Eagle Energy Trust VISION. GROWTH. INCOME. Investor Presentation November 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, including the impact on Eagle’s investments, structure, taxability and distributions of investing in Canadian assets, drilling program, production, operating costs, hedging, the amount and sustainability of distributions, tax pools, business strategy and plans for growth, among other things. These forward looking statements involve estimates and assumptions including those relating to timing to drill and bring wells on production, production rates, operating 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. 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 of 6 Mcf: 1 bbl would be misleading as an indication of value. 2
Mission Statement 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. 3
Overview • Eagle’s strategy is to provide investors with a reliable distribution paying investment by generating stable cashflows and managing risk while delivering moderate growth through increasing unit value. • On October 20, 2014, Eagle announced that it will seek unitholder approval to permit investment in Canadian assets to expand its range of opportunities in addition to continuing to actively acquire, operate and exploit U.S. oil and gas production in accordance with the Trust’s growth strategy. All of Eagle’s current production is in Texas and Oklahoma. • 95% of Eagle’s current production is light oil. • • Strong balance sheet – cash on hand and debt-free. 4
Corporate Profile Current Estimated Working Interest Production: 1,900 boe/d Production Split: 95% light oil Cash on Hand: $ 69.5 million Credit Facility Available: $ 61.6 million Annual Distribution: $1.05 per unit Tax Pools: approx. $US 166 million 5
Market Data TSX: EGL.UN Ticker Symbol: Units Outstanding (basic): 34.89 million 52 Week Range: $3.38 - $8.63 Recent price (Nov 4/14 close): $3.44 Average daily trading volume (30 day): 100,805 units 30 day VWAP: $4.88 Market Cap (Nov 4/14): $120 million Directors’ & Officers’ Ownership: 2.4% basic, 10.6% fully diluted Equity Research: Scotia NBF Acumen TD 6
Proposal to Invest in Canadian Assets A Special Meeting of unitholders will be held on November 24, 2014 to vote • on a special resolution to permit the acquisition of Canadian energy assets. • Opportunities in Canada are as attractive as opportunities in the U.S.: • market conditions in Canada’s oil and gas sector have resulted in Canadian oil and gas assets being available at attractive prices; pricing differentials will continue to narrow over the coming years with the expansion of • liquefied natural gas, rail and pipeline infrastructure; • Eagle’s management and directors have significant experience acquiring and developing energy assets in Canada; • investing in Canada will mitigate the Trust’s commodity price, foreign exchange and interest rate risk through diversification. 7
Impact of Eagle Investing in Canadian Assets Acquiring Canadian Assets will not affect Eagle’s U.S. Investments and U.S. • Sourced Distributions: • No effect on its U.S. operations or on the taxes on distributions from U.S. assets. • The Trust’s U.S. operating subsidiary will continue to actively acquire, operate and exploit U.S. oil and gas production in accordance with the Trust’s growth strategy. • Acquiring Canadian Assets will have no Negative Effects on Eagle’s Structure or Taxability: The Trust’s proposed Canadian investments will be structured such that the Specified • investment flow-through (SIFT) trust income and distribution tax will not apply to the Trust or its affiliates. • The Trust’s Canadian corporate subsidiaries will be taxed in the same manner as other Canadian oil and gas corporations. • The total annual distribution will be allocated among three components and shown on the Unitholder’s annual tax slips as: • other income (i.e., trust income from U.S. sources) • return of capital dividends • 8
Sale of Permian Properties In August 2014, Eagle sold its Texas Permian asset for $ 150 million ($US 140 • million). Eagle’s remaining U.S. properties produce approximately 1,900 barrels of oil per day. • As a result of the disposition, Eagle currently has $69.5 million ($US 62 million) of cash on hand, and a $61.6 million ($US 55 million) unutilized debt facility. Eagle is actively pursuing acquisitions to redeploy capital in attractive • investment opportunities. • Eagle has withdrawn its current guidance and expects to provide revised guidance after an announcement is made regarding its re-deployment of the sale proceeds. 9
Q3 2014 Highlights • Over 80% of the Trust’s current production is hedged at an average price of over $US 90 per barrel WTI through to June 30, 2015. • 30% of production is hedged for the second half of 2015 at an average price of $US 87 per barrel WTI. • Eagle disposed of its entire working interest in its Permian properties on August 29, 2014 for net proceeds of $150.1 million ($US 140 million) after closing adjustments. Strong financial position, with approximately $69.5 million ($US 62.0 million) • cash on hand, debt free and a $61.6 million ($US 55 million) unused credit facility. Suspended the Premium Distribution TM component of its Distribution • Reinvestment Plan (“DRIP”) and reduced the market discount from 5% to 2% on units acquired under the regular DRIP. DRIP participation is substantially reduced from 60% to the range of 5% to 8%, • significantly reducing the number of units issued each month. 10
Q3 2014 Highlights • To date, 91% of the $US 28 million capital program for 2014 has been executed with results performing to expectations. • In recent news, Eagle announced that it will seek unitholder approval to permit investment in Canadian assets to expand its range of opportunities in addition to continuing to actively acquire, operate and exploit U.S. oil and gas production in accordance with the Trust’s growth strategy. 11
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