Eagle's average production for the months of January and February 2013 was 2,888 boe/d, which is consistent with Eagle's previously published guidance. Eagle is on target to add additional production with the start of its 2013 capital program, beginning in April with five planned wells in Midland, followed by six planned wells in Luling beginning in June.
Operating costs continue to decline, as evidenced by the fourth quarter operating costs of $13.47 per boe (including transportation costs).
All of Eagle's production is located in the State of Texas. 88% of Eagle's revenue comes from light oil production. Eagle recently renewed its oil marketing arrangement increasing its overall 2013 realized weighted oil price to an approximate $US 2.67 per barrel premium to WTI (excluding estimated transportation costs of $2.00 per boe). By comparison, over the past few months producers of Canadian light and heavy oil have experienced record discounts from WTI for their wellhead prices, by as much as $15 to $40 per barrel, respectively. Having all of its production in the United States gives Eagle a significant pricing advantage over producers of Canadian domestic oil.
This outlook section is intended to provide unitholders with information about Eagle's expectations as at the date hereof for production and capital expenditures for 2013. Readers are cautioned that the information may not be appropriate for any other purpose. This information constitutes forward-looking information. Readers should note the assumptions, risks and discussion under "Note about forward-looking statements".
2013 Summary Capital, Production and Operating Cost Guidance
On December 7, 2012, the Board of Directors approved a 2013 capital budget of $US 24.0 million (down 45% year-over-year). The budget demonstrates a planned move from a growth phase on the Luling and Midland assets toward a sustainability phase where the level of capital necessary to maintain production, plus distributions paid to unitholders, will be more closely aligned with funds flow from operations.
Management anticipates that, based on 2013 estimated levels of drilling and operating costs, an annual budget of $US 24.0 million should be sufficient to grow 2013 average working interest production by approximately 10-15% over 2012 average working interest production.
With this 2013 capital budget, Eagle intends to execute a 6 (gross) well drilling program at Luling, a 5 (gross) well drilling program at Midland, plus 3 (gross) recompletions at Midland. In addition, a portion of the capital investment will be deployed to add new zones in Midland, test Salt Flat analogs and pilot enhanced recovery initiatives that should flatten the corporate decline, increase recovery rates, and cost effectively add reserves.
Eagle anticipates average 2013 working interest production in the range of 2,900 to 3,100 boe/d (up 10-15% year-over-year) comprised of 88% oil, 8% natural gas liquids ("NGLs") and 4% gas.
Operating costs (inclusive of transportation) per boe are expected to average in the range of $12.00 to $14.00 per boe (down 10% year-over-year).
2013 funds flow from operations of $41.0 million has been estimated using the following assumptions:
-- average working interest production of 3,000 boe/d;-- pricing at $US 90.00 per barrel West Texas Intermediate ("WTI") oil, $US 2.90 per Mcf NYMEX gas and $US 39.60 per barrel NGLs (NGLs price is calculated as 44% of the WTI price);-- a $US 2.56 per barrel discount from WTI in Midland (excluding transportation) and a $US 1.89 per barrel discount from WTI in Luling (excluding transportation);-- average operating costs (inclusive of transportation) of $13.00 per boe; and-- foreign exchange at $1.00 CDN/US.