Richard Clark, President and Chief Executive Officer of Eagle stated, "Eagle's first quarter 2013 performance validates our stated business strategy of acquiring assets with substantial early stage growth capability, executing on that growth, and then entering into a harvest mode where the borrowing base is expected to increase due to increasing levels of lending base reserves (proved developed producing reserves). Under this strategy, expected increases in borrowing capacity will provide additional low cost capital for future drilling and additional acquisitions."
Mr. Clark continued, "Eagle's distribution strategy remains supported by a low-risk balance sheet, top decile per boe returns, and a solid recycle ratio in excess of 1.9 to 1 on capital deployed."
Operations Update
Eagle is drilling its second Permian well of the five well 2013 Midland program. Eagle's first 2013 Permian well is expected to be on production within 45 days. Open hole logs indicate better than expected production potential in Wolfcamp, Cline and Leonard shales. In Luling, permitting and location construction is underway, with the six well Salt Flat Field 2013 drilling program scheduled to begin in June.
Outlook
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 regarding forward-looking statements".
2013 Updated guidance
Following completion of the Acquisition, the Trust updated its guidance as set forth below.
--------------------------------------------- --------------------------------------------- Updated Previous 2013 Guidance 2013 Guidance Notes----------------------------------------------------------------------------Capital Budget $US 26.0 mm $US 24.0 mm (1)Working Interest Production 2,900 - 3,100 2,900 - 3,100 boe/d boe/d (2)Operating Costs (inclusive of $12.00 - $14.00 $12.00 - $14.00 transportation) per boe per boe (2)Funds Flow from Operations $45.0 mm $41.0 mm (3)
Notes:
(1) Increased due to the Acquisition. Eagle now owns a 100% working interest in its Midland properties. Note that the capital budget amount excludes the initial $US 8.5 million cost of the Acquisition.(2) The Acquisition is expected to add approximately 70 boe/d to production volumes. This results in no change to previously stated production range guidance or operating cost guidance.(3) 2013 funds flow from operations of $45.0 million (previous funds flow guidance of $41.0 million) has been estimated using the following assumptions: a. based on actual results through to March 31, 2013 and the Acquisition; b. full year average working interest production of 3,100 boe/d, which is at the upper end of the guidance range (previous funds flow guidance assumption used 3,000 boe/d, which was at the mid-point of the guidance range); c. April - December pricing unchanged from previous funds flow guidance assumptions: $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); d. April - August field marketing contracts currently in place for both Midland and Luling, as described in the "Revenue" section of the MD&A; e. September - December $2.23 per barrel discount from WTI in Midland (excluding transportation) and a $1.71 per barrel discount from WTI in Luling (excluding transportation), which is based on assumptions used in the latest reserve report, since no field marketing contracts yet are in place for this period; f. April - December average operating costs (inclusive of transportation) unchanged from previous funds flow guidance assumption of $13.00 per boe; and g. April - December foreign exchange unchanged from previous funds flow guidance assumption at $1.00 CDN/US.
