fixed income securities, the Trust has no obligation to distribute any fixed amount, and reductions in, or suspension of, cash distributions may occur that would reduce future yield.

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Market Data

Ticker Symbol:

TSX: EGL.UN

Units Outstanding (basic): 32.4 million 52 Week Range: $6.28 - $9.05 Recent price (Feb 19/14 close): $8.30 Average daily trading volume (30 day): 50,003 units 30 day VWAP: $8.19 Market Cap (Feb 19/14): $268.6 million Directors’ & Officers’ Ownership: 2.2% basic, 10% fully diluted Equity Research:

Scotia Acumen CIBC TD NBF

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2014 Guidance

• Eagle’s 2014 capital guidance is $US 28.0 million

consisting of:

• $US 3.8 million towards land acquisition and seismic

evaluation of future opportunities in Eagle’s areas;

• $US 24.2 million base investment (down 17% year over

year) used to replace declines and grow 2014 average working interest production and funds flow by approximately 10% over 2013;

• Execute an 11 (9.6 net) well drilling program on its properties

near Luling, Midland and in Hardeman County

• Embark on recompletions, facilities and debottlenecking

across our portfolio

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2014 Guidance and Capital Budget (cont’d)

9 Notes: (1) The capital budget amount does not include the cost of acquisitions. (2) 2014 funds flow from operations of $49.1 million has been estimated using the following assumptions:

• a. Average working interest production at the mid-point of guidance, at 3,350 boe/d;
• b. Pricing at $US 95.00 per barrel WTI oil, $US 3.35 per Mcf NYMEX gas and $US 33.25 per barrel NGLs (NGLs price is

calculated as 35% of the WTI price); c. Differential to WTI (excluding transportation) is $1.17 discount per barrel in Midland, $2.52 discount per barrel in Luling and $2.40 discount per barrel in Hardeman;

• d. Operating costs (inclusive of transportation) of $13.50 per boe; and
• e. Foreign exchange at $CAD 1.05 = $US 1.00.

Eagle’s 2014 guidance with respect to its capital budget, production, operating costs and funds flow from operations is as follows:

2014 Guidance Notes Capital Budget $US 28.0 mm (1) Working Interest Production 3,250 - 3,450 boe/d Operating Costs (inclusive of transportation) $12.50 - $14.50 per boe Funds Flow from Operations $49.1 mm (2)

2014 Guidance and Sustainability Benchmarks (cont’d)

Notes: 1. Eagle calculates the Basic Payout Ratio as follows: Unitholder Distributions / Funds Flow from Operations = Basic Payout Ratio. A table showing the sensitivity of Eagle’s Basic Payout Ratio to production and pricing is set out in the slide titled “2014 Sensitivities”. 2. Approximately $US 3.75 million of the 2014 capital budget will be directed towards land and seismic evaluation of opportunities in Eagle’s areas of operation, and is excluded from this calculation. 3. Eagle calculates the Corporate Payout Ratio as follows: (Capital Expenditures + Unitholder Distributions) / Funds Flow from Operations = Corporate Payout Ratio. A table showing the sensitivity of Eagle’s Corporate Payout Ratio to production and pricing is set out in the slide titled “2014 Sensitivities”. 4. Assumes 65% unitholder participation in Eagle’s Premium DRIPTM and distribution reinvestment programs is unchanged throughout 2014. As is the case with any manner of equity funding, Eagle weighs the benefits from this method of financing and will make adjustments as deemed prudent. 5. Debt to cash flow is a bigger driver than the percentage drawn on current bank facilities. Increase leverage means increased distribution sustainability risk. Eagle’s view is that the maximum target would be 2.0x for larger entities, and 1.5x for smaller entities. 6. The borrowing base under the credit facility is $US 90.0 million.

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2014 Guidance Notes

Payout Ratios (as a percentage of funds flow) Basic Payout Ratio (i.e.: distribution) 72% (1) Plus: Capital Expenditures (Excluding "E" capital) 52% (2) Equals: Corporate Payout Ratio 123% (3) Adjusted Payout Ratio (i.e.: Distribution - DRIP proceeds + Capital Expenditures) 77% (4) Financial Strength Debt to trailing cash flow 1.34x (5) % Drawn on existing credit facility at end of period 78% (6)

2014 Sensitivities

Assumptions: 1. Annual distributions are held at current levels of $1.05 per unit per year. 2. No new equity issued other than under the distribution reinvestment program. 3. Field operating costs (including transportation) at the mid-point of guidance at $13.50 per boe. 4. Approximately $US 3.75 million of the 2014 capital budget will be directed towards land and seismic evaluation of opportunities in Eagle’s areas of operation, and is excluded from this calculation.

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Sensitivity of Cashflow ($MM) to Commodity Price & Production 2014 Average WTI $90.00 $95.00 $100.00 2014 Average WI Production (boe/d) 3,250 $45.6 $47.2 $48.3 3,350 $47.4 $49.1 $50.4 3,450 $49.2 $51.1 $52.4 Sensitivity of Corporate Payout Ratio to Commodity Price & Production 2014 Average WTI $90.00 $95.00 $100.00 2014 Average WI Production (boe/d) 3,250 132% 129% 125% 3,350 126% 123% 120% 3,450 123% 118% 115% Sensitivity of Basic Payout Ratio to Commodity Price & Production 2014 Average WTI $90.00 $95.00 $100.00 2014 Average WI Production (boe/d) 3,250 77% 74% 73% 3,350 74% 72% 70% 3,450 71% 69% 67%

2013 Hardeman Acquisition

On November 25, 2013, Eagle acquired its Hardeman County, Texas properties for $US 26.3 million. Concurrently, Eagle’s authorized credit facility was increased to $US 90 million. The acquisition was entirely funded by bank debt.

• Current working interest production of approximately 300 boe/d consisting
• f 97% light sweet crude (43oAPI) from 34 (30 net) producing wells.
• Zones currently being produced are the Holmes, Mississippi Chappel and

Conglomerate.

• Approximately 10,000 gross acres of land plus wells, gathering system and

associated assets.

• 80% of the land is held by production, with the undeveloped lands remaining

available to be drilled under current leases through 2017.

• Internally estimated proved reserves additions of 1.47 million boe of which

88% is proved developed producing.

• Field netbacks of $US 48 per boe at $US 93.00 WTI.
• Estimated average annual decline of 12%.

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2013 Guidance *

13 Notes: (1) The capital budget amount does not include the cost of acquisitions. (2) 2013 funds flow from operations of $45.0 million has been estimated using the following assumptions:

• a. Based on actual results through to September 30, 2013;
• b. Full year average working interest production of 3,000 boe/d, which is at the mid-range of guidance;

c. October – December benchmark pricing of $US 100.00 per barrel WTI oil, $US 2.90 per Mcf NYMEX gas and $US 44.00 per barrel NGLs (NGLs price is calculated as 44% of the WTI price);

• d. October – December field marketing contracts currently in place for both Midland and Luling, and a WTI to LLS

premium of $US 3.03 per barrel;

• e. October – December average operating costs (inclusive of transportation) of $12.60 per boe; and

f. October – December foreign exchange at $1.00 CDN/US.

* 2013 full year results are scheduled to be released in March 2014.

2013 Guidance Notes Capital Budget $US 29.2 mm (1) Working Interest Production 2,900 - 3,100 boe/d Operating Costs (inclusive of transportation) $12.00 per boe (2) Funds Flow from Operations $45.0 mm (3)

2013 Guidance and Sustainability Benchmarks *

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* 2013 full year results are scheduled to be released in March 2014.

Notes: 1. Eagle calculates the Basic Payout Ratio as follows: Unitholder Distributions / Funds Flow from Operations = Basic Payout Ratio. A table showing the sensitivity of Eagle’s Basic Payout Ratio to production and pricing is set out in the slide titled “2013 Sensitivities”. 2. Capital expenditures generally exclude corporate and property acquisitions because these are evaluated separately on their own merits. The $US 8.6 million acquisition in Midland and the $US 26.3 million acquisition in Hardeman County have therefore been excluded from this percentage. 3. Eagle calculates the Corporate Payout Ratio as follows: (Capital Expenditures + Unitholder Distributions) / Funds Flow from Operations = Corporate Payout Ratio. 4. Assumes 65% unitholder participation in Eagle’s Premium DRIPTM and distribution reinvestment programs is unchanged throughout 2013. As is the case with any manner of equity funding, Eagle weighs the benefits from this method of financing and will make adjustments as deemed prudent.

2013 Guidance Notes

Payout Ratios (as a percentage of funds flow) Basic Payout Ratio (i.e., assuming annualized Distribution at $1.05/unit) 72% (1) Plus: Capital Expenditures 67% (2) Equals: Corporate Payout Ratio 139% (3) Adjusted Payout Ratio (i.e., Distribution - DRIP proceeds + Capital Expenditures) 93% (4)

2012 Year-end Reserves*

• Total proved plus probable reserves of approximately 15.6

million boe (68% proved, 29% proved producing).

• PV10 value of total proved plus probable reserves of

approximately $US 264.3 million.

• Reserve life index of 14.3 years based on forecast 2013

production.

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* 2013 year-end reserves scheduled to be released in March 2014

29.15% 4.95% 33.77% 32.13%

Reserves (Mboe) by Category

PDP PDNP PUD Probable $115.3 $13.3 $37.5 $98.1

PV10 Value ($US MM)

PDP PDNP PUD Probable

Production History & Forecast

Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Q3/13 Q4/13 (est.) 2014 Guidance Mid- range Production 1,269 1,214 995 2,023 2,169 2,400 2,825 2,986 2,928 3,022 3,052 3,000 3,350

500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 Average WI Production per Quarter (boe/d)

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Revenue & Operating Netback

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Breakdown of Working Interest Revenue (Before Realized Hedges)

$51.00 $57.42 $44.58 $47.82 $54.36 $44.96 $44.63 $46.66 $52.58 $52.20 $56.79 $11.49 $8.68 $15.85 $15.50 $16.31 $14.93 $13.78 $13.48 $11.19 $10.22 $12.73 $23.90 $25.51 $23.10 $25.57 $26.49 $24.11 $21.40 $23.13 $24.80 $24.26 $27.00 $0.00 $20.00 $40.00 $60.00 $80.00 $100.00 $120.00 Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Q3/13 Operating Netback (before realized hedges) Op Costs & Processing Royalties & Tax

$86.39 $91.61 $83.53 $88.89 $97.16 $84.00 $79.81 $83.27 $88.57 $86.68 $96.52

Crude Oil Price Comparison

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50.00 60.00 70.00 80.00 90.00 100.00 110.00 120.00 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 WTI (NYMEX) - Cushing ($US/bbl) Edmonton Par ($CDN/bbl) WCS ($CDN/bbl)

With 100% of Eagle’s production in Texas, the Canadian price differentials do not affect its revenue stream.

Top Quartile Field Netbacks

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Field Netback1,2

• 1. Field netback is a non-IFRS financial measure. Field netback is calculated by subtracting royalties, operating costs and transportation costs from revenues.
• 2. For the three months ended September 30, 2013. Excludes impact of hedging. Canadian dollars. Natural gas converted on a 6:1 basis.

Attractive Recycle Ratio

Recycle Ratio1,2

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• 1. Sourced from publicly available company disclosure; where AIF not provided, based on press release.
• 2. Recycle ratio is calculated as 2012 average operating netback divided by proved + probable FD&A (including FDC) cost per barrel for the year ended December 31, 2012.

2013E Yield vs. 2013E Sustainability Ratio(1)(2)

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1. Estimates as per National Bank (NBF )or Industry Research, sourced from publicly available company disclosure. 2. Estimates adjusted to reflect NBF commodity pricing based on the Oct. 31, 2013 forward strip (2013E: WTI – US$97.25/bbl, Natural Gas – C$3.10/mcf, $US/$CAD – 0.972)

A company’s yield is not necessarily an indication of the sustainability of its distributions. Neither the term “yield” nor the term “sustainability” can be considered in isolation. This page tells the story behind the story.

0% 2% 4% 6% 8% 10% 12% 14% 80% 90% 100% 110% 120% 130% 140% 150% 160% 170% 180% 190% 200% 2013E Yield (%) 2013E Sustainability Ratio (%)

Type Curves

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*Commodity assumptions (US$): WTI Oil $95/bbl, Gas $3.35/Mcf, & NGL $33.25/bbl **Average 12 month rate Midland Salt Flat Midland Uphole Recompletion Opportunity Summary

• New well completion strategy typically

leaves 2-4 uphole zones behind pipe

• 40-60 boed initial incremental rate
• 40-70 Mboe of additional reserves
• $400k – $600k capital cost (2-4 frac

stages) Field Drill, Complete & Equip Cost ($M) EUR/Well (Mboe) Capital Efficiency ($M/boed12)** Operating Netback ($/boe) F&D ($/boe) Salt Flat 1,000 90 24 $57.00 $11.00 Midland 2,411 117 46 $39.00 $21.00 Midland Uphole Recompletion (3 stage) 600 66 20 $39.00 $9.00

Hedging Program

• Current hedges lock in 1,623 bbl/d at US$91.15 - $98.00 WTI and account

for 48% of 2014 production guidance.

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200 400 600 800 1000 1200 1400 1600 1800 2000 2200 2400 2600 2800 3000 3200 3400 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 BBL/D - OIL

Hedging Summary

$85.40 Fixed Price $93 x $95.35 Costless Collar $90 x $94.95 Costless Collar $91.15 Fixed Price $91.15 Fixed Price $98 Fixed Price

Highlights

Solid metrics:

• 94% light oil and NGLs
• Premium netbacks
• Competitive operating costs
• Excellent balance sheet – prudent use of debt
• Experienced management team and Board
• Demonstrated ongoing organic growth
• Predictable distributions
• Poised to grow production on existing assets
• Expect to grow by continuing to transact

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Peer Comparison

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Total Pre-Tax EV / Entity Value / Reserve Market Entity Debt / Yield DACF Volume % Gas 2013E Daily P+P Life Index Price Cap Value

2013E CF Current 2013E 2013E 2013E

Production Reserves

P+P

11/19/2013

$MM $MM x % x boe / d % $/ boe / d $/ boe years

Crescent Point $40.50 $15,929 $17,926 1.0 x 6.8% 8.2 x 119,000 9% $150,640 $29.45 14.0 Vermilion $58.48 $6,048 $6,943 1.3 x 4.1% 9.6 x 40,750 33% $170,376 $39.16 11.9 Baytex $42.38 $5,393 $6,125 1.2 x 6.2% 9.1 x 57,500 11% $106,529 $21.01 13.9 Lightstream $6.15 $1,251 $3,460 3.2 x 15.6% 4.2 x 47,000 20% $73,625 $16.82 12.0 Bonterra $54.85 $1,828 $1,912 0.9 x 6.1% 9.3 x 12,000 29% $159,305 $27.10 16.1 Argent $7.25 $433 $675 3.3 x 14.5% 7.6 x 5,700 31% $118,419 $16.95 19.1 Parallel $3.67 $198 $430 5.5 x 16.3% 7.8 x 7,000 36% $61,371 $9.10 18.5 Zargon $7.42 $223 $341 1.9 x 9.7% 4.9 x 7,267 34% $46,906 $12.41 10.4 Average 2.3 x 9.9% 7.6 x 37,027 25% $110,896 $21.50 14.5 $8.12 $273 $343 1.7x 12.9% 6.1x 3,000 8% $114,351 $19.13 16.4 Notes:

(1) Production and reserves stated gross of royalties using a 6:1 equivalent conversion. (2) Total debt includes long-term debt, working capital deficiency and convertible debentures. (3) Leverage ratios exclude option proceeds. (4) Cash flow forecasts based on consensus estimates. (5) Production forecasts based on company guidance and street consensus estimates. (6) Reserve Life Index calculated based on 2013E production, adjusted for acquisitions and divestitures. (7) Unlike fixed income securities, the Trust has no obligation to distribute any fixed amount, and reduction in, or suspensions of cash distributions may occur that will reduce future yield.

Daily Production

(8) Eagle Energy Trust reserves as at December 31, 2012; Reserve Life Index calculated based on midpoint of 2013E production guidance of 2,900 - 3,100 boe/d affirmed November 2013 adjusted for 300 boe/d acquisition on November, 8 2013. (9) Sourced from publicly available company disclosure; where AIF not provided, based on press release.

Management

Richard Clark, B.A. (Econ), LLB, Director, President and Chief Executive Officer

• 19 years in the legal profession as a founding partner at a boutique oil and

gas law firm, then 10 years at a Canadian national law firm, specializing in corporate finance, securities, M&A and venture capital.

• Extensive experience in the royalty trust sector.

Kelly Tomyn, CA, Chief Financial Officer

• Former VP Finance and CFO for numerous public & private companies with
• ver 23 years of financial experience with E&P companies.
• Former controller for Shiningbank.

Wayne Wisniewski, P.E., MBA, Chief Operating Officer (Houston)

• 30 years of oil and gas engineering and operations experience.
• Last 13 years of career spent in a senior operations and engineering

management role in the Houston office of a major international E&P company.

Continued..

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Management

Continued..

Robert Cunningham, Vice President, Business Development (Houston)

• Over 25 years experience in the oil and gas industry involving business

development, finance, energy banking and risk management.

James Elliott, CA, Vice President, Finance

• Over 16 years of corporate finance and financial accounting experience,

including 14 years in the oil and gas industry.

Jo-Anne Bund, LLB, General Counsel and Corporate Secretary

• 17 years of experience in corporate finance, securities, and M&A, including

with a national law firm, with a securities regulator and as corporate counsel.

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Board of Directors

David Fitzpatrick, P.Eng., Chairman

• Former Chief Executive Officer of Shiningbank

Bruce Gibson, CA, Chair of Audit Committee

• Former Chief Financial Officer of Shiningbank

Warren Steckley, P.Eng., Chair of Reserves and Governance Committee

• Former President and Chief Operating Officer, Barnwell of Canada,

Former Director of Shiningbank

Joseph Blandford, P.Eng., Chair of Compensation Committee

• Retired Oilman, Resides in Houston, TX

Richard Clark, B.A. (Econ), LLB, Director

• President and Chief Executive Officer, Eagle Energy, Former Director of

Shiningbank

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Eagle’s Areas of Activity

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Caldwell County – Salt Flat Properties

Eagle’s Areas of Activity

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Eagle’s Areas of Activity

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Caldwell County – Salt Flat Properties

Eagle’s Areas of Activity

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Caldwell County – Salt Flat Properties

Eagle’s Areas of Operation

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Martin County – Permian Properties

CONTACT: Richard W. Clark, CEO

Tel: (403) 531-1575

Kelly Tomyn, CFO

Tel: (403) 531-1574

Eagle Energy Inc. Eagle Hydrocarbons LLC

2710, 500 – 4th Avenue SW 3005, 333 Clay Street Calgary, AB T2P 2V6 Houston, TX 77002 info@EagleEnergyTrust.com www.eagleenergytrust.com TSX: EGL.UN

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