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American Eagle Energy Announces Operations Update and Reports Results for First Quarter 2014

DENVER, CO--(Marketwired - May 13, 2014) - American Eagle Energy Corporation (NYSE MKT: AMZG) ("American Eagle" or the "Company"), announces operational update and financial results for the first quarter ended March 31, 2014. The Company intends to file its Quarterly Report on Form 10-Q with the U.S. Securities and Exchange Commission on or before Thursday, May 15, 2014.

Highlights

  • Closed separate transactions to bring the Company's average working interest in the total Spyglass area to 68% and the proved Spyglass area to 67% resulting in a total of 45,600 net acres in the Spyglass area;
  • Added seven (3.0 net) operated wells to production that included a mix of Bakken and Three Forks wells in central and eastern Spyglass and a step-out well in western Spyglass;
  • April net production averaged approximately 2,250 barrels of oil equivalent per day ("BOEPD");
  • American Eagle reports first quarter 2014 oil production of 148,048 barrels of oil equivalent ("BOE"), or an average of 1,645 BOEPD. First quarter production was up 69% from 972 BOEPD (87,471 BOE) year-over-year for the quarter ended March 31, 2013 ("YOY") but down 12% from 1,879 BOEPD (172,829 BOE) quarter-over-quarter for the period ended December 31, 2013 ("QOQ") due to severe cold weather;
  • Quarterly oil and gas sales of $12.5 million, up 64% YOY and down 7% QOQ;
  • Adjusted EBITDA* of $7.4 million;
  • Adjusted Cash Flow* of $4.6 million or $0.24 per diluted share; and
  • Adjusted Net Income* of $0.8 million or $0.04 per diluted share.

* Non-GAAP financial measure. Please see Adjusted EBITDA, Adjusted Cash Flow and Adjusted Net Income descriptions and tables later in this earnings release for a reconciliation of these measures to their nearest comparable GAAP measure.

Management Comments

Brad Colby, President and CEO of American Eagle, said, "Despite the extremely cold winter in North Dakota, our operations team continued to move forward and successfully drilled, completed and brought onto production approximately seven (3.0 net) operated wells (four Bakken and three Three Forks) during the quarter. Our new wells added to production a number of Bakken wells which continued to successfully de-risk and delineate our Spyglass Bakken well locations and should be additive to future reserve reports. We also tested the far western Spyglass acreage with an American Eagle operated well that our JV partner financed. While the initial results on the test well were below other operated wells, we are still evaluating performance and have seen recent improvements in production rates. We are currently producing approximately 2,250 BOEPD and are completing wells that should be additive to second quarter results. The remainder of our 2014 development plan continues to focus on higher working interest wells in central and eastern Spyglass."

First Quarter 2014 Financial and Operational Results

For the quarter ended March 31, 2014, the Company had oil and gas sales of $12.5 million, which represented an increase of 64% from $7.6 million when compared to the first quarter ended March 31, 2013 and a decrease of 7% from $13.5 million when compared to the fourth quarter ended December 31, 2013. This increase in revenue on a YOY basis is due primarily to production from 35 gross (16.3 net) operated wells in the Spyglass area producing in the Three Forks and Bakken formations during the first quarter 2014, compared to production from 13 gross (3.3 net) operated wells at the end of March 31, 2013 and 28 gross (13.7 net) operated wells as of December 31, 2013. The decrease in revenue on a QOQ basis is due primarily to the impact of severe cold weather in North Dakota. Oil represented 98% of revenue and 95% of production during the first quarter 2014.

Adjusted EBITDA for first quarter 2014 was $7.4 million, up 52% from $4.9 million for the first quarter ended March 31, 2013 but down 2% from $7.6 million for the fourth quarter ended December 31, 2013. The increase in Adjusted EBITDA on a YOY basis is due primarily to higher revenues from increased production which increased 69% YOY and a 1% increase in realized oil price when including the positive effect of hedges during the quarter, which was partially offset by higher lease operating expenses ("LOE") per BOE and a higher differential when comparing realized oil price to benchmark oil prices such as West Texas Intermediate ("WTI"). The modest 2% decrease in Adjusted EBITDA on a QOQ basis is due primarily to a 12% decrease in average daily oil equivalent production and higher LOE per BOE, which was partially offset by higher realized oil prices and lower general and administrative expenses per BOE.

American Eagle added seven gross (3.0 net) operated wells to production during the quarter ended March 31, 2014. American Eagle's first quarter 2014 realized oil price per barrel prior to the effect of hedges was positively impacted by a lower differential discount of about $11.57 relative to WTI due to an agreement that locks in a $10.75 discount to WTI for all 2014 operated oil production and compares with a differential discount of approximately $17.04 during the fourth quarter 2013. Lease operating expenses for the quarter ended March 31, 2014 were $15.36 per BOE, which were higher than normal due to weather conditions and increased workovers. The higher production and revenue helped to reduce per unit general and administrative expenses ("G&A") on a YOY and QOQ basis, as G&A, excluding stock-based compensation, was $10.56 per BOE during the first quarter 2014 compared to $12.23 per BOE the previous year and $15.07 per BOE the previous quarter. Adjusted EBITDA per BOE for the quarter ended March 31, 2014 was $50.29, compared to $56.13 per BOE for the first quarter ended March 31, 2013 and $44.16 per BOE for the fourth quarter ended December 31, 2013.

                                                                            
                           -------------------------------------------------
                                           Three Months Ended               
                           -------------------------------------------------
                            Mar. 31,  Dec. 31,  Sep. 30,  Jun. 30,  Mar. 31,
                                2014      2013      2013      2013      2013
                           -------------------------------------------------
Crude Oil Revenues ($000s) $  12,267 $  13,272 $  11,585 $  10,366 $   7,628
Natural Gas Revenues                                                        
 ($000s)                   $      72 $     114 $      26 $       4 $       1
Natural Gas Liquids                                                         
 Revenues ($000s)          $     206 $     115 $      28 $       0 $       0
                                                                            
Net Production:                                                             
Crude Oil (Barrels)          140,841   164,923   123,343   117,000    87,440
Crude Oil Mix                    95%       95%       98%      100%      100%
Natural Gas (Mcf)             11,370    20,055     6,333       981       187
Natural Gas Liquids                                                         
 (Barrels)                     5,312     4,563       944         0         0
                                                                            
Total Net Production (BOE)   148,048   172,829   125,343   117,164    87,471
Quarter-Over-Quarter                                                        
 Increase                       -14%       38%        7%       34%       44%
                                                                            
Average Daily Production                                                    
 (BOEPD)                       1,645     1,879     1,362     1,288       972
Quarter-Over-Quarter                                                        
 Increase                       -12%       38%        6%       32%       47%
                                                                            
Average Sales Prices:                                                       
Crude Oil Per Barrel       $   87.10 $   80.48 $   93.92 $   88.60 $   87.23
Effect of Settled Oil                                                       
 Derivatives Per Barrel    $    0.82 $    4.16 $    0.94 $    0.00 $    0.00
                           -------------------------------------------------
Crude Oil Net of Settled                                                    
 Derivatives Per Barrel    $   87.92 $   84.64 $   94.86 $   88.60 $   87.23
Natural Gas Per Mcf        $    6.37 $    5.67 $    4.09 $    4.39 $    5.70
Natural Gas Liquids Per                                                     
 Barrel                    $   38.83 $   25.27 $   29.67 $    0.00 $    0.00
Realized Price Per BOE     $   85.52 $   82.10 $   93.78 $   88.51 $   87.21
                                                                            
Average Per BOE:                                                            
Lease Operating Expenses   $   15.36 $   13.59 $   14.09 $   15.31 $    9.27
Production Taxes           $    9.32 $    9.28 $   10.28 $    9.89 $    9.58
G&A Expenses, Excluding                                                     
 Stock-Based Compensation  $   10.56 $   15.07 $   12.04 $    8.31 $   12.23
                           -------------------------------------------------
Total                      $   35.24 $   37.94 $   36.41 $   33.51 $   31.08
                           -------------------------------------------------
                                                                            
Adjusted EBITDA per BOE    $   50.29 $   44.16 $   57.36 $   54.99 $   56.13
                                                                            
                                                                            

Well Development Activity

Since the Company's March 26, 2014 operations update, it has continued to drill and complete wells successfully. In that update, American Eagle released preliminary results on wells that had not yet produced for a full 30 days. The first full 30 days of production on these wells is listed below:

                                                                            
----------------------------------------------------------------------------
                                   30-Day   Lateral                  Infill 
                                  IP Rate    Length   Approximate    Number 
       Well          Formation    BOEPD(1)    Feet   DSU(2 ) Acres in DSU(2)
----------------------------------------------------------------------------
                                                                    1st well
                                                                    in DSU, 
  Tangedal 13-31-                                                  1st Three
 164-101 (30 & 31)  Three Forks     363      5,784        800        Forks  
                                                                            
----------------------------------------------------------------------------
                                                                    4th well
                                                                    in DSU, 
   Janice 2-3-                                                        1st   
 163-101 (3 & 10)      Bakken       276      9,473       1,280       Bakken 
                                                                            
----------------------------------------------------------------------------
1 IP Rate BOEPD is calculated taking the cumulative production from each    
well divided by the number of days each well has been on production. Results
above are based on the first 30 days of production.                         
2 Drill spacing unit ("DSU")                                                
                                                                            

The initial results from the Tangedal 13-31 Three Forks well seem to confirm and expand the good quality area of the reservoir in the north central portion of the Spyglass acreage as was previously established by the offset wells, Lynda 15-32 to the east and the Stanley 8-1E to the south. The Janice 2-3 well-established, good Middle Bakken production in a DSU in the middle of the eastern Spyglass acreage.

Since the Company's March 26, 2014 operations update, there are five additional operated wells that have produced an average of 30 days. The operated wells are listed below from the most easterly well listed first and moving to the west with the most westerly well listed last:

                                                                            
----------------------------------------------------------------------------
                                   30-Day   Lateral                  Infill 
                                  IP Rate    Length   Approximate    Number 
       Well          Formation    BOEPD(1)    Feet   DSU(2 ) Acres in DSU(2)
----------------------------------------------------------------------------
                                                                    4th well
  Harvard State                                                     in DSU, 
  16-36S-163-101       Bakken       190      9,924       1,280        2nd   
     (1 & 12)                                                        Bakken 
                                                                            
----------------------------------------------------------------------------
                                                                    3rd well
   Uncompahgre                                                      in DSU, 
   State 14-36-        Bakken       233      5,885        800         1st   
 164-101 (25 & 36)                                                   Bakken 
                                                                            
----------------------------------------------------------------------------
                                                                    4thwell 
 Blackwatch 2-2N-                                                   in DSU, 
164-101 (26 & 35)      Bakken       194      6,023        800         2nd   
       Carry                                                         Bakken 
                                                                            
----------------------------------------------------------------------------
                                                                    2nd well
   Taylor 16-1E-                                                    in DSU, 
 163-101 (5 & 6)       Bakken       358      9,915       1,280        1st   
     Farm-Out                                                        Bakken 
                                                                            
----------------------------------------------------------------------------
                                                                    1st well
  Haugen 15-12-                                                     in DSU, 
 163-103 (1 & 12)   Three Forks      91      9,677       1,280     1st Three
     Farm-Out                                                        Forks  
                                                                            
----------------------------------------------------------------------------
1 IP Rate BOEPD is calculated taking the cumulative production from each    
well divided by the number of days each well has been on production. Results
above are based on the first 30 days of production.                         
2 Drill spacing unit ("DSU")                                                
                                                                            

The Taylor 16-1E well is a Bakken well and part of the Farm-Out well program with the JV partner that is in the central portion of the Spyglass acreage in the same DSU as the Stanley (Three Forks) well and exhibits similarly strong production results as the other wells in the surrounding area.

The Haugen 15-12 step-out well is a Three Forks completion and part of the Farm-Out well program with the JV partner. It is designed to test the far western edge of the Spyglass area close to the Montana border. The Haugen 15-12 produced an average of 91 BOEPD during the first 20 days of production with an apparent water-cut in excess of 90%. The well has shown some chemical emulsion problems that have resulted in fluctuating oil rates ranging from 60 to 192 barrels of oil per day. Although the initial results are disappointing, the Company is still evaluating the improving production trend observed over the last 10 days and will incorporate the production results over the next 30 to 60 days into the interpretation of the prospectivity of the Three Forks zone as we approach the western edge of our acreage position.

In addition to the wells listed above, the Company has one operated well that is producing but has not yet produced for 30 cumulative days, four operated wells that are in various stages of completion, one operated well that is awaiting completion, and two wells that are being drilled. Below is a list of operated wells that have spud but have not yet produced for 30 cumulative days:

                                                                            
----------------------------------------------------------------------------
                                                                     Infill 
                                            Lateral   Approximate    Number 
       Well          Formation    Status     Length    DSU1 Acres   in DSU1 
----------------------------------------------------------------------------
                                                                    5th well
  Braelynne 2-2N                Producing                           in DSU, 
164-101 (26 & 35)                  (< 30     Short        800         3rd   
       Carry          Bakken       days)                             Bakken 
----------------------------------------------------------------------------
                                                                    1st well
    Ella 3-15-                                                      in DSU, 
163-102 (15 & 22)   Three Forks Completing    Long       1,280     1st Three
     Farm-Out                                                        Forks  
                                                                            
----------------------------------------------------------------------------
                                                                    2nd well
  La Plata State                                                    in DSU, 
      2-16-         Three Forks Completing    Long       1,280     2nd Three
163-101 (16 & 21)                                                    Forks  
       Carry                                                                
----------------------------------------------------------------------------
                                                                    1st well
                                                                    in DSU, 
   Shelly 3-2N-     Three Forks Completing   Short        800      1st Three
 164-102 (26 & 35)                                                   Forks  
                                                                            
----------------------------------------------------------------------------
                                                                    4th well
                                                                    in DSU, 
    Warren 4-2-       Bakken    Completing    Long       1,280        1st   
 163-101 (2 & 11)                                                    Bakken 
                                                                            
----------------------------------------------------------------------------
                                                                    3rd well
                                 Awaiting                           in DSU, 
  Murielle 9-1E-    Three Forks Completion    Long       1,280     2nd Three
  163-101 (5 & 6)                                                    Forks  
                                                                            
----------------------------------------------------------------------------
                                                                    5th well
                                                                    in DSU, 
  Richard 2-13N-    Three Forks  Drilling     Long       1,280        3rd   
 163-101 (1 & 12)                                                    Bakken 
                                                                            
----------------------------------------------------------------------------
                                                                    1st well
                                                                    in DSU, 
    George 3-1-     Three Forks  Drilling     Long       1,280     1st Three
 163-102 (1 & 12)                                                    Forks  
                                                                            
----------------------------------------------------------------------------
1 Drill spacing unit ("DSU")                                                
                                                                            

American Eagle plans to announce results of the wells once it has achieved approximately 30 days of cumulative production. The Company anticipates releasing results for wells in an operations update that will likely be after the end of June 2014, but before announcing second quarter 2014 operational results in August.

Operated Well Development Guidance

American Eagle currently has two rigs drilling in its Spyglass area. Thus far during the second quarter, the Company has spud two gross operated wells, is in the process of completing four gross operated wells and anticipates drilling and completing an additional two gross operated wells. At the current pace of development, American Eagle estimates that approximately six gross operated wells will be spud, completed and brought onto production each quarter.

For the remainder of 2014, American Eagle plans to drill a mix of Three Forks and Middle Bakken wells, with a weighting towards Three Forks wells. The Company will focus on developing wells with high working interests and giving effect for the increased working interests now expects to drill and complete a total of 24 gross (16 net) operated wells during 2014 for approximately $97 million. American Eagle also plans to participate in the development of non-operated wells in its Spyglass area and spend approximately $3 million to participate in less than one non-operated well. The Company's total well development budget for 2014 is approximately $100 million.

2014 Production Volume Guidance

American Eagle has reaffirmed its production volume guidance to exit 2014 at over 3,000 BOEPD. As weather in the Williston Basin has recently improved, production volumes are expected to return to normal levels during second quarter 2014 with the added benefit of higher working interests that now average 68% in the Spyglass area following the acquisitions completed in March 2014. The Company estimates that its current production is approximately 2,250 BOEPD. American Eagle anticipates significant QOQ production volume growth during the third and fourth quarters of 2014 and overall is comfortable with consensus estimates for 2014 production volumes.

Liquidity and Shares Outstanding

As of March 31, 2014, American Eagle had approximately $50.1 million in cash, $108.0 million total debt outstanding and 30.4 million shares of common stock outstanding. American Eagle believes that its cash on hand, cash flow from operations, and anticipated additional availability under the $200 million credit facility driven by increased proved producing reserves should adequately fund its two-rig drilling program to drill 16 net operated wells per year in 2014 and well development at a similar pace in 2015.

Conference Call

American Eagle will host a conference call on Wednesday, May 14, 2014 at 10:00 a.m. Eastern Time (8:00 a.m. Mountain Time) to discuss financial and operational results for the quarter.

                                                                            
----------------------------------------------------------------------------
 American Eagle Energy Corporation 1Q 2014 Financial and Operational Results
                               Conference Call                              
----------------------------------------------------------------------------
Date:        Wednesday, May 14, 2014                                        
----------------------------------------------------------------------------
Time:        10:00 a.m. Eastern Time                                        
             9:00 a.m. Central Time                                         
             8:00 a.m. Mountain Time                                        
             7:00 a.m. Pacific Time                                         
----------------------------------------------------------------------------
Webcast:     Live and rebroadcast over the Internet at American Eagle       
             website                                                        
----------------------------------------------------------------------------
Website:     www.americaneagleenergy.com                                    
----------------------------------------------------------------------------
Telephone    877-407-9171 (toll-free) and 201-493-6757 (international)      
 Dial-In:                                                                   
----------------------------------------------------------------------------
Telephone    Available through Wednesday, May 21, 2014                      
 Replay:     877-660-6853 (toll-free) and 201-612-7415 (international)      
             Passcode: 13572777                                             
----------------------------------------------------------------------------
                                                                            

ABOUT AMERICAN EAGLE ENERGY CORPORATION

American Eagle Energy Corporation is an independent exploration and production operator that is focused on acquiring acreage and developing wells in the Williston Basin of North Dakota, targeting the Bakken and Three Forks shale oil formations. The Company is based in Denver, CO. More information about American Eagle can be found at www.americaneagleenergy.com or by contacting investor relations at 303-798-5235 or [email protected]. Company filings with the Securities and Exchange Commission can be obtained free of charge at the SEC's website at www.sec.gov.

SAFE HARBOR

This press release may contain forward-looking statements regarding future events and the Company's future results that are subject to the safe harbors created under the Securities Act of 1933 (the "Securities Act") and the Securities Exchange Act of 1934 (the "Exchange Act"). All statements other than statements of historical facts included in this press release regarding the Company's financial position, business strategy, plans and objectives of management for future operations, industry conditions, and indebtedness covenant compliance are forward-looking statements. When used in this report, forward-looking statements are generally accompanied by terms or phrases such as "estimate," "project," "predict," "believe," "expect," "anticipate," "possible," "target," "plan," "intend," "seek," "goal," "will," "should," "may" or other words and similar expressions that convey the uncertainty of future events or outcomes. Items contemplating or making assumptions about, actual or potential future sales, market size, collaborations, and trends or operating results also constitute such forward-looking statements. 

Forward-looking statements involve inherent risks and uncertainties and important factors (many of which are beyond the Company's control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the amount we may invest, the location, and the scale of the drilling projects in which we intend to participate; our beliefs with respect to the potential value of drilling projects; our beliefs with regard to the impact of environmental and other regulations on our business; our beliefs with respect to the strengths of our business model; our assumptions, beliefs, and expectations with respect to future market conditions; our plans for future capital expenditures; and our capital needs, the adequacy of our capital resources, and potential sources of capital.

The Company has based these forward-looking statements on its current expectations and assumptions about future events. While management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory, and other risks, contingencies, and uncertainties, most of which are difficult to predict and many of which are beyond the Company's control. The Company does not assume any obligations to update any of these forward-looking statements.

                                                                            
                     AMERICAN EAGLE ENERGY CORPORATION                      
                   CONDENSED CONSOLIDATED BALANCE SHEETS                    
                                (UNAUDITED)                                 
                                                                            
                                                 March 31,      December 31,
                                                      2014              2013
                                           ---------------   ---------------
Current assets:                                                             
  Cash                                     $    50,081,532   $    31,850,161
  Trade receivables                              8,955,900        17,919,518
  Income tax receivable                             25,000                 -
  Prepaid expenses                                 213,858            68,194
                                           ---------------   ---------------
    Total current assets                        59,276,290        49,837,873
Equipment and leasehold improvements, net                                   
 of accumulated depreciation and                                            
 amortization of $356,524 and $322,437,                                     
 respectively                                      221,598           173,516
Oil and gas properties, full-cost method -                                  
 subject to amortization, net of                                            
 accumulated depletion of $16,312,547 and                                   
 $12,849,063, respectively                     237,324,350       155,145,039
Oil and gas properties, full-cost method -                                  
 not subject to amortization                     2,487,322         2,487,158
Marketable securities                            1,016,024         1,049,944
Other assets                                     7,123,972         7,503,612
                                           ---------------   ---------------
                                                                            
Total assets                               $  307,449,556    $  216,197,142 
                                           ===============   ===============
                                                                            
Current liabilities:                                                        
  Accounts payable                         $    53,830,430   $    41,842,068
  Current derivative liability                   1,260,380            64,737
  Current portion of long-term debt              4,800,000         3,000,000
                                           ---------------   ---------------
    Total current liabilities                   59,890,810        44,906,805
Asset retirement obligation                      1,293,720         1,059,689
Noncurrent portion of long-term debt           103,200,000       105,000,000
Noncurrent derivative liability                  1,377,331           749,872
Deferred taxes                                   4,755,465         5,385,954
                                           ---------------   ---------------
Total liabilities                              170,517,326       157,102,320
Stockholders' equity:                                                       
  Common stock, $.001 par value,                                            
   48,611,111 shares authorized,                                            
   30,370,537 and 17,712,151 shares                                         
   outstanding                                      30,371            17,712
  Additional paid-in capital                   145,937,382        67,197,521
  Accumulated other comprehensive income                                    
   (loss)                                          107,588           (5,747)
  Accumulated deficit                          (9,143,111)       (8,114,664)
                                           ---------------   ---------------
Total stockholders' equity                     136,932,230        59,094,822
                                           ---------------   ---------------
                                                                
Total liabilities and stockholders' equity $  307,449,556    $   216,197,142         
                                           ===============   ===============
                                                                            
                                                                            
                                                                            
                     AMERICAN EAGLE ENERGY CORPORATION                      
              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS               
                                (UNAUDITED)                                 
                                                                            
                                              For the Three-Month Periods   
                                                    Ended March 31,         
                                          ----------------------------------
                                                     2014               2013
                                          ---------------   ----------------
                                                                            
Oil and gas revenues                      $    12,545,479   $      7,628,707
                                                                            
Operating expenses:                                                         
  Oil and gas production costs                  3,652,876          1,648,534
  General and administrative expenses           2,017,538          1,307,333
  Depreciation, depletion and                                               
   amortization                                 3,635,919          1,274,923
  Impairment of oil and gas properties                  -          1,525,027
                                          ---------------   ----------------
    Total operating expenses                    9,306,333          5,755,817
                                          ---------------   ----------------
                                                                            
                                                                   1,872,890
Total operating income                          3,239,146                   
                                                                            
Other income (expense)                                                      
  Interest income                                     641              3,156
                                                   15,797             17,240
  Dividend income                                                           
                                              (3,214,952)          (418,340)
  Interest expense                                                          
                                                  115,648                   
  Realized gains on derivatives                                            -
                                              (1,823,102)           (27,507)
  Unrealized loss on derivatives                                            
                                          ---------------   ----------------
                                              (4,905,968)          (425,451)
    Total other income (expense)                                            
                                          ---------------   ----------------
                                                                            
Income (loss) before taxes                    (1,666,822)          1,447,439
                                                                            
                                                (638,375)                   
Income tax expense (benefit)                                       1,092,092
                                          ---------------   ----------------
                                                                            
                                                                 
Net income (loss)                         $   (1,028,447)   $        355,347
                                          ===============   ================
                                                                            
Net income (loss) per common share:                                         
                                                                      
  Basic                                   $        (0.06)   $           0.03
                                          ===============   ================
                                                                 
  Diluted                                 $        (0.06)   $           0.03              
                                          ===============   ================
                                                                            
Weighted average number of shares                                           
 outstanding:                                                               
                                                       
  Basic                                        18,556,695         12,472,642                    
                                          ===============   ================
                                                                  
  Diluted                                      18,556,695         12,889,584          
                                          ===============   ================
                                                                            
                                                                            
                                                                            
                     AMERICAN EAGLE ENERGY CORPORATION                      
              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS               
                                (UNAUDITED)                                 
                                                                            
                                               For the Three-Month Periods  
                                                     Ended March 31,        
                                                                            
                                            --------------------------------
                                                   2014            2013     
                                            --------------------------------
Cash flows from operating activities:                                       
Net income (loss)                            $    (1,028,447) $      355,347
  Adjustments to reconcile net income (loss)                                
   to net cash provided by operating                                        
   activities:                                                              
    Non-cash transactions:                                                  
      Stock-based compensation                        454,026        237,348
      Depreciation, depletion and                                  1,274,923
       amortization                                 3,635,919               
      Accretion of discount on asset                                        
       retirement obligation                           21,906          2,631
      Amortization of deferred financing                                    
       costs                                          379,640         45,231
      Provision for deferred income tax                                     
       expense (benefit)                            (630,489)      1,091,636
      Impairment of oil and gas properties                  -      1,525,027
      Unrealized loss on derivatives                1,823,102         27,507
    Changes in operating assets and                                         
     liabilities:                                                           
      Income taxes receivable                        (25,000)              -
                                                                   
      Trade receivables                             4,374,671       5,510,325
                                                                   
      Prepaid expense                               (145,785)        (67,381)
      Accounts payable                            (1,475,176)        481,359
                                            --------------------------------
                                                                 10,483,953 
Net cash from operating activities                 7,384,367                
                                            --------------------------------
Cash flows used for investing activities:        (67,349,728)   (13,923,555)
  Additions to oil and gas properties                                       
  Additions to equipment and leasehold                                      
   improvements                                      (82,169)        (3,453)
  Purchases of equity securities                      (8,940)              -
  Decrease in amounts due to Carry Agreement                                
   partner                                                  -    (2,450,723)
                                            --------------------------------
Net cash used for investing activities          (67,440,837)   (16,377,731) 
                                            --------------------------------
Cash flows from financing activities:                                       
  Proceeds from issuance of stock                  78,298,494      4,000,000
  Proceeds from issuance of long-term debt                  -      2,000,000
  Repayment of long-term debt                               -      (970,803)
                                            --------------------------------
Net cash from financing activities                78,298,494      5,029,197 
                                            --------------------------------
Effect of exchange rate changes on cash             (10,653)       (83,425) 
                                            --------------------------------
Net change in cash                                18,231,371      (948,006) 
Cash - beginning of period                        31,850,161     19,057,727 
                                            --------------------------------
Cash - end of period                        $     50,081,532 $   18,109,721 
                                            ================================
                                                                            
                                                                            
                                                                            
                                               For the Three-Month Periods  
                                                                            
                                                     Ended March 31,        
                                                                            
                                             -------------------------------
                                                    2014                    
                                                                    2013    
                                             ---------------   -------------
                                                                            
Net income (loss)                               $(1,028,447)   $     355,347
                                                                            
Other comprehensive income (loss):                                          
  Unrealized gains (losses) on securities,                                  
   net of tax                                       (42,860)         (1,587)
  Foreign currency translation adjustments           156,195        (99,958)
                                                 -----------    ------------
                                                                            
Comprehensive income (loss)                     $  (915,112)   $     253,802
                                                ============   =============
                                                                            

Non-GAAP Financial Measures

Adjusted EBITDA

In addition to reporting net income (loss) as defined under GAAP, American Eagle also presents net earnings before interest income, dividend income, interest expense, income taxes, depletion, depreciation, and amortization, non-cash expenses related to stock-based compensation, impairment of oil and gas properties, loss on early extinguishment of debt, and unrealized loss (gain) from mark-to-market on derivatives recognized under ASC Topic 718 ("Adjusted EBITDA"), which is a non-GAAP performance measure. Adjusted EBITDA consists of net earnings after adjustment for those items described in the table below. Adjusted EBITDA does not represent, and should not be considered an alternative to GAAP measurements, such as net income (loss) (its most directly comparable GAAP measure), and the calculations thereof may not be comparable to similarly titled measures reported by other companies. By eliminating the items described below, American Eagle believes the measure is useful in evaluating its fundamental core operating performance. The Company also believes that Adjusted EBITDA is useful to investors because similar measures are frequently used by securities analysts, investors, and other interested parties in their evaluation of companies in similar industries. American Eagle's management uses Adjusted EBITDA to manage its business, including in preparing its annual operating budget and financial projections. Management does not view Adjusted EBITDA in isolation and also uses other measurements, such as net income (loss) and revenues to measure operating performance. The following table provides a reconciliation of net income (loss) to Adjusted EBITDA for the periods presented:

                                                                            
                ------------------------------------------------------------
                                     Three Months Ended                     
                ------------------------------------------------------------
                               December   September                         
                  March 31,      31,         30,       June 30,   March 31, 
                    2014         2013        2013        2013       2013    
                ------------------------------------------------------------
                                                                            
Net income                                                                  
 (loss)          ($1,028,447)  ($462,160)  ($936,237) $2,637,484 $  355,347 
Less: Interest                                                              
 income                 (641)     (6,964)     (1,700)     (1,472)    (3,156)
Less: Dividend                                                              
 income              (15,797)    (16,523)    (16,697)    (16,982)   (17,240)
Add: Interest                                                               
 expense           3,214,952   3,207,039   1,315,865     414,797    418,340 
Add: Income tax                                                             
 expense                                                                    
 (benefit)          (638,375)    130,056    (646,123)  1,192,691  1,092,092 
Add: Depletion,                                                             
 depreciation                                                               
 and                                                                        
 amortization      3,635,919   4,158,124   2,524,039   2,116,378  1,274,923 
Add: Stock-                                                                 
 based                                                                      
 compensation        454,026     375,756     302,842     287,172    237,348 
Add: Impairment                                                             
 of oil and gas                                                             
 properties                -     206,508           -           -  1,525,027 
Add: Loss on                                                                
 early                                                                      
 extinguishment                                                             
 of debt                   -           -   3,713,972           -          - 
Add: Unrealized                                                             
 (gain) loss on                                                             
 derivatives       1,823,102      39,569     934,287    (186,754)    27,507 
                ------------------------------------------------------------
Adjusted EBITDA $  7,444,739 $ 7,631,405 $ 7,190,248  $6,443,314 $4,910,188 
                ============================================================
                                                                            

Adjusted Cash Flow

In addition to reporting net income (loss) as defined under GAAP, American Eagle also presents cash flow after paying interest expense ("Adjusted Cash Flow"), which is a non-GAAP performance measure. Adjusted Cash Flow consists of Adjusted EBITDA after adjustment for those items described in the table below. Adjusted EBITDA does not represent, and should not be considered an alternative to GAAP measurements, such as net income (loss) (its most directly comparable GAAP measure), and the calculations thereof may not be comparable to similarly titled measures reported by other companies. By eliminating the items described below, American Eagle believes the measure is useful in evaluating its fundamental core operating performance. The Company also believes that Adjusted Cash Flow is useful to investors because similar measures are frequently used by securities analysts, investors, and other interested parties in their evaluation of companies in similar industries. American Eagle's management uses Adjusted Cash Flow to manage its business, including in preparing its annual operating budget and financial projections. Management does not view Adjusted Cash Flow in isolation and also uses other measurements, such as net income (loss) and revenues to measure operating performance. The following table provides a reconciliation of Adjusted EBITDA to Adjusted Cash Flow for the periods presented:

                                                                            
             ---------------------------------------------------------------
                                    Three Months Ended                      
             ---------------------------------------------------------------
                             December    September                          
               March 31,       31,          30,       June 30,    March 31, 
                  2014         2013         2013        2013        2013    
             ---------------------------------------------------------------
                                                                            
Adjusted                                                                    
 EBITDA (1)  $  7,444,739 $  7,631,405 $  7,190,248 $ 6,443,314 $ 4,910,188 
Less:                                                                       
 Interest                                                                   
 expense       (3,214,952)  (3,207,039)  (1,315,865)   (414,797)   (418,340)
Add:                                                                        
 Amortization                                                               
 of deferred                                                                
 financing        379,640      327,922      161,758      66,944      45,231 
Adjusted Cash                                                               
 Flow        $  4,609,427 $  4,752,288 $  6,036,141 $ 6,095,461 $ 4,537,079 
                                                                            
Adjusted Cash                                                               
 Flow per                                                                   
 share -                                                                    
 basic       $       0.25 $       0.34 $       0.46 $      0.49 $      0.36 
Adjusted Cash                                                               
 Flow per                                                                   
 share -                                                                    
 diluted     $       0.24 $       0.33 $       0.44 $      0.47 $      0.35 
                                                                            
Weighted                                                                    
 average                                                                    
 shares -                                                                   
 basic         18,556,695   13,961,688   13,223,608  12,517,087  12,472,642 
Weighted                                                                    
 average                                                                    
 shares -                                                                   
 diluted       19,205,118   14,598,836   13,732,595  12,992,218  12,889,584 
                                                                            
(1) See previous table for reconciliation of net income (loss) to Adjusted  
 EBITDA.                                                                    
                                                                            

Adjusted Income

In addition to reporting net income (loss) as defined under GAAP, American Eagle also presents net earnings before the impairment of oil and gas properties, loss on early extinguishment of debt, and the effect of unrealized loss (gain) from mark-to-market on derivatives ("adjusted income (loss)"), which is a non-GAAP performance measure. Adjusted income (loss) consists of net earnings after adjustment for those items described in the table below. Adjusted income (loss) does not represent, and should not be considered an alternative to GAAP measurements, such as net income (loss), and the calculations thereof may not be comparable to similarly titled measures reported by other companies. By eliminating the items described below, American Eagle believes the measure is useful in evaluating its fundamental core operating performance. The Company also believes that adjusted income (loss) is useful to investors because similar measures are frequently used by securities analysts, investors, and other interested parties in their evaluation of companies in similar industries. American Eagle's management uses adjusted income (loss) to manage its business, including in preparing its annual operating budget and financial projections. Management does not view adjusted income (loss) in isolation and also uses other measurements, such as net income (loss) and revenues to measure operating performance. The following table provides a reconciliation of net income (loss), to adjusted income (loss) for the periods presented:

                                                                            
           -----------------------------------------------------------------
                                   Three Months Ended                       
           -----------------------------------------------------------------
                          December                                          
             March 31,      31,     September 30,    June 30,     March 31, 
               2014         2013         2013          2013         2013    
           -----------------------------------------------------------------
                                                                            
Net income                                                                  
 (loss)     ($1,028,447)  ($462,160)    ($936,237) $  2,637,484 $    355,347
Add:                                                                        
 Impairment                                                                 
 of oil and                                                                 
 gas                                                                        
 properties           -     206,508             -             -    1,525,027
Add: Loss                                                                   
 on early                                                                   
 extinguish                                                                 
 ment of                                                                    
 debt                 -           -     3,713,972             -            -
Add:                                                                        
 Unrealized                                                                 
 lossed on                                                                  
 derivative                                                                 
 s            1,823,102      39,569       934,287      (186,754)      27,507
           -----------------------------------------------------------------
Adjusted                                                                    
 Income /                                                                   
 (Loss)    $    794,655   ($216,083) $  3,712,022  $  2,450,730 $  1,907,881
           =================================================================
                                                                            
Adjusted                                                                    
 Income per                                                                 
 share -                                                                    
 basic     $       0.04      ($0.02) $       0.28  $       0.20 $       0.15
Adjusted                                                                    
 Income per                                                                 
 share -                                                                    
 diluted   $       0.04      ($0.01) $       0.27  $       0.19 $       0.15
                                                                            
Weighted                                                                    
 average                                                                    
 shares -                                                                   
 basic       18,556,695  13,961,688    13,223,608    12,517,087   12,472,642
Weighted                                                                    
 average                                                                    
 shares -                                                                   
 diluted     19,205,118  14,598,836    13,732,595    12,992,218   12,889,584
                                                                            

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