TSX, NYSE: BXE
CALGARY, Nov. 9, 2016 /CNW/ - Bellatrix Exploration
Ltd. ("Bellatrix" or the "Company") (TSX, NYSE: BXE) announces its
financial and operating results for the three and nine months ended
September 30, 2016. This press
release contains forward-looking statements. Please refer to
our cautionary language on forward-looking statements and the other
matters set forth at the end of this press release and the
beginning of the Management's Discussion and Analysis (the
"MD&A") for the three and nine months ended September 30, 2016 and
2015. Bellatrix's unaudited condensed consolidated
financial statements and notes, and the MD&A are available on
Bellatrix's website at www.bellatrixexploration.com,
and are filed on SEDAR at www.sedar.com.
THIRD QUARTER 2016
HIGHLIGHTS
|
|
Three months
ended
September
30,
|
Nine months
ended
September
30,
|
|
2016
|
2015
|
2016
|
2015
|
SELECTED FINANCIAL
RESULTS
|
|
|
|
|
(CDN$000s except
share and per share amounts)
|
|
|
|
|
Total revenue
(1)
|
56,524
|
82,066
|
159,967
|
261,193
|
Funds flow from
operations (1)
|
10,556
|
26,598
|
32,479
|
79,833
|
|
Per basic share
(2)
|
$0.05
|
$0.14
|
$0.16
|
$0.42
|
|
Per diluted share
(2)
|
$0.05
|
$0.14
|
$0.16
|
$0.42
|
Cash flow from
operating activities
|
2,425
|
22,015
|
20,432
|
61,042
|
|
Per basic share
(2)
|
$0.01
|
$0.11
|
$0.10
|
$0.32
|
|
Per diluted share
(2)
|
$0.01
|
$0.11
|
$0.10
|
$0.32
|
Adjusted net loss
(1)
|
(12,718)
|
(6,860)
|
(61,001)
|
(37,261)
|
|
Per basic share
(2)
|
($0.06)
|
($0.04)
|
($0.30)
|
($0.19)
|
|
Per diluted share
(2)
|
($0.06)
|
($0.04)
|
($0.30)
|
($0.19)
|
Net loss
|
(13,907)
|
(50,460)
|
(49,753)
|
(87,577)
|
|
Per basic share
(2)
|
($0.06)
|
($0.26)
|
($0.24)
|
($0.46)
|
|
Per diluted share
(2)
|
($0.06)
|
($0.26)
|
($0.24)
|
($0.46)
|
Capital – exploration
and development
|
17,235
|
19,578
|
54,019
|
138,376
|
Capital – corporate
assets
|
4
|
177
|
58
|
3,288
|
Property
acquisitions
|
3
|
-
|
4
|
749
|
Capital expenditures
– cash
|
17,242
|
19,755
|
54,081
|
142,413
|
Property dispositions
– cash
|
(116,023)
|
(8,496)
|
(193,852)
|
(10,307)
|
Total net capital
expenditures – cash
|
(98,781)
|
11,259
|
(139,771)
|
132,106
|
Property acquisitions
– non-cash
|
-
|
-
|
29,178
|
-
|
Other non-cash
items
|
784
|
2,465
|
2,337
|
6,019
|
Total capital
expenditures – net (1)
|
(97,997)
|
13,724
|
(108,256)
|
138,125
|
Bank debt
|
119,728
|
341,030
|
119,728
|
341,030
|
Senior
Notes
|
316,529
|
320,709
|
316,529
|
320,709
|
Convertible
Debentures
|
36,950
|
-
|
36,950
|
-
|
Adjusted working
capital deficiency (1)
|
24,858
|
61,715
|
24,848
|
61,715
|
Total net debt
(1)
|
498,065
|
723,454
|
498,065
|
723,454
|
Total
assets
|
1,528,077
|
2,160,522
|
1,528,077
|
2,160,522
|
Total shareholders'
equity
|
829,518
|
1,165,587
|
829,518
|
1,165,587
|
|
|
|
|
|
|
|
|
|
SELECTED OPERATING
RESULTS
|
|
Three months
ended
September
30,
|
Nine months
ended
September
30,
|
|
|
2016
|
2015
|
2016
|
2015
|
Average daily sales
volumes
|
|
|
|
|
|
|
Crude oil, condensate
and NGLs
|
(bbl/d)
|
9,652
|
11,993
|
10,251
|
12,036
|
|
Natural
gas
|
(mcf/d)
|
148,539
|
169,704
|
160,189
|
177,917
|
|
Total oil
equivalent
|
(boe/d)
(3)
|
34,409
|
40,277
|
36,949
|
41,689
|
Average realized
prices
|
|
|
|
|
|
|
Crude oil and
condensate
|
($/bbl)
|
50.08
|
51.59
|
45.90
|
55.94
|
|
Crude oil and
condensate (including risk management (4))
|
($/bbl)
|
49.17
|
54.00
|
45.32
|
57.14
|
|
NGLs (excluding
condensate)
|
($/bbl)
|
10.53
|
11.03
|
11.34
|
14.59
|
|
Crude oil, condensate
and NGLs
|
($/bbl)
|
23.87
|
25.57
|
23.56
|
31.92
|
|
Natural
gas
|
($/mcf)
|
2.47
|
3.24
|
1.97
|
3.04
|
|
Natural gas
(including risk management (4))
|
($/mcf)
|
2.74
|
3.04
|
2.49
|
3.00
|
|
Total oil
equivalent
|
($/boe)
(3)
|
17.36
|
21.27
|
15.09
|
22.21
|
|
Total oil equivalent
(including risk management (4))
|
($/boe)
(3)
|
18.46
|
21.12
|
17.28
|
22.37
|
|
|
|
|
|
|
|
Net wells
drilled
|
|
2.3
|
5.4
|
8.0
|
11.4
|
Selected Key
Operating Statistics
|
|
|
|
|
|
|
Operating netback
(1)
|
($/boe)
(3)
|
7.09
|
11.72
|
5.67
|
10.84
|
|
Operating netback
(1) (including risk management
(4))
|
($/boe)
(3)
|
8.18
|
11.58
|
7.87
|
11.01
|
|
Transportation
expense
|
($/boe)
(3)
|
0.86
|
1.34
|
0.89
|
1.27
|
|
Production
expense
|
($/boe)
(3)
|
8.69
|
7.38
|
8.16
|
8.18
|
|
General &
administrative expense
|
($/boe)
(3)
|
1.74
|
1.34
|
1.47
|
1.67
|
|
Royalties as a % of
sales (after
transportation)
|
|
7%
|
9%
|
8%
|
13%
|
COMMON SHARES
|
|
|
|
|
Common shares
outstanding (5)
|
|
237,791,252
|
191,963,910
|
237,791,252
|
191,963,910
|
Weighted average
shares (2)
|
|
226,641,921
|
191,963,910
|
204,207,551
|
191,959,099
|
SHARE TRADING STATISTICS
|
|
|
|
|
TSX and Other
(6)
|
|
|
|
|
(CDN$, except
volumes) based on intra-day trading
|
|
|
|
|
High
|
|
1.44
|
3.30
|
1.99
|
4.46
|
Low
|
|
0.96
|
1.80
|
0.96
|
1.80
|
Close
|
|
1.13
|
2.04
|
1.13
|
2.04
|
Average daily
volume
|
|
2,433,078
|
1,667,953
|
2,350,541
|
2,143,204
|
NYSE
|
|
|
|
|
(US$, except
volumes) based on intra-day trading
|
|
|
|
|
High
|
|
1.11
|
2.57
|
1.48
|
3.81
|
Low
|
|
0.75
|
1.38
|
0.75
|
1.38
|
Close
|
|
0.85
|
1.52
|
0.85
|
1.52
|
Average daily
volume
|
|
614,815
|
783,798
|
1,104,243
|
800,899
|
|
|
|
|
|
|
|
(1) The
terms "funds flow from operations", "funds flow from operations per
share", "adjusted net profit (loss)", "total net debt", "operating
netbacks", "total capital expenditures – net", "adjusted
working capital deficiency (excess)", and "total revenue" do
not have standard meanings under generally accepted accounting
principles ("GAAP"). Refer to "Non-GAAP measures" disclosed at the
end of this Press Release.
|
(2)
Basic weighted average shares for the three and nine months
ended September 30, 2016 were 226,641,921 (2015: 191,963,910) and
204,207,551(2015: 191,959,099), respectively.
|
In computing
weighted average diluted loss per share, weighted average diluted
adjusted net loss per share, weighted average diluted cash flow
from operating activities per share, and weighted average diluted
funds flow from operations per share for the three and nine months
ended September 30, 2016, a total of nil (2015: nil) and nil (2015:
nil) common shares were added to the denominator as a consequence
of applying the treasury stock method to the Company's outstanding
share options, and a total of nil (2015: nil) and nil (2015: nil)
common shares issuable on conversion of the Convertible Debentures
(as defined below) were added to the denominator for the three and
nine month periods resulting in diluted weighted average common
shares of 226,641,921 (2015: 191,963,910) and 204,207,551 (2015:
191,959,099), respectively.
|
(3)
A boe conversion ratio of 6 mcf: 1 bbl has been used, which is
based on an energy equivalency conversion method primarily
applicable at the burner tip. Given that the value ratio based on
the current price of crude oil as compared to natural gas is
significantly different than the energy equivalency of the
conversion ratio, utilizing the 6:1 conversion ratio may be
misleading as an indication of value.
|
(4)
The Company has entered into various commodity price risk
management contracts which are considered to be economic hedges.
Per unit metrics after risk management include only the realized
portion of gains or losses on commodity contracts. The Company does
not apply hedge accounting to these contracts. As such, these
contracts are revalued to fair value at the end of each reporting
date. This results in recognition of unrealized gains or losses
over the term of these contracts which is reflected each reporting
period until these contracts are settled, at which time realized
gains or losses are recorded. These unrealized gains or losses on
commodity contracts are not included for purposes of per unit
metrics calculations disclosed.
|
(5)
Fully diluted common shares outstanding for the three and nine
months ended September 30, 2016 were 281,682,719 (2015:
205,157,409). This includes 13,027,267 (2015: 13,193,499) of share
options outstanding and 30,864,200 (2015: nil) of shares issuable
on conversion of the Convertible Debentures. Shares issuable on
conversion of the Convertible Debentures are calculated by dividing
the $50 million principal amount of the Convertible Debentures by
the conversion price of $1.62 per share.
|
(6) TSX
and Other include the trading statistics for the Toronto Stock
Exchange ("TSX") and other Canadian trading markets.
|
PRESIDENT'S MESSAGE
Since the first quarter of 2016, Bellatrix has reduced
outstanding bank debt by 79%, improving the Company's financial
position and liquidity, and allowing the Company to resume
profitable development of its Spirit
River liquids-rich natural gas play during the third
quarter. From May through early November 2016, Bellatrix has generated
$325 million in gross proceeds
through a series of disposition and financing transactions that
have improved the Company's balance sheet, reduced financing
charges and interest costs, and alleviated financial constraints on
development and project planning, all while preserving the
Company's core asset base.
Subsequent to the end of the third quarter of 2016, Bellatrix
completed the previously announced $47
million non-core asset disposition in the greater Pembina
area of Alberta (the "Pembina
asset sale") to InPlay Oil. Corp ("New InPlay"), a TSX listed
public company. Pursuant to the Pembina asset sale, the Company
received approximately $42 million in
cash and 2,171,667 common shares of New InPlay with a deemed
value of $5 million. The net cash
proceeds from the Pembina asset sale were used to reduce
outstanding bank debt, including repayment in full of the
non-revolving term loan previously outstanding.
Concurrent with the closing of the Pembina asset sale, Bellatrix
also completed the November semi-annual borrowing base
redetermination and the renewal of its syndicated revolving credit
facilities (the "Credit Facilities"). Effective upon the closing of
the Pembina asset sale, the total commitments under the Credit
Facilities were set at $130 million,
comprised of a $25 million operating
facility provided by a Canadian bank and a $105 million syndicated facility provided by nine
financial institutions. During the third quarter of 2016, the
maturity date of the Credit Facilities was extended from
July 1, 2017 to October 1, 2017, which maturity date may be
further extended for a period of up to three years with the consent
of the lenders. The next regularly scheduled borrowing base
redetermination is expected to take place in May of 2017 following
completion of the Company's year-end independent reserves
evaluation. Other than the $75
million currently outstanding on the Credit Facilities, the
Company has no debt maturities until 2020 and 2021.
Bellatrix resumed its drilling and completion activity in July,
following the end of the seasonal spring break-up period. The
Company drilled four gross (2.3 net) Spirit River liquids-rich natural gas wells in
the third quarter and invested 72% of total exploration and
development capital during the quarter towards drilling and
completion projects. Optimization initiatives continued with
recompletion efforts and wellbore cleanouts directed at low cost
production and reserve additions, which has resulted in further
attenuation of the base corporate decline rate. Third quarter
2016 production averaged 34,409 boe/d (72% natural gas weighted),
exceeding the midpoint of second half 2016 average production
guidance of 34,000 boe/d, providing visibility for the Company to
meet its full year average production guidance target of 36,000
boe/d (+/- 500 boe/d).
CONTINUING TO DELIVER ON GUIDANCE
Bellatrix drilled a total of 15,669 meters across four gross
(2.3 net) horizontal wells in the quarter. Operational efficacy was
sustained in the third quarter as Bellatrix continued to drive
industry leading spud to on-production timing of 35 days for its
Spirit River program. All four
wells drilled in the third quarter have been placed on production
and have been benefitting from a 67% improvement in AECO daily
index natural gas prices in the third quarter compared with the
second quarter 2016. Bellatrix proactively mitigated the
potential impact on production volumes from planned and unplanned
maintenance activities at a number of third party natural gas
processing plants, including the impact during September, when
seven of the eight processing facilities Bellatrix produces to in
the greater Ferrier area were down for turnaround periods ranging
from three to ten days. Additionally, Bellatrix's active
management of nominations during periods of restricted firm
capacity on the Nova Gas Transmission Ltd. ("NGTL") system have
consistently optimized production volumes during periods of overall
constraint for industry producers.
Utilization remained strong at the Bellatrix O'Chiese
Nees-Ohpawganu'ck deep-cut gas plant at Alder Flats (the "Alder Flats Plant") in the
third quarter of 2016, contributing to an average capacity
utilization rate achieved over the trailing twelve month period of
96%. Bellatrix completed the installation and migration of
its Distributed Control System ("DCS") in September, providing
enhanced reliability and operational control. The Alder Flats
Plant continues to provide strategic benefits to Bellatrix
including reduced operating costs, deep-cut liquids extraction
capabilities, and reliability of processing including the ability
to re-direct additional natural gas volumes to the Alder Flats
Plant during periods of third party facility constraints and
unplanned downtime.
COST SUPPRESSION ACHIEVEMENTS
Through the first nine months of 2016, Bellatrix has contained
and reduced costs in response to continued weak commodity
prices. These efforts have mitigated the precipitous impact
of weaker year over year natural gas prices as evidenced by the
AECO daily index price which averaged $1.85/mcf over the nine month period ending
September 30, 2016, a decline of 33%
compared with the same period of 2015. The cost suppression
achievements made to date have also reduced the impact from WTI oil
prices that have declined 19% in the nine months ended September 30, 2016 compared with the similar nine
month period in 2015.
Cost reductions and achievements are evident across all areas of
our business when comparing the first nine months of 2016 with the
comparable period of 2015, including:
- Average estimated capital costs for drilling, completing,
equipping, and tie-in activity for Spirit
River wells drilled in the first nine months of 2016 was
$3.7 million, representing a
reduction of 12% from an average of $4.2
million all-in capital costs for Spirit River wells drilled in the comparable
period in 2015.
- Net general and administrative ("G&A") expenses of
$1.47/boe in the nine months ending
September 30, 2016 have decreased
from $1.67/boe in the comparable 2015
period, representing a 12% reduction. More important, the gross
G&A expenditures have decreased by $8.3
million for the first nine months of 2016 compared to the
same period in 2015, representing a 25% reduction.
- Royalty expenses of $1.08/boe
over the first nine months of 2016 represent a reduction of 59%
from $2.66/boe in the comparable nine
month period in 2015, reflecting lower commodity prices year over
year, and include increased gas cost allowance ("GCA") credits
associated with prior period infrastructure and facilities
investments by Bellatrix.
- Transportation expenses of $0.89/boe in the first nine months of 2016 were
reduced 30% compared with $1.27/boe
in the comparable 2015 period, demonstrating the long term benefit
of pipeline infrastructure investment in 2015 that has structurally
reduced transportation costs for transferring liquids volumes from
major compression facilities to processing facilities.
- Production expenses of $8.16/boe
during the nine months ended September 30,
2016 were relatively unchanged versus the $8.18/boe in the comparable 2015 period, however,
cost containment efforts year to date have mitigated increased
costs associated with facility dispositions in 2016, as well as an
11% reduction in average production volumes over the comparable
periods.
- Interest and financing charges over the three months ended
September 30, 2016 of $10.9 million are a 13% reduction from the
comparable three month period in 2015. The reduced charges in part
reflect the reduction in bank debt levels over the comparable
periods.
STRONG RISK MANAGEMENT PORTFOLIO
Underpinning Bellatrix's strategic planning process is an active
risk management policy providing reduced commodity price volatility
and greater predictability of future revenue and cash flow.
The risk management program in place over the first nine months of
2016 has added $0.52/mcf of value to
the average corporate natural gas realized price thereby providing
enhanced revenue and cash flow.
Bellatrix remained active in the third quarter of 2016
bolstering its 2017 risk management protection to approximately 62%
of gross natural gas volumes hedged at an average fixed price of
approximately $3.34/mcf, up from the
approximate 35% hedged level as reported in early August
2016.
As at November 8, 2016 Bellatrix
had approximately 57% of fourth quarter 2016 gross natural gas
volumes hedged at an average fixed price of approximately
$3.02/mcf, based upon second half
2016 average production volume guidance of 34,000 boe/d (73%
natural gas weighted).
At November 1, 2016, the 2018 AECO
forward strip had improved modestly compared with forward strip
pricing three months prior on August
1, 2016. Management continues to actively monitor
market pricing with the intent to further enhance Bellatrix's level
of risk management protection by initializing a base level of 2018
risk management protection over the next several quarters.
As at November 8, 2016, Bellatrix
was party to a series of commodity price risk management contracts
for 2016 and 2017 as summarized below:
|
|
|
|
|
Product
|
Financial
Contract
|
Period
|
Volume
|
Average Price
(1)
|
Natural
gas
|
Fixed price
swap
|
October 1, 2016 to
December 31, 2016
|
84.3
MMcf/d
|
$3.02/mcf
|
Natural
gas
|
Fixed price
swap
|
January 1, 2017 to
December 31, 2017
|
92.7
MMcf/d
|
$3.34/mcf
|
Crude oil
|
WTI basis swap
(2)
|
October 1, 2016 to
December 31, 2016
|
1,500
bbl/d
|
US$4.05/bbl
|
|
|
|
(1)
The conversion of $/GJ to $/mcf is based on an average corporate
heat content rate of 40.6Mj/m3.
|
|
(2)
Settled on the monthly average Mixed Sweet Blend ("MSW")
Differential to WTI. The MSW differential refers to the
discount between WTI and the mixed sweet crude grade at Edmonton,
calculated on a monthly weighted average
basis.
|
OPERATIONAL AND FINANCIAL HIGHLIGHTS
- Production volumes in the third quarter of 2016 averaged 34,409
boe/d (72% natural gas weighted). Production volumes in the quarter
reflect expected natural production declines partially offset by
resumed drilling and completion activity in the third quarter
following a period of curtailed drilling due to low commodity
prices and the seasonal spring break-up period in the second
quarter.
- Total cash capital expenditures were $17.2 million in the third quarter of 2016
including $4.0 million invested in
facilities and equipment. Capital expenditures in the quarter were
focused on drilling and completion activity with four gross (2.3
net) Spirit River liquids rich
natural gas wells spud during the quarter. Facilities related
investment was focused principally on the Phase 2 expansion project
of the Alder Flats Plant.
- Total cash property dispositions were $116.0 million in the third quarter of 2016
reflecting the 35% minority working interest sale Alder Flats Plant
(the "Alder Flats Plant Sale") and a minor non-core property
disposition.
- Total revenue decreased by 31% to $56.5
million for the three months ended September 30, 2016, compared to $82.1 million realized in the third quarter of
2015, mainly attributable to AECO natural gas daily index prices
decreasing 20% in the comparable periods and 15% lower average
corporate production volumes.
- Production expenses in the third quarter of 2016 averaged
$8.69/boe, up modestly from
$8.46/boe in the second quarter of
2016. The increase in production expenses between periods was
primarily attributable to the addition of midstream service
agreements associated with the previously announced sale of
facilities and the Alder Flats Plant Sale, which has been partially
mitigated by cost reductions realized through the operation of the
Alder Flats Plant and continued field optimization work.
- The corporate royalty rate in the third quarter of 2016
averaged 7% of sales (after transportation), compared with 9% in
the comparative quarter of 2015. Lower average royalty rates year
over year reflect the impact of lower commodity prices as well as
increased GCA credits associated with prior period infrastructure
and facilities investments by Bellatrix.
- The corporate operating netback realized (after risk
management) for the third quarter of 2016 was $8.18/boe, a decrease of 29% compared with
$11.58/boe in the comparative quarter
of 2015, but an increase of 14% compared with the second quarter of
2016. The year over year decrease in operating netback was
primarily attributable to the 18% decline in total corporate
realized pricing (before risk management) over the comparative
periods. However, Bellatrix mitigated the impact of lower commodity
prices on its realized operating netbacks through cost reductions,
including lower transportation expenses, reduced royalty rates, and
higher realized risk management gains in the third quarter 2016
compared with the third quarter 2015.
- Gross G&A expenses were reduced by $0.9 million as a result of significant cost
saving initiatives on discretionary G&A spending, workforce
reductions and compensation expenses over the three months ending
September 2016 and the 2015
comparable period. Net G&A expenses (after capitalized costs
and recoveries) in the third quarter of 2016 were $5.5 million ($1.74/boe), compared to $5.0 million ($1.34/boe) in the comparative quarter of 2015.
Reduced recoveries from partners associated from lower capital in
2016 as compared to 2015, resulted in modestly higher net G&A
expenses in the third quarter of 2016 compared with the third
quarter of 2015.
- Funds flow from operations generated in the three months ended
September 30, 2016 was $10.6 million ($0.05 per basic and diluted share), a 17%
increase compared with second quarter 2016 funds flow of
$9.0 million, and a decrease of 60%
from $26.6 million ($0.14 per basic and diluted share) in the third
quarter of 2015. The year over year variance principally results
from a 32% decline in corporate realized pricing (before risk
management) over the comparative periods and an 11% decline in
average production volumes, partially mitigated by lower
transportation and royalty expenditures and higher realized risk
management gains.
- The Company recorded an adjusted net loss of $12.7 million in the third quarter 2016 compared
to an adjusted net loss of $6.9
million in the comparable period of 2015. The adjusted net
loss recorded in the third quarter of 2016 is higher than in the
same period in 2015 primarily as a result of the decrease in
revenue attributable to the significant reduction in commodity
prices partially offset by the decreased costs related to
royalties, transportation, interest, and depletion and depreciation
expenses.
- The third quarter 2016 net loss of $13.9
million compared to a net loss of $50.5 million in the third quarter of 2015. The
variance in the third quarter periods was primarily due to a
non-cash impairment loss on property dispositions recorded in the
third quarter of 2015.
- Total net debt of $498.1 million
as at September 30, 2016, declined by
$139.9 million compared with
June 30, 2016 net debt of
$638.0 million. The reduction in
total net debt is principally related to the completion of the
Alder Flats Plant Sale for gross proceeds of $112.5 million and the completion of the bought
deal equity financing for gross proceeds of $30 million. The Company also reduced amounts
outstanding under its Credit Facilities using the net proceeds from
the issuance during the third quarter of 6.75% convertible
subordinated debentures (the "Convertible Debentures") due on
September 30, 2021. Subsequent to
September 30, 2016, Bellatrix
completed both the Pembina asset sale and a private placement of
Canadian development expense ("CDE") flow-through common shares
which combined have generated gross cash proceeds of approximately
$52 million. Bellatrix used the net
cash proceeds from the Pembina asset sale to reduce outstanding
bank debt, including the repayment in full of the previously
outstanding non-revolving term loan. Bellatrix intends to use the
proceeds from the CDE flow-through financing for development
drilling activity prior to calendar 2016 year end.
- For the trailing twelve months ending September 30, 2016, Bellatrix's Senior Debt to
EBITDA (as defined below) ratio was 2.16 times, within the
financial covenant of 3.5 times as permitted by the Credit
Facilities.
CORPORATE RESPONSIBILITY REPORT RELEASED
Bellatrix is dedicated to achieving industry leading economic
results in an environmentally responsible, compliant, and safe
manner. To that end, Bellatrix is pleased to have completed
its inaugural Corporate Responsibility Report which has been posted
to our website at www.bellatrixexploration.com. The Corporate
Responsibility Report is an extension of our ongoing commitment to
enhanced disclosure and stakeholder engagement and is designed to
provide context around our corporate responsibility initiatives,
including how the Company's efforts relate to the broader economic,
environmental, and social conditions in which we operate.
Bellatrix remains committed to safe, compliant, and environmentally
responsible operations for the benefit of employees, contractors,
shareholders, and the communities we operate in. The
Company's proactive approach to responsible resource development
has produced the following accomplishments:
- Achieved compliance for year one of the Inactive Well
Compliance Program ("IWCP") implemented by the Alberta Energy
Regulator ("AER") by meeting the Company's target quota ahead of
schedule.
- In 2015, over one hundred inspections were conducted at our
operations by the AER resulting in a 90% satisfactory rating as
compared to an industry average rating of 75%.
- Zero lost time injuries for employees in 2015 and zero costs
recorded in 2015 for lost time claims.
- Improved recycle rates of frac flowback water by 132% in 2015
compared with 2014 levels by optimizing timing of completions and a
multi-well pad development strategy.
- On October 1, 2016, the AER
assessed Bellatrix's Liability Management Ratio ("LMR") at 9.66,
more than double the industry average LMR of 4.36, and
significantly above the Industry LMR threshold of 1.0 demonstrating
a continued strong LMR position.
Bellatrix plans to release its Corporate Responsibility Report
at least every second year with the next report scheduled for
mid-year 2018.
OUTLOOK
Bellatrix continues to direct capital investment into its low
cost Spirit River liquids-rich
natural gas play which generates strong rates of return at current
natural gas prices. Fourth quarter 2016 forecast capital
expenditures of approximately $25
million includes the $10
million of eligible CDE qualifying expenses that the Company
is required to incur prior to December 31,
2016 pursuant to the private placement of flow-through
common shares of Bellatrix which closed on October 27, 2016. The majority of the
Company's fourth quarter capital budget is expected to be invested
directly in drilling, completion and tie-in activity with
approximately 10% of total expenditures invested in facilities and
infrastructure, the majority of which will be invested into Phase 2
of the Bellatrix Alder Flats Plant.
Second half 2016 production expenditure guidance of $9.10/boe remains unchanged, and reflects the
impact from the previously announced facilities monetization
transaction and the Alder Flats Plant Sale. Bellatrix expects
that upon completion of Phase 2 of the Alder Flats Plant in the
first half of 2018, production expenditures will realize a
favourable step change reduction as a result of an incremental 30
MMcf/d ownership capacity net to Bellatrix's 25% working
interest.
Bellatrix's second half and full year 2016 guidance forecasts
remain consistent with the levels previously announced on
September 19, 2016.
|
|
|
|
Second
Half
2016
Guidance
|
Full Year
Average
2016
Guidance
|
Average daily
production (boe/d)
|
|
|
|
Period average
production volumes (+/- 500 boe/d)
|
34,000
|
36,000
|
Natural gas
weighting
|
73%
|
73%
|
Net capital spending
($ millions) (1)
|
$40
|
$77
|
Production expenses(2)
($/boe)
|
$9.10
|
$8.50
|
|
|
|
(1) Capital spending
includes exploration and development capital projects and corporate
assets, and excludes property acquisitions and
dispositions.
|
|
(2)
Production expenses before net processing revenue/fees and
include the forecasted increase in production expense resulting
from the Alder Flats Plant Sale.
|
The debt reduction initiatives completed to date position
Bellatrix with an improved balance sheet and ability to take
advantage of stronger future commodity prices and an improving
macro outlook. The Company's net bank debt including the
working capital deficit has been systematically reduced by
approximately $600 million compared
with first quarter 2015 levels. The Spirit River liquids-rich
natural gas play remains the future growth engine for the Company,
underpinned by the competitive advantage afforded by infrastructure
and facilities ownership and operatorship within the greater
Ferrier region of west central Alberta.
Bellatrix plans on releasing its initial 2017 capital budget and
forecast guidance to the market by mid-December 2016, with a continued emphasis on
profitable and sustainable per share growth, and proactive capital
resource management.
In summary, we have concluded one of our most active quarters
with Bellatrix completing multiple transactions which have
strategically repositioned the Company, reduced financing charges
and interest costs, and reduced financial constraints on future
project planning, all while preserving the Company's core asset
base. We will continue to deliver on our goals of
providing long term sustainable value creation for
shareholders.
("Raymond G. Smith")
Raymond G. Smith, P.Eng.
President and CEO
November 8, 2016
OPERATIONAL REVIEW
Sales
Volumes
|
|
|
|
Three months
ended
September
30,
|
Nine months
ended
September
30,
|
|
|
2016
|
2015
|
2016
|
2015
|
|
Crude oil and
condensate
|
(bbl/d)
|
3,256
|
4,300
|
3,624
|
5,046
|
|
NGLs (excluding
condensate)
|
(bbl/d)
|
6,396
|
7,693
|
6,627
|
6,990
|
Total crude oil,
condensate, and NGLs
|
(bbl/d)
|
9,652
|
11,993
|
10,251
|
12,036
|
|
Natural
gas
|
(mcf/d)
|
148,539
|
169,704
|
160,189
|
177,917
|
Total sales volumes
(6:1 conversion)
|
(boe/d)
|
34,409
|
40,277
|
36,949
|
41,689
|
Sales volumes for the three months ended September 30, 2016 averaged 34,409 boe/d, a
decrease of 15% from an average of 40,277 boe/d realized in the
third quarter of 2015. The volume weighting for crude oil,
condensate and NGLs for the three months ended September 30, 2016 was 28%, compared to 30% in
the third quarter of 2015.
Sales volumes for the nine months ended September 30, 2016 averaged 36,949 boe/d, a
decrease of 11% from 41,689 boe/d realized in the first nine months
of 2015. Total crude oil, condensate and NGLs averaged 28% of
sales volumes for the nine months ended September 30, 2016, compared to 29% in the same
period in 2015.
Third quarter 2016 production averaged 34,409 boe/d (72% natural
gas weighted), exceeding the midpoint of second half 2016 average
production guidance of 34,000 boe/d. Bellatrix drilled four
gross (2.3 net) Spirit River
liquids rich wells in the quarter, all of which have been placed on
production and are benefitting from a 67% improvement in AECO daily
index natural gas prices in the third quarter compared with the
second quarter of 2016.
Drilling Activity
- 2016
|
|
|
|
Three months
ended
September 30,
2016
|
Nine months
ended
September 30,
2016
|
|
Gross
|
Net
|
Success
Rate
|
Gross
|
Net
|
Success
Rate
|
Spirit River
liquids-rich natural gas
|
4
|
2.3
|
100%
|
14
|
8.0
|
100%
|
Total
|
4
|
2.3
|
100%
|
14
|
8.0
|
100%
|
|
|
|
|
|
|
|
Drilling Activity
- 2015
|
|
|
|
Three months
ended
September 30,
2015
|
Nine months
ended
September 30,
2015
|
|
Gross
|
Net
|
Success
Rate
|
Gross
|
Net
|
Success
Rate
|
Cardium
oil
|
0
|
0.0
|
-
|
3
|
1.2
|
100%
|
Spirit River
liquids-rich natural gas
|
12
|
5.4
|
100%
|
19
|
10.2
|
100%
|
Total
|
12
|
5.4
|
100%
|
22
|
11.4
|
100%
|
|
|
|
|
|
|
|
Bellatrix's drilling activity in the three and nine months ended
September 30, 2016, was weighted 100%
towards liquids-rich natural gas wells. Three operated
Spirit River liquids-rich gas
wells were drilled under Bellatrix's joint venture with
Grafton in the nine months ended
September 30, 2016. The Company has
continued its focus in the Spirit River liquids-rich natural gas
play in response to ongoing suppressed oil prices in the global
market, and to take advantage of processing capacity at the Alder
Flats Plant. Fourth quarter 2016 forecast capital
expenditures of approximately $25
million includes the $10
million of eligible CDE qualifying expenses pursuant to the
flow-through financing which closed on October 27, 2016 and will be focused on
development drilling in the high impact Spirit River play.
In the three months ended September 30,
2015, Bellatrix drilled and/or participated in 12 gross (5.4
net) Spirit River liquids-rich gas
wells. During the nine months ended September 30, 2015, Bellatrix drilled and/or
participated in 22 gross (11.4 net) wells, consisting of 3 gross
(1.2 net) Cardium light oil horizontal wells and 19 gross (10.2
net) Spirit River liquids-rich gas
wells.
Capital Expenditures
During the nine months ended September
30, 2016, Bellatrix invested $54.0
million in exploration and development capital projects,
excluding property acquisitions and dispositions, compared to
$138.4 million in the same period in
2015.
Capital
Expenditures
|
|
|
|
Three months
ended
September
30,
|
Nine months
ended
September
30,
|
($000s)
|
2016
|
2015
|
2016
|
2015
|
Lease acquisitions
and retention
|
842
|
1,514
|
1,867
|
3,581
|
Geological and
geophysical
|
25
|
20
|
78
|
646
|
Drilling and
completion costs
|
12,395
|
15,944
|
39,963
|
55,829
|
Facilities and
equipment
|
3,973
|
2,100
|
12,111
|
86,959
|
Property transfers –
cash
|
-
|
-
|
-
|
(8,639)
|
|
Capital – exploration
and development (1)
|
17,235
|
19,578
|
54,019
|
138,376
|
Capital – corporate
assets (2)
|
4
|
177
|
58
|
3,288
|
Property
acquisitions
|
3
|
-
|
4
|
749
|
|
Total capital
expenditures – cash
|
17,242
|
19,755
|
54,081
|
142,413
|
Property dispositions
– cash
|
(116,023)
|
(8,496)
|
(193,852)
|
(10,307)
|
|
Total net capital
expenditures – cash
|
(98,781)
|
11,259
|
(139,771)
|
132,106
|
Property acquisitions
– non-cash
|
-
|
-
|
29,178
|
-
|
Other – non-cash
(3)
|
784
|
2,465
|
2,337
|
6,019
|
Total
non-cash
|
784
|
2,465
|
31,515
|
6,019
|
Total capital
expenditures – net (4)
|
(97,997)
|
13,724
|
(108,256)
|
138,125
|
|
|
|
|
|
|
|
|
|
(1)
Excludes capitalized costs related to decommissioning
liabilities expenditures incurred during the period.
|
|
(2)
Capital - corporate assets includes office leasehold
improvements, furniture, fixtures and equipment before recoveries
realized from landlord lease inducements.
|
|
(3)
Other includes non-cash adjustments for the current period's
decommissioning liabilities and share based
compensation.
|
|
(4) Total capital
expenditures – net is considered to be a non-GAAP measure.
Total capital expenditures – net includes the cash impact of
capital expenditures and property dispositions, as well as the
non-cash capital impacts of corporate acquisitions, property
acquisitions, adjustments to the Company's decommissioning
liabilities, and share based compensation.
|
Bellatrix focused its capital activity in the third quarter of
2016 on drilling and completion activity within the Spirit River
formation, as well as facilities and equipment expenditures related
to the development of Phase 2 of the Alder Flats Plant.
Bellatrix continues to advance the Phase 2 expansion project
of the Alder Flats Plant which is expected to more than double the
inlet capacity of the Plant from 110 MMcf/d currently to 230
MMcf/d. The project remains on time and budget, and is
scheduled for completion in the first half 2018 at a remaining net
estimated cost to Bellatrix of approximately $40.6 million which includes the amount
represented by the prepayment of future construction costs made by
Keyera (as defined below) pursuant to the Alder Flats Plant
Sale.
During the three months ended September
30, 2016, Bellatrix completed the Alder Flats Plant Sale
which involved the sale of a 35% minority interest in the Alder
Flats Plant to Keyera Partnership ("Keyera") for cash consideration
of $112.5 million. In connection with
the Alder Flats Plant Sale, Bellatrix entered into a midstream
services and governance agreement with Keyera pursuant to which we
will have exclusive access to the purchased capacity (approximately
80.5 MMcf/d post commissioning of Phase 2 of the Alder Flats Plant)
for a term of 10 years, and will remain the operator of the Alder
Flats Plant. In exchange for exclusive access to the purchased
capacity during the term, Keyera will be entitled to receive, on an
annual basis, a guaranteed fee calculated with reference to the
capital fees that Keyera will otherwise receive in accordance with
the terms of the construction, ownership and operation agreement
governing the Alder Flats Plant. Following the transaction,
Bellatrix maintains a 25% working interest ownership, and retains
the option to reacquire a 5% interest in the Alder Flats Plant near
the end of the final year of the 10 year agreement with Keyera at a
cost of $8 million. A portion of the
cash consideration received includes a prepayment by Keyera for 35%
of the estimated future construction costs of Phase 2 of the Alder
Flats Plant. Net proceeds from the sale were used to repay
bank indebtedness.
Undeveloped land
At September 30, 2016, Bellatrix
had approximately 253,941 net undeveloped acres of land in
Alberta, British Columbia, and Saskatchewan.
FINANCIAL REVIEW
Funds Flow from
Operations, Cash Flow from Operating Activities, Adjusted Net Loss
and Net Loss
|
|
Three months
ended
September
30,
|
Nine months
ended
September
30,
|
($000s, except per
share amounts)
|
2016
|
2015
|
2016
|
2015
|
Funds flow from
operations
|
10,556
|
26,598
|
32,479
|
79,833
|
|
Basic
($/share)
|
0.05
|
0.14
|
0.16
|
0.42
|
|
Diluted
($/share)
|
0.05
|
0.14
|
0.16
|
0.42
|
Cash flow from
operating activities
|
2,425
|
22,015
|
20,432
|
61,042
|
|
Basic
($/share)
|
0.01
|
0.11
|
0.10
|
0.32
|
|
Diluted
($/share)
|
0.01
|
0.11
|
0.10
|
0.32
|
Adjusted net
loss
|
(12,718)
|
(6,860)
|
(61,001)
|
(37,261)
|
|
Basic
($/share)
|
(0.06)
|
(0.04)
|
(0.30)
|
(0.19)
|
|
Diluted
($/share)
|
(0.06)
|
(0.04)
|
(0.30)
|
(0.19)
|
Net loss
|
(13,907)
|
(50,460)
|
(49,753)
|
(87,577)
|
|
Basic
($/share)
|
(0.06)
|
(0.26)
|
(0.24)
|
(0.46)
|
|
Diluted
($/share)
|
(0.06)
|
(0.26)
|
(0.24)
|
(0.46)
|
The overall weak global commodity price environment continued
through the third quarter of 2016 significantly impacting funds
flow from operations and the adjusted net loss of the Company.
Management believes that, in addition to cash flow from
operating activities, funds flow from operations is a useful
supplemental measure as it demonstrates the Company's ability to
generate the cash necessary to fund future capital investments and
to repay debt. Funds flow from operations is calculated as
cash flow from operating activities, excluding decommissioning
costs incurred and changes in non-cash working capital
incurred.
Bellatrix generated funds flow from operations of $10.6 million ($0.05 per basic and diluted share) in the third
quarter of 2016, a decrease of 60% from $26.6 million ($0.14 per basic and diluted share) generated in
the comparative 2015 period. The decrease in funds flow from
operations between the third quarters of 2015 and 2016 was mainly
attributable to lower realized commodity pricing and a 15% decrease
in sales volumes, partially offset by decreased transportation,
royalty and interest expenses. Bellatrix's cash flow from
operating activities for the three months ended September 30, 2016 decreased by 89% to
$2.4 million ($0.01 per basic and diluted share) from
$22.0 million ($0.11 per basic and diluted share) generated in
the third quarter of 2015. Bellatrix generated funds flow
from operations of $32.5 million
($0.16 per basic share and diluted
share) for the nine months ended September
30, 2016, a decrease of 59% from $79.8 million ($0.42 per basic share and diluted share)
generated during the first nine months of 2015. Bellatrix's
cash flow from operating activities in the first nine months of
2016 decreased by 67% to $20.4
million ($0.10 per basic share
and diluted share) from $61.0 million
($0.32 per basic share and diluted
share) generated in the comparative 2015 period.
Management believes that, in addition to net profit (loss),
adjusted net profit (loss) is a useful supplemental measure as it
reflects the underlying performance of Bellatrix's business
activities by excluding the after tax effect of non-deductible tax
items of non-cash commodity contracts mark-to-market gains and
losses, unrealized foreign exchange gains and losses, non-cash
impairment charges and non-cash one time charges, as applicable,
that may significantly impact net profit (loss) from period to
period.
Adjusted Net
Loss
|
|
|
|
Three months
ended
September
30,
|
Nine months
ended
September
30,
|
($000s)
|
2016
|
2015
|
2016
|
2015
|
Net loss
|
(13,907)
|
(50,460)
|
(49,753)
|
(87,577)
|
Add (deduct)
non-operating items:
|
|
|
|
|
|
Unrealized (gain)
loss on commodity contracts
|
(1,042)
|
(7,031)
|
4,219
|
(6,420)
|
|
Unrealized (gain)
loss on foreign exchange
|
1,967
|
21,524
|
(14,324)
|
27,803
|
|
Impairment
|
-
|
37,412
|
-
|
37,412
|
|
Tax impact on
non-operating items (1)
|
264
|
(8,305)
|
(1,143)
|
(8,479)
|
Adjusted net
loss
|
(12,718)
|
(6,860)
|
(61,001)
|
(37,261)
|
|
|
|
|
|
(1)
Tax impact on non-operating items after adjusting for
non-deductible tax items calculated using 27% tax
rate.
|
For the three and nine month periods ended September 30, 2016, Bellatrix recognized adjusted
net losses of $12.7 million
($0.06 per basic and diluted share)
and $61.0 million ($0.30 per basic and diluted share), compared to
an adjusted net loss of $6.9 million
($0.04 per basic and diluted share)
and $37.3 million ($0.19 per basic and diluted share) in the
comparative 2015 periods, respectively. The variance in
adjusted net loss recorded in the first nine months of 2016
compared to the same period in 2015 was primarily the result of the
decrease in revenue attributable to the significant reduction in
commodity prices partially offset by the decreased cash costs
related to transportation, interest and depletion and depreciation
expenses. For the three and nine month periods ended September 30, 2016, Bellatrix recognized net
losses of $13.9 million ($0.06 per basic share and diluted share) and
$49.8 million ($0.24 per basic and diluted share), compared to
net losses of $50.5 million
($0.26 per basic and diluted share)
and $87.6 million ($0.46 per basic and diluted share) in the
comparative 2015 periods, respectively.
Operating Netback
– Corporate
|
|
Three months
ended
September
30,
|
Nine months
ended
September
30,
|
($/boe)
|
2016
|
2015
|
2016
|
2015
|
Sales
(1)
|
17.86
|
22.15
|
15.80
|
22.95
|
Production
|
(8.69)
|
(7.38)
|
(8.16)
|
(8.18)
|
Transportation
|
(0.86)
|
(1.34)
|
(0.89)
|
(1.27)
|
Royalties
|
(1.22)
|
(1.71)
|
(1.08)
|
(2.66)
|
Operating netback
before risk management
|
7.09
|
11.72
|
5.67
|
10.84
|
Realized risk
management gain
|
1.09
|
(0.14)
|
2.20
|
0.17
|
Operating netback
after risk management
|
8.18
|
11.58
|
7.87
|
11.01
|
|
|
|
|
|
(1)
Sales includes other income
|
The corporate operating netback before commodity price risk
management contracts for crude oil, condensate, NGLs, and natural
gas during the third quarter of 2016 averaged $7.09/boe, a decrease of 40% from the
$11.72/boe realized during the same
period in 2015. After including commodity risk management
contracts, the corporate operating netback for the three months
ended September 30, 2016 was
$8.18/boe compared to $11.58/boe in the third quarter of 2015.
Bellatrix's corporate operating netback before commodity price
risk management contracts for crude oil, condensate, NGLs, and
natural gas during the nine months ended September 30, 2016, averaged $5.67/boe; a decrease of 48% compared to
$10.84/boe in the first nine months
of 2015. After including commodity risk management contracts,
the corporate operating netback for the nine months ended
September 30, 2016 was $7.87/boe compared to $11.01/boe in the first nine months of 2015.
Total revenue decreased by 31% to $56.5
million for the three months ended September 30, 2016, compared to $82.1 million realized in the third quarter of
2015. Total revenue from crude oil, condensate, and NGLs
contributed 39% of total third quarter 2016 revenue before other
income, royalties, and commodity price risk management contracts,
compared to 36% in the three months ended September 30, 2015. For the nine months
ended September 30, 2016, total
revenue decreased 39% to $160.0
million, compared to $261.2
million in the comparative 2015 period. Total revenue
from crude oil, condensate, and NGLs contributed 43% of the first
nine months of 2016 revenue before other income, royalties, and
commodity price risk management contracts, compared to 42% in the
comparative 2015 period. The decrease in total revenue in 2016 and
the comparable periods in 2015 was primarily the result of the
significant reduction in the commodity prices environment in the
periods.
In the three months ended September 30,
2016, production expenses totaled $27.5 million ($8.69/boe), compared to $27.4 million ($7.38/boe) recorded in the same period of
2015. Production expenses totaled $82.6 million ($8.16/boe) for the nine months ended September 30, 2016, compared to $93.2 million ($8.18/boe) in the first nine months of
2015. The increase in production expenses on a per-boe-basis
between the three month period ended September 30, 2016, and the comparative period in
2015 was primarily attributable to increased processing fees
associated with the Alder Flats Plant Sale in the quarter and the
facilities monetization transaction which occurred in the second
quarter of 2016, which has been partially mitigated by cost
reductions realized through the operation of the Alder Flats Plant
and continued field optimization work. Bellatrix executed a strong
optimization program in 2016, mitigating base declines and
providing additional cash flow with relatively modest capital
investment.
For the three months ended September 30,
2016, Bellatrix incurred royalties of $3.9 million, compared to $6.3 million in the third quarter of 2015.
Overall royalties as a percentage of revenue (after transportation
costs) in the third quarter of 2016 were 7% compared to 9% in the
comparative 2015 period. For the nine months ended
September 30, 2016, royalties
incurred totaled $10.9 million,
compared to $30.2 million incurred in
the comparative 2015 period. Overall royalties as a
percentage of revenue (after transportation costs) in the nine
months ended September 30, 2016 were
8% compared with 13% in the first nine months of 2015. Lower
average corporate royalty rates period over period includes the
impact from lower commodity prices as well as increased GCA credits
associated with significant infrastructure and facilities
investments by Bellatrix.
In the first half of 2016, the Government of Alberta completed its oil and gas royalty
review, and announced a new Modernized Royalty Framework ("MRF")
which included, for conventional activity, no changes to the
royalty structure of wells drilled prior to 2017 for a 10-year
period from the MRF implementation date and improved transparency
concerning disclosure of royalty information. Based on the
internal assessment completed, the MRF is expected to have a
minimal impact on Bellatrix's funds flow from
operations.
Commodity Prices
Average Commodity
Prices
|
|
|
|
Three months
ended
September
30,
|
Nine months
ended
September
30,
|
|
2016
|
2015
|
%
Change
|
2016
|
2015
|
%
Change
|
|
|
|
|
|
|
|
Exchange rate
(CDN$/US$1.00)
|
1.3041
|
1.3086
|
0
|
1.3206
|
1.2582
|
5
|
|
|
|
|
|
|
|
Crude oil:
|
|
|
|
|
|
|
|
WTI
(US$/bbl)
|
44.94
|
46.50
|
(3)
|
41.33
|
51.01
|
(19)
|
|
Canadian Light crude
blend ($/bbl)
|
54.19
|
55.10
|
(2)
|
50.14
|
59.09
|
(15)
|
Bellatrix's average
realized prices ($/bbl)
|
|
|
|
|
|
|
|
Crude oil and
condensate
|
50.08
|
51.59
|
(3)
|
45.90
|
55.94
|
(18)
|
|
NGLs (excluding
condensate)
|
10.53
|
11.03
|
(5)
|
11.34
|
14.59
|
(22)
|
|
Total crude oil and
NGLs
|
23.87
|
25.57
|
(7)
|
23.56
|
31.92
|
(26)
|
|
Crude oil and
condensate (including risk management (1))
|
49.17
|
54.00
|
(9)
|
45.32
|
57.14
|
(21)
|
|
|
|
|
|
|
|
Natural
gas:
|
|
|
|
|
|
|
|
NYMEX
(US$/mmbtu)
|
2.81
|
2.73
|
3
|
2.29
|
2.76
|
(17)
|
|
AECO daily index
($/mcf)
|
2.32
|
2.90
|
(20)
|
1.85
|
2.77
|
(33)
|
|
AECO monthly index
($/mcf)
|
2.20
|
2.80
|
(21)
|
1.85
|
2.80
|
(34)
|
Bellatrix's average
realized prices ($/mcf)
|
|
|
|
|
|
|
|
Natural
gas
|
2.47
|
3.24
|
(24)
|
1.97
|
3.04
|
(35)
|
|
Natural gas
(including risk management (1))
|
2.74
|
3.04
|
(10)
|
2.49
|
3.00
|
(17)
|
|
|
|
|
|
|
|
|
(1) Per unit metrics
including risk management include realized gains or losses on
commodity contracts and exclude unrealized gains or losses on
commodity contracts.
|
In the first nine months of 2016, the continued strength in
global oil production has sustained oil inventory levels at
relatively robust levels, resulting in prolonged price suppression
for crude oil. North American oil inventories remain high to
historical standards; however North American crude stock levels
have been declining since the spring of 2016. From a Canadian
producer perspective, these impacts have been partially offset by
the relative weakness in the Canadian dollar compared to
the United States dollar and a
slight narrowing of the WTI/Canadian light crude oil
differential. Both supply and demand dynamics for natural gas
have begun to improve which have driven a 35% improvement in Henry
Hub U.S. natural gas prices between the third and second quarters
of 2016. Production of natural gas in North America has steadily declined since
hitting peak levels in the first quarter of 2016, while the
combination of increased power demand, liquefied natural gas
exports, and U.S. exports to Mexico have increased total North American
natural gas demand relative to 2015 levels. The supply and
demand improvements in natural gas have led to a marked rebalancing
in storage, with 2016 shoulder season levels of storage similar to
those exhibited in 2015.
For crude oil and condensate, Bellatrix realized an average
price of $50.08/bbl before commodity
price risk management contracts during the three months ended
September 30, 2016, a decrease of 3%
from the average price of $51.59/bbl
received in the third quarter of 2015. By comparison, the
Canadian Light crude blend price decreased by 2% and the average
WTI crude oil benchmark price decreased by 3% between the third
quarters of 2015 and 2016. For crude oil and condensate,
Bellatrix realized an average price of $45.90/bbl before commodity price risk management
contracts during the nine months ended September 30, 2016, a decrease of 18% from the
average price of $55.94/bbl received
in the first nine months of 2015. In comparison, the Canadian
Light price decreased by 15% and the average WTI crude oil
benchmark price decreased by 19% between the first nine months of
2015 and 2016.
Bellatrix's average realized price for NGLs (excluding
condensate) decreased by 5% to $10.53/bbl during the third quarter of 2016,
compared to $11.03/bbl received in
the three months ended September 30,
2015. NGL pricing in Western
Canada remains challenged given individual market conditions
for products such as propane and butane. Butane and propane
pricing have been negatively impacted by increased supply from key
United States natural gas plays.
Propane has also been impacted by logistical issues in Western Canada which has hindered deliveries
to major demand markets. Propane inventories remain high
across North America. Realized
propane prices improved in the third quarter as seasonal demand had
risen in key markets. Bellatrix's average realized price for
NGLs (excluding condensate) decreased by 22% to $11.34/bbl during the nine months ended
September 30, 2016, compared to
$14.59/bbl received in the first nine
months of 2015.
Bellatrix's natural gas sales are priced with reference to the
daily or monthly AECO indices. Bellatrix's natural gas sold
has a higher heat content than the industry average, which results
in slightly higher realized prices per mcf than the daily AECO
index. During the three months ended September 30, 2016, the AECO daily reference
price decreased by 20% and the AECO monthly reference price
decreased by approximately 21% compared to the third quarter of
2015. Bellatrix's natural gas average sales price before
commodity price risk management contracts for the third quarter of
2016 decreased by 24% to $2.47/mcf
compared to $3.24/mcf in the same
period in 2015. During the first nine months of 2016, the
AECO daily reference price decreased by 33% and the AECO monthly
reference price decreased by 34% compared to the same period in
2015. Bellatrix's natural gas average sales price before
commodity price risk management contracts for the nine months ended
September 30, 2016 decreased by 35%
to $1.97/mcf compared to $3.04/mcf in the first nine months of 2015.
Long Term Debt
Bank Debt
The total commitments under the Credit Facilities were set on
July 15, 2016 at $365 million, comprised of a $210 million revolving facility with a maturity
date of July 1, 2017 (the "Revolving
Facility") and the $155 million term
facility with a maturity date of November
11, 2016 (the "Term Facility"). On August 9, 2016, following the completion of the
$112.5 million Alder Flats Plant
Sale, the $30 million offering of
subscription receipts (which were subsequently converted into
common shares of Bellatrix), the $50
million offering of Convertible Debentures and the
application of the net proceeds therefrom, the Revolving Facility
was reduced to $160 million and the
amount outstanding under the Term Facility reduced to approximately
$13 million. Subsequent to the third
quarter, the Company fully repaid all amounts owing under the Term
Facility by utilizing cash received from its operations and the
cash proceeds from the Pembina asset sale that closed on
November 7, 2016.
Concurrent with the closing of the Pembina asset sale, the
Company completed its semi-annual borrowing base redetermination
and the renewal of its Credit Facilities. Effective upon
closing of the Pembina asset sale, total commitments under the
Credit Facilities were set at $130
million, comprised of a $25
million operating facility provided by a Canadian bank and a
$105 million syndicated facility
provided by nine financial institutions, subject to a borrowing
base test. During the third quarter of 2016, the maturity
date of the Credit Facilities was extended from July 1, 2017 to October 1,
2017, which maturity date may be further extended for a
period of up to three years with the consent of the lenders.
The borrowing base is subject to redetermination on or before
May 31 and November 30 in each year prior to maturity, with
the next semi-annual redetermination expected to be completed on or
before May 31, 2017. With the
semi-annual redetermination and the Pembina asset sale completed,
Bellatrix maintains approximately $55
million of available capacity based on current bank debt
outstanding of approximately $75
million (excluding letters of credit).
At September 30, 2016, the Credit
Facilities include a single financial covenant being the Company's
Senior Debt to EBITDA ratio must not exceed 3.5 times for the
fiscal quarters ending on or before March
31, 2017 ("Senior Debt Covenant"). Commencing with the
second quarter of 2017, the maximum Senior Debt to EBITDA ratio
will reduce to 3.0 times (3.5 times for the two fiscal quarters
immediately following a material acquisition). As at
September 30, 2016, the Senior Debt
to EBITDA ratio was 2.16 times.
Senior Notes
At September 30, 2016, the Company
has outstanding US$250 million of
8.50% senior unsecured notes maturing on May
15, 2020 (the "Senior Notes"). Interest on the Senior
Notes is payable semi-annually and the Senior Notes are redeemable
at the Company's option, in whole or in part, commencing on
May 15, 2017 at specified redemption
prices.
Convertible Debentures
On August 9, 2016, Bellatrix
issued and sold $50 million principal
amount of 6.75% convertible subordinated debentures (the
"Convertible Debentures") due on September
30, 2021 (the "Maturity Date"). Interest on the Convertible
Debentures is payable semiannually in arrears on September 30 and March
31 of each year commencing September
30, 2016. The Convertible Debentures are convertible
at the option of the holder at any time prior to the Maturity Date
at a price of $1.62 per share (the
"Conversion Price"), representing a conversion rate of
approximately 617.2840 common shares per $1,000 principal amount of Convertible
Debentures. The Convertible Debentures are redeemable by
Bellatrix on and after September 30,
2019 at a redemption price equal to the principal amount
plus accrued and unpaid interest thereon, provided that the current
market price of the common shares is not less than 125% of the
Conversion Price. On and after September 30,
2020, the Convertible Debentures are redeemable by Bellatrix
at a redemption price equal to the principal amount plus accrued
and unpaid interest thereon. Under certain circumstances, the
Company may elect to satisfy its obligation to repay, in whole or
in part, the principal amount of the Convertible Debentures upon
redemption or maturity by issuing Bellatrix common shares to the
holders of the Convertible Debentures. Payment for such Convertible
Debentures would be satisfied by delivering that number of common
shares obtained by dividing the principal amount of the Convertible
Debentures which are to be redeemed or which will mature by 95% of
the current market price of the common shares on the redemption
date or maturity date, as applicable.
Notes:
|
(1)
"EBITDA" refers to earnings before interest, taxes, depreciation
and amortization. EBITDA is calculated based on terms and
definitions set out in the agreement governing the Credit
Facilities which adjusts net income for financing costs, certain
specific unrealized and non-cash transactions, and acquisition and
disposition activity and is calculated based on a trailing twelve
month basis. EBITDA for the trailing twelve months ended
September 30, 2016 was $93.3 million.
|
|
(2)
"Senior Debt" is defined as Consolidated Total Debt,
excluding any unsecured or subordinated debt (Senior Notes and
Convertible Debentures). "Consolidated Total Debt" is defined as
determined on a consolidated basis in accordance with GAAP and
without duplication, all Debt of the Company. The Company's
calculation of Consolidated Total Debt excludes decommissioning
liabilities and deferred tax liability. The calculation includes
outstanding letters of credit, bank debt, finance lease
obligations, deferred lease inducements and net working capital
deficiency (excess), calculated as working capital deficiency
excluding current commodity contract assets and
liabilities. Senior Debt at September 30, 2016 was
$201.7 million.
|
CONFERENCE CALL INFORMATION
A conference call to discuss Bellatrix's third quarter
financial and operational results will be held on November 9, 2016 at 9:00
am MT / 11:00 am ET. To
participate, please call toll-free 1-888-231-8191 or 647-427-7450.
The conference call will also be recorded and available until
November 16, 2016 by calling
1-855-859-2056 or 403-451-9481 and entering passcode 9374742
followed by the pound sign.
Bellatrix Exploration Ltd. is a Western Canadian based growth
oriented oil and gas company engaged in the exploration for, and
the acquisition, development, and production of oil and natural gas
reserves in the provinces of Alberta, British
Columbia, and Saskatchewan.
Common shares of Bellatrix trade on the Toronto Stock Exchange
and on the New York Stock Exchange under the symbol
"BXE".
NON-GAAP measures
This press release contains the term "funds flow from
operations" which should not be considered an alternative to, or
more meaningful than, cash flow from operating activities as
determined in accordance with GAAP as an indicator of the Company's
performance. Therefore reference to the non-GAAP measures of funds
flow from operations, or funds flow from operations per share may
not be comparable with the calculation of similar measures for
other entities. Management uses funds flow from operations to
analyze operating performance and leverage and considers funds flow
from operations to be a key measure as it demonstrates the
Company's ability to generate the cash necessary to fund future
capital investments and to repay debt. Funds flow from
operations is calculated as cash flow from operating activities,
excluding decommissioning costs incurred, changes in non-cash
working capital incurred, and transaction costs. The
reconciliation between cash flow from operating activities and
funds flow from operations can be found in the MD&A.
Funds flow from operations per share is calculated using the
weighted average number of common shares for the period.
"Total net debt" and "adjusted working capital deficiency
(excess)" are considered to be non-GAAP measures. Therefore
reference to the non-GAAP measures of total net debt or adjusted
working capital deficiency (excess) may not be comparable with the
calculation of similar measures for other entities. The
Company's calculation of total net debt excludes other deferred
liabilities, deferred capital obligation, long-term risk management
contract liabilities, decommissioning liabilities, and the deferred
tax liability. Total net debt includes the adjusted working
capital deficiency (excess), the liability component of the
Convertible Debentures, current bank debt and long-term debt.
The adjusted working capital deficiency (excess) is a non-GAAP
measure calculated as net working capital deficiency (excess)
excluding current risk management contract assets and liabilities,
current portion of other deferred liabilities, current portion of
deferred capital obligation, and the current portion of bank debt
(Term Facility). Management believes these measures are
useful supplementary measures of the total amount of current and
long-term debt. A reconciliation between total liabilities under
GAAP and total net debt as calculated by the Company is found in
the MD&A.
"Total revenue" is considered to be a non-GAAP measure.
Therefore reference to the non-GAAP measure of total revenue may
not be comparable with the calculation of similar measures for
other entities. The Company's calculation of total revenue
includes petroleum and natural gas sales and other income, and
excludes commodity price risk management.
"Operating netbacks", "adjusted net profit (loss)", and
"total capital expenditures – net" are
considered to be non-GAAP measures. Operating netbacks are
calculated by subtracting royalties, transportation, and operating
costs from total revenue. Adjusted net profit (loss)
is calculated by excluding the after tax effect after adjusting for
non-deductible tax items, of non-cash commodity contracts
mark-to-market gains and losses, unrealized foreign exchange gains
and losses, non-cash impairment charges and non-cash one time
charges, as applicable, impacting net profit
(loss). Total capital expenditures – net
includes the cash impact of capital expenditures and property
dispositions, as well as the non-cash capital impacts of corporate
acquisitions, property acquisitions, adjustments to the Company's
decommissioning liabilities, and share based compensation.
The detailed calculations of operating netbacks are found in the
MD&A.
These measures have been described and presented in this news
release in order to provide shareholders and potential investors
with additional information regarding Bellatrix's liquidity and its
ability to generate funds to finance its operations.
FORWARD LOOKING STATEMENTS
Certain information contained in this press release may
contain forward looking statements within the meaning of applicable
securities laws. The use of any of the words "remain", "focus",
"believe", "will", "position", "opportunity", "maintain",
"continue", "plan", "future", "strive", "committed", "expect",
"estimate", "assume", "target", "forecast", "intend", "strategy",
"anticipate", "enhance" and similar expressions are intended to
identify forward-looking statements. More particularly and without
limitation, this document contains forward-looking statements
concerning management's assessment of future plans, full-year 2017
average production guidance, second half 2016 average production
volume guidance, the intention of management to continue to
actively monitor market pricing with the intent to further enhance
Bellatrix's level of risk management protection by initializing a
base level of 2018 risk management protection over the next several
quarters, Bellatrix's intention to continue to direct capital
investment into its Spirit River
liquids-rich natural gas play, expected fourth quarter 2016 capital
expenditures including the amount of such expenditures to be
incurred on eligible CDE qualifying expenses, second half 2016
production expenditure guidance, Bellatrix's expectation that upon
completion of Phase 2 of the Alder Flats Plant production
expenditures will improve, the expected timing of completion of
Phase 2 of the Alder Flats Plant, the expectation that debt
reduction initiatives completed to date will position Bellatrix to
take advantage of stronger future commodity prices and an improving
macro outlook, the expectation that the Spirit River liquids-rich
natural gas play will drive future growth for the Company,
Bellatrix's plan to release its initial 2017 budget and forecast
guidance to the market by mid-December
2016, the intention of the Company to continue to focus on
profitable and sustainable per share growth, and proactive capital
resource management, the intent of the Company to continue to
deliver on our goals of providing long term sustainable value
creation for shareholders of the Company and expectations relating
to future commodity prices, may constitute forward-looking
statements under applicable securities laws. To the extent that any
forward-looking information contained herein constitute a financial
outlook, they were approved by management on November 8, 2016 and are included herein to
provide readers with an understanding of the anticipated funds
available to Bellatrix to fund its operations and readers are
cautioned that the information may not be appropriate for other
purposes. Forward-looking statements necessarily involve
risks, including, without limitation, risks associated with oil and
gas exploration, development, exploitation, production, marketing
and transportation, loss of markets, volatility of commodity
prices, currency fluctuations, imprecision of reserve estimates,
environmental risks, competition from other producers, inability to
retain drilling rigs and other services, incorrect assessment of
the value of acquisitions, failure to realize the anticipated
benefits of acquisitions, delays resulting from or inability to
obtain required regulatory approvals, actions taken by the
Company's lenders that reduce the Company's available credit, any
inability to repay any debt of the Company when due, any inability
to satisfy the covenants in the Credit Facilities, any reduction in
the borrowing base of the Credit Facilities below levels of
outstanding debt under such Credit Facilities, and ability to
access sufficient capital from internal and external sources.
Events or circumstances may cause actual results to differ
materially from those predicted, as a result of the risk factors
set out and other known and unknown risks, uncertainties, and other
factors, many of which are beyond the control of Bellatrix. In
addition, forward looking statements or information are based on a
number of factors and assumptions which have been used to develop
such statements and information but which may prove to be incorrect
and which have been used to develop such statements and information
in order to provide shareholders with a more complete perspective
on Bellatrix's future operations. Such information may prove
to be incorrect and readers are cautioned that the information may
not be appropriate for other purposes. Although the Company
believes that the expectations reflected in such forward looking
statements or information are reasonable, undue reliance should not
be placed on forward looking statements because the Company can
give no assurance that such expectations will prove to be
correct. In addition to other factors and assumptions which
may be identified herein, assumptions have been made regarding,
among other things: the continued availability of funds under the
Credit Facilities; the impact of increasing competition; the
general stability of the economic and political environment in
which the Company operates; the timely receipt of any required
regulatory approvals; the ability of the Company to obtain
qualified staff, equipment and services in a timely and cost
efficient manner; drilling results; the ability of the operator of
the projects which the Company has an interest in to operate the
field in a safe, efficient and effective manner; the ability of the
Company to obtain financing on acceptable terms; field production
rates and decline rates; ability to generate sufficient cash to
repay debt of the Company when due; the ability to replace and
expand oil and natural gas reserves through acquisition,
development of exploration; the timing and costs of pipeline,
storage and facility construction and expansion and the ability of
the Company to secure adequate product transportation; future
commodity prices; currency, exchange and interest rates; the
regulatory framework regarding royalties, taxes and environmental
matters in the jurisdictions in which the Company operates; and the
ability of the Company to successfully market its oil and natural
gas products. Readers are cautioned that the foregoing list
is not exhaustive of all factors and assumptions which have been
used. As a consequence, actual results may differ materially
from those anticipated in the forward-looking statements.
Additional information on these and other factors that could affect
Bellatrix's operations and financial results are included in
reports (including, without limitation, under the heading "Risk
Factors" in the Company's Annual Information Form for the year
ended December 31, 2015) on file with
Canadian and United States
securities regulatory authorities and may be accessed through the
SEDAR website (www.sedar.com), through the SEC website
(www.sec.gov), and at Bellatrix's website
(www.bellatrixexploration.com). Furthermore, the forward looking
statements contained herein are made as at the date hereof and
Bellatrix does not undertake any obligation to update publicly or
to revise any of the included forward looking statements, whether
as a result of new information, future events or otherwise, except
as may be required by applicable securities laws.
BARRELS OF OIL EQUIVALENT
The term barrels
of oil equivalent ("boe") may be misleading, particularly if used
in isolation. A boe conversion ratio of six thousand cubic feet of
natural gas to one barrel of oil equivalent (6 mcf/bbl) is based on
an energy equivalency conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the
wellhead. All boe conversions in this press release are derived
from converting gas to oil in the ratio of six thousand cubic feet
of gas to one barrel of oil. Given that the value ratio based on
the current price of crude oil as compared to natural gas is
significantly different from the energy equivalency of 6:1,
utilizing a conversion on a 6:1 basis may be misleading as an
indication of value.
SOURCE Bellatrix Exploration Ltd.