American Eagle Energy Corporation (ticker: AMZG) is a Williston Basin focused E&P company engaged in the exploration and production of petroleum and natural gas in North America. The company operated under the name Eternal Energy Corp. until December 2011 when it changed its name to American Eagle Energy Corporation upon its acquisition of American Eagle Energy Inc.
Recent Financial Results
American Eagle Energy reported Q3’13 results on November 13, 2013. AMZG produced record quarterly volumes of 125 MBOE (1,362 BOEPD), a 6% increase over Q2’13 and a 232% increase over Q3’12. Oil sales totaled $11.6 million and adjusted EBITDA reached $7.2 million ($0.14 per share), both company records. Adjusted cash flow is $6 million and adjusted income totaled $3.7 million. Record revenue was achieved in Q3’13 despite an increase in lease operating expenses due to routine workover expenses including changing out downhole pumps and repairing locations damaged by extreme weather conditions. Accounting fees also rose due to various acquisitions, including one as recent as October 2013.
Boosting Production in the Spyglass Project
AMZG added production from five gross operated wells in the Three Forks and Bakken formations in Q3’13 and now has a total of 25 gross wells (7.94 net) in the area. Oil accounted for 99.5% of revenue and 98.4% of production. The four new wells have a combined 30 day IP rate of 1,335 BOEPD and the fifth began producing on the last day of the quarter. AMZG spud six additional wells in the quarter and expects to provide initial results in the next operational update.
Operated Program Moving Ahead
The company began drilling with a second rig in late September and plans to keep two rigs in operation through the end of Q1’14. The operated well development plan for the second half of 2013 is consistent with its estimate of 14 gross wells. Approximately $8.7 million was spent on well development in Q3’13 and $10.3 is estimated in Q4’13. Plans in 2014 include drilling 18 gross wells (10 net) at an estimated total cost of approximately $65 million.
In a conference call following the release, AMZG management estimated the PV-10 proved undeveloped (PUD) reserves in its current Spyglass area at $271 million. The company currently owns 25,000 net acres with 14 possible drilling spacing units (DSUs). An additional property option consisting of 25 DSUs across roughly 9,000 acres can be purchased by the company any time prior to March 2014. Estimated PUD in the bolt-on area is estimated to be between $130 million and $180 million, which would bring total estimated PUD in the area to $400 million to $450 million.
At the time of writing this article, AMZG had a market capitalization of $148 million.
Exit rate production for year-end 2013 is expected at approximately 2,100 BOEPD, pro forma for the acquisition of 750 BOEPD on 9,700 net acres in Q3’13. Production volumes are expected to increase once recently completed wells are put online. The company said it plans to use its two-rig program to move west, with one rig expanding its production acreage while the other infills drilling locations.
Liquidity and Shares Outstanding
AMZG currently has approximately $19 million in cash with $68 million total debt outstanding. A public offering netted the company approximately $25 million and the first half of its $47 million Spyglass closed in the quarter. Pro forma for the stock offering, the cash balance would be approximately $39 million with $108 million of outstanding debt. AMZG believes its two-rig drilling program will be adequately funded.
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