TSX, NYSE: BXE
CALGARY, March 15, 2017 /CNW/ - Bellatrix Exploration
Ltd. ("Bellatrix" or the "Company") (TSX, NYSE: BXE) announces its
financial and operating results for the fourth quarter and year
ended December 31, 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 years ended December 31, 2016 and
2015. Bellatrix's audited 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, and on EDGAR at
www.sec.gov/edgar.
FOURTH QUARTER AND
ANNUAL 2016 HIGHLIGHTS
|
|
Three months
ended
December
31,
|
Year
ended
December
31,
|
|
2016
|
2015
|
2016
|
2015
|
SELECTED FINANCIAL
RESULTS
|
|
|
|
|
(CDN$000s except
share and per share amounts)
|
|
|
|
|
Cash flow from
operating activities
|
17,114
|
42,033
|
37,546
|
103,075
|
|
Per basic share
(1)
|
$0.07
|
$0.22
|
$0.18
|
$0.54
|
|
Per diluted share
(1)
|
$0.07
|
$0.22
|
$0.18
|
$0.54
|
Funds flow from
operations (2)
|
8,437
|
29,653
|
40,916
|
109,485
|
|
Per basic share
(1)
|
$0.03
|
$0.15
|
$0.19
|
$0.57
|
|
Per diluted share
(1)
|
$0.03
|
$0.15
|
$0.19
|
$0.57
|
Net profit
(loss)
|
23,085
|
(356,631)
|
(26,668)
|
(444,208)
|
|
Per basic share
(1)
|
$0.09
|
($1.86)
|
($0.12)
|
($2.31)
|
|
Per diluted share
(1)
|
$0.09
|
($1.86)
|
($0.12)
|
($2.31)
|
Capital – exploration
and development
|
24,640
|
16,775
|
78,660
|
155,151
|
Capital – corporate
assets
|
172
|
153
|
230
|
3,440
|
Property
acquisitions
|
(13)
|
287
|
(9)
|
1,036
|
Capital expenditures
– cash
|
24,799
|
17,215
|
78,881
|
159,627
|
Property dispositions
– cash (3)
|
(105,206)
|
(5,129)
|
(299,058)
|
(15,436)
|
Total net capital
expenditures – cash
|
(80,407)
|
12,086
|
(220,177)
|
144,191
|
Property acquisitions
– non-cash
|
-
|
-
|
29,178
|
-
|
Property dispositions
– non-cash
|
(21,309)
|
-
|
(21,309)
|
-
|
Other non-cash
items
|
(36,224)
|
2,594
|
(33,886)
|
8,613
|
Total capital
expenditures – net (4)
|
(137,940)
|
14,680
|
(246,194)
|
152,804
|
Bank debt
|
19,143
|
340,743
|
19,143
|
340,743
|
Senior
Notes
|
324,691
|
332,024
|
324,691
|
332,024
|
Convertible
Debentures (liability component)
|
37,420
|
-
|
37,420
|
-
|
Long term loan
receivable
|
(8,775)
|
-
|
(8,775)
|
-
|
Adjusted working
capital deficiency (2)
|
23,716
|
44,878
|
23,716
|
44,878
|
Total net debt
(2)
|
396,195
|
717,645
|
396,195
|
717,645
|
Total
assets
|
1,453,730
|
1,703,212
|
1,453,730
|
1,703,212
|
Total shareholders'
equity
|
863,418
|
810,572
|
863,418
|
810,572
|
|
|
|
|
SELECTED OPERATING
RESULTS
|
|
Three months
ended
December
31,
|
Year
ended
December
31,
|
|
|
2016
|
2015
|
2016
|
2015
|
Total revenue
(4)
|
|
67,907
|
72,125
|
227,874
|
333,318
|
Average daily sales
volumes
|
|
|
|
|
|
|
Crude oil, condensate
and NGLs
|
(bbl/d)
|
8,993
|
11,884
|
9,935
|
11,998
|
|
Natural
gas
|
(mcf/d)
|
137,372
|
172,923
|
154,453
|
176,658
|
|
Total oil
equivalent
|
(boe/d)
(5)
|
31,888
|
40,705
|
35,677
|
41,441
|
Average realized
prices
|
|
|
|
|
|
Crude oil and
condensate
|
($/bbl)
|
58.12
|
48.76
|
48.41
|
54.34
|
|
Crude oil and
condensate (including risk management (6))
|
($/bbl)
|
57.46
|
58.67
|
47.81
|
58.76
|
|
NGLs (excluding
condensate)
|
($/bbl)
|
18.87
|
12.99
|
13.14
|
14.16
|
|
Crude oil, condensate
and NGLs
|
($/bbl)
|
31.08
|
25.88
|
25.27
|
30.41
|
|
Natural
gas
|
($/mcf)
|
3.29
|
2.66
|
2.27
|
2.95
|
|
Natural gas
(including risk management (6))
|
($/mcf)
|
3.13
|
2.75
|
2.64
|
2.94
|
|
Total oil
equivalent
|
($/boe)
(5)
|
22.95
|
18.85
|
16.86
|
21.37
|
|
Total oil equivalent
(including risk management (6))
|
($/boe)
(5)
|
22.19
|
20.26
|
18.38
|
21.85
|
|
|
|
|
|
|
|
Net wells
drilled
|
|
5.0
|
2.3
|
12.9
|
13.7
|
|
|
|
|
|
|
Selected Key
Operating Statistics
|
|
|
|
|
|
|
Operating netback
(4)
|
($/boe)
(5)
|
8.87
|
10.80
|
6.39
|
10.83
|
|
Operating netback
(4) (including risk management
(6))
|
($/boe)
(5)
|
8.11
|
12.21
|
7.91
|
11.30
|
|
Transportation
expense
|
($/boe)
(5)
|
1.07
|
0.72
|
0.93
|
1.13
|
|
Production
expense
|
($/boe)
(5)
|
10.57
|
6.87
|
8.70
|
7.86
|
|
General &
administrative expense
|
($/boe)
(5)
|
1.72
|
1.18
|
1.53
|
1.55
|
|
Royalties as a % of
sales (after transportation)
|
|
12%
|
5%
|
9%
|
11%
|
COMMON
SHARES
|
|
|
|
|
|
Common shares
outstanding (7)
|
|
246,585,828
|
191,963,910
|
246,585,828
|
191,963,910
|
Weighted average
shares (1)
|
|
243,582,436
|
191,963,910
|
214,105,063
|
191,960,312
|
SHARE TRADING
STATISTICS
|
|
|
|
|
|
TSX and Other
(8)
|
|
|
|
|
|
(CDN$, except
volumes) based on intra-day trading
|
|
|
|
|
|
High
|
|
1.40
|
2.92
|
1.99
|
4.47
|
Low
|
|
0.96
|
1.30
|
0.96
|
1.30
|
Close
|
|
1.28
|
1.64
|
1.28
|
1.64
|
Average daily
volume
|
|
2,074,471
|
1,233,615
|
2,282,348
|
1,911,812
|
NYSE
|
|
|
|
|
|
(US$, except
volumes) based on intra-day trading
|
|
|
|
|
|
High
|
|
1.07
|
2.25
|
1.48
|
3.81
|
Low
|
|
0.72
|
0.94
|
0.72
|
0.94
|
Close
|
|
0.94
|
1.21
|
0.94
|
1.21
|
Average daily
volume
|
|
524,253
|
1,160,457
|
959,245
|
892,215
|
(1) Basic weighted average shares
for the three months and year ended December 31, 2016 were
243,582,436 (2015: 191,963,910) and 214,105,063 (2015:
191,960,312), respectively.
|
In computing
weighted average diluted 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 months
and year ended December 31, 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 twelve month periods resulting in diluted weighted
average common shares of 243,582,436 (2015: 191,963,910) and
214,105,063 (2015: 191,960,312), respectively.
|
(2) The terms "funds flow from
operations", "funds flow from operations per share", "total net
debt", and "adjusted working capital deficiency", do
not have standard meanings under generally accepted accounting
principles ("GAAP"). Refer to "Capital performance measures"
disclosed at the end of this Press Release.
|
(3) Property dispositions – cash
does not include transaction costs.
|
(4) The terms "operating
netbacks", "total capital expenditures – net", 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.
|
(5)
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.
|
(6)
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.
|
(7) Fully diluted common
shares outstanding for the three months and year ended December 31,
2016 were 290,315,127 (2015: 204,810,242). This includes 12,865,099
(2015: 12,846,332) 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.
|
(8) TSX and Other includes the
trading statistics for the Toronto Stock Exchange ("TSX") and other
Canadian trading markets.
|
PRESIDENT'S MESSAGE
Bellatrix executed on three strategic objectives in 2016, which
collectively have materially improved our balance sheet and
liquidity position, and repositioned the Company to accelerate
profitable growth of our large scale asset base, and enhance long
term shareholder value. Our first priority was debt
reduction. Total net debt was reduced by $321.4 million, or 45%, during calendar 2016, but
more importantly, bank debt was reduced to only $19.1 million at December
31, 2016 representing a reduction of 94% from year end 2015
levels. The absolute reduction in bank debt of $321.6 million not only achieves significant
savings on interest and financing charges but more importantly
improves the Company's liquidity position and meaningfully reduces
external financial constraints on our business. Secondly, the
transactions completed in 2016 were principally focused on non-core
and non-strategic properties which have not attracted capital
investment within our portfolio over the past several years.
Rationalizing these assets improved the Company's balance sheet and
liquidity and repositioned Bellatrix for enhanced long term
shareholder value while maintaining the Company's core asset base
and growth engine. The core foundational assets for the
Company reside in a proven area of the Deep Basin in west central
Alberta, known for its favourable geologic characteristics.
Bellatrix maintains decades of development ready opportunities
anchored by our 393 net identified Spirit
River well locations and our 239 net identified Cardium well
locations. The Company's strategic infrastructure and firm
service capacity create barriers to industry competition within our
core "sandbox", and provide the egress and above ground control to
profitably develop our significant resource potential.
Thirdly, operational execution remained focused on development
drilling in the low cost Spirit
River liquids-rich natural gas play, delivering strong rates
of return at current commodity prices. In addition, our
operations team focused on optimization initiatives including
plunger lift installations, wellbore cleanouts, and pipeline
optimization efforts all directed towards maximizing volumes,
attenuating base decline rates and increasing value from every
capital investment dollar. Capital optimization activities
proved successful again in 2016 with continued improvements in
drill times, spud to on-stream delivery, and the advancement of
several technological improvements providing continued efficiency
gains, and insulating against potential service cost inflation
pressure in the future.
The delivery of our strategic objectives in 2016 has
repositioned Bellatrix to resume profitable growth activity moving
forward. To that end, Bellatrix recently announced its 2017
guidance and its three year development plan outlook, providing
line of sight for 10% to 15% compound annual growth in production
volumes. Over our three year outlook, Bellatrix plans to
continue its strategy to profitably grow production, while
expanding margins and cash flow netbacks through continued
investment in strategic infrastructure including Phase 2 of the
Bellatrix O'Chiese Nees-Ohpawganu'ck deep-cut gas plant at
Alder Flats (the "Alder Flats
Plant"). The Phase 2 expansion project remains on time, and
on budget for completion in the second quarter of 2018, and is
anticipated to drive improved revenue through additional higher
margin natural gas liquids ("NGL") extraction, and provide further
reductions to corporate operating costs, driving expanded corporate
profit margins and cash flow.
Bellatrix continues to protect its long term strategic plan
through an active hedging program, with approximately 66% of
forecast gross natural gas volumes in 2017 hedged at an average
fixed price of approximately $3.36/mcf (based on the mid-point of 2017 average
gross production guidance of 33,500 boe/d; 76% natural gas
weighted). In addition, Bellatrix has secured meaningful 2018
risk management protection with a total of 65.6 MMcf/d of 2018
natural gas volumes hedged at an average fixed price of
approximately $3.08/mcf; this
represents approximately 43% of volumes compared to the mid-point
of 2017 full year average guidance. Finally, stronger propane
prices in early 2017 provided an attractive opportunity for
Bellatrix to hedge 1,500 bbl/d of propane volumes at an average
price of 51% of WTI light oil prices from February through December
of 2017, and 1,000 bbl/d of propane volumes at an average price of
47% of WTI light oil prices in 2018, both meaningfully above long
term historical averages. Bellatrix's hedging program is part
of its overall risk management strategy focused on providing
reduced commodity price volatility and greater assurance over
future revenue and cash flows which help drive the capital and
reinvestment decisions within our business.
Furthermore, Bellatrix retains several long term firm capacity
agreements which assure market egress for both current and forecast
production volumes and generate a distinct, competitive advantage
for the Company as we execute on our growth strategy.
Bellatrix maintains secured firm transportation ("FT") representing
approximately 120% of current gross operated natural gas volumes at
multiple receipt points on the Nova Gas Transmission Ltd. (the
"NGTL") system. The NGTL system has experienced, and is
expected to experience further curtailments of both interruptible
and firm service capacity as the operator continues work through
2017 to expand capacity along the system. With excess FT
relative to current production levels, Bellatrix is well positioned
to deliver volumes with minimal impacts during periods of system
curtailments. Bellatrix previously negotiated additional FT
capacity to facilitate increased growth volumes from Phase 2 of its
Alder Flats Plant which provides additional strategic long term
value for the Company. Bellatrix also maintains firm service
contracts through a number of third party processing plants in its
greater core Ferrier region to ensure unfettered delivery
capability for current and planned production growth, with
staggered contract maturity dates to align with the in-service date
of Phase 2 of the Alder Flats Plant. Finally, Bellatrix has
secured fractionation capacity for its NGL volumes by way of long
term agreements providing 100% coverage for current and forecast
NGL volumes from both Phase 1 and Phase 2 of its Alder Flats
Plant.
Bellatrix is dedicated to achieving industry leading economic
results in an environmentally responsible, compliant, and safe
manner. To that end, Bellatrix released its inaugural
Corporate Responsibility Report in November
2016, which is available on 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 in which we operate.
OPERATIONAL UPDATE
Improved commodity prices in 2017, supplemented by the Company's
risk management activities, underpin the resumption of profitable
growth, which is focused on development of the low cost
Spirit River liquids-rich natural
gas play, and maximizing netbacks, margins, and operating cash
flow.
The Company launched its 2017 drilling program in January with
two rigs, and proactively added a third rig in early February to
ensure completion of the first half drilling program before the
seasonal spring break up period. Completion operations have
progressed according to plan, and Bellatrix remains encouraged that
operational activity, including corporate production volume levels,
remain consistent with its previously announced 2017 guidance
targets.
Bellatrix's capital investment program is focused on organic,
high working interest development drilling opportunities in
2017. The Company plans to drill approximately nine net wells
including two high impact Cardium well locations in the first half
of the year. With the conclusion of all joint venture
drilling in 2016, Bellatrix retains flexibility in 2017 to balance
infill development drilling and expanded core area development
focused on growing production, adding reserves, and increasing our
inventory of development drilling locations. Bellatrix is
pleased to announce preliminary 2017 development program results
including the:
- 100/1-30-44-09W5 one mile Spirit
River (100% working interest) well IP40: 18.1 MMcf/d
- 102/1-6-45-09W5 one mile Spirit
River (100% working interest) well IP30: 11.6 MMcf/d
- 102/1-19-44-09W5 one mile Spirit
River (67% working interest) well IP25: 14.5 MMcf/d
- 102/16-30-44-09W5 one mile Spirit
River (100% working interest) well IP10: 11.9 MMcf/d
Additionally, Bellatrix recently drilled the 100/1-30-45-09W5
one mile Cardium (100% working interest) well in the Alder Flats area. The well was drilled
within the bioturbated reservoir sandstones of the Cardium
formation to optimize potential well deliverability. A 25
stage cemented liner system was utilized, and the well was
completed using a 625 tonne slickwater fracture stimulation (25
tonnes per stage). The well was turned over to production in
early March, with an average IP8 producing day rate of 810 boe/d
(30% liquids).
TOTAL NET DEBT REDUCED BY $321
MILLION IN 2016
In 2016, Bellatrix remained focused on debt reduction and
liquidity enhancing initiatives. The combination of several
non-core asset dispositions, Facilities Monetization transactions,
and capital financings, have materially improved the Company's
balance sheet, reduced financing charges and interest costs,
thereby repositioning the Company to resume profitable development
and growth of its high quality asset base in 2017.
Total net debt at December 31,
2016 of $396.2 million
represented a reduction of $321.4
million or 45% of year end 2015 total net debt of
$717.6 million. The reduction
in bank debt was more pronounced; December
31, 2016 bank debt of $19.1
million represented a reduction of 94% compared to year end
2015 bank debt of $340.7
million. The significant reduction in bank debt
achieves estimated interest and financing charge savings of
approximately $15 million annually,
assuming the 2016 weighted average interest rate of 4.51% on
Bellatrix's syndicated revolving credit facilities (the "Credit
Facilities").
Based on outstanding bank debt at December 31, 2016 of $19.1
million, the Company maintains approximately $80.9 million of available liquidity on its
Credit Facilities (before deducting outstanding letters of
credit). With the completion of Bellatrix's 2016 year end
independent reserves evaluation, the Company remains active in
discussions with existing and new potential syndicate members about
establishing a new long-term revolving credit facility prior to the
next semi-annual redetermination in May of 2017. Bellatrix
maintains a well-managed long term debt profile; other than the
$19.1 million outstanding on the
Credit Facilities at year end 2016, the Company has no debt
maturities until May 2020 and
September 2021.
ALDER FLATS PLANT ACHIEVES
96% CAPACITY UTILIZATION IN THE FOURTH QUARTER
The Alder Flats Plant averaged 96% capacity utilization through
its first 18 months of continuous operation and this trend
continued in the fourth quarter of 2016. An efficient and reliable
addition to the Company's strategic infrastructure network in the
greater Ferrier core area, the Alder Flats Plant provides Bellatrix
with financial and operational advantages.
MAINTAINED STRONG OPERATIONAL PERFORMANCE
Bellatrix delivered strong operational momentum and performance
in 2016. Full year average annual production of 35,677 boe/d (72%
natural gas weighted) was in line with the Company's guidance range
notwithstanding weather related delays to field operations in the
fourth quarter and the impact to volumes associated with the
non-core Harmattan and Pembina asset dispositions completed in the
fourth quarter. Bellatrix's production and marketing groups
actively mitigated system wide curtailments of take away capacity
on the NGTL system and the impact of unplanned third party plant
downtime during the year. Full year exploration and
development net capital spending of $78.7
million was within 2% of guidance of $77 million.
Full year production expenses averaged $8.70/boe, slightly above guidance of
$8.50/boe. The modest increase in
production expenses was primarily attributable to the fixed cost
structure associated with the Facilities Monetization transactions
and a decrease in volumes over the period, but was mitigated by
cash cost savings delivered through operational optimization and
cost suppression initiatives.
2016 Actual
Performance versus Guidance
|
|
2016
Results
|
2016
Guidance
|
Actual Versus
Guidance
|
Average daily
production (boe/d)
|
|
|
|
|
Low range
|
35,677
|
35,500
|
-
|
|
High range
|
35,677
|
36,500
|
-2%
|
Average product
mix
|
|
|
|
|
Crude oil, condensate
and NGLs (%)
|
28
|
27
|
+1%
|
|
Natural gas
(%)
|
72
|
73
|
-1%
|
Net capital spending
($ millions) (1)
|
79
|
77
|
+2%
|
Expenses
($/boe)
|
|
|
|
|
Production
|
8.70
|
8.50
|
+2%
|
(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.
|
EFFICIENCY GAINS AND CAPITAL COST REDUCTIONS
Bellatrix was successful in further capital cost reductions and
operational optimization efforts in 2016, embracing technological
improvements and leveraging advancements made in prior years which
are expected to deliver sustained efficiency gains into the
future. Bellatrix has established itself as a premier
operator in west central Alberta, continuously delivering top tier
well results from the Spirit River, and was an industry pioneer in
development of the Cardium formation specifically targeting the
bioturbated zone for maximum deliverability and profitability from
its wells. In 2016, Bellatrix drilled 19 gross (12.9 net)
operated Spirit River wells,
drilling a total of 77,089 meters including 27,885 meters of
horizontal length. All-in (drill, complete, equip and tie-in)
well costs in 2016 averaged $3.8
million, down 27% compared to 2014 levels, and down 2% year
over year. Cost improvements were achieved across drilling
and completion activities despite a 12% increase in average
horizontal length per well (162 meters longer) and a 6% increase in
average frac size (tonnage) in 2016 compared to 2015.
Efficiency improvements continued in 2016, which provide the
foundation for continued cost suppression and insulation against
potential service cost inflation pressure. In 2016, Bellatrix
achieved an average time of 14 days from spud to rig release, down
26% compared to 2014 levels and a 4% improvement year over
year. Most important, is obtaining cash flow from investment
activity quickly and efficiently; to that end Bellatrix improved on
its already industry leading spud to on-stream delivery for its
Spirit River program to 34 days in
2016, a 19% improvement year over year and significantly ahead of
industry peers. Return on capital employed and cash flow
reinvestment remain paramount to our business; the efficiency gains
achieved in 2016 provide confirmation of Bellatrix's continued
focus on efficiency improvements.
BOARD OF DIRECTOR AND MANAGEMENT CHANGES
As previously announced, on February 6,
2017 Mr. Doug Baker resigned
as a member of the Board of Directors and on February 15, 2017, Mr. Raymond Smith retired as member of the Board of
Directors. Additionally, Mr. Melvin
Hawkrigg has resigned from the Board of Directors for
personal reasons; Mr. Hawkrigg was previously a member of the
Company's Audit Committee. Mr. Keith
Macdonald, a current Board member and former member of the
Audit Committee, has taken Mr. Hawkrigg's place on that committee
effective March 10, 2017. On
behalf of the entire Board of Directors and management, I wish to
thank Messrs. Baker, Smith, and Hawkrigg for their stewardship,
guidance and contributions during their years of service and wish
them best in their future endeavours. On February 6, 2017 Bellatrix announced the
appointment of Mr. Tom MacInnis to
the Board and as a member of the Audit Committee. Mr. MacInnis is a
seasoned energy-focused financial executive, most recently as Head
of Financial Markets for National Bank Financial where he was
responsible for leading the firm's global energy
practice.
Bellatrix is pleased to announce the following management
changes, effective March 15,
2017. Mr. Charles Kraus, the
Company's current Vice President, General Counsel & Corporate
Secretary, has been promoted to Executive Vice President, and will
otherwise continue in his role as the Company's General Counsel
& Corporate Secretary. Mr. Garrett Ulmer has been promoted to Chief
Operating Officer from his previous position as Vice President,
Engineering. Finally, Mr. Robert
Lee has been appointed Vice President, Marketing. Mr.
Lee was previously Director, Marketing & Commercial with
Bellatrix.
OPERATIONAL AND FINANCIAL HIGHLIGHTS
- Bellatrix completed another successful organic development
program in 2016, demonstrating a 100% success rate through the
drill bit and delivering another strong year of consistent
operational results and technical work. See the March 7, 2017 news release announcing Bellatrix's
2016 year end reserves for additional information on the Company's
year-end reserves information.
- Production volumes in the fourth quarter of 2016 averaged
31,888 boe/d (72% natural gas weighted) contributing to full year
2016 average production volumes in 2016 of 35,677 boe/d, meeting
the Company's guidance. Production levels in the fourth quarter
2016 declined from third quarter 2016 levels, reflecting the impact
from the Pembina asset disposition, and the Harmattan asset
disposition completed in December. The Company was able to
proactively manage system wide interruptible and firm takeaway
constraints through the utilization of its strategic infrastructure
including the Alder Flats Plant which averaged 96% capacity
utilization in the fourth quarter of 2016.
- Cash capital expenditures were $24.8
million in the fourth quarter of 2016 and $78.9 million during the full 2016 calendar year.
However, total net capital expenditures were negative $246.2 million in 2016 as the monetization of
certain production facilities and the sale of a 35% minority
interest of the Alder Flats Plant ("Alder Flats Plant Sale")
(referred to together as, the "Facilities Monetization"), and the
Harmattan and Pembina asset dispositions more than offset capital
investments made during the year. The $47
million consideration received on the non-core Pembina asset
disposition included marketable securities with a fair value of
$5 million as at the date of the
transaction. The $80 million
consideration received from the Harmattan asset disposition
included a $15 million vendor take
back loan receivable ("VTB Loan"). The VTB Loan bears interest at
10% per annum and is secured by a first lien charge against the
sold assets.
- In October 2016, Bellatrix issued
8,474,576 common shares on a "flow-through" basis in respect of
Canadian Development Expenses ("CDE") at a price of $1.18 per share resulting in gross proceeds of
$10 million. Proceeds were used to
partially finance the Company's drilling and complete expenditures
during the remainder of 2016.
- The fourth quarter of 2016 marked the fifth consecutive quarter
Bellatrix reduced total net debt. Compared to third quarter 2016
levels, Bellatrix reduced bank debt by $100.6 million or 84%. At December 31, 2016, Bellatrix reduced outstanding
bank debt to $19.1 million and total
net debt to $396.2 million
representing year over year reductions of 94% and 45%,
respectively. The total net debt was reduced as proceeds from
non-core dispositions were used to decrease the outstanding bank
indebtedness during the fourth quarter.
- At December 31, 2016, Bellatrix
had $80.9 million of undrawn capacity
(approximately 81% undrawn) on its Credit Facilities, excluding
outstanding letters of credit of $13.1
million that reduce the amount otherwise available to be
drawn on the facilities.
- For the year ended December 31,
2016, Bellatrix's Senior Debt to EBITDA (as defined below)
ratio was 1.57 times, well below the financial covenant of 3.5
times as permitted by the Credit Facilities.
- Production expenses in the fourth quarter 2016 averaged
$10.57/boe. Fourth quarter 2016
production expenditures included approximately $1.3 million ($0.46/boe) of one-time adjustments related to
maintenance and overhauls of facilities. Production expenditures
are expected to decline during 2017 and average $9.00/boe during the year, given cost suppression
initiatives and increased production volumes which reduce overall
production expenditures on a per unit of production basis.
- The corporate royalty rate in the three months ended
December 31, 2016 averaged 12% of
sales (after transportation), compared to 8% in the first nine
months of 2016. Higher average royalty rates over the comparative
periods reflect higher commodity prices, and decreased gas cost
allowance ("GCA") credits associated with prior period Facilities
Monetization transactions completed in 2016.
- Net general and administrative ("G&A") expenses (after
capitalized costs and recoveries) for the three months and year
ended December 31, 2016 were
$5.0 million ($1.72/boe) and $19.9
million ($1.53/boe), compared
to $4.4 million ($1.18/boe) and $23.4
million ($1.55/boe) in the
comparative 2015 periods, respectively. Bellatrix achieved a
material reduction in gross G&A costs as workforce reductions,
and cost savings initiatives resulted in a $9.8 million decrease in 2016 compared to 2015
levels. The reduction in gross G&A expenses more than offset
lower cost recoveries from partners associated with reduced capital
spending levels resulting in an overall reduction in net G&A
expenditures.
- The corporate operating netback (including risk management)
realized for the three months ended December
31, 2016 was $8.11/boe. Before
risk management, the fourth quarter 2016 operating netback was
$8.87/boe, an increase of 56%
compared to the $5.67/boe netback
realized in the first nine months of 2016 reflecting improved
realized commodity prices over the comparable periods.
- In the fourth quarter of 2016, Bellatrix drilled 5 gross (5.0
net) Spirit River liquids-rich
natural gas wells, resulting in a total of 19 (12.9 net)
Spirit River liquids-rich natural
gas wells drilled in 2016. Bellatrix also concluded all drilling
associated with the joint venture partnership with Grafton Energy
Co I Ltd. in 2016. While the joint venture was beneficial in
accelerating the development plan of the Company's asset base, its
conclusion is expected to provide greater flexibility and improved
working interest ownership of planned organic drilling
opportunities in 2017.
- The net profit for the three months ended and net loss for the
year ended December 31, 2016 were
$23.1 million and $26.7 million, respectively. This compares to the
net loss of $444.2 million incurred
in the year ended 2015. The decrease in net loss year over year is
due to a non-cash impairment reversal recognized in the current
period of $264 million, as compared
to a non-cash impairment loss in the prior period of $475 million.
- Funds flow from operations generated in the three months ended
December 31, 2016 was $8.4 million ($0.03
per basic and diluted share), a decrease of 71% from $29.7 million ($0.15 per basic and diluted share) in the fourth
quarter of 2015. Cash flow from operating activities was
$17.1 million in the fourth quarter
2016 ($0.07 per basic and diluted
share) a decrease of 59% from $42.0
million ($0.22 per basic and
diluted share) in the fourth quarter of 2015. Funds flow from
operations generated in the year ended December 31, 2016 was $40.9 million ($0.19 per basic and diluted share), a decrease of
63% from $109.5 million ($0.57 per basic and diluted share) in the
comparative 2015 period. Cash flow from operating activities for
the year ended December 31, 2016 was
$37.5 million ($0.18 per basic and diluted share) a decrease of
64% from $103.1 million ($0.54 per basic and diluted share) in the
comparative 2015 period.
- Total revenue decreased by 32% to $227.9
million for 2016, compared to $333.3
million realized in 2015 mainly attributable to the
aforementioned reduction in commodity prices for oil, NGLs and
natural gas in the comparative periods.
- As at December 31, 2016,
Bellatrix had approximately 180,203 net undeveloped acres of land
in Alberta, British Columbia, and Saskatchewan.
- At December 31, 2016, the net
non-cash impairment recovery of $264
million was recognized in the fourth quarter of 2016, mainly
as a result of strong positive technical revisions and infill
drilling additions in 2016.
- At December 31, 2016, Bellatrix
had approximately $1.45 billion in
tax pools available for deduction against future income.
OUTLOOK
In January 2017, Bellatrix
announced a three year strategic outlook and development plan,
including a return to profitable growth. The Company's plans
are supported by an active risk management program designed to
mitigate the impact of commodity price volatility. Our
focused capital investment into high rate of return drilling
projects and near term infrastructure investments that deliver high
value liquids extraction capability and production expense
reductions, provide the foundational support to execute on our
three year development plan.
In 2017, Bellatrix plans to expand its drilling efforts across
our core west central Alberta acreage including expanded
development of the Spirit River formation in the Willesden Green
area, following on our success in the Ferrier area. With
the improvement in oil and natural gas liquids pricing relative to
2016, a number of Cardium opportunities begin to compete for
capital investment. Our first half capital program includes one gas
weighted Cardium well in the Ferrier area, and one oil weighted
Cardium well in the Alder Flats
area. With the completion of joint venture programs, Bellatrix has
strategically reviewed its drilling program to optimize capital
investment, forecast rates of return, and long term net asset value
and reserve growth potential. Bellatrix maintains a balanced
portfolio of natural gas and oil weighted investment opportunities
and at current commodity prices remains focused on development of
the Spirit River liquids-rich natural gas play which is expected to
provide the value enhancing growth platform for the Company in its
three year development plan, with the Cardium oil weighted
opportunities providing additional value as we move through the
commodity price cycle.
With two rigs currently operating, Bellatrix remains well
positioned to execute on its 2017 budget with approximately 50% of
the total $105 million capital budget
allocated to the first half of 2017. Production volumes are
expected to grow over the course of the year, resulting in exit
2016 to exit 2017 growth of 10% to 15%. Following the conclusion of
the joint venture programs in 2015 and 2016, Bellatrix intends on
honing in on organic, high working interest, and highly profitable
development drilling opportunities. In 2017, the Company
plans to drill approximately 19 net wells at an average working
interest of approximately 80%, which is up significantly from the
average working interest of 68% completed in the 2016 drill
program.
REAFFIRMED 2017 GUIDANCE
Operational execution remains paramount as the Company embarks
on delivering its 2017 objectives including 10% to 15% forecast
production growth. The 2017 guidance table below is unchanged
from the initial guidance metrics announced January 5, 2017.
|
|
|
2017
Guidance
|
Production
(boe/d)
|
|
|
2017 Exit
production
|
35,000
|
|
2017 Average daily
production
|
33,500
|
Average product
mix
|
|
|
Natural gas
(%)
|
76
|
|
Crude oil, condensate
and NGLs (%)
|
24
|
Net capital
expenditures ($ millions) (1)
|
$105
|
Production expense
($/boe) (2)
|
$9.00
|
(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 partners
35% share of the cost of construction of Phase 2 of the Alder Flats
Plant during calendar 2017.
|
(2)
Production expenses before net processing
revenue/fees
|
The culmination of transactions and deleveraging activities in
2016 has strategically repositioned the Company to grow production,
cash flow, and value in 2017 and beyond. Management is
focused on executing on our sustainable growth strategy and
delivering value for our shareholders. I want to personally
thank our employees for their tireless efforts as we embark on
executing our plan, and delivering on our promises. To our
shareholders and stakeholders, we thank you for your long term
support; we remain steadfast in our resolve to build on our
strengths, seize attractive opportunities, and expand on the
foundation we have in place for sustainable long term value
creation.
("Brent A. Eshleman")
Brent A. Eshleman, P.Eng.
President and CEO
March 14, 2017
OPERATIONAL REVIEW
Sales
Volumes
|
|
|
Three months
ended
December
31,
|
Year
ended
December
31,
|
|
|
2016
|
2015
|
2016
|
2015
|
|
Crude oil and
condensate
|
(bbl/d)
|
2,798
|
4,281
|
3,417
|
4,853
|
|
NGLs (excluding
condensate)
|
(bbl/d)
|
6,195
|
7,603
|
6,518
|
7,145
|
Total crude oil,
condensate, and NGLs
|
(bbl/d)
|
8,993
|
11,884
|
9,935
|
11,998
|
|
Natural
gas
|
(mcf/d)
|
137,372
|
172,923
|
154,453
|
176,658
|
Total sales volumes
(6:1 conversion)
|
(boe/d)
|
31,888
|
40,705
|
35,677
|
41,441
|
Sales volumes for the three months ended December 31, 2016 averaged 31,888 boe/d, a
decrease of 22% from an average of 40,705 boe/d realized in the
fourth quarter of 2015. The weighting towards crude oil,
condensate and NGLs for the three months ended December 31, 2016 was 28%, compared to 29% in the
fourth quarter of 2015. Sales volumes for the year ended
December 31, 2016 decreased by 14% to
average 35,677 boe/d compared to 41,441 boe/d in 2015. Total
crude oil, condensate and NGLs averaged approximately 28% of sales
volumes for 2016, compared to 29% in 2015.
Total sales volumes between the three month periods ended
December 31, 2015 and December 31, 2016 declined due to non-core
dispositions completed in the fourth quarter of 2016 in the Pembina
and Harmattan areas as well as reduced drilling activity through
2015 and 2016 in response to the volatile and challenging commodity
price environment, as the Company focused on maintaining financial
strength and liquidity as well as optimization of capital
investments.
Full year 2016 average production levels met guidance
notwithstanding system-wide curtailments of take-away capacity on
the NGTL system, third party plant constraints and unplanned
downtime, and the impact from the Pembina area and Harmattan area
non-core asset dispositions. Bellatrix focused operational activity
in 2016 on optimization of existing assets, offsetting base
declines and maximizing cash flow. Optimization of operations has
improved Bellatrix's ability to mitigate downtime, reduce declines,
and reduce operating costs across its operating areas. By improving
wellbore dynamics through optimization projects, daily rates are
maximized and base production declines have flattened. Gathering
system optimization was achieved through system modelling and
subsequent redirection of hydrocarbon flows which have maximized
deliverability throughout the Company's gathering system.
Utilization remained strong at the Bellatrix Alder Flats Plant
in the fourth quarter of 2016, contributing to an average capacity
utilization rate achieved both in the fourth quarter 2016 and over
the trailing 18 month period of 96%. Bellatrix completed the
installation and migration of its Distributed Control System in
September 2016, which has provided
increased reliability and operational control. The Alder
Flats Plant continues to provide strategic benefits to Bellatrix
including reduced operating costs, improved deep-cut liquids
extraction, and reliability of processing including the ability to
re-direct additional natural gas volumes during periods of third
party facility constraints and unplanned downtime.
Drilling Activity
- 2016
|
|
Three months
ended
December 31,
2016
|
Year
ended
December 31,
2016
|
|
Gross
|
Net
|
Success
Rate
|
Gross
|
Net
|
Success
Rate
|
Spirit River
liquids-rich natural gas
|
5
|
5.0
|
100%
|
19
|
12.9
|
100%
|
Total
|
5
|
5.0
|
100%
|
19
|
12.9
|
100%
|
|
|
Drilling Activity
- 2015
|
|
Three months
ended
December 31,
2015
|
Year
ended
December 31,
2015
|
|
Gross
|
Net
|
Success
Rate
|
Gross
|
Net
|
Success
Rate
|
Cardium
oil
|
-
|
-
|
-
|
3
|
1.3
|
100%
|
Spirit River
liquids-rich natural gas
|
5
|
2.3
|
100%
|
24
|
12.4
|
100%
|
Total
|
5
|
2.3
|
100%
|
27
|
13.7
|
100%
|
During the fourth quarter of 2016, Bellatrix drilled 5 gross
(5.0 net) Spirit River
liquids-rich gas wells. In the year ended December 31, 2016, Bellatrix posted a 100%
success rate, drilling and/or participating in 19 gross (12.9 net)
Spirit River liquids-rich gas
wells. The Company continues to focus capital investment in
its low-cost Spirit River natural
gas play, which continues to deliver strong returns at current
natural gas and liquids prices.
Capital Expenditures
During the three months ended December
31, 2016, Bellatrix invested $24.6
million in exploration and development capital projects,
excluding property acquisitions and dispositions, compared to
$16.8 million in the same period in
2015. Bellatrix invested $78.7
million in exploration and development projects, excluding
property acquisitions and dispositions during the year ended
December 31, 2016, compared to
$155.2 million in 2015.
Capital
Expenditures
|
|
Three months
ended
December
31,
|
Year
ended
December
31,
|
($000s)
|
2016
|
2015
|
2016
|
2015
|
Lease acquisitions
and retention
|
768
|
1,736
|
2,635
|
5,317
|
Geological and
geophysical
|
258
|
14
|
336
|
661
|
Drilling and
completion costs
|
22,994
|
5,626
|
62,958
|
61,454
|
Facilities and
equipment
|
620
|
9,399
|
12,731
|
96,358
|
Property transfers –
cash
|
-
|
-
|
-
|
(8,639)
|
|
Capital – exploration
and development (1)
|
24,640
|
16,775
|
78,660
|
155,151
|
Capital – corporate
assets (2)
|
172
|
153
|
230
|
3,440
|
Property
acquisitions
|
(13)
|
287
|
(9)
|
1,036
|
|
Total capital
expenditures – cash
|
24,799
|
17,215
|
78,881
|
159,627
|
Property dispositions
– cash (3)
|
(105,206)
|
(5,129)
|
(299,058)
|
(15,436)
|
|
Total net capital
expenditures – cash
|
(80,407)
|
12,086
|
(220,177)
|
144,191
|
Property acquisitions
– non-cash
|
-
|
-
|
29,178
|
-
|
Property dispositions
– non-cash (4)
|
(21,309)
|
-
|
(21,309)
|
-
|
Other – non-cash
(5)
|
(36,224)
|
2,594
|
(33,886)
|
8,613
|
Total
non-cash
|
(57,533)
|
2,594
|
(26,017)
|
8,613
|
Total capital
expenditures – net (6)
|
(137,940)
|
14,680
|
(246,194)
|
152,804
|
(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)
Property dispositions – cash does not include transaction
costs.
|
(4) Property dispositions –
non-cash includes marketable securities and loans receivable
received on the Pembina and Harmattan asset dispositions. Pursuant
to the Pembina asset sale, the Company received 2,171,667 common
shares of InPlay Oil. Corp with a fair value of $5 million as at
the date of the transaction. The loan receivable consists of the
$15 million VTB Loan received pursuant to the Harmattan asset sale.
The VTB Loan bears interest at 10% per annum and is secured by a
first lien charge against the sold assets.
|
(5)
Other includes non-cash adjustments
for the current period's decommissioning liabilities and share
based compensation.
|
(6)
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 and dispositions, adjustments to the Company's
decommissioning liabilities, and share based
compensation.
|
During the fourth quarter of 2016, Bellatrix completed two asset
dispositions. Firstly, Bellatrix completed the Pembina
property sale for total consideration of $47
million, consisting of approximately $42 million in cash and 2,171,667 common shares
of the purchaser with a fair value of $5
million at the time of sale. Secondly, Bellatrix
completed the Harmattan property sale for total consideration of
$80 million. Pursuant to the
Harmattan asset sale, the Company received net cash proceeds of
approximately $65 million, and made a
$15 million vendor take back loan
("VTB Loan") to the purchaser. The VTB Loan bears interest at 10%
per annum and is secured by a first lien charge against the assets
sold. The terms of the VTB Loan also provide that a minimum
of 50% of the net operating income from the assets sold will be
earmarked for principal repayment on a quarterly basis, together
with accrued interest. The VTB Loan has a 2 year maturity date and
no prepayment penalties. The VTB Loan is a loan receivable at
December 31, 2016, with an estimate
of the current portion of the loan receivable of $6.2 million and $8.8
million as a long term loan receivable. The net cash
proceeds from the Pembina and the Harmattan property sales were
used to reduce the Company's outstanding bank debt.
Bellatrix focused its capital activity in the fourth 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 second quarter 2018.
Non-Cash Impairment Recovery
As a result of strong positive technical reserve revisions and
infill drilling additions, Bellatrix recognized a $264 million non-cash impairment recovery for the
quarter ended December 31,
2016. These non-cash recoveries did not affect the Company's
cash flows. Additional details regarding the non-cash
impairment charges are available in the Company's 2016 Year End
MD&A.
Undeveloped Land
At December 31, 2016, Bellatrix
had approximately 180,203 undeveloped acres of land in Alberta, British
Columbia, and Saskatchewan.
FINANCIAL REVIEW
Cash Flow from
Operating Activities, Funds Flow from Operations, and Net Profit
(Loss)
|
|
Three months
ended
December
31,
|
Year
ended
December
31,
|
($000s, except per
share amounts)
|
2016
|
2015
|
2016
|
2015
|
Cash flow from
operating activities
|
17,114
|
42,033
|
37,546
|
103,075
|
|
Basic
($/share)
|
0.07
|
0.22
|
0.18
|
0.54
|
|
Diluted
($/share)
|
0.07
|
0.22
|
0.18
|
0.54
|
Funds flow from
operations
|
8,437
|
29,653
|
40,916
|
109,485
|
|
Basic
($/share)
|
0.03
|
0.15
|
0.19
|
0.57
|
|
Diluted
($/share)
|
0.03
|
0.15
|
0.19
|
0.57
|
Net profit
(loss)
|
23,085
|
(356,631)
|
(26,668)
|
(444,208)
|
|
Basic
($/share)
|
0.09
|
(1.86)
|
(0.12)
|
(2.31)
|
|
Diluted
($/share)
|
0.09
|
(1.86)
|
(0.12)
|
(2.31)
|
The overall weak global commodity price environment continued
through the fourth quarter of 2016, significantly impacting funds
flow from operations 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's cash flow from operating activities for the three
months ended December 31, 2016
decreased by 59% to $17.1 million
($0.07 per basic and diluted share)
from $42.0 million ($0.22 per basic and diluted share) generated in
the fourth quarter of 2015. Bellatrix generated funds flow
from operations of $8.4 million
($0.03 per basic and diluted share)
in the fourth quarter of 2016, a decrease of 72% from $29.7 million ($0.15 per basic and diluted share) generated in
the comparative 2015 period.
Bellatrix's cash flow from operating activities for the year
ended December 31, 2016 decreased by
64% to $37.5 million ($0.18 per basic and diluted share) from
$103.1 million ($0.54 per basic and diluted share) generated
during the 2015 year. Bellatrix generated funds flow from
operations of $40.9 million
($0.19 per basic and diluted share)
in the year ended December 31, 2016,
a decrease of 63% from $109.5 million
($0.57 per basic and diluted share)
generated in 2015.
For the three months ended December 31,
2016, Bellatrix recognized net profit of $23.1 million ($0.09 per basic share and diluted share),
compared to a net loss of $356.6
million ($1.86 per basic and
diluted share) in the fourth quarter of 2015. Bellatrix recognized
net loss of $26.7 million
($0.12 per basic share and diluted
share) for the year ended December 31,
2016, compared to a net loss of $444.2 million ($2.31 per basic share diluted share) in
2015.
Operating Netback
– Corporate
|
|
Three months
ended
December
31,
|
Year
ended
December
31,
|
($/boe)
|
2016
|
2015
|
2016
|
2015
|
Total revenue
(1)
|
23.15
|
19.25
|
17.45
|
22.03
|
Production
|
(10.57)
|
(6.87)
|
(8.70)
|
(7.86)
|
Transportation
|
(1.07)
|
(0.72)
|
(0.93)
|
(1.13)
|
Royalties
|
(2.64)
|
(0.86)
|
(1.43)
|
(2.21)
|
Operating netback
before risk management
|
8.87
|
10.80
|
6.39
|
10.83
|
Risk management gain
(loss)
|
(0.76)
|
1.41
|
1.52
|
0.47
|
Operating netback
after risk management
|
8.11
|
12.21
|
7.91
|
11.30
|
(1)
Total revenue includes petroleum and natural gas sales and other
income
|
The operating netback before commodity price risk management
contracts for crude oil, condensate, NGLs, and natural gas during
the fourth quarter of 2016 averaged $8.87/boe, a decrease of 18% from the
$10.80/boe realized during the same
period in 2015. For the year ended December 31, 2016, the corporate operating
netback (before commodity risk management contracts) was
$6.39/boe, a decrease of 41% compared
to $10.83/boe in the 2015
year.
Total revenue decreased by 6% to $67.9
million for the three months ended December 31, 2016, compared to $72.1 million realized in the fourth quarter of
2015. Total revenue from crude oil, condensate, and NGLs
contributed 38% of total fourth quarter 2016 revenue before other
income, royalties, and commodity price risk management contracts,
compared to 40% in the three months ended December 31, 2015.
In the three months ended December 31,
2016, production expenses totaled $31.0 million ($10.57/boe), compared to $25.7 million ($6.87/boe) recorded in the same period of
2015. Fourth quarter 2016 production expenditures included
approximately $1.3 million
($0.46/boe) of one-time adjustments
related to maintenance and overhauls of facilities.
Production expenses totaled $113.6
million ($8.70/boe) for the
year ended December 31, 2016,
compared to $118.9 million
($7.86/boe) in the 2015 year.
The variance in the production expenses for year ending
December 31, 2016 from December 31, 2015, was primarily attributable to
the fixed costs structure associated with the Facilities
Monetization transactions combined with a decrease in volumes over
the period, but were mitigated by operational optimization and cost
suppression initiatives through leveraging technology resulting in
cash cost reductions. The operations team focused on optimization
initiatives including plunger lift installations, wellbore
cleanouts, and pipeline optimization efforts all directed towards
growing volumes, attenuating base decline rates and increasing
value from every capital investment dollar spent.
For the three months ended December 31,
2016, Bellatrix incurred royalties of $7.7 million, compared to $3.2 million in the fourth quarter of 2015.
Overall royalties as a percentage of revenue (after transportation
costs) in the fourth quarter of 2016 were 12% compared to 5% in the
comparative 2015 period. Higher average corporate royalty
rates period over period include the impact from higher commodity
prices as well as decreased GCA credits in the current period than
in the fourth quarter of 2015 when the Company had credits
associated with significant infrastructure and facilities
investments and as well as adjustment in fourth quarter of 2015 for
Crown recovery. In the year ended December
31, 2016, royalties incurred totaled $18.6 million, compared to $33.5 million incurred in the 2015 year.
Overall royalties as a percentage of revenue (after transportation
costs) in 2016 were 9% compared to 11% in 2015. Lower average
corporate royalty rates period over period include the impact from
lower commodity prices reflecting the "sliding scale" effect
included in the Alberta Royalty Framework.
Commodity Prices
Average Commodity
Prices
|
|
Three months
ended
December
31,
|
Year
ended
December
31,
|
|
2016
|
2015
|
%
Change
|
2016
|
2015
|
%
Change
|
|
|
|
|
|
|
|
Exchange rate
(CDN$/US$1.00)
|
1.3347
|
1.3347
|
-
|
1.3241
|
1.2764
|
4
|
|
|
|
|
|
|
|
Crude oil:
|
|
|
|
|
|
|
|
WTI
(US$/bbl)
|
49.29
|
42.16
|
17
|
43.32
|
48.76
|
(11)
|
|
Canadian Light crude
blend ($/bbl)
|
60.76
|
52.55
|
16
|
52.79
|
57.45
|
(8)
|
Bellatrix's average
realized prices ($/bbl)
|
|
|
|
|
|
|
|
|
Crude oil and
condensate
|
58.12
|
48.76
|
19
|
48.41
|
54.34
|
(11)
|
|
|
NGLs (excluding
condensate)
|
18.87
|
12.99
|
45
|
13.14
|
14.16
|
(7)
|
|
|
Total crude oil and
NGLs
|
31.08
|
25.88
|
20
|
25.27
|
30.41
|
(17)
|
|
|
Crude oil and
condensate (including risk management (1))
|
57.46
|
58.67
|
(2)
|
47.81
|
58.76
|
(19)
|
|
|
|
|
|
|
|
Natural
gas:
|
|
|
|
|
|
|
|
NYMEX
(US$/MMBtu)
|
2.98
|
2.23
|
34
|
2.46
|
2.63
|
(6)
|
|
AECO daily index
(CDN$/mcf)
|
3.09
|
2.46
|
26
|
2.16
|
2.69
|
(20)
|
|
AECO monthly index
(CDN$/mcf)
|
2.81
|
2.65
|
6
|
2.09
|
2.77
|
(25)
|
Bellatrix's average
realized prices ($/mcf)
|
|
|
|
|
|
|
|
|
Natural
gas
|
3.29
|
2.66
|
24
|
2.27
|
2.95
|
(23)
|
|
|
Natural gas
(including risk management (1))
|
3.13
|
2.75
|
14
|
2.64
|
2.94
|
(10)
|
(1) Per unit metrics
including risk management include realized gains or losses on
commodity contracts and exclude unrealized gains or losses on
commodity contracts
|
Global crude oil prices strengthened in the fourth quarter of
2016 as the Organization of the Petroleum Exporting Countries
("OPEC") agreed to production cuts by up to 1.2 million barrels per
day to support higher crude prices. Additionally, non-OPEC
countries including Russia,
Kazakhstan and Oman agreed collectively to output cuts of
over 550,000 barrels per day. This collaborative effort
between OPEC and non-OPEC producing countries provided support to
oil prices with cuts aimed at stabilizing the global supply/demand
balance and reducing robust levels of global crude product
inventories. The production cut announcements drove an
increase in WTI pricing to US$53.72/bbl at December
31, 2016, up from the low point in the fourth quarter 2016
of US$42.20/bbl experienced in
November.
North American natural gas prices firmed in the fourth quarter
2016 compared to the comparative period in 2015 and also compared
to the third quarter 2016, given a cold start to the winter heating
season which helped to reduce natural gas storage levels after
reaching record levels in the fall of 2016. Total U.S.
natural gas production waned through 2016 given weaker prices
earlier in the year; lower industry activity levels reflected a
slower supply response given backwardation in the forward pricing
market. Total U.S. natural gas exports (excluding
Canada) grew through 2016,
reaching record levels of over 5.0 Bcf/d, mainly attributable to
growing liquefied natural gas ("LNG") shipments and increased
exports to Mexico over the
period. Higher Alberta natural
gas demand in the fourth quarter helped to reduce provincial
storage levels and provided support for an improved AECO daily
price in the fourth quarter of 2016.
In the fourth quarter of 2016 Bellatrix realized an average
price of $58.12/bbl before commodity
price risk management contracts for crude oil and condensate, an
increase of 19% from the average price of $48.76/bbl received in the fourth quarter of
2015. By comparison, Canadian Light crude blend price
increased by 16% and the average WTI crude oil benchmark price
increased by 17% between the fourth quarters of 2016 and
2015. The WTI/Canadian Light sweet differential has remained
in a historically tight range, averaging -$3.12 US/bbl for the quarter. During the year
ended December 31, 2016, Bellatrix
realized an average price for crude oil and condensate of
$48.41/bbl before commodity price
risk management contracts, a decrease of 11% from the average price
of $54.34/bbl received in the 2015
year. By comparison Bellatrix's realized price decreased in
line with industry, the Canadian Light price decreased by 8% and
the average WTI crude oil benchmark price decreased by 11% between
the 2016 and 2015 years.
Bellatrix's average realized price for NGLs (excluding
condensate) increased by 45% to $18.87/bbl during the fourth quarter of 2016,
compared to $12.99/bbl received in
the 2015 period. NGL pricing in Western
Canada improved significantly through the fourth quarter
given stronger underlying light oil prices and improved individual
market conditions for propane and butane products. Cold
weather through the fourth quarter kept North American propane
demand firm, while exports helped materially reduce robust storage
levels resulting in much stronger propane prices through the fourth
quarter 2016. Butane prices also firmed materially in the
fourth quarter 2016 both in absolute terms and as a percentage of
light oil, given strong gasoline blending demand and export
demand. Bellatrix's average realized price for NGLs
(excluding condensate) decreased by 7% to $13.14/bbl during the 2016 year, compared to
$14.16/bbl received in the 2015
year.
Natural gas prices increased during the fourth quarter of 2016
given strong demand and lower U.S. production which reduced high
storage levels. 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 AECO daily index. During the fourth quarter of 2016,
the AECO daily reference price increased by 26% and the AECO
monthly reference price increased by approximately 6% compared to
the fourth quarter of 2015. Bellatrix's natural gas average
sales price before commodity price risk management contracts for
the fourth quarter of 2016 increased by 24% to $3.29/mcf compared to $2.66/mcf in the same period in 2015.
Bellatrix's natural gas average price after including commodity
price risk management contracts for the three months ended
December 31, 2016 averaged
$3.13/mcf compared to $2.75/mcf in the comparative 2015 period.
During the year ended December 31,
2016, the AECO daily reference price decreased by 20% and
the AECO monthly reference price decreased by approximately 25%
compared to the 2015 year. Bellatrix's natural gas average
sales price before commodity price risk management contracts for
the 2016 year decreased by 23% to $2.27/mcf compared to $2.95/mcf in 2015. Bellatrix's natural gas
average price after including commodity price risk management
contracts for the year ended December 31,
2016 averaged $2.64/mcf
compared to $2.94/mcf in 2015.
Bellatrix was active in the fourth quarter of 2016 increasing its
2017 risk management protection, subsequently adding additional
commodity price protection subsequent to quarter end with
approximately 66% of 2017 gross natural gas volumes hedged at an
average fixed price of approximately $3.36/mcf.
Debt
Bank Debt
At December 31, 2016, the Company
had $19.1 million outstanding under
the its syndicated revolving credit facilities (the "Credit
Facilities") at a weighted average interest rate of 4.45%. The
Company completed its November 2016
semi-annual borrowing base redetermination on November 7, 2016, concurrent with the closing of
the Pembina asset sale. Pursuant to the redetermination, the total
commitments under the Credit Facilities were set at $130 million. On December
21, 2016, following the completion of the $80 million Harmattan asset sale and the
application of the net proceeds therefrom, the borrowing base under
the Company's Credit Facilities was redetermined at $100 million, comprised of a $20 million operating facility provided by a
Canadian bank and a $80 million
syndicated facility provided by nine financial institutions,
subject to a borrowing base test. The maturity date of the Credit
Facility is 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. Bellatrix
maintains approximately $81 million
of available capacity based on current bank debt outstanding of
approximately $19 million (excluding
letters of credit).
At December 31, 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
December 31, 2016, the Senior Debt to
EBITDA ratio was 1.57 times.
Senior Notes
At December 31, 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.
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
December 31, 2016 was $61.1 million.
|
|
(2)
"Senior Debt" is defined as Consolidated Total Debt,
excluding any unsecured or subordinated debt (Senior Notes and
Convertible Debentures (liability component)). "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 December 31, 2016 was
$96.1 million.
|
CONFERENCE CALL INFORMATION
A conference call to discuss Bellatrix's fourth quarter and year
end results and reserves will be held on March 15, 2017 at 9:00 am
MT / 11:00 am ET. To
participate, please call toll-free 1-800-319-4610 or 403-351-0324
or 416-915-3239. The call can also be heard live through an
internet webcast accessible via the investors section of
Bellatrix's website at
http://investors.bellatrixexploration.com/webcasts and will be
archived on the website for approximately 60 days following the
call.
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
Throughout this press
release, the Company uses terms that are commonly used in the
oil and natural gas industry, but do not have a standardized
meaning presented by International Financial Reporting Standards
("IFRS") and therefore may not be comparable to the calculations of
similar measures for other entities. Management believes that the
presentation of these non-GAAP measures provide useful information
to investors and shareholders as the measures provide increased
transparency and the ability to better analyze performance against
prior periods on a comparable basis.
Operating netbacks are calculated by subtracting royalties,
transportation, and operating expenses from total revenue.
Management believes this measure is a useful supplemental measure
of the amount of total revenue received after transportation,
royalties and operating expenses. The Company's calculation of
total revenue includes petroleum and natural gas sales and other
income, and excludes commodity price risk management. 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's method of calculating this measure may
differ from other entities, and accordingly, may not be comparable
to measures used by other companies. 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.
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.
CAPITAL PERFORMANCE MEASURES
In addition to
the non-GAAP measures described above, there are also terms
that have been reconciled in the Company's financial statements to
the most comparable IFRS measures. These terms do not have any
standardized meaning prescribed by IFRS and therefore may not be
comparable with the calculations of similar measures for other
entities. These terms have been referenced in the Company's press
release, MD&A and financial statements. These terms are used by
management to analyze operating performance on a comparable basis
with prior periods and to analyze the liquidity of the
Company.
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. 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 shares for the
period.
This press release also contains the terms "total net debt"
and "adjusted working capital deficiency", which also are not
recognized measures under GAAP. Therefore reference to total net
debt and adjusted working capital deficiency, 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 obligations, long-term risk
management contract liabilities, decommissioning liabilities, and
deferred tax liabilities. Total net debt includes the
adjusted working capital deficiency, long term loans receivable,
Convertible Debentures (liability component), current bank debt and
long term bank debt. The adjusted working capital deficiency
is calculated as net working capital deficiency excluding current
risk management contract assets and liabilities, current portion of
other deferred liabilities, current portion of deferred capital
obligation and the current bank debt. Management believes
these measures are useful supplementary measures of the total
amount of current and long-term debt.
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 "position", "continue",
"opportunity", "expect", "plan", "maintain", "estimate", "assume",
"target", "believe" "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, Bellatrix's
intent to maintain focused on maintaining financial strength and
liquidity and on profitable resource development in 2017, details
of Bellatrix's net 2017 capital budget including expectation to not
exceed $105 million, expectation that
2017 capital investment will focus on Phase 2 of the Alder Flats
Plant (as defined above) and Bellatrix's core areas, expectation
that construction of Phase 2 of the Alder Flats Plant will be
completed on time and on budget, expected timing and costs
associated with completing Phase 2 of the Alder Flats Plant,
expected capacity of Phase 2 of the Alder Flats Plant, expected
annual interest savings resulting from reduced bank debt, the
intent to establish new credit facility prior to maturity date of
existing credit facilities, intent to continue to expand technical
acumen to drive sustainable efficiency gains and greater overall
corporate profitability from our capital investment projects,
expectation that capital investment into near term infrastructure
investments will deliver high value liquids extraction capability
and production expense reductions, expectation that capital
expenditures will provide foundational support to execute on our
three year development plan, expected reductions in operating costs
as a result of completion of Phase 2 of the Alder Flats Plant,
expectation of continued development focus in the Company's core
areas, expected drilling and other capital expenditure plans in
certain areas (including expected working interest in wells to be
drilled), expected annual average 2017 production of approximately
33,500 boe/d, expectation of percentage of production hedged in
2017 and 2018, expected 2017 production expenditures, expectations
of how Bellatrix will fund its 2017 capital expenditure budget,
anticipated liquidity of the Company and various matters that may
impact such liquidity, the intent that the 2017 drilling program
will optimize capital investment, forecast rates of return, and
long term net asset value and reserve growth potential, expectation
that approximately 50% of the total 2017 $105 million capital budget will be spent in the
first half of 2017, expectation that exit production volumes will
grow over the course of 2017 by approximately 10% to 15%, and the
intent that Bellatrix's hedging program will provide reduced
commodity price volatility and greater assurance over future
revenue and cash flows, 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 March 14, 2017 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 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 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 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 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.
DRILLING LOCATIONS
In this press release,
the Company has disclosed certain drilling locations associated
with Bellatrix's interest in the Spirit River and Cardium plays. Of
the 393 net Spirit River drilling
locations identified herein, 86 are proved locations, 30 are
probable locations and 277 are unbooked locations. Of the 239
net Cardium drilling locations identified herein, 107 are proved
locations, 37 are probable locations, and 95 are unbooked
locations. Proved locations and probable locations are derived from
Bellatrix's independent reserve report prepared by InSite Petroleum
Consultants Ltd as at December 31,
2016 and account for drilling locations that have associated
proved and/or probable reserves, as applicable. Unbooked locations
are internal estimates based on the Company's prospective acreage
and an assumption as to the number of wells that can be drilled per
section based on industry practice and internal review. Unbooked
locations do not have attributed reserves or resources.
Unbooked locations as disclosed herein have been identified by
management as an estimation of the Company's multi-year drilling
activities using information including 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.
INITIAL RATES OF PRODUCTION
References in
this press release to initial production rates associated with
certain wells are useful in confirming the presence of
hydrocarbons, however such rates are not determinative of the rates
at which such wells will commence production and decline thereafter
and are not indicative of long term performance or of ultimate
recovery. While encouraging, readers are cautioned not to place
reliance on such rates in calculating the aggregate production for
the Company. The Company cautions that such production rates should
be considered to be preliminary.
SOURCE Bellatrix Exploration Ltd.