VISION GROWTH INCOME 2010 ANNUAL REPORT
Eagle Energy Trust trades on the Toronto Stock Exchange under the symbol EGL.UN.
B
EAGLE ANNUAL REPORT 2010
A New Era for Energy Trusts Eagle Energy Trust is a new, publicly traded trust that pays monthly distributions to its unitholders. Ours is a tried and true business, with a new approach. Unaffected by the tax changes that came into effect for Canadian trusts at the beginning of 2011, Eagle signals a new era for energy trusts in Canada.
02 Letter to Our Unitholders 07 Your Investment 09 Our First Asset 11 Reserves 12 Code of Business Conduct and Ethics 12 Health, Safety and the Environment 13 Directors and Officers 15 Corporate Governance 16 Corporate Information
Eagle is delivering tax advantaged monthly distributions through an innovative business strategy that fits squarely within the new trust regulations.
EAGLE ANNUAL REPORT 2010
Letter to Our Unitholders On November 24, 2010, Eagle completed its Initial Public Offering (“IPO”) marking the first new publicly traded energy trust to be formed in Canada since 2006. For me, this was a deeply personal event. In part, our IPO marked the conclusion of a creative process which I had begun in November 2006 when it became apparent that the status quo for Canadian trust investors had changed. More importantly, Eagle’s IPO represented what I and others believed would be a new era for a tried and true style of business which investors had embraced for over 20 years and had come to depend on for a portion of their monthly income. This is why we created Eagle. This is why we were able to attract a dedicated management team and Board, each with a history and a culture of excellence. This is why you have entrusted us with your investment.
Our Focus on Yield
2010
We know first-hand how important consistent distributions
for what we have done in creating Eagle. We have paved
are to investors. During the past six months, I have
the way toward filling a void in the market, which is
spoken with many Eagle unitholders and I have heard how
important to me because it impacts people’s livelihoods.
distributions paid by Canadian trusts over the past 20
About three-quarters of Eagle units are held by retail
years have made a measurable difference in their lives. I
investors and we welcome the opportunity to be part
have listened as our investors have expressed appreciation
of the investment portfolio of the average Canadian.
January
April
May
August
September
Richard Clark completes Eagle’s business plan and begins sourcing suitable assets for Eagle’s IPO.
Peter Churcher joins as Executive Vice President, Engineering and Geosciences.
Purchase negotiations commence for the Salt Flat Field.
Purchase and sale agreement signed to acquire the Salt Flat Field.
Preliminary prospectus and trust documents are finalized and asset due diligence is completed.
Engaged Scotia Capital as lead underwriter for Eagle’s IPO.
Kelly Tomyn joins as Vice President, Finance and CFO.
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Our Structure
Why the United States
Eagle was developed by our management and Board, along
As trust rules were changing in Canada, I observed a few
with leading tax experts; in fact, a lot of the thought process
publicly traded Canadian companies conducting oil and
took place in front of my home computer. Our model is not a
gas operations in the U.S. and saw how capital for funding
loophole in the tax legislation. We have taken respected and
growth appeared to be more accessible in Canada than in
trusted elements of the former energy trusts and added an
the U.S. This observation led me to a business strategy which
innovative business strategy which fits squarely within the new
I believed made sense. We could have chosen any country
trust tax rules.
outside of Canada in which to conduct our operations, but the
Eagle has a straight-forward business model with a simple innovation. We are able to deliver tax advantaged distributions because we are a trust and all of our assets are located in the United States. In a brief explanation, the federal government’s new trust tax legislation is clear. To qualify for favourable tax treatment, a trust may be publicly traded if it only holds properties outside
doing business internationally. The maturity and diversity
U.S. was the obvious choice for many reasons.
We have taken respected and trusted elements of the former energy trusts and added an innovative business strategy which fits squarely within the new trust regulations.
of Canada. This is how we have structured Eagle.
October Prospectus is filed on October 16. Marketing road show commences.
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October/ November Three-week cross Canada roadshow with over 75 presentations to major investment houses.
of the oil and gas reserves in the U.S. means Eagle has more low risk opportunities than it might in other countries. The presence of Canadian banks and a broad pool of industry talent also makes it easier to execute our business model in the U.S., compared to most other countries.
In summary, we can acquire, operate and exploit U.S. oil and gas reserves at competitive costs compared to Canadian reserves. The U.S. presents many opportunities for a growing trust. On one end of the industry spectrum, larger companies are pursuing resource plays and acquiring large blocks of undeveloped land with little or no existing production. At the other end, certain upstream companies are pursuing ultra long-life reserves with less remaining upside. In the middle is a large swath of assets with low-risk development potential that are outside our competitors’ areas of interest. When combined with deal flow that is often many times higher than in Canada,
Business costs in the U.S. are comparable to Canada, deal
the opportunity for acquiring assets to sustain distributions
flow is higher, and average acquisition costs for producing oil
is attractive. Eagle expects to have access to the capital
and gas assets are competitive. The proximity to Canada’s
necessary for us to be competitive in the U.S. market, setting
petroleum capital in Calgary minimizes the costs of
the stage for accretive acquisitions.
November 24
December
December
Closed $130 million IPO, the 1st public energy trust launch since 2006. Eagle units start trading on the TSX.
Kirt Warrack joins Eagle as Chief Accountant in Calgary, along with Danae Parker, Manager, Production Analysis.
IPO overallotment raises an additional $19.5 million.
Closed the acquisition of the Salt Flat Field at attractive metrics.
First distribution announced.
Exit production for the year exceeds 1,300 bbl/d, which is at the upper range of our IPO guidance.
2011
EAGLE ANNUAL REPORT 2010
Our First Asset Concurrent with the closing of our IPO, we completed the acquisition of our first asset. The Salt Flat Field in south central Texas produces high netback, light oil. Up until three years ago when the first horizontal drilling was initiated, it was an abandoned field with almost 75% of the original-oil-in-place still to be recovered. Through a joint venture, and our 80% field working interest, we have an aggressive re-development program underway with 23 horizontal wells drilled since June 1, 2010 with 100% success.
Over time, our initial asset investment will deliver a cash
drill 21 oil wells in 2011 and our forecast is for production to
flow stream sufficient to fund the capital program in the
average 1,900 to 2,100 bbl/d for the year. The Salt Flat Field
field and also to pay our distributions. As we build our asset
will provide immediate visible growth as we evaluate accretive
base beyond the Salt Flat Field, our focus will be to acquire
acquisitions of other conventional oil and gas assets in select
conventional and long life reserves that will allow us to grow
basins in the U.S.
our production and deliver predictable monthly income to our unitholders.
The Tax Advantage From an investor’s perspective, the Eagle model is a straightforward investment. Our unitholders receive distributions which are either taxed as interest income, or classified as a return
Making the simple complicated is commonplace; making the complicated simple — awesomely simple — that’s creativity!
reserve estimate of 7.1 million barrels of light oil. We expect to
Jazz musician, Charles Mingus
of capital which does not attract current tax. Eagle units can also be held within an RRSP, TFSA, or other deferred plan. We currently estimate that non-taxable (RRSP or TFSA) investors will earn a yield premium of 3.5% when compared to a peer group of dividend paying, oil weighted Canadian corporations.
Much has been accomplished since our IPO five months ago. Many people have contributed to the launch of Eagle and I would like to offer my personal thanks for their effort and support, including our Board of Directors and the Eagle team in both Canada and the U.S. Experience and innovation led to Eagle’s launch. An evolved trust model, grounded by proven and respected components that both investors and capital markets know and trust, will be our legacy.
A New Era for Trusts The innovative thinking behind our business model is balanced
During the past 10 months, our production has increased over
by three important elements: Vision, Growth and Income. Our
Richard W. Clark
300% to more than 1,300 bbl/d. Based on our 2010 year end
vision has created a sustainable energy yield product, which
President and Chief Executive Officer
independent reserve report, total field development could see
fills an important niche in the investment landscape.
April 14, 2011
us drill at least 69 horizontal wells with a proved plus probable
January
February
February
March
March
April
Eagle announces $23 million 2011 capital budget for the Salt Flat Field. Acquired 500+ additional acres in the Salt Flat Field.
Press release of 2010 year end reserves. 300% of 2010 production was replaced with new reserve additions.
Dusty Dumas joins as our U.S. Controller in Houston.
The Eagle team expands with Bob Cunningham, Vice President, Business Development in Houston and Executive Assistant, Donna Caron in Calgary.
The field operations grow to include Bernadette Jurica, Drilling Engineer, and Justin Prichard-Jones, Production Engineer, based in Luling, Texas.
Production growth is on track with 23 wells drilled since June 1, 2010.
Jo-Anne Bund joins as General Counsel.
Distribution, Reinvestment and Premium DistributionTM Plan implemented.
Continue to evaluate low risk, high netback growth opportunities.
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Eagle Energy Trust
Current production is 100% light oil from low risk redevelopment of a formerly abandoned field in south central Texas.
5
EAGLE ANNUAL REPORT 2010
Vision To create wealth for our investors by combining innovation, expertise and opportunity.
Growth To ensure long term sustainability, we are targeting growth in production and reserves through our capital program and accretive acquisitions.
Income In a market starved of income products, our goal is to maintain predictable monthly distributions.
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Your Investment Eagle is a Yield-focused Mutual Fund Trust
You will have a 15% withholding on the entire distribution, which
Under Canada’s new tax legislation for trusts which came into
Our Business Strategy
effect in January 2011, Eagle is not taxable at the trust level due to one strategic element in our business model — all of our properties are outside of Canada. We structured Eagle to comply with the new trust legislation in order to fill an important niche in the Canadian investment landscape, a lack of yield-focused energy products for investors. Eagle is not a SIFT trust.
Income Tax Treatment for Investors
you may be able to recover as a foreign tax credit. (1)
As a trust, our goal is to target accretive acquisitions with remaining upside, which allows us to add reserves and production through low risk exploitation. We see a large number of properties within those acquisition parameters. In addition, there is a high percentage of U.S. oil and gas reserves held privately by non-industry investors that offer consolidation potential. The costs of doing business in the U.S. are competitive
For Canadian residents, Eagle units can be held in an RRSP,
compared to Canada, including acquisition metrics. We
a TFSA, or other deferred plan. A portion of the distribution
believe we can acquire, operate and exploit U.S. reserves at
to unitholders is treated as income and the balance is treated
competitive costs compared to Canadian reserves.
as a return of capital, which reduces the adjusted cost base in the units. For 2010, no distributions were required to be included in the income of unitholders. In the coming years, we expect the taxable component to be approximately 40% to
Patterson 128 rig drilling on the Salt Flat Field.
50% of the total distribution. In addition, Canadian residents are not required to file a U.S. tax return. For U.S. investors, a portion of Eagle’s distributions will be treated as qualified dividends in the U.S., with the balance as a return of capital, which reduces the adjusted cost base in
The market is starved for yield investment product. That void was one impetus for the founding of Eagle. In 2011, we are targeting an annual distribution of $1.05 per unit, or $0.0875 per unit monthly.
the units. (1) T his is general information only and we encourage investors to consult their own tax advisors.
7
EAGLE ANNUAL REPORT 2010
U.S. vs Canada* Canada
USA
$20.00 $16.00 In the sedimentary basins we are targeting, we are seeing
and reserves. We will also maintain control over capital
competitive operating costs. At our Salt Flat Field, 2011
spending, either through directly operating a property, or
operating costs are expected to be in the $10.00 to $11.50
through our operating agreements with partners.
per barrel range, which is competitive compared to average operating costs for similarly sized Canadian producers.
All of our assets will be located onshore in the United States,
As we build a production and reserve base, the type of
the Midcontinent, the Rockies, North and South Dakota and
assets we acquire is critical for the long term sustainability
Montana. Our initial asset is 100% light oil, reflecting a focus
of distributions. We are targeting oil and gas properties
on near term profitability. Future acquisitions may be mixed
with a total proved reserve life of eight years or more, with
between oil and natural gas depending on profitability.
predominantly in the producing sedimentary basins in Texas,
$12.00 $8.00 $4.00 $0.00 2004
2005
2006
2007
2008
Operating Costs ($/bbl)
predictable cash flows. Our assets must also have low risk development upside where we can profitably add production
Canadian Oil
Permian Oil
$250,000
Cash Flow
Cash Distribution Model
$200,000
Eagle plans to distribute approximately 50% of its net
$150,000
operating cash flow to unitholders in 2011 with the balance
50% 50%
$
dedicated to development drilling in the Salt Flat Field distribution of $1.05 per unit for 2011, or $0.0875 per unit monthly.
$ Unitholders
• Drilling • P otential acquisitions
$100,000
and potential acquisitions. Eagle is targeting an annual $50,000 $0 0
5
10
20
15
25
30
35
RLI
Aquisition Metrics ($/bbl/day) * Source: IHS Herold Inc.
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1,300
726
Our First Asset
438 320
Located in Caldwell County in south central Texas, the Salt Flat Field is producing light oil from the Edwards limestone formation. Eagle closed the acquisition of an 80% working
Q2 2010
Q3 2010
Q4 2010
Q1 2011
interest in the field on November 24, 2010, with an effective date of June 1, 2010. The field is undergoing re-development
Average Daily Production (bbl/d)
after being discovered in 1928, explored with over 500 vertical wells and then shut-in during the 1960s. An estimated 26% of the original recoverable reserves in the field were produced by these old vertical wells. Since 2008, more than 35 horizontal wells have been drilled which have derisked the development
2011 Capital Program This year’s capital spending in the Salt Flat Field is aimed at visible growth. Eagle plans to invest $23 million for the drilling of 21 horizontal wells and five water disposal wells, along with associated facilities. We expect the spud to tie-in cycle time to be reduced to less than three weeks following completion of an electricity trunk line in the second quarter of 2011. Eagle’s working interest production is expected to average 1,900 to 2,100 bbl/d in 2011.
program. Analogue fields next door that have been on production since the 1930s suggest that up to 42% of 23
the original oil in place can be recovered. Full field development, based on a report by our independent reserve evaluators, outlined 69 horizontal drilling locations remaining to be drilled after June 1, 2010. At year end 2010, 56 wells remained to be drilled, primarily moving reserves from
13
the proved undeveloped category to the producing reserves category. Before the recent run up in oil prices, 7.1 million barrels of proved plus probable reserves were valued at
6
Q3 2010
$173 million (at a 10% discount).
Q4 2010
Q1 2011
Cumulative Wells Drilled (gross)
9
In 2011, we expect to have average production ranging from 1,900 to 2,100 bbl/d of light oil.
EAGLE ANNUAL REPORT 2010
The Opportunity • 100% light oil, 36 degree API. •P remium netbacks (2010 – $48.00/bbl at US$88.00 WTI).
Eagle has begun the commercial re-development of the Salt Flat Field. 23 horizontal wells have been drilled since June 1, 2010 with 100% success. Initial production per well has averaged 170 bbl/d.
•L ow operating costs (excluding transportation, 2010 – $10.25/bbl). • 80% field working interest.
The play has also been derisked by drilling success in two nearby oil fields, Darst Creek and Luling Branyon, where more than 150 wells have been drilled since 1992.
•R eserve Life Index 14.6 years (proved plus probable).
Activity Update •A djusted purchase price $127 million. Drilling Rig
•C urrent production is 1,300 bbl/d, up more than 300% from June 1, 2010.
Salt Water Injector Tank Battery
Lower Edwards Formation
2,700 feet
Impermeable Layer
3,000 feet
Upper Edwards Formation
2,000+ feet
Oil
Water
Horizontal wells completed in the Upper Edwards produce oil, water and small amounts of gas, which is processed at a nearby tank battery. Water is disposed of down hole in the Lower Edwards via a vertical well.
•F ield development program of 69 horizontal wells; no fracture or acid stimulation is required. •2 3 wells drilled from June 1, 2010 to date. •F orecast 2011 average production of 1,900 to 2,100 bbl/d.
10
2010 Year End Reserve Report Highlights • Total proved plus probable reserves of approximately 7.1 million barrels of oil, 43% of which are categorized as proved. •T otal reserve additions of 318 Mbbls over the seven months since the June 1, 2010 effective acquisition date, resulting in 300% of volumes produced from June 1 to December 31, 2010 being replaced. •A US$44 million increase in proved plus probable reserves value since June 1, 2010, after having produced 99.5 Mbbls. •A current Reserve Life Index of 14.6 years based on January 2011 average production of 1,327 bbl/d. • 100% of the reserves are light oil.
Reserves The independent engineering firm of GLJ Petroleum
exceed the proved reserves estimates. Probable reserves
Consultants Ltd. evaluated 100% of Eagle’s reserves.
estimates have at least a 50% probability that the quantities
Eagle’s reserve estimates have been calculated in
actually recovered will equal or exceed the sum of the
accordance with National Instrument 51-101 Standards
proved plus probable reserves estimate.
of Disclosure for Oil and Gas Activities and are disclosed in Eagle’s Annual Information Form for the year ended December 31, 2010, which is available on SEDAR and on our website. Proved reserves have at least a 90% probability that quantities actually recovered will equal or
In just seven months, Eagle replaced 300% of 2010 production through development drilling.
Summary of Net Present Value of Future Net Revenue Net Present Value of Future Net Revenue Before Income Taxes Discounted at (%/year) (1) 0%
5%
10%
15%
20%
(US$000)
(US$000)
(US$000)
(US$000)
(US$000)
Developed producing
47,718
38,762
32,885
28,787
25,784
Developed non producing
21,611
17,593
14,893
12,982
11,566
Reserves Category Proved
Undeveloped
55,108
41,947
33,159
26,984
22,456
Total proved
124,438
98,302
80,938
68,753
59,807
Total probable
192,528
129,054
92,361
69,510
54,376
Total proved plus probable
316,966
227,356
173,299
138,263
114,183
Notes: (1) E stimates of after-tax future net revenue are not presented because the Trust will not be subject to taxes in Canada. (2) I t should not be assumed that the present values of estimated future net revenue shown above are representative of the fair market value of the reserves. There is no assurance that such price and costs assumptions will be attained and variances could be material. The recovery and reserves estimates of crude oil reserves provided are estimates only and there is no guarantee that the reserves, as estimated, will be recovered. Actual reserves may be greater than or less than the estimates provided. (3) P resent values of estimated future net revenue shown above are based on GLJ’s escalated price forecast as of December 31, 2010, which assumes a base 2011 oil price of US$88/bbl. (4) T otals may not add due to rounding.
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EAGLE ANNUAL REPORT 2010
Code of Business Conduct and Ethics
Summary of Oil Reserves
Eagle has adopted a written code of business conduct and Company Gross(1) Reserves Category
(Mbbl)
ethics that encourages and promotes a culture of ethical business conduct by its directors, management, employees and consultants.
Proved Developed producing
987
Developed non producing
464
Undeveloped
1,600
Total proved
3,051
Total probable
4,023
Total proved plus probable
7,073
Notes: (1) Gross reserves are Eagle’s total working interest share before the deduction of any royalties and without including any royalty interest of Eagle. (2) Totals may not add due to rounding
Health, Safety and the Environment High standards of health and safety and a commitment
contact with our operations, including landowners and local
to the environment (HS&E) are an integral part of Eagle’s
communities. Our due diligence in working with an operator
strategic and economic decision making.
includes ensuring they have a record of compliance with
Prior to acquiring a property, Eagle conducts a thorough review to ensure the asset has no significant safety or environmental liabilities. While Eagle does not currently operate drilling programs or field production, a core business strategy is to partner with respected operators with technical and field experience in areas where we hold
Mbbl
requires assurance that drilling projects are designed and conducted, and facilities constructed and operated in a manner that minimizes environmental impacts and promotes the health and safety of all those who could be impacted by our operations.
assets, and those with a demonstrated record of high
This emphasis on high standards of HS&E is important
standards of performance with regards to HS&E.
to Eagle, as well as being integral for our partners,
Probable
4,023
government regulations and industry standards. Eagle also
Eagle recognizes that health and safety are paramount for our operational partners and contractors in both the drilling
contractors, the residents and stakeholders near our operations and, ultimately, for our unitholders.
and production phases, and for all those who come in
Proved
3,051 Mbbl
Total 7,073 Mbbl
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Board of Directors
13
David M. Fitzpatrick
Bruce K. Gibson
Warren D. Steckley
Joseph W. Blandford
Richard W. Clark
Chairman of the Board
Audit Committee Chair
Reserves & Governance Committee Chair
Compensation Committee Chair
President, Chief Executive Officer and Director
Mr. Fitzpatrick is a geological engineer with more than 30 years industry experience including being a founder, President and Chief Executive Officer of Shiningbank Energy Income Fund, a TSX listed Canadian energy trust. Mr. Fitzpatrick is currently a director of Pinecrest Energy Inc., Compton Petroleum Corporation and Twin Butte Energy Ltd.
Mr. Gibson was formerly the Vice President and Chief Financial Officer of Shiningbank Energy Income Fund. His 35 years of industry experience includes oil and gas financial management, commodity marketing and public equity market issues. Prior to Shiningbank, Mr. Gibson was the Chief Financial Officer of Magrath Energy Corp. and Northridge Exploration Ltd.
Mr. Steckley combines more than 32 years of oil and gas industry experience with financial and investment expertise. Mr. Steckley is currently President, Chief Operating Officer and a Director of Barnwell of Canada, Limited, an oil and gas company and wholly owned subsidiary of Barnwell Industries Inc., a public company listed on the American Stock Exchange.
Mr. Blandford has over 35 years of oil and gas industry experience, and was the Chairman and Chief Executive Officer of Atlantia Offshore Limited, a Houston based company. Mr. Blandford is a member of the Independent Petroleum Association of America, the American Petroleum Institute and the American Society of Civil Engineers. Although retired since 2003, Mr. Blandford also serves on the University of Texas Chancellor’s Council and the University of Texas Development Board.
Mr. Clark’s career includes over 19 years in the legal profession, first as a founding partner at a boutique oil and gas firm and then for 10 years at a national law firm in Canada, where he specialized in the areas of corporate finance, securities, mergers and acquisitions and venture capital. He has extensive experience in the royalty trust sector and was a key contributor to the governance, capital markets, finance and growth strategy at Shiningbank Energy Income Fund.
EAGLE ANNUAL REPORT 2010
Management Richard W. Clark
Peter L. Churcher
Kelly A. Tomyn
Robert J. Cunningham
Dusty J. Dumas
President, Chief Executive Officer and Director
Executive Vice President, Engineering and Geosciences
Vice President, Finance and Chief Financial Officer
Vice President, Business Development
U.S. Controller
Mr. Clark’s career includes over 19 years in the legal profession, first as a founding partner at a boutique oil and gas firm and then for 10 years at a national law firm in Canada, where he specialized in the areas of corporate finance, securities, mergers and acquisitions and venture capital. He has extensive experience in the royalty trust sector and was a key contributor to the governance, capital markets, finance and growth strategy at Shiningbank Energy Income Fund.
Mr. Churcher is a petroleum professional with over 24 years of varied geological, engineering and business experience in the global oil and gas industry, most recently as Global Head of Upstream Business Development with the Abu Dhabi National Energy Company (TAQA). Prior to joining TAQA, he was the Manager of Business Development for PrimeWest Energy Trust. Mr. Churcher has lived, worked and transacted in the U.S. and has extensive experience with the technical and business environment in the U.S.
Ms. Tomyn has over 21 years experience in the oil and gas industry developing and executing financial strategies primarily for publicly traded companies, including Diamond Tree Energy Inc., Ranchgate Energy Inc., Saddle Resources Inc., WestPoint Energy Inc. and most recently as Vice President, Finance and Chief Financial Officer with Aduro Resources Ltd., a private company.
Mr. Cunningham has over 25 years of oil and gas experience including business development, finance, energy banking and risk management. Most recently, he was Vice President, Finance and Business Development of Zone Energy, LLC, a privately held oil and gas company. He holds a Bachelor of Business Administration degree in Finance from The University of Houston.
Mr. Dumas has over 20 years of financial experience including roles as Controller and Chief Financial Officer for both publicly traded as well as private enterprises. Dusty has led merger and acquisition projects and participated in several public offering transactions. Dusty is a Certified Public Accountant (CPA) and a Certified Management Accountant (CMA). He holds both a Bachelor of Business Administration in Accounting and a Master of Business Administration in Finance.
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Corporate Governance At Eagle, we believe that corporate governance is fundamental
Eagle’s distribution-focused model. There is regular contact
Reserves & Governance Committee
to all of our business dealings, our reputation with unitholders
between the directors and management, which allows for
The Reserves & Governance Committee is responsible
and within the larger investment community and, ultimately,
open and timely dialogue and decision making.
for reviewing the year-end reserves evaluation report
is crucial to our success. Both management and the Board
Board Composition
in all aspects of our business and our operations, including
Each year, directors are elected by unitholders at the Annual
second mandate is to ensure that the process of corporate
regular and open communication with unitholders and full
General Meeting. The Board is responsible for nominating
governance is ingrained in the structure and functioning of
and transparent disclosure in our business transactions and
new directors with appropriate experience and skill sets. To
the Board. This committee is also charged with ensuring
financial reporting.
ensure non-partisan leadership, the Board is comprised of one
the Board is aware of new developments and current
management member and four independent directors.
legislation regarding corporate governance and the
Duties of the Board The Board is responsible for the stewardship of Eagle.
review, recommending its acceptance to the Board. Its
responsibilities of directors. All directors and committees, individually or as a whole, have the right to retain independent legal counsel or other
Audit Committee
professional advisors. The Board also has the right to, and
The Audit Committee is responsible for overseeing Eagle’s
regularly does, meet without management present. All of
accounting and financial reporting processes. The committee
the independent directors serve on a committee. Each
meets with management to review the quarterly financial
committee meets as required, and all directors are asked
statements and directly with Eagle’s external auditors to review
to attend each Board meeting, and meetings of a committee
the annual financial statements, both prior to presentation to
on which they serve.
the Board for approval.
ranging nature, including the level of monthly distributions,
Board Committees
Compensation Committee
and to decide on matters that could have a major impact
To help discharge its responsibilities, the Board
on our operations, such as acquisitions, financing decisions
operates with three committees, all comprised of
reasonable compensation for directors and management and
and material corporate matters. Management operates the
non-management directors.
The Board has direct responsibility for such matters as strategic planning, assessing opportunities and risks of the business, and ensuring that systems are in place to manage those risks. The Board approves annual operating and capital budgets, equity issues and has established long-term debt parameters within which Eagle is expected to operate. The Board meets regularly to consider matters of a wide
business on a day-to-day basis, in accordance with such specific responsibilities and expectations as are set by the Board. These include conducting business in a cost-effective manner and the execution of a growth strategy to sustain
15
prepared by independent engineers and, subject to this
are committed to high standards of corporate governance
The Compensation Committee is charged with recommending implementing the equity-based and incentive compensation plans, policies and programs. These recommendations are presented to the Board for review and approval.
EAGLE ANNUAL REPORT 2010
Forward-looking Statements
Corporate Information Board of Directors
Officers
David Fitzpatrick
Richard W. Clark
Chairman of the Board
President, Chief Executive Officer and Director
Bruce K. Gibson
Peter L. Churcher
(2)
Director Warren D. Steckley
Executive Vice President, Engineering and Geosciences Kelly A. Tomyn
(1)
Director Joseph W. Blandford
Vice President, Finance and Chief Financial Officer (3)
Robert J. Cunningham
Director
Vice President, Business Development
Richard W. Clark
Dusty J. Dumas
President, Chief Executive Officer and Director
U.S. Controller
(1) Reserves & Governance Committee Chair
Auditors
(2) Audit Committee Chair
PricewaterhouseCoopers LLP
(3) Compensation Committee Chair
Trustee and Transfer Agent Computershare Trust Company of Canada
Engineering Consultants GLJ Petroleum Consultants Ltd.
Annual General Meeting
Bankers
Unitholders are cordially invited to attend the Annual
Bank of Nova Scotia
General Meeting to be held on May 18, 2011 at 3 p.m. (MDT) in the Devonian Room at the Calgary Petroleum Club,
Legal Counsel
319 – 5th Avenue SW, Calgary, Alberta.
McCarthy Tétrault LLP
Design: Bryan Mills Iradesso
Certain of the statements made and information contained in this Annual Report are forward-looking statements and forward-looking information (collectively referred to as “forward-looking statements”) within the meaning of Canadian securities laws. Statements relating to the volumes and future net revenue of “reserves” are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described exist in the quantities predicted or estimated and can be profitably produced in the future. This Annual Report also contains forward-looking statements pertaining to, and which rely on assumptions as to, the estimated volumes and estimated value of Eagle’s reserves, forecasted production levels, future oil prices and the expected timing of tying in the remaining wells. These forward-looking statements are based on Eagle’s current beliefs as well as assumptions made by, and information currently available to Eagle, including the accuracy of the estimates of Eagle’s reserves volumes, future commodity prices and costs assumptions, future production levels, the ability to obtain equipment in a timely manner to carry out development activities, the ability to market oil successfully, and the ability to obtain financing on acceptable terms to fund Eagle’s planned expenditures. Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect. These assumptions necessarily involve known and unknown risks and uncertainties inherent in the oil and gas industry such as geological, technical, drilling and processing problems and other risks and uncertainties, as well as the business risks discussed in Eagle’s Annual Information Form dated March 9, 2011 under the heading “Risk Factors.” Undue reliance should not be placed on forward-looking statements, which are inherently uncertain, are based on estimates and assumptions, and are subject to known and unknown risks and uncertainties (both general and specific) that contribute to the possibility that the future events or circumstances contemplated by the forward looking statements will not occur. Although we believe that the expectations conveyed by the forward-looking statements are reasonable based on information available to us on the date the forward-looking statements were made, there can be no assurance that the plans, intentions or expectations upon which forwardlooking statements are based will in fact be realized. Actual results will differ, and the difference may be material and adverse to Eagle and its unitholders. Eagle does not undertake any obligation, except as required by applicable securities legislation, to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise. Unlike fixed income securities, Eagle has no obligation to distribute any fixed amount, and reductions in, or suspensions of cash distributions may occur that would reduce future yield. All material information pertaining to Eagle Energy Trust may be found at www.sedar.com or on Eagle’s website at www.eagleenergytrust.com.
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Calgary Office
Houston Office
Eagle Energy Inc. Suite 900, 639-5th Avenue SW Calgary, Alberta T2P 0M9
Eagle Hydrocarbons LLC Suite 3005, 333 Clay Street Houston, Texas 77002
Phone: (403) 531-1575 Fax: (403) 266 4124 Email: info@eagleenergytrust.com
Phone: (713) 300-3245 Fax: (713) 300-3240
www.eagleenergytrust.com
TSX : EGL.UN