TSX, NYSE: BXE
CALGARY, Jan. 5, 2017 /CNW/ - Bellatrix Exploration Ltd.
("Bellatrix" or the "Company") (TSX, NYSE: BXE) is pleased to
announce its 2017 capital budget, highlighted by over 10% forecast
production growth and key strategic infrastructure
investment. Bellatrix is also pleased to outline its three
year corporate development plan, which is designed to deliver
compound annual growth in annual average production of over 10%
through 2019. Following the strategic repositioning efforts
undertaken throughout 2016, Bellatrix is poised to deliver strong
growth in both production and funds flow from operations in 2017
through the continued development of its core Spirit River play.
Net Capital Budget of $105
Million in 2017 Designed to Deliver Over 10% Production
Volume Growth That Doubles Yearly Funds Flow from Operations to
$100 Million or $0.40 per Share
Bellatrix's Board of Directors has approved a net capital budget
of $105 million in 2017. The
2017 net capital budget is designed to achieve production growth of
over 10% (exit 2016 to exit 2017) and annual average production of
33,500 boe/d. Bellatrix anticipates directing approximately
$70 million of its net budget to
drilling and completion activity; $13
million towards its share of the construction of Phase 2 of
the Bellatrix O'Chiese Nees-Ohpawganu'ck deep-cut gas plant at
Alder Flats (the "Alder Flats
Plant"); $7 million in land and other
minor infrastructure projects; and $15
million in other capital (capitalized general and
administrative costs, capitalized interest, and other minor capital
investments). In addition, Bellatrix will also fund the
previously received prepayment portion of its partner's 35% share
of the cost of construction of Phase 2 of the Alder Flats Plant
during calendar 2017, estimated at approximately $18 million.
Bellatrix's 2017 net capital budget incorporates forward pricing
expectations of approximately US$55.80/bbl WTI and $2.72/GJ AECO, and is backstopped by commodity
price risk management contracts covering approximately 66% of 2017
forecast average gross natural gas volumes at an average fixed
price of approximately $3.36/mcf.
Reduced debt levels and interest expense, firmer commodity prices,
strong risk management positions, and focused operational
initiatives are anticipated to more than double funds flow from
operations in 2017 to approximately $100
million, or $0.40 per basic
share, compared with 2016 forecast funds flow from operations.
2017 Budget &
Guidance Summary
|
|
|
2017
Guidance
|
|
|
Production
(boe/d)
|
|
|
2017 Exit
production
|
35,000
|
|
2017 Average daily
production
|
33,500
|
Production Mix
(%)
|
|
|
Natural
gas
|
76
|
|
Crude oil, condensate
and NGLs
|
24
|
Net Capital
Expenditures ($000)(1)
|
|
|
Drilling, completion
and equipping
|
70,000
|
|
Phase 2 of Alder
Flats Plant
|
13,000
|
|
Land and
infrastructure
|
7,000
|
|
Other
capital
|
15,000
|
|
Total net capital
expenditures
|
105,000
|
Financial
|
|
|
Funds flow from
operations ($000)(2)
|
100,000
|
|
Per share - basic
($)
|
0.40
|
|
Production expense
($/boe)(3)
|
9.00
|
|
General and
administrative expense ($/boe)
|
1.90
|
|
|
(1)
Net capital spending includes exploration and development
capital projects and corporate assets, and excludes property
acquisitions and dispositions. Net capital spending also
excludes the previously received prepayment portion of Bellatrix's
partner's 35% share of the cost of construction of Phase 2 of the
Alder Flats Plant during calendar 2017.
|
(2)
The term "funds flow from operations", does not have standard
meaning under generally accepted accounting principles ("GAAP").
Refer to "Non-GAAP measures" disclosed at the end of this Press
Release.
|
(3)
Production expenses before net processing
revenue/fees.
|
Increased Commodity Risk Management Contracts Support the
Three Year Development Plan
Underpinning Bellatrix's strategic planning process is an active
risk management program designed to mute the impact of commodity
price volatility and provide greater predictability of future
revenue and cash flow.
Over the past several months Bellatrix has methodically
increased its risk management protection with approximately 66% of
2017 forecast gross natural gas volumes hedged at an average fixed
price of approximately $3.36/mcf. Additionally, Bellatrix has
added initial 2018 commodity price risk management protection with
approximately 52.5 MMcf/d of 2018 gross natural gas volumes hedged
at an average fixed price of approximately $3.11/mcf.
As at January 1, 2017, Bellatrix
was party to a series of commodity price risk management contracts
for 2017 and 2018 as summarized below:
Product
|
Financial
Contract
|
Period
|
Volume
|
Average Price
(1)
|
Natural
gas
|
Fixed price
swap
|
January 1, 2017 to
December 31, 2017
|
101.4
MMcf/d
|
$3.36/mcf
|
Natural
gas
|
Fixed price
swap
|
January 1, 2018 to
December 31, 2018
|
52.5
MMcf/d
|
$3.11/mcf
|
(1) The
conversion of $/GJ to $/mcf is based on an average corporate heat
content rate of 40.6Mj/m3.
|
Strategically Repositioned for Over 10% Compound Annualized
Production Growth Through 2019
Bellatrix completed a series of strategic transactions in 2016,
further simplifying the Company's asset portfolio and materially
reducing outstanding bank debt, thereby positioning the Company to
return to growth in 2017. Outstanding bank debt as at
December 31, 2016 is estimated at
$30 million, providing the Company
with approximately $70 million of
available liquidity (before deducting outstanding letters of
credit). Bellatrix is positioned to replace the production,
cash flow, and reserves associated with the non-core asset
dispositions completed in 2016 from continued development of its
low cost Spirit River play, which
is supported by strategic infrastructure ownership and
operatorship.
With ample firm service capacity, growth in strategic
infrastructure and solid commodity price risk management
protection, Bellatrix maintains line of sight to organically grow
corporate production volumes beyond 42,000 boe/d in late 2019,
representing approximately 33% production growth through 2019 and
an over 10% compound annual growth rate. In addition,
strategic infrastructure investments are expected to further
improve margins, netbacks, and operating funds flow due to the
combination of lower unit production costs and enhanced revenues
over this period.
Bellatrix maintains industry leading efficiencies, spud to
on-stream times, and capital costs within the Spirit River
formation which delivers superior rates of return and competes as
one of the lowest cost natural gas plays in North America.
The Company's three year development plan contemplates drilling
approximately 55 net Spirit River
and 10 net Cardium wells representing only 14% and 4% of the
Company's 390 net future Spirit
River drilling locations and 239 net Cardium drilling
locations respectively.
Additionally, Bellatrix retains decades of incremental
multi-zone potential in both oil and liquids rich natural gas
weighted hydrocarbon charged zones including, but not limited to,
the Viking, Belly River, Lower Mannville, Rock Creek, Second White Specks and
Duvernay formations. The
multi-zone nature of the Deep Basin provides the ability to
proactively adjust capital investment to either oil or natural gas
weighted projects focused on delivering the highest return and
value for shareholders.
Readers are cautioned that comments regarding development plans
beyond 2017 represent management estimates, as formal plans have
not been approved.
Lower Production Costs, Increased Revenue, and Improved
Corporate Capital Efficiencies Expected Upon Completion of Phase 2
of Alder Flats Plant
Bellatrix continues to advance the Phase 2 expansion 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, scheduled for
completion in the second quarter of 2018 and is expected to deliver
three primary long term benefits. First, with an expected net
increase in available throughput at the Alder Flats Plant by
approximately 30 MMcf/d to 57.5 MMcf/d, and an expected increase in
production volumes, corporate operating costs are expected to
recognize a step change reduction in the second half of 2018 by
approximately $1.00/boe (relative to
2017 corporate average production expense guidance), further
enhancing the Company's long term competitiveness. Bellatrix
has also secured additional firm service sales gas transportation
to coincide with the commissioning of Phase 2 of the Alder Flats
Plant. Second, the Phase 2 expansion project is engineered with a
colder process to provide deeper liquids extraction capability,
thereby enhancing natural gas liquid revenue upon project
completion. Third, corporate capital efficiencies are
expected to improve as incrementally additional capital can be
invested into drilling and completion projects relative to
facilities spending subsequent to the first half of 2018.
Operational Update and Upcoming Conference
Participation
Bellatrix completed its fourth quarter 2016 capital investment
plans despite minor field level delays due to a relatively warmer
weather and later start to winter. Full year 2016 production
volumes are expected to average modestly below the mid-point of the
previously announced guidance range of 35,500 to 36,500 boe/d as
minor delays in fourth quarter activity had a relatively immaterial
impact to full year average volumes.
As previously announced on December 21,
2016, Bellatrix completed the sale of certain non-core
assets in the greater Harmattan area of Alberta for $80
million. Bellatrix's corporate production volumes are
approximately 31,500 boe/d in December after incorporating the
disposition of the Harmattan assets, with one 100% working interest
Spirit River well drilled and
awaiting completion and tie-in for January 2017.
Bellatrix plans to participate at the TD Securities London
Energy Conference in London,
England on Monday, January 9,
2017. A copy of Bellatrix's updated corporate presentation
will be available at www.bellatrixexploration.com.
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.
Reader Advisories:
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.
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 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. The reconciliation between cash flow
from operating activities and funds flow from operations can be
found in the Company's most recent management's discussion and
analysis, which may be accessed through the SEDAR website
(www.sedar.com). Funds flow from operations per share
is calculated using the weighted average number of shares for the
period.
DRILLING LOCATIONS: This press release discloses future
drilling locations, which can be categorized as follows: (i) proved
locations; (ii) probable locations; and (iii) unbooked locations.
Proved locations and probable locations are sometimes collectively
referred to as "booked locations", are derived from Bellatrix's
most recent independent reserves evaluation and account for
drilling locations that have associated proved plus probable
reserves or probable-only reserves, as applicable. Unbooked
locations as disclosed herein have been identified by management as
an estimation of the Company's multi-year drilling activities using
information including evaluation of applicable geologic, seismic,
engineering, production, pricing assumptions and reserves
information. There is no certainty that Bellatrix will drill all
unbooked drilling locations and if drilled there is no certainty
that such locations will result in additional oil and gas reserves,
resources or production. The drilling locations on which Bellatrix
actually drill wells will ultimately depend upon the availability
of capital, regulatory approvals, seasonal restrictions, oil and
natural gas prices, costs, actual drilling results, additional
reservoir information that is obtained and other factors. While the
majority of Bellatrix's unbooked locations are extensions or
infills of the drilling patterns already recognized by the
Company's independent qualified reserves evaluator, other unbooked
drilling locations are farther away from existing wells where
management may have less information about the characteristics of
the reservoir and therefore there may be more uncertainty whether
wells will be drilled in such locations and if drilled there may be
more uncertainty that such wells will result in additional oil and
gas reserves, resources or production. Of the Company's 390
net future Spirit River drilling
locations, 303 represent unbooked locations. Of the Company's
referenced 239 Cardium drilling locations, 105 represent unbooked
locations.
FORWARD LOOKING STATEMENTS: This press release contains
forward-looking statements within the meaning of applicable
securities laws. More particularly and without limitation, this
press release contains forward-looking statements concerning the
Company's anticipated 2017 capital budget and the details of the
expenditures and expected timing of such expenditures relating to
such budget; expected future production volumes, production mix,
year over year production growth and expected compound annual
growth in annual average production; expectation that Bellatrix is
positioned to replace the production, cash flow, and reserves
associated with the non-core asset dispositions completed in 2016
from continued development of its low cost Spirit River play; the expected percentage of
forecast production covered by commodity price contracts; expected
future commodity pricing; expected future funds flow from
operations, including specifically the expectation that funds flow
from operations in 2017 will more than double to approximately
$100 million, or $0.40 per basic share; expectations regarding
future production/operating expenses and general and administrative
expenses; expectations that the Company is positioned to grow in
2017; expectations regarding outstanding bank debt and available
liquidity; expectations regarding the level and sufficiency of the
Company's firm service capacity and the availability thereof;
expectations regarding the Company's capital efficiencies, spud to
on-stream times and capital costs; expectations regarding future
drilling locations and expectations that the Spirit River play
delivers superior rates of return and competes as one of the lowest
cost natural gas plays in North
America; expectations regarding the Company's future
development of its land holdings, and in particular management's
assessment of the multi-zone potential in other zones in the Deep
Basin; expectations regarding the timing and cost of completion of
Phase 2 of the Alder Flats Plant, and the expected increase in
available throughput resulting from completion thereof; the
expectation that operating costs will recognize a step change
reduction in the second half of 2018 by approximately $1.00/boe; expectations that Phase 2 of the Alder
Flats Plant will provide deeper liquids extraction capability and
enhanced natural gas liquids revenue; expectations that corporate
capital efficiencies will improve after Phase 2 of the Alder Flats
Plant is completed and that additional capital can be invested into
drilling and completion projects; expectations regarding full year
2016 production volumes averaging modestly below the mid-point of
the previously announced guidance range of 35,500 to 36,500 boe/d;
expectations that the Company's corporate production volumes were
approximately 31,500 boe/d in December after incorporating the
disposition of Harmattan; and expectations that the Company will
participate in the TD Securities London Energy Conference in
London, England on Monday January 9, 2017.
To the extent that any forward-looking statements contained
herein constitutes a financial outlook, they were approved by
management on the date hereof 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 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
particular, as no budgets for 2018 and 2019 have been approved or
will be approved in the near future, the Company's expectations and
plans for 2018 and 2019 may change as circumstances change and as
different opportunities arise, such as acquisition opportunities,
and as the Company continues to evaluate its drilling results and
opportunities. The 3 year business model presented does not
represent management's expectations of the Company's future
performance but rather is intended to present management's belief
in the economic viability of the Company's long term business.
Readers should not use such 3 year business model as a presentation
or forecast of the Company's future performance as such performance
will differ as a result of a variety of factors including as a
result of changes to assumptions and or the occurrence of the risks
identified herein.
In addition to other factors and assumptions which may be
identified herein, assumptions have been made regarding, among
other things: 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; the ability to replace and expand oil and natural
gas reserves through acquisition, development or 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 on file with Canadian and US 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.
SOURCE Bellatrix Exploration Ltd.