CALGARY, ALBERTA – Enercapita Energy Trust (“Enercapita”, the “Trust”) is pleased to announce a summary of key accomplishments for the first two quarters of 2015 and provide an update on how the Trust is well positioned to succeed in the current low commodity price environment.
Enercapita Energy Trust Report to Shareholders
The oil and gas industry continues to experience significant pressure as the global energy complex find its new equilibrium, presenting a tremendous opportunity for Enercapita to deploy capital at historically low commodity prices. With West Texas Intermediate crude oil prices below US$50 per barrel and Aeco natural gas prices below C$3.00 per gigajoule, we anticipate a very active 2015-16 as highly levered oil and gas companies are forced to sell assets in an effort to meet short-term liquidity needs.
Enercapita’s business remains very well positioned in this environment. Our conservative business model of acquiring proven, low decline production and concurrently hedging commodity prices has produced the desired yield stability. This approach has protected our cash flow and balance sheet, while positioning the fund to be opportunistic in adding high quality assets in this depressed commodity price environment.
Enercapita was active in the first half of 2015 with a significant increase in 2014 proved plus probable reserves of 21%, completion of two acquisitions increasing Enercapita’s productive capacity to approximately 1,000 boe/d and formalizing our initial team at Enercapita with the addition of three permanent oil and gas professionals.
Enercapita’s strategy of acquiring low risk, conventional assets with exploitation upside allowed the company to deliver a significant increase in reserves in the Company’s first year of operations. Key highlights from the 2014 reserve report include:
- Proved reserves increased 6%, from 2,262.0 Mboe to 2,401.8 Mboe
- Proved plus probable reserves increased by 21% from 2,735.4 Mboe to 3,316.5 Mboe
- Net present value for proved plus probable reserves increased by 27% to $30.5 million (NPV10) or $6.4 million
First Half 2015 Acquisitions
Enercapita acquired White Ram Resources Ltd. on April 30, 2015 for total consideration of approximately $6.9 million.
- Acquired assets consisted primarily of a 50% working interest in Enercapita’s existing assets representing approximately 425 boe/d
- An additional 30 boe/d of low decline production in Alberta was also acquired
- Transaction metrics of $15,182 per flowing boe; $5.75 per proved boe of reserves
Enercapita also acquired certain operated and non-operated oil and gas assets in the Boundary Lake field in Alberta and British Columbia on June 9, 2015 for cash consideration of $0.9 million.
- Acquired assets are producing approximately 55 boe/d, 90% oil and liquids weighting
- Low decline rate of 8%
- Expect to add 30 bbl/d of oil production currently shut in with expected capital of $0.3 million
As we exit the second quarter of 2015, Enercapita’s productive capacity is approximately 1,000 boe/d, weighted 80% to natural gas with an average decline rate of 8%. Our disciplined hedging strategy has positioned us well in the current commodity price environment as our cash flows remain protected. The following outlines our hedge position to the end of 2016 : 77% of forecasted natural gas production hedged at C$3.59/GJ for 2015 and 69% hedged at C$3.48/GJ for 2016. Our forecasted oil production is 37% hedged at C$99.85/bbl for 2015 and 30% hedged at C$94.50/bbl for 2016. In addition, Enercapita has further hedges extending into 2017 and 2018. Enercapita’s acquisition, exploitation and optimization success to date reinforces our belief that a unique opportunity exists to generate superior risk-adjusted returns by aggregating a portfolio of high quality, low risk conventional energy assets.
We are also excited about the build out of the Enercapita team. These new members are professional oil and gas experts with the relevant engineering, geology and accounting backgrounds. The following provides a brief summary of their background.
Duane Masse – P.Eng : Chief Operating Officer
- Over 20 years of experience in exploitation and optimization of assets along with sourcing and evaluating acquisition opportunities
- Prior employment included ConocoPhillips, Gulf Canada, PetroCanada, Addison Energy, Signalta Resources and White Ram Resources
Trevor Duncan – P.Geol : Vice President Business Development
- Over 15 years of experience involved in several oil and gas basins across Western Canada including both conventional and unconventional reservoirs
- Prior employment included Salvo Energy, Addison Energy, Geocan Resources and White Ram Resources
Shawn Tomlinson – B.Comm : Manager, Accounting and Finance
- Over 10 years of experience in a variety of accounting, finance, and business analysis roles within the oil and gas sector
- Prior employment included Scollard Energy, Crocotta Energy, and Salvo Energy
Enercapita is excited about our current position and the macro environment of the oil and gas sector. With nearly $50 million in assets under management, 1,000 boe/d of production, no bank debt and in excess of $20 million of available cash we are ideally positioned to continue to execute our business plan of aggregating a portfolio of long life, low decline producing assets.
Key to our ongoing success is remaining patient and disciplined with our acquisition strategy as we focus on the assets that best meet our investment criteria. With current commodity prices nearing decade lows we anticipate oil and gas producers will continue to feel the financial strain of higher debt balances, forcing further asset sales. Currently, we have in excess of $200 million of offers for properties in our core operating areas that meet our investment metrics. To that end, we have an ongoing need for additional capital as we look to deploy and fully capitalize on the opportunities in front of us; with an aim to grow production to 3,000 boe/d and reach our target of $100 million in assets under management in the next 12 months.
Our mandate at Enercapita is to maximize free cash flow. With our current team now in place, we will begin to benefit from economies of scale driving an increase to Enercapita’s free cash flow as we add production from future acquisitions, exploitation and optimization efforts. As a well-capitalized entity, Enercapita is positioned to grow our company during this downturn in the commodity price cycle and continue to add value for our unitholders.
Enercapita is an energy fund focused on low risk exploitation and optimization of existing production. The fund is an RRSP eligible investment vehicle that streams the cash flow from its production directly to its investors on a priority basis.