FORWARD LOOKING STATEMENTS
Certain statements within this report may constitute forward-looking statements. Forward-looking statements are those that do not relate solely to historical fact. They include, but are not limited to, any statement that may predict, forecast, indicate or imply future results, performance, achievements or events. You can identify these statements by the use of words such as “may,” “will,” “could,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “predict,” “continue,” “further,” “seek,” “plan” or “project” and variations of these words or comparable words or phrases of similar meaning.
These forward-looking statements include such things as:
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investment objectives and our ability to make investments in a timely manner on acceptable terms;
references to future success in the Partnership’s property acquisition, drilling and marketing activities;
our use of proceeds of the public offering and our business strategy;
estimated future capital expenditures;
sales of the Partnership’s properties and other liquidity events;
competitive strengths and goals; and
other similar matters.
These forward-looking statements reflect our current beliefs and expectations with respect to future events and are based on assumptions and are subject to risks and uncertainties and other factors outside our control that may cause actual results to differ materially from those projected. Such factors include, but are not limited to, those described under “Risk Factors” and the following:
that our strategy of acquiring oil and gas properties on attractive terms and developing those properties may not be successful or, even if we successfully acquire properties, that our operations on such properties may not be successful;
general economic, market, or business conditions;
changes in laws or regulations;
the risk that the wells in which we acquire an interest are productive, but do not produce enough revenue to return the investment made;
the risk that the wells we drill do not find hydrocarbons in commercial quantities or, even if commercial quantities are encountered, that actual production is lower than expected on the productive life of wells is shorter than expected;
current credit market conditions and our ability to obtain long-term financing for our property acquisitions and drilling activities in a timely manner and on terms that are consistent with what we project when we invest in a property;
uncertainties concerning the price of oil and natural gas, which may decrease and remain low for prolonged periods; and
the risk that any hedging policy we employ to reduce the effects of changes in the prices of our production will not be effective.
Although we believe the expectations reflected in such forward-looking statements are based upon reasonable assumptions, we cannot assure investors that our expectations will be attained or that any deviations will not be material. Investors are cautioned that forward-looking statements speak only as of the date they are made and that, except as required by law, we undertake no obligation to update these forward-looking statements to reflect any future events or circumstances. All subsequent written or oral forward-looking statements attributable to the Partnership or to individuals acting on its behalf are expressly qualified in their entirety by this section.
1. Business
Energy 11, L.P. (the “Partnership,” “we” or “us”) was formed as a Delaware limited partnership in June 2013. The initial capitalization of the Partnership of $1,000 occurred on July 9, 2013. In the public offering, we are offering common units of limited partners’ interests (the “common units”) on a “best efforts” basis with the intention of raising up to $2,000,000,000 of capital, consisting of 100,263,158 common units. The registration statement with respect to the public offering was declared effective by the Securities and Exchange Commission (“SEC”) on January 22, 2015. As of August 19, 2015, we completed the sale of the minimum offering of 1,315,790 common units. The subscribers were admitted as limited partners of the Partnership at the initial closing. As of March 28, 2016, we had 5,586,294 common units outstanding.
As of December 31, 2015, we own an approximate 11% working interest in approximately 215 existing producing wells and approximately 262 future development locations in the Sanish field located in Mountrail County, North Dakota (the “Sanish Field Assets”). The purchase closed on December 18, 2015. For this reason, our 2015 operating results reflect only the 14-day period during 2015 that we owned these properties. See “2015 Acquisition” below.
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Business Objective
Our primary investment objectives are to (i) acquire producing and non-producing oil and gas properties with development potential, and to enhance the value of the properties through drilling and other development activities, (ii) make distributions to the holders of the common units, (iii) engage in a liquidity transaction after five – seven years, in which all properties are sold and the sales proceeds are distributed to the partners, merge with another entity, or list the common units on a national securities exchange, and (iv) permit holders of common units to invest in oil and gas properties in a tax efficient basis. The proceeds from the sale of the common units primarily will be used to acquire producing and non-producing oil and natural gas properties onshore in the United States, and to develop those properties.
We were formed to acquire and develop oil and gas properties located onshore in the United States. We will manage and further develop our existing interests and as capital is available will look for additional interests in oil and gas properties.
Management Agreement
At the initial closing of the sale of common units on August 19, 2015, the Partnership entered into a management services agreement (the “Management Agreement”) with E11 Management LLC (the “Manager”) to provide management and operating services regarding substantially all aspects of the Partnership. The Manager is an indirect, wholly-owned subsidiary of American Energy Partners, L.P. The Manager is not an affiliate of the Partnership or the General Partner.
Under the Management Agreement, the Manager will provide management and other services to the Partnership including the following:
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Identifying producing and non-producing properties that the Partnership may consider acquiring, and assisting in evaluation, contracting for and acquiring these properties and managing the development of these properties;
Operating, or causing one of its affiliates to operate, on the Partnership’s behalf, any properties in which the Partnership interest in the property is sufficient to appoint the operator;