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

Eagle Energy Trust

VISION GROWTH INCOME

Investor Presentation

June 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 20, 2014 under the headings “Risk Factors” and “Advisory-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 20, 2014 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 We create wealth for investors by combining innovation, expertise and opportunity.

GROWTH

We target a capital spend and payout ratio that sustains moderate growth and distributes income.

INCOME

We strive to deliver predictable monthly distributions.

Overview

• Eagle Energy Trust provides investors with a publicly traded,
• il focused reliable distribution paying investment, with

favourable tax treatment relative to taxable Canadian corporations.

• Investors receive a portion of Eagle’s available cash on a

monthly basis to provide attractive income to unitholders.

• All of Eagle’s production is in Texas and Oklahoma.
• 93% of Eagle’s production is light oil and NGLs.

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Corporate Overview

Q1 2014 Working Interest Production: 3,010 boe/d Production Guidance – full year 2014 : 3,250 - 3,450 boe/d (average) Production Split: 93% light oil and NGLs Credit Facility: $US 90 million Annual Distribution: $1.05 per unit Current Yield (1)(2): 16.5% Tax Pools:

• approx. $306 million

1. Based on the closing price of $6.37 on June 16, 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

• ccur that would reduce yield.

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Market Data

Ticker Symbol:

TSX: EGL.UN

Units Outstanding (basic): 33.4 million 52 Week Range: $4.92 - $9.05 Recent price (June 16/14 close): $6.57 Average daily trading volume (30 day): 192,485 units 30 day VWAP: $6.04 Market Cap (June 16/14): $207.6 million Directors’ & Officers’ Ownership: 2.2% basic, 10% fully diluted Equity Research:

Scotia NBF Acumen TD

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Q1 2014 Highlights

• Average working interest sales volumes of 3,010 boe/d and on track to meet

2014 full year production guidance of 3,250 to 3,450 boe/d.

• Top quartile field netbacks of $54.29/boe, up 14% from Q4 2013.
• Canadian dollar realized oil prices of $109.00/bbl, giving Eagle a substantial

revenue advantage over producers of Canadian oil.

• Funds flow from operations of $10.3 million, up 18% from Q4 2013.
• Unitholder distributions maintained at $0.26 per unit ($0.0875 per unit per

month).

• Increased our presence in our most recently established Hardeman core area,

through a tuck-in acquisition of approximately 130 boe/d for cash consideration of $5.3 million ($US 4.7 million).

• Executed 55% of our capital program, with success to date.
• Took steps in early May to assure the market that we intend to lower our

sustainability ratio (corporate payout ratio) while maintaining our distribution.

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Hedging Program

• Current hedges lock in 1,650 bbl/d at US$90.00 - $98.00 WTI

and account for 49% 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 BBL/D - OIL

Hedging Summary

$87.90 Fixed Price $90.50 x $94.35 Costless Collar $90.10 x $92.00 Costless Collar $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

2014 Capital Budget

• 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 used to replace declines and

grow 2014 average working interest production and funds flow by approximately 10% over 2013;

• Execute a 7 (6.2 net) well drilling program on our Salt Flat, Permian and

Hardeman properties

• Embark on recompletions, facilities upgrades and debottlenecking across
• ur portfolio
• $US 4.7 million February 2014 producing property tuck-in acquisition in

Hardeman County

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2014 Guidance and Capital Budget (cont.)

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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)

Notes: 1. As a result of its February 2014 tuck-in acquisition for $US 4.7 million, the Trust has kept the capital budget unchanged and has reduced its planned drilling program by the amount of the acquisition. With the incremental production from this acquisition replacing the production from those wells that were removed from the drilling program, 2014 guidance for average working interest production, operating costs and cash flow remain unchanged. 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 Permian, $2.52 discount per barrel in Salt Flatand $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.

2014 Guidance and Sustainability Benchmarks (cont.)

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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 % Drawn on existing credit facility at end of period 78% (5)

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 3.8 million of the 2014 capital budget will be directed towards land and seismic evaluation of opportunities in Eagle’s areas of

• peration, 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. The total borrowing base under the credit facility is $US 90.0 million.

2014 Sensitivities

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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%

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 3.8 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 the corporate payout ratio calculation.

Eagle’s Areas of Activity

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• Eagle holds a light oil weighted portfolio and operates properties

in 3 core areas: Salt Flat (Edwards), Permian (Atokaberry) and Hardeman (Pennsylvanian, Mississippian and Ordorcian).

Caldwell County – Salt Flat Properties

Eagle’s Areas of Operation

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Eagle’s Areas of Operation

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Martin and Palo Pinto Counties – Permian Properties

Eagle’s Areas of Operation

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Hardeman County – Hardeman Properties

Eagle’s Areas of Operation

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Hardeman County – Hardeman Properties

Operations Update

• As of March 31, 2014, Eagle is 55% through its $US 28 million capital

budget, is pleased with the results of its capital program to date, and has kicked off additional programs to reduce operating costs.

• At the Hardeman properties:
• Added undeveloped acreage and additional production through an acquisition in

this recently established core area;

• Recompleted one well, with results meeting expectations. Several recompletions

and a salt water disposal well (to reduce field operating costs) planned for the second half of 2014;

• Purchased seismic data, evaluating in-house and expecting to add several

Chappell and Atoka formation drilling locations to Eagle’s inventory;

• Implementing plans to reduce water disposal and power costs, which collectively

comprise 80% of Hardeman field operating costs.

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Operations Update (cont.)

• At the Permian properties:
• Drilled two vertical wells, with costs coming in under budget. The first well has been

completed, is currently flowing back, and is expected to commence commercial production in the second quarter. The second well is scheduled to be completed in the middle of the second quarter, with production expected to follow in the third quarter.

• Recompleted eight wells. As planned, the eight existing producing wells each had to

be shut-in for approximately one month each while their recompletion took place, and then had to “de-water”, but the temporary impact of lower first quarter production is more than offset by incremental volumes.

• At the Salt Flat properties:
• Drilled two horizontal oil wells, with production commencing in February.
• Installed pumps in horizontal portion of eight existing wells, with resulting increase in

production rates and reserves.

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2013 Year-end Reserves

• Total proved plus probable reserves of approximately 14.3

million boe (76% proved, 36% proved producing).

• PV10 value of total proved plus probable reserves of

approximately $US 269.7 million.

• Reserve life index of 11.7 years based on the mid-point of

2014 average working interest production guidance.

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36.2% 9.4% 30.6% 23.8%

Reserves (Mboe) By Category

PDP PDNP PUD Probable $131.95 $25.63 $40.88 $71.21

PV10 Value ($US MM)

PDP PDNP PUD Probable

Production History & Forecast

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500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 2014 Guidance 3,250 - 3,450 Average WI Production per Quarter (boe/d)

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 $47.58 $54.29 $11.49 $8.68 $15.85 $15.50 $16.31 $14.93 $13.78 $13.48 $11.19 $10.22 $12.73 $16.79 $17.54 $23.90 $25.51 $23.10 $25.57 $26.49 $24.11 $21.40 $23.13 $24.80 $24.26 $27.00 $24.55 $26.19 $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 Q4/13 Q1/14 Operating Netback (before realized hedges) Op Costs & Processing Royalties & Tax

Crude Oil Price Comparison

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• With 100% of Eagle’s production in Texas and Oklahoma, the Trust

realizes premium sales prices compared to producers of Canadian oil.

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 Jan-14 Feb-14 Mar-14 Apr-14 May-14 WTI (NYMEX) - Cushing ($US/bbl) Edmonton Par ($CDN/bbl) WCS ($CDN/bbl)

Premium 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 March 31, 2014. Excludes impact of hedging. Canadian dollars. Natural gas converted on a 6:1 basis.

$54.29 $0 $10 $20 $30 $40 $50 $60 $70

Pengrowth Crescent Point Penn West TORC Eagle Whitecap Bonterra Surge Cardinal Argent Arsenal Lightstream Baytex Zargon Twin Butte Long Run Parallel

$/boe

Highlights

Solid metrics:

• 93% light oil and NGLs
• Premium netbacks
• Competitive operating costs
• Strong 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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CONTACT: Richard W. Clark, President and CEO

Tel: (403) 531-1575

Kelly Tomyn, CFO

Tel: (403) 531-1574

Eagle Energy Inc. Eagle Hydrocarbons Inc.

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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APPENDIX

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Peer Comparison

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Total Pre-Tax EV / Entity Value / Reserve Market Entity Debt / Yield DACF Volume % Gas 2014E Daily P+P Life Index Price Cap Value

2014E CF Current 2014E 2014E 2014E

Production Reserves

P+P

6/10/2014

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

Crescent Point $44.96 $18,642 $21,737 1.2 x 6.1% 8.2 x 133,000 9% $163,439 $30.37 14.7 Baytex $47.68 $7,967 $10,110 2.2 x 6.0% 9.1 x 89,671 13% $112,751 $20.87 14.8 Penn West $10.73 $5,265 $7,741 2.7 x 5.2% 7.5 x 103,500 35% $74,793 $12.38 16.6 Pengrowth $7.24 $3,891 $5,502 3.0 x 6.6% 8.7 x 72,000 46% $76,418 $11.53 18.2 Whitecap $15.64 $3,874 $4,593 1.5 x 4.8% 8.4 x 31,600 27% $145,346 $21.11 18.9 Lightstream $8.12 $1,661 $3,652 3.0 x 5.9% 4.7 x 44,000 20% $82,997 $18.95 12.0 Surge $7.24 $1,594 $2,153 2.1 x 8.3% 7.0 x 21,350 16% $100,838 $18.61 14.8 Bonterra $59.86 $2,008 $2,117 0.9 x 5.8% 9.2 x 12,550 27% $168,686 $28.23 16.4 TORC $14.64 $1,447 $1,637 1.1 x 3.7% 7.8 x 11,000 15% $148,833 $34.79 11.7 Long Run $5.47 $869 $1,438 2.0 x 7.7% 4.3 x 32,150 47% $44,720 $9.09 13.5 Twin Butte $1.85 $650 $1,020 1.9 x 10.4% 4.6 x 22,000 9% $46,385 $14.96 8.5 Cardinal $17.17 $667 $671 0.1 x 3.8% 8.0 x 6,387 11% $105,112 $31.72 9.1 Parallel $4.34 $255 $496 5.1 x 13.8% 8.2 x 7,200 36% $68,827 $10.11 18.7 Argent $2.69 $170 $458 5.1 x 8.9% 6.2 x 6,000 36% $76,350 $10.92 19.2 Zargon $9.20 $277 $394 1.8 x 7.8% 5.5 x 6,725 36% $58,568 $14.23 11.3 Arsenal $8.22 $143 $209 1.4 x 3.2% 3.6 x 4,400 26% $47,475 $14.50 9.0 Average 2.2 x 6.8% 6.9 x 37,721 25% $95,096 $18.90 14.2 $6.12 $201 $298 2.0 x 17.2% 5.6 x 3,350 6% $89,072 $20.82 11.7 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 2014E 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. (8) Reserves as at December 31, 2013. (9) Sourced from publicly available company disclosure; where AIF not provided, based on press release.

Daily Production

Management

Richard Clark, B.A. (Econ), LLB, Director, President and CEO

• 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 25 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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