TSX, NYSE: BXE
CALGARY, Aug. 10, 2017 /PRNewswire/ - Bellatrix
Exploration Ltd. ("Bellatrix" or the "Company") (TSX, NYSE: BXE)
announces its financial and operating results for the three and six
months ended June 30, 2017.
This press release contains forward-looking statements.
Please refer to our cautionary language on forward-looking
statements and the other matters set forth at the end of this press
release and the beginning of the Management's Discussion and
Analysis (the "MD&A") for the three and six months ended
June 30, 2017 and
2016. Bellatrix's unaudited condensed consolidated
financial statements and notes, and the MD&A are available on
Bellatrix's website at www.bellatrixexploration.com,
and are filed on SEDAR at www.sedar.com and on EDGAR
at www.sec.gov/edgar.
SECOND QUARTER
2017 HIGHLIGHTS
|
|
|
|
Three months
ended
June
30,
|
Six months
ended
June
30,
|
|
|
2017
|
2016
|
2017
|
2016
|
SELECTED FINANCIAL
RESULTS
|
|
|
|
|
(CDN$000s except
share, per share amounts and as otherwise indicated)
|
|
|
|
|
Cash flow from
operating activities
|
10,495
|
7,675
|
18,754
|
18,008
|
|
Per basic share
(1)
|
$0.21
|
$0.20
|
$0.38
|
$0.47
|
|
Per diluted share
(1)
|
$0.21
|
$0.20
|
$0.38
|
$0.47
|
Funds flow from
operations (2)
|
19,347
|
9,048
|
34,240
|
21,924
|
|
Per basic share
(1)
|
$0.39
|
$0.23
|
$0.69
|
$0.57
|
|
Per diluted share
(1)
|
$0.39
|
$0.23
|
$0.69
|
$0.57
|
Net profit
(loss)
|
(69,236)
|
(55,193)
|
(56,186)
|
(35,846)
|
|
Per basic share
(1)
|
($1.40)
|
($1.42)
|
($1.14)
|
($0.93)
|
|
Per diluted share
(1)
|
($1.40)
|
($1.42)
|
($1.14)
|
($0.93)
|
Capital – exploration
and development
|
11,235
|
7,766
|
55,213
|
36,784
|
Facilities
transferred
|
(5,611)
|
-
|
-
|
-
|
Capital – corporate
assets
|
989
|
23
|
1,205
|
54
|
Property
acquisitions
|
-
|
(2)
|
-
|
1
|
Capital expenditures
– cash
|
6,613
|
7,787
|
56,418
|
36,839
|
Property dispositions
– cash (3)
|
(32,354)
|
(77,704)
|
(32,354)
|
(77,829)
|
Total net capital
expenditures – cash
|
(25,741)
|
(69,917)
|
24,064
|
(40,990)
|
Property acquisitions
– non-cash
|
-
|
29,178
|
-
|
29,178
|
Other non-cash
capital items
|
(5,027)
|
(390)
|
(3,612)
|
1,554
|
Total capital
expenditures – net (4)
|
(30,768)
|
(41,129)
|
20,452
|
(10,258)
|
Credit
Facilities
|
13,100
|
314,187
|
13,100
|
314,187
|
Senior
Notes
|
315,308
|
313,279
|
315,308
|
313,279
|
Convertible
Debentures (liability component)
|
38,380
|
-
|
38,380
|
-
|
Adjusted working
capital deficiency (2)
|
15,773
|
10,559
|
15,773
|
10,559
|
Total net debt
(2)
|
382,561
|
638,025
|
382,561
|
638,025
|
Total
assets
|
1,351,623
|
1,607,674
|
1,351,623
|
1,607,674
|
Total shareholders'
equity
|
808,727
|
806,534
|
808,727
|
806,534
|
|
|
|
|
SELECTED OPERATING
RESULTS
|
|
Three months
ended
June 30,
|
Six months
ended
June 30,
|
|
|
2017
|
2016
|
2017
|
2016
|
Total revenue
(4)
|
|
74,325
|
48,285
|
140,349
|
103,443
|
Average daily sales
volumes
|
|
|
|
|
|
|
Crude oil, condensate
and NGLs
|
(bbl/d)
|
9,182
|
10,550
|
8,908
|
10,554
|
|
Natural
gas
|
(mcf/d)
|
172,402
|
164,699
|
164,602
|
166,077
|
|
Total oil
equivalent
|
(boe/d)
(5)
|
37,916
|
38,000
|
36,342
|
38,234
|
Average realized
prices
|
|
|
|
|
|
Crude oil and
condensate
|
($/bbl)
|
59.49
|
49.32
|
63.28
|
44.10
|
|
NGLs (excluding
condensate)
|
($/bbl)
|
20.57
|
13.05
|
19.42
|
11.74
|
|
Crude oil, condensate
and NGLs
|
($/bbl)
|
31.24
|
25.57
|
31.47
|
23.42
|
|
Crude oil, condensate
and NGLs (including risk management (5))
|
($/bbl)
|
31.19
|
25.33
|
31.46
|
23.26
|
|
Natural
gas
|
($/mcf)
|
2.94
|
1.50
|
2.91
|
1.75
|
|
Natural gas
(including risk management (6))
|
($/mcf)
|
3.14
|
2.34
|
3.12
|
2.38
|
|
Total oil
equivalent
|
($/boe)
(5)
|
20.94
|
13.60
|
20.88
|
14.06
|
|
Total oil equivalent
(including risk management (6))
|
($/boe)
(5)
|
21.83
|
17.19
|
21.82
|
16.74
|
|
|
|
|
|
|
|
Net wells
drilled
|
|
1.2
|
-
|
11.8
|
5.7
|
|
|
|
|
|
|
Selected Key
Operating Statistics
|
|
|
|
|
|
|
Operating netback
(4)
|
($/boe)
(5)
|
9.35
|
3.58
|
8.86
|
5.05
|
|
Operating netback
(4) (including risk management
(6))
|
($/boe)
(5)
|
10.24
|
7.17
|
9.80
|
7.73
|
|
Transportation
expense
|
($/boe)
(5)
|
1.98
|
0.87
|
1.53
|
0.90
|
|
Production
expense
|
($/boe)
(5)
|
8.30
|
8.46
|
8.81
|
7.91
|
|
General &
administrative expense
|
($/boe)
(5)
|
2.10
|
1.41
|
2.02
|
1.35
|
|
Royalties as a % of
sales (after transportation)
|
|
10%
|
8%
|
11%
|
8%
|
PRE-CONSOLIDATION
COMMON SHARES
|
|
|
|
|
Common shares
outstanding
|
246,890,127
|
212,511,486
|
246,890,127
|
212,511,486
|
Weighted average
shares (1)
|
246,666,083
|
193,770,290
|
246,626,177
|
192,867,100
|
POST CONSOLIDATION
COMMON SHARES
|
|
|
|
|
Common shares
outstanding (7)
|
49,378,026
|
42,502,297
|
49,378,026
|
42,502,297
|
Weighted average
shares (1)
|
49,333,217
|
38,754,058
|
49,325,235
|
38,573,420
|
SHARE TRADING
STATISTICS (PRE-CONSOLIDATION)(1)
|
|
|
|
|
TSX and Other
(8)
|
|
|
|
|
(CDN$, except
volumes) based on intra-day trading
|
|
|
|
|
High
|
1.13
|
1.68
|
1.37
|
1.99
|
Low
|
0.71
|
1.17
|
0.71
|
1.11
|
Close
|
0.74
|
1.27
|
0.74
|
1.27
|
Average daily
volume
|
879,237
|
2,566,699
|
921,584
|
2,309,273
|
NYSE
|
|
|
|
|
(US$, except
volumes) based on intra-day trading
|
|
|
|
|
High
|
0.85
|
1.30
|
1.03
|
1.48
|
Low
|
0.54
|
0.90
|
0.54
|
0.75
|
Close
|
0.58
|
0.99
|
0.58
|
0.99
|
Average daily
volume
|
405,658
|
727,342
|
454,937
|
1,354,830
|
(1)
Subsequent to June 30, 2017, Bellatrix completed a 5 to 1 common
share consolidation, which has been reflected in the calculation of
cash flow from operating activities per share, funds flow from
operations per share, and net loss per share for the three and six
month periods ended June 30, 2016 and 2017. As a result of the
share consolidation the Company has 49,378,026 common shares
outstanding at July 1, 2017.
|
|
Before
consolidation basic weighted average shares for the three
and six months ended June 30, 2017 were 246,666,083 (2016:
193,770,290) and 246,626,177 (2016: 192,867,100), respectively.
Post consolidation basic weighted average shares for the
three and six months ended June 30, 2017 were 49,333,217 (2016:
38,754,058) and 49,325,235 (2016: 38,573,420),
respectively.
|
|
In computing
weighted average diluted profit per share, weighted average diluted
cash flow from operating activities per share, and weighted average
diluted funds flow from operations per share for the three and six
months ended June 30, 2017, a total of nil (2016: 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 (2016: nil) common shares issuable on
conversion of the Convertible Debentures (as defined below) were
added to the denominator resulting in diluted weighted average
common shares of 49,333,217 (2016: 38,754,058) and 49,325,235
(2016: 38,573,420), 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 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)
After giving effect to the 5 to 1 common share consolidation,
fully diluted common shares outstanding for the three and six
months ended June 30, 2017 were 57,360,955 (2016: 44,805,930). This
includes 1,810,089 (2016: 2,303,633) of share options outstanding
and 6,172,840 (2016: 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 post
consolidation conversion price of $8.10 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's competitive strengths remain anchored by three
pillars that provide the foundation for long term profitable
growth: high quality assets and acreage, infrastructure ownership
and control, and takeaway capacity and market egress. The
combination of these three competitive strengths is evident in year
to date operational results. Bellatrix has surpassed guidance
expectations in both the first and second quarters of 2017, and
today announced the second consecutive quarter of upwardly revised
production guidance for 2017.
Execution of our development plan continued during the second
quarter with performance outpacing internal expectations. The
Company delivered on its objectives, including over 15% growth in
production volumes during the first half of the year, a continued
reduction in operating costs, an enhanced liquidity position, a
material reduction in total net debt, and growth in funds flow from
operations per share. Second quarter 2017 performance included the
following operational and financial achievements:
- Production volumes of 37,916 boe/d grew 9% from the previous
quarter, and represented 19% growth compared to average fourth
quarter 2016 production volumes
- Funds flow from operations of $19.3
million grew 30% compared to the previous quarter and more
than doubled compared to funds flow from operations in the fourth
quarter of 2016
- Production expenditures of $8.30/boe were reduced by $1.07/boe or 11% from the previous quarter and
down 21% compared to fourth quarter 2016 operating costs of
$10.57/boe
- Borrowings under the Credit Facilities (as defined below) were
reduced to $13.1 million at
June 30, 2017, representing a
decrease of $28.4 million or 68% from
borrowings of $41.5 million at
March 31, 2017
- Total net debt was reduced to $382.6
million at June 30, 2017, a
reduction of $52.8 million or 12%
compared to the previous quarter
THE SPIRIT RIVER IS ONE OF
NORTH AMERICA'S TOP NATURAL GAS
PLAYS
The Spirit River liquids rich natural gas play represents one of
North America's lowest supply cost
natural gas plays and delivers strong rates of return at current
natural gas prices. The Spirit River is relatively shallow compared
to other top natural gas plays resulting in lower drilling costs.
The Spirit River formation is a conventional sandstone which
requires less intensive and expensive fracture stimulation
treatments. The formation produces sweet liquids rich natural gas
and no water which contributes to low processing costs and enhanced
profitability. In 2016, the Spirit River accounted for
approximately half of all western Canada total natural gas volumes from new
wells drilled during the year. Spirit
River well results continue to rank among the best in
Alberta on a consistent basis.
According to industry data, of the top 20 natural gas wells in
Alberta, ranked by initial
production over the first 90 days ("IP90") volumes over the past
year (June 2016 to May 2017), 17 wells were produced from the Spirit
River, with one well from each of the Montney, Viking and Cardium formations. The
Spirit River remains a quiet giant given its importance to overall
Western Canadian Sedimentary Basin volume growth and its low supply
cost.
Rate of return expectations for the Spirit River continue to
rank among the highest within our portfolio of investment
opportunities, thereby attracting the majority of anticipated
capital investment in 2017. Bellatrix has proven itself as a
premier operator within the Spirit River play, consistently
delivering industry leading well productivity results. Since 2009
Bellatrix has drilled over 120 Spirit River horizontal wells with
zero dry holes. Bellatrix's well results consistently rank as some
of the best in Alberta; the
Company achieved two of the top 12 highest IP90 well productivity
results over the past year. Bellatrix operates one of the premier
acreage positions in the Spirit River play within the greater
Ferrier, Alder Flats and Willesden
Green areas of Alberta. At the current pace of development,
Bellatrix maintains an inventory of over 15 years of identified
development drilling opportunities.
INFRASTRUCTURE OWNERSHIP AND CONTROL WITH AMPLE TAKEAWAY
CAPACITY AND MARKET EGRESS
Strong operational results in both the first and second quarters
of 2017 highlight the strategic advantage Bellatrix has built
behind its infrastructure and takeaway capacity.
Infrastructure ownership, operatorship and control ensure the
operational flexibility and the reliability to profitably process
our production volumes. The investment in key strategic
infrastructure and facilities provide the processing capacity and
capability to grow net Company production volumes beyond 60,000
boe/d, with minimal future facility related capital. The
Company's foresight to secure ample takeaway capacity and market
egress has produced significant strategic benefits and underpins
our long term growth plans. Bellatrix maintains several long
term firm transportation ("FT") agreements, ensuring market egress
for current and forecast production, currently 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 also previously negotiated additional
FT capacity to accommodate increased growth volumes when Phase 2 of
the Bellatrix O'Chiese Nees-Ohpawganu'ck deep cut gas plant at
Alder Flats (the "Alder Flats
Plant") comes on-stream in the second quarter of 2018.
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.
CONTINUED MOMENTUM AND STRONG OPERATIONAL PERFORMANCE
DEMONSTRATED IN THE SECOND QUARTER
Bellatrix delivered another strong quarter of operational
performance with second quarter average production of 37,916 boe/d
(76% natural gas weighted), outperforming the Company's 2017
previously increased average annual guidance (mid-point) estimate
of 34,500 boe/d. With first half 2017 results outperforming
guidance expectations, the Company has increased its 2017
production guidance target as discussed in the Outlook section of
this release. This represents the second consecutive quarter
of upwardly revised production guidance targets in 2017.
Second quarter production expenses averaged $8.30/boe, representing a reduction of
$1.07/boe from the $9.37/boe production expenditure level in the
first quarter of 2017. First half 2017 production
expenditures averaged $8.81/boe,
below our previously set full year guidance of $9.00/boe. Production expenditures are expected
to decline further given continued cost suppression activity and
strong production volumes, therefore Bellatrix has reduced its full
year 2017 production expenditure guidance target to $8.75/boe.
Bellatrix completed its planned first half 2017 capital program
with exploration and development expenditures of $55.2 million which was in line with previously
announced plans. Drilling and completion activity was minimal
during the second quarter given the seasonal spring break up
period. Bellatrix drilled and/or participated in 2 gross (1.2 net)
Spirit River liquids rich natural
gas wells during the month of June. Strong well performance
and momentum gained through the first quarter of 2017 carried
forward and contributed to the strong second quarter volume
performance.
Previously set year 2017 guidance expectations refer to
Bellatrix's guidance as announced on June
26, 2017; updated guidance metrics are included in the
forward guidance section of this press release.
Second Quarter
2017 Actual Performance versus Previously Set 2017 Annual
Guidance
|
|
|
Second
Quarter
2017
Results
|
Previously
Set
2017 Annual
Guidance
|
Actual Versus
Previous
Guidance
|
Average daily
production (boe/d)
|
37,916
|
34,500
|
+10%
|
Average product
mix
|
|
|
|
|
Crude oil, condensate
and NGLs
(%)
|
24
|
24
|
-
|
|
Natural gas
(%)
|
76
|
76
|
-
|
Net capital spending
($ millions) (1)
|
56
|
120
|
n/a
|
Expenses
($/boe)
|
|
|
|
|
Production(2)
|
8.30
|
9.00
|
-8%
|
(1)
|
Capital spending
includes exploration and development capital projects and corporate
assets, and excludes property acquisitions, property dispositions,
and facilities transferred.
|
(2)
|
Production
expenses before net processing revenue/fees.
|
|
ENHANCED LIQUIDITY POSITION WITH BORROWING BASE INCREASED 20%
DURING THE SECOND QUARTER
Effective May 9, 2017, Bellatrix
amended and restated the terms of its syndicated revolving credit
facilities (the "Credit Facilities"), whereby the total commitments
under the Credit Facilities were set at $120
million, comprised of a $25
million operating facility provided by a Canadian bank and a
$95 million syndicated facility
provided by four financial institutions. Total commitments under
the Credit Facilities were increased 20% relative to total
commitments at year end 2016. The borrowing base increase provides
enhanced liquidity relative to prior levels, while maintaining
Bellatrix's financial resources at a level that minimizes standby
fees. The Company remains committed to continued fiscal prudence,
and achieving near term growth objectives within current capital
spending guidance levels.
On June 27, 2016 Bellatrix
announced that concurrent with the closing of the sale of certain
non-core assets in the Strachan area of Alberta (the "Strachan asset sale"), the
borrowing base under the Company's syndicated revolving credit
facilities was reconfirmed at $120
million, unchanged from prior levels.
At June 30, 2017, the Company
maintained approximately $107 million
of available liquidity (before deducting outstanding letters of
credit) on its Credit Facilities. Other than approximately
$13 million outstanding on the Credit
Facilities, the Company has no debt maturities until 2020 and
2021.
STRONG RISK MANAGEMENT POSITIONS IN BOTH 2017 AND
2018
Bellatrix maintains strong risk management protection in both
2017 and 2018. Bellatrix maintains approximately 67% of forecast
gross natural gas volumes in the second half of 2017 hedged at an
average fixed price of approximately $3.26/mcf (based on the mid-point of the updated
2017 average gross production guidance of 36,000 boe/d; 76% natural
gas weighted). In addition, the Company has in place material risk
management protection in 2018 with a total of 66.1 MMcf/d of 2018
natural gas volumes hedged at an average fixed price of
approximately $3.06/mcf; this
represents approximately 40% of volumes compared to the mid-point
of the updated 2017 full year average guidance. Strong propane
prices during the first half of 2017 provided an attractive
opportunity for Bellatrix to hedge 2,000 bbl/d of propane volumes
at an average price of 51% of WTI light oil prices from July
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.
As at August 9, 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
|
July 1, 2017 to
September 30, 2017
|
117.0
MMcf/d
|
$3.19/mcf
|
Natural
gas
|
Fixed price
swap
|
October 1, 2017 to
December 31, 2017
|
102.2
MMcf/d
|
$3.33/mcf
|
Natural
gas
|
Fixed price
swap
|
January 1, 2018 to
December 31, 2018
|
66.1
MMcf/d
|
$3.06/mcf
|
Propane
|
Fixed price
differential
|
July 1, 2017 to
December 31, 2017
|
2,000
bbl/d
|
51% of NYMEX
WTI
|
Propane
|
Fixed price
differential
|
January 1, 2018 to
December 31, 2018
|
1,000
bbl/d
|
47% of NYMEX
WTI
|
|
|
|
|
|
(1)
Prices for natural gas fixed price swap contracts assume a
conversion of $/GJ to $/mcf is based on an average corporate heat
content rate of 40.3Mj/m3.
|
ALDER FLATS PHASE 2
EXPANSION NEARING COMPLETION REPRESENTING THE FINAL STAGE OF THE
COMPANY'S LONG TERM STRATEGIC INFRASTRUCTURE BUILD-OUT
The Alder Flats Plant Phase 2 expansion project remains on time
and on budget, and will more than double gross throughput capacity
at the plant to 230 MMcf/d (from 110 MMcf/d currently).
Construction activity is progressing according to plan with full
completion of the Phase 2 expansion expected early in the second
quarter of 2018. In terms of recent progress, site
construction activity re-commenced late in the second quarter with
pile driving activity which was completed in June. Fabrication of
all major equipment for Phase 2 is complete including compressors,
propane bullets, condensate stabilizer, production tanks, heat
medium package and electrical equipment. Major equipment is
currently being installed on site and installation activity will
continue through the fall with completion anticipated in
November.
Completion of Phase 2 of the Alder Flats Plant, which will add
an incremental 30 MMcf/d ownership capacity net to Bellatrix's 25%
working interest, and production growth are expected to deliver a
favourable step change reduction in operating costs down by
approximately $1.00/boe relative to
revised full year 2017 average production expense guidance.
Furthermore, the Plant expansion is anticipated to drive improved
revenue generation through additional higher margin natural gas
liquids ("NGL") extraction, driving expanded corporate profit
margins and cash flow. Bellatrix forecasts net capital
expenditures of approximately $8
million in the second half of 2017 and $3 million in 2018 (excluding received partner
prepayment) to complete Phase 2 of the Alder Flats Plant.
Management expects that completion of Phase 2 of the Alder Flats
Plant will provide the facilities and processing capacity to grow
net production volumes beyond 60,000 boe/d, with minimal future
facility related capital.
NEW INDEPENDENT DIRECTOR APPOINTMENT
Bellatrix is pleased to announce the appointment of a new
independent director, Ms. Lynn Kis,
effective August 9, 2017. Ms. Kis
will also serve on the Reserves, Safety & Environmental
Committee of the Board. Ms. Kis is an accomplished energy
executive, having senior management responsibility in technical
reserve evaluation firms in addition to decades of upstream oil and
gas experience. Ms. Kis is currently Chair of the Reserves
Committee and Member of the Audit Committee of the Board of
Directors of Painted Pony Energy Ltd., an intermediate Canadian
exploration and development company. Prior thereto, Ms. Kis
was Senior Vice President and Manager of Ryder Scott Company,
Canada, Vice President and Partner
at AJM Petroleum Consultants, and Vice President of Engineering and
Planning with Pengrowth Energy Corporation. Ms. Kis is a
professional engineer by trade, and holds a Bachelor of Applied
Science degree with honors from the University of Wales, Cardiff.
OPERATIONAL AND FINANCIAL HIGHLIGHTS
- Production volumes in the second quarter of 2017 averaged
37,916 boe/d (76% natural gas weighted), ahead of the Company's
previously set full year 2017 guidance. Production levels in the
second quarter 2017 increased 9% relative to first quarter 2017
levels, reflecting strong results achieved from the first half 2017
capital program. The Company proactively managed system wide
interruptible and firm takeaway constraints through the utilization
of its strategic infrastructure including the Alder Flats
Plant.
- Funds flow from operations generated in the three months ended
June 30, 2017 was $19.3 million ($0.39 per basic and diluted share), an increase
of 30% from $14.9 million
($0.30 per basic share and
$0.26 per diluted share) in the first
quarter of 2017.
- Exploration and development capital expenditures were
$11.2 million in the second quarter
of 2017 and $55.2 million for the
first half of 2017, in line with internal expectations. Lower
quarter over quarter capital expenditures reflect the seasonal
spring break up period where drilling activity is typically
curtailed given additional costs and logistical considerations. The
Company drilled and/or participated in two (1.2 net) wells during
the second quarter. Facilities related investment excluding
transfers was focused primarily on the Phase 2 expansion project of
the Alder Flats Plant.
- Bellatrix reduced borrowings under the Credit Facilities at
June 30, 2017 to $13.1 million, down $28.4
million or 68% compared with March
31, 2017 levels.
- Total net debt was reduced to $382.6
million at June 30, 2017, down
$52.8 million or 12% compared with
the previous quarter as proceeds from non-core asset dispositions,
and other capital transactions completed during the second quarter
were used to reduce outstanding indebtedness.
- At June 30, 2017, Bellatrix had
approximately $107 million of undrawn
capacity (approximately 89% undrawn) on its $120 million Credit Facilities excluding
outstanding letters of credit of $12.9
million that reduce the amount otherwise available to be
drawn on the Credit Facilities.
- For the quarter ended June 30,
2017, Bellatrix's Senior Debt to EBITDA (as defined below)
ratio was 1.06 times, well below the financial covenant of 3.0
times as permitted by the agreement governing the Credit
Facilities.
- Total revenue increased by 13% to $74.3
million for the second quarter 2017, compared to
$66.0 million realized in the first
quarter 2017 mainly attributable to a 9% increase in production
volumes over the comparative period.
- The corporate royalty rate in the three months ended
June 30, 2017 averaged 10% of sales
(after transportation), compared to 12% in the first quarter of
2017. Lower average royalty rates over the comparative periods
principally reflect lower liquids commodity prices.
- Production expenses in the second quarter of 2017 averaged
$8.30/boe and averaged $8.81/boe in the first half of 2017. Production
expenditures are expected to average approximately $8.75/boe during the year, as a result of cost
suppression initiatives and increased production volumes which will
reduce overall production expenditures on a per unit of production
basis.
- The corporate operating netback (including risk management)
realized for the three months ended June 30,
2017 was $10.24/boe up from
$9.34/boe in the prior quarter.
Before risk management, the second quarter of 2017 operating
netback was $9.35/boe, an increase of
12% compared to the $8.35/boe netback
realized in the first quarter of 2017 reflecting reduced production
expenditures and lower royalty rates over the comparable
periods.
- Net general and administrative ("G&A") expenses (after
capitalized costs and recoveries) for the three months ended
June 30, 2017 were $7.3 million ($2.10/boe), compared to $4.9 million ($1.41/boe) in the comparative 2016 period. Net
G&A costs increased in the current period due to an increase in
gross expenses related to executive changes.
- The net loss for the three months ended June 30, 2017 was $69.2
million compared to a net loss of $55.2 million for the three months ended
June 30, 2016. The decrease in net
profit period over period is due to an increase in loss on property
dispositions of $25.0 million and the
deferred tax expense of $46.4 million
compared to the prior period, offset by an increase in the
operating netbacks as a result of increased commodity prices.
- As at June 30, 2017, Bellatrix
had approximately 156,833 net undeveloped acres of land principally
in Alberta.
- At June 30, 2017, Bellatrix had
approximately $1.32 billion in tax
pools available for deduction against future income.
OUTLOOK
Bellatrix's ongoing focus on the high productivity, and low
supply cost Spirit River liquids
rich natural gas play combined with active management of firm
service transportation capacity contributed to another strong
operational result. As a result of this continued positive
operational momentum, the Company is increasing full year 2017
average production guidance for the second consecutive quarter.
Our capital investment plans for 2017 of $120 million includes the drilling of
approximately 13 net wells during the second half of 2017.
With two operated drilling rigs currently active the Company
expects average production volumes to remain near our full year
average guidance target of approximately 36,000 boe/d through the
third and fourth quarters of 2017, with growth to approximately
36,500 boe/d through the end of the year.
SECOND CONSECUTIVE QUARTER OF INCREASED PRODUCTION GUIDANCE
GIVEN STRONG OPERATIONAL PERFORMANCE
Solid operational momentum has carried over into the third
quarter as a result of strong well performance and operational
execution. Average well productivity continues to outperform type
curve expectations for our Spirit
River program. Bellatrix has announced today an increase to
its full year 2017 average production guidance to 36,000 boe/d, an
increase of 1,500 boe/d from previous guidance announced on
June 26, 2017 and a 2,500 boe/d
increase from our original guidance announced in January
2017. Bellatrix's full year net capital expenditures of
$120 million remain unchanged from
previous guidance levels on June 26,
2017. Bellatrix remains committed to providing sustainable
long term growth for shareholders, including delivery of our 2017
capital program providing over 15% forecast production growth.
First half 2017 production expenditures averaged $8.81/boe, below our previous full year guidance
of $9.00/boe. Given continued cost
suppression activity and strong production volumes, Bellatrix has
reduced its full year 2017 production expenditure guidance target
to $8.75/boe.
|
|
|
|
|
|
Revised
2017 Annual
Guidance
(August 10,
2017)
|
Previously Set
2017
Annual Guidance
(June 26,
2017)
|
Production
(boe/d)
|
|
|
|
2017 Average daily
production
|
36,000
|
34,500
|
|
2017 Exit
production
|
36,500
|
35,500
|
Average product
mix
|
|
|
|
Natural gas
(%)
|
76
|
76
|
|
Crude oil, condensate
and NGLs (%)
|
24
|
24
|
Capital expenditures
($000's)
|
|
|
|
Total net capital
expenditures
|
120,000
|
120,000
|
|
Property disposition
– cash
|
(34,500)
|
(34,500)
|
|
Total net capital
expenditures after property disposition - cash
|
85,500
|
85,500
|
Production expense
($/boe)
|
8.75
|
9.00
|
Bellatrix has delivered significant growth in production volumes
through the first half of 2017, while meaningfully reducing
operating costs, and materially reducing total net debt levels and
increasing available liquidity. Our second half 2017 plan
remains unchanged and focused on the low supply cost Spirit River play. Bellatrix maintains a
high quality asset base in one of the most profitable natural gas
plays in North America,
underpinned by strategic infrastructure ownership and control and
ample takeaway capacity. The strategic repositioning efforts
achieved in 2017 position the Company to deliver profitable growth
in production, cash flow, and net asset value. I want to
personally thank our employees for their substantial efforts that
drive our operational and financial achievements. As always I
wish to personally thank our shareholders and stakeholders for
their long term support, we remain focused on delivering our long
term strategy and enhancing shareholder value.
("Brent A. Eshleman")
Brent A. Eshleman, P.Eng.
President and CEO
August 9, 2017
OPERATIONAL REVIEW
Sales
Volumes
|
|
Three months
ended
June
30,
|
Six months
ended
June
30,
|
|
|
2017
|
2016
|
2017
|
2016
|
|
Crude oil and
condensate
|
(bbl/d)
|
2,516
|
3,641
|
2,447
|
3,811
|
|
NGLs (excluding
condensate)
|
(bbl/d)
|
6,666
|
6,909
|
6,461
|
6,743
|
Total crude oil,
condensate, and NGLs
|
(bbl/d)
|
9,182
|
10,550
|
8,908
|
10,554
|
|
Natural
gas
|
(mcf/d)
|
172,402
|
164,699
|
164,602
|
166,077
|
Total sales volumes
(6:1 conversion)
|
(boe/d)
|
37,916
|
38,000
|
36,342
|
38,234
|
Sales volumes for the three months ended June 30, 2017 averaged 37,916 boe/d, remaining
consistent with the average of 38,000 boe/d realized in the second
quarter of 2016. The weighting towards crude oil, condensate
and NGLs for the three months ended June 30,
2017 was 24%, compared to 28% in the second quarter of
2016. Total sales volumes between the three months ended
June 30, 2017 and June 30, 2016 were impacted by non-core
dispositions completed in the fourth quarter of 2016 in the Pembina
and Harmattan areas and natural production declines, which have
been balanced by production volumes added through strong results
development drilling in the first half of 2017.
Sales volumes for the six months ended June 30, 2017 averaged 36,342 boe/d, a decrease
of 5% from 38,234 boe/d realized in the first half of 2016.
Total crude oil, condensate and NGLs averaged 25% of sales volumes
for the six months ended June 30,
2017, compared to 28% in the same period in 2016.
Second quarter 2017 average production of 37,916 boe/d (76%
natural gas weighted) surpassed the Company's 2017 average annual
guidance (midpoint) estimate of 34,500 boe/d.
Drilling Activity
- 2017
|
|
Three months
ended
June 30,
2017
|
Six months
ended
June 30,
2017
|
|
|
Gross
|
Net
|
Success
Rate
|
Gross
|
Net
|
Success
Rate
|
Spirit
River
|
2
|
1.2
|
100%
|
11
|
9.0
|
100%
|
Ellerslie
|
-
|
-
|
-
|
2
|
0.8
|
100%
|
Cardium
|
-
|
-
|
-
|
2
|
2.0
|
100%
|
Total
|
2
|
1.2
|
100%
|
15
|
11.8
|
100%
|
|
|
Drilling Activity
- 2016
|
|
Three months
ended
June 30,
2016
|
Six months
ended
June 30,
2016
|
|
|
Gross
|
Net
|
Success
Rate
|
Gross
|
Net
|
Success
Rate
|
Spirit
River
|
-
|
-
|
-
|
10
|
5.7
|
100%
|
Total
|
-
|
-
|
-
|
10
|
5.7
|
100%
|
During the second quarter of 2017, Bellatrix drilled and/or
participated in 2 gross (1.2 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 six months ended June 30,
2017, Bellatrix invested $55.2
million in exploration and development capital projects,
excluding property acquisitions and dispositions, compared to
$36.8 million in the same period in
2016.
Capital
Expenditures
|
|
Three months
ended
June
30,
|
Six months
ended
June
30,
|
($000s)
|
|
2017
|
2016
|
2017
|
2016
|
Lease acquisitions
and retention
|
157
|
72
|
2,630
|
1,025
|
Geological and
geophysical
|
2
|
(75)
|
361
|
53
|
Drilling and
completion costs
|
6,717
|
2,656
|
46,868
|
27,568
|
Facilities and
equipment
|
4,359
|
5,113
|
5,354
|
8,138
|
|
Capital – exploration
and development (1)
|
11,235
|
7,766
|
55,213
|
36,784
|
Facilities
transferred
|
(5,611)
|
-
|
-
|
-
|
Capital – corporate
assets (2)
|
989
|
23
|
1,205
|
54
|
Property
acquisitions
|
-
|
(2)
|
-
|
1
|
|
Total capital
expenditures –
cash
|
6,613
|
7,787
|
56,418
|
36,839
|
Property dispositions
– cash (3)
|
(32,354)
|
(77,704)
|
(32,354)
|
(77,829)
|
|
Total net capital
expenditures – cash
|
(25,741)
|
(69,917)
|
24,064
|
(40,990)
|
Property acquisitions
– non-cash
|
-
|
29,178
|
-
|
29,178
|
Other – non-cash
capital (4)
|
(5,027)
|
(390)
|
(3,612)
|
1,554
|
Total capital
expenditures – net (5)
|
(30,768)
|
(41,129)
|
(20,452)
|
(10,258)
|
(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)
|
Other includes
non-cash capital adjustments for the current period's
decommissioning liabilities and share based
compensation.
|
(5)
|
The term "total
capital expenditures – net" does not have standard meaning under
GAAP. Refer to "Non-GAAP measures" disclosed at the end of this
Press Release.
|
Bellatrix focused its capital activity in the second quarter of
2017 on drilling and completion activity within the Spirit River
formation, as well as facilities and equipment expenditures related
to the construction 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 of 2018.
During the three months ending June 30,
2017, Bellatrix completed the non-core Strachan property
sale for gross proceeds of $34.5
million.
Undeveloped Land
At June 30, 2017, Bellatrix had
approximately 156,833 undeveloped acres of land principally in
Alberta.
FINANCIAL REVIEW
Cash Flow from
Operating Activities, Funds Flow from Operations, and Net
Loss
|
|
Three months
ended
June
30,
|
Six months
ended
June
30,
|
($000s, except per
share amounts)
|
2017
|
2016
|
2017
|
2016
|
Cash flow from
operating activities
|
10,495
|
7,675
|
18,754
|
18,008
|
|
Basic ($/share)
(1)
|
0.21
|
0.20
|
0.38
|
0.47
|
|
Diluted ($/share)
(1)
|
0.21
|
0.20
|
0.38
|
0.47
|
Funds flow from
operations
|
19,347
|
9,048
|
34,240
|
21,924
|
|
Basic ($/share)
(1)
|
0.39
|
0.23
|
0.69
|
0.57
|
|
Diluted ($/share)
(1)
|
0.39
|
0.23
|
0.69
|
0.57
|
Net loss
|
(69,236)
|
(55,193)
|
(56,186)
|
(35,846)
|
|
Basic ($/share)
(1)
|
(1.40)
|
(1.42)
|
(1.14)
|
(0.93)
|
|
Diluted ($/share)
(1)
|
(1.40)
|
(1.42)
|
(1.14)
|
(0.93)
|
(1)
|
Post share
consolidated share amounts
|
Subsequent to June 30, 2017,
Bellatrix completed a 5 to 1 common share consolidation, which has
been reflected in the calculation of net loss per share for the
three and six months ended June 30,
2016 and 2017. As a result of the share consolidation the
Company has 49,378,026 Common Shares.
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 quarter
ended June 30, 2017 increased by 37%
to $10.5 million ($0.21 per basic and diluted share) from
$7.7 million ($0.20 per basic and diluted share) generated in
the second quarter of 2016. Bellatrix's cash flow from operating
activities for the six months ended June 30,
2017 increased by 4% to $18.8
million ($0.38 per basic and
diluted share) from $18.0 million
($0.47 per basic and diluted share)
generated in the first half of 2016. Bellatrix generated funds
flow from operations of $19.3 million
($0.39 per basic and diluted share)
in the second quarter of 2017, an increase of 114% from
$9.0 million ($0.23 per basic and diluted share) generated in
the comparative 2016 period. The increase in funds flow from
operations between the second quarter of 2016 and 2017 was mainly
attributable to increased revenues from commodity prices in the
quarter, decreased production expenses, and interest and financing
charges,partially offset by an increase in royalty and G&A
expenses. Bellatrix generated funds flow from operations of
$34.2 million ($0.69 per basic and diluted share) in the second
half of 2017, an increase of 56% from $21.9
million ($0.57 per basic and
diluted share) generated in the comparative 2016 period.
For the three months ended June 30,
2017, Bellatrix recognized a net loss of $69.2 million ($1.40 per basic share and diluted share),
compared to a net loss of $55.2
million ($1.42 per basic and
diluted share) in the second quarter of 2016 due to an increase in
loss on property dispositions and the increase in deferred tax
expense, offset by an increase in the operating netbacks as a
result of increased commodity prices. For the six months ended
June 30, 2017, Bellatrix recognized a
net loss of $56.2 million
($1.14 per basic share and diluted
share), compared to a net loss of $35.8
million ($0.93 per basic and
diluted share) in the comparative 2016 period.
Operating Netback
– Corporate
|
|
Three months
ended
June
30,
|
Six months
ended
June
30,
|
($/boe)
|
2017
|
2016
|
2017
|
2016
|
Total revenue
(1)
|
21.55
|
13.96
|
21.33
|
14.87
|
Production
|
(8.30)
|
(8.46)
|
(8.81)
|
(7.91)
|
Transportation
|
(1.98)
|
(0.87)
|
(1.53)
|
(0.90)
|
Royalties
|
(1.92)
|
(1.05)
|
(2.13)
|
(1.01)
|
Operating netback
before risk management
|
9.35
|
3.58
|
8.86
|
5.05
|
Risk management gain
(loss)
|
0.89
|
3.59
|
0.94
|
2.68
|
Operating netback
after risk management
|
10.24
|
7.17
|
9.80
|
7.73
|
(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 second quarter of 2017 averaged $9.35/boe, an increase of 161% from the
$3.58/boe realized during the same
period in 2016 reflecting improved realized commodity prices and a
reduction in production expenses over the comparable period.
The operating netback before commodity price risk management
contracts for crude oil, condensate, NGLs, and natural gas during
the six months ended June 30, 2017
averaged $8.86/boe, an increase of
75% from the $5.05/boe realized
during the same period in 2016 reflecting improved realized
commodity prices over the comparable period.
Total revenue increased by 54% to $74.3
million for the three months ended June 30, 2017, compared to $48.3 million realized in the second quarter of
2016. The higher total revenue realized in the second quarter of
2017 compared to 2016 was primarily attributable to the improved
realized average commodity prices.
In the three months ended June 30,
2017, production expenses totaled $28.6 million ($8.30/boe), compared to $29.3 million ($8.46/boe) recorded in the same period of 2016.
Production expenses totaled $57.9
million ($8.81/boe) for the
six months ended June 30, 2017,
compared to $55.0 million
($7.91/boe) in the first half of
2016. Given continued cost suppression activity and strong
production volumes, Bellatrix has reduced its full year 2017
production expenditure guidance target to $8.75/boe, down from $9.00/boe.
Royalties as a percentage of revenue (after transportation
costs) in the second quarter of 2017 were 10% compared to 8% in the
comparative 2016 period. For the six months ended June 30, 2017, royalties as a percentage of
revenue (after transportation costs) were 11% compared with 8% in
the first six months of 2016. Higher average corporate
royalty rates period over period reflect the impact from higher
commodity prices, as well as decreased gas cost allowance ("GCA")
credits in the first six months of 2017 resulting from the
infrastructure and facilities dispositions in 2016.
Commodity Prices
Average Commodity
Prices
|
|
Three months
ended
June
30,
|
Six months
ended
June
30,
|
|
2017
|
2016
|
%
Change
|
2017
|
2016
|
%
Change
|
|
|
|
|
|
|
|
Exchange rate
(CDN$/US$1.00)
|
1.3440
|
1.2882
|
4
|
1.3335
|
1.3289
|
-
|
|
|
|
|
|
|
|
Crude oil:
|
|
|
|
|
|
|
|
WTI
(US$/bbl)
|
48.27
|
45.59
|
6
|
50.09
|
39.52
|
27
|
|
Canadian Light crude
blend ($/bbl)
|
59.27
|
55.01
|
8
|
62.27
|
48.11
|
29
|
Bellatrix's average
realized prices ($/bbl)
|
|
|
|
|
|
|
|
Crude oil and
condensate
|
59.49
|
49.32
|
21
|
63.28
|
44.10
|
43
|
|
NGLs (excluding
condensate)
|
20.57
|
13.05
|
58
|
19.42
|
11.74
|
65
|
|
Crude oil, condensate
and NGLs
|
31.24
|
25.57
|
22
|
31.47
|
23.42
|
34
|
|
Crude oil, condensate
and NGLs (including risk management (1))
|
31.19
|
25.33
|
23
|
31.46
|
23.26
|
35
|
|
|
|
|
|
|
|
Natural
gas:
|
|
|
|
|
|
|
|
NYMEX
(US$/MMBtu)
|
3.18
|
1.95
|
63
|
3.25
|
2.02
|
61
|
|
AECO daily index
($/mcf)
|
2.78
|
1.39
|
100
|
2.74
|
1.61
|
70
|
|
AECO monthly index
($/mcf)
|
2.77
|
1.25
|
122
|
2.86
|
1.68
|
70
|
Bellatrix's average
realized prices ($/mcf)
|
|
|
|
|
|
|
|
Natural
gas
|
2.94
|
1.50
|
96
|
2.91
|
1.75
|
66
|
|
Natural gas
(including risk management (1))
|
3.14
|
2.34
|
34
|
3.12
|
2.38
|
31
|
(1)
|
Per unit metrics
including risk management include realized gains or losses on
commodity contracts and exclude unrealized gains or losses on
commodity contracts
|
In the second quarter of 2017, Bellatrix realized an average
price of $59.49/bbl before commodity
price risk management contracts for crude oil and condensate, an
increase of 21% from the average price of $49.32/bbl received in the second quarter of
2016, partially due to an increase in the condensate differential
period over period. By comparison, Canadian Light crude blend price
increased by 8% and the average WTI crude oil benchmark price
increased by 6% between the second quarters of 2017 and 2016. The
WTI/Canadian Light sweet differential has remained in a
historically tight range, averaging -US$2.26/bbl for the quarter.
Bellatrix's average realized price for NGLs (excluding
condensate) increased by 58% to $20.57/bbl during the second quarter of 2017,
compared to $13.05/bbl received in
the comparable 2016 period. Propane inventories in the United States are at five year lows, as
increased exports and higher domestic demand drew down inventories
at records rates. Butane prices historically correlate closely with
WTI oil prices, which resulted in price volatility during the
second quarter. Lower seasonal demand and reduced exports led to
weaker prices for butane in Canada
and the United States. Recent
increases in export demand has begun to lift butane prices in
the United States, as Asian
markets have increased calls for butane use in the petrochemical
sector.
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 second quarter of 2017, the AECO daily
reference price increased 100% and the AECO monthly reference price
increased 122% compared to the second quarter of 2016.
Bellatrix's natural gas average sales price before commodity price
risk management contracts for the second quarter of 2017 increased
by 96% to $2.94/mcf compared to
$1.50/mcf in the same period in
2016. Bellatrix's natural gas average price, after including
commodity price risk management contracts for the three months
ended June 30, 2017, averaged
$3.14/mcf compared to $2.34/mcf in the comparative 2016 period.
Bellatrix was active in the first quarter of 2017 increasing its
2017 risk management protection, with approximately 67% of second
half 2017 gross natural gas volumes hedged at an average fixed
price of approximately $3.26/mcf.
Debt
Credit Facilities
At June 30, 2017, the Company had
$13.1 million outstanding under its
Credit Facilities. During the three months ending June 30, 2017, Bellatrix entered into an amended
and restated credit facility agreement provided by four financial
institutions, increasing the borrowing base of the Credit
Facilities to $120 million. The
Credit Facilities are available on an extendible revolving term
basis and consist of a $25 million
operating facility and a $95 million
syndicated facility. The Credit Facilities have an initial term of
one year and are extendible annually at the option of the Company,
subject to lender approval, with a 1 year term-out period if not
renewed. Availability under the Credit Facilities is subject
to a borrowing base test, which will be subject to redetermination
in May and November of each year, with the next regularly scheduled
redetermination to occur in November
2017.
At June 30, 2017, Bellatrix had
$106.9 million of available capacity
(before deducting outstanding letters of credit).
Senior Notes
At June 30, 2017, the Company has
outstanding US$250 million of 8.50%
senior unsecured notes due 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, at specified
redemption prices.
Convertible Debentures
At June 30, 2017, the Company has
outstanding $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.
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 June 30,
2017 was $74.5 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, Credit
Facilities, 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 June 30, 2017 was $78.8
million.
|
CONFERENCE CALL INFORMATION
A conference call to discuss Bellatrix's second quarter results
will be held on August 10, 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 30 days following the
call.
Bellatrix Exploration Ltd. is a publicly traded 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, with highly concentrated operations
in west central Alberta,
principally focused on profitable development of the Spirit River
liquids rich natural gas play.
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. 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 Credit
Facilities and long term Credit Facilities. 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 Credit
Facilities. 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, rate
of return expectations for the Spirit River formation, expectation
that the Spirit River formation will continue to attract the
majority of anticipated capital investment in 2017, anticipated
future drilling inventory, the expectation that the investment in
key strategic infrastructure and facilities provide the processing
capacity and capability to grow net Company production volumes
beyond 60,000 boe/d, with minimal future facility related capital,
the expectation that long term FT and processing agreements will
ensure market egress for current and forecast production, the
expectation that the NGTL system will experience further
curtailments of both interruptible and firm service capacity,
expected production expenditure reductions and 2017 production
expenditure guidance, intent to achieve near term growth objectives
within current capital spending guidance levels, the expected
timing, budget and capacity associated with the Alder Flats Plant
Phase 2 expansion project, expected operating cost reductions,
improved revenue generation and expanded corporate profit margins
and cash flow associated with completion of Phase 2 of the Alder
Flats Plant, capital investment plans for 2017 including the number
of wells to be drilled during the second half of 2017, expected
average production in the third and fourth quarters of 2017,
expected average and exit 2017 production, the expectation that the
strategic repositioning efforts achieved in 2017 position the
Company to thrive in the current commodity price environment and
deliver profitable growth in production, cash flow, and net asset
value and the intent to remain focused on delivering our long term
strategy and enhancing shareholder value, 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
August 9, 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, including under the heading "Risk Factors" in the
Company's annual information form for the year ended December 31, 2016, 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.
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.