2008 Highlights
— Reported a gain of CAD1.8 million (before income tax) on hedges, a major contributor to Eagle Rock Exploration’s profit for the year
— Produced 487 boe/d in 2008, down 11% in the previous year average of 546 boe/d. The sale of the Antelope Lake property for CAD6.9 million was effective April 1, 2008 and accounts for the decrease
— The increase is attributable to higher oil prices as Eagle Rock Exploration averaged CAD85.33 per boe in 2008 compared to CAD59.90 in the previous year
— Generated cash from operating activities of CAD8.5 million, up 61% over previous year cash flow of CAD5.3 million, again attributable to higher oil prices
— Acquired three private companies in December 2008, adding a battery facility in Saskatchewan, production of about 90 boe/d and 338 mboe of reserves
— Incurred capital expenditures of CAD23.3 million, which comprises of the cost of drilling 14 wells of which nine are producing
— Accepted terms of forbearance proposed by the local office of Eagle Rock Exploration ’ bank, which is currently subject to approval by the bank’s credit committee. The forbearance agreement was the result of a breach of the working capital covenant (failed to maintain the required working capital ratio of 1:1) in the credit facility agreement with the bank.
Fourth Quarter 2008 Highlights:
— Earned operating netbacks of CAD27.86 per boe in fourth quarter (Q4) of 2008 compared to CAD39.59 in the year-ago quarter. The decrease is a result of lower oil prices and higher operating costs.
— Increased average daily production to 523 boe/d in Q4 2008 representing, up 7% over the year-ago quarter, which averaged 489 boe/d.
— Incurred capital expenditures of CAD8.7 million in this quarter which was more than anticipated due to cost over runs on wells spudded in the quarter.
As of March 2009 Eagle Rock Exploration has suspended its capital program and will apply its accessible cash flow (after royalties, operating expenses and general and administrative expenses) from about 600 boe/d to debt reduction. General and administrative expenses have been decreased mainly by way of employee decreases. It has also placed three Alberta properties (Coutts, Enchant and Conrad) for sale through an agent, Sayer Energy advisors, with the proceeds to be applied to debt decrease and to meet the proposed terms of forbearance with the bank.
Under the terms of the proposed forbearance, the Bank will not implement its rights in respect of Eagle Rock Exploration’s indebtedness under its credit facilities until August 31, 2009. The bank will consolidate the revolver loan and development loan facilities into one credit facility having the maximum availability of CAD18.2 million. Eagle Rock Exploration is to make monthly principal payments of CAD175,000 and remedy the working capital ratio on its June 30, 2009 financial statements as submitted to the bank by August 29, 2009.
Eagle Rock Exploration’s existing indebtedness to the bank under the credit facilities is about CAD18 million.
