Bellatrix Exploration Ltd. (“Bellatrix” or the “Company”)
(TSX:BXE) (NYSE:BXE) is pleased to announce its 2017 year end
reserves, and an update of commodity price risk management and
sales market diversification contracts. Reserves at December
31, 2017 were independently evaluated by InSite Petroleum
Consultants Ltd. (“InSite”). The evaluation encompasses 100%
of Bellatrix's oil and gas properties and was prepared in
accordance with National Instrument 51-101 Standards of Disclosure
for Oil and Gas Activities (“NI 51-101”) and the Canadian Oil and
Gas Evaluation Handbook (“COGE Handbook”). Financial information
presented herein is based on management prepared financial
statements for the year ended December 31, 2017, which are in the
process of being audited by Bellatrix’s independent auditors and,
accordingly, such financial information is subject to change based
on the results of the audit. See "Reader Advisory - Unaudited
Financial Information" below.
2017 YEAR END RESERVE
HIGHLIGHTS
Bellatrix delivered low cost reserve additions
in 2017 with growth in both Proved (“1P”), and Proved plus Probable
(“2P”) reserve categories notwithstanding the sale of non-core
assets during the year. The Company achieved a 100% success
rate through the drill bit, focused on the low cost Spirit River
liquids rich natural gas play. Average Spirit River well
performance exceeded management type curve expectations by
approximately 38% over an IP180 day basis, underpinning the high
quality nature of Bellatrix’s core area play.
Bellatrix established a December 31, 2017 2P net
asset value (2P NPV10 before tax) of $1.16 billion ($23.52/share)
which incorporates future net revenue adjusted for year end total
net debt, seismic, and land value. This represents a reduction of
only 6% compared with the 2P net asset value calculated at year end
December 31, 2016 of $25.10/share.
Bellatrix demonstrated strong results within its
core area in 2017 highlighted by the following achievements:
- Total 1P and 2P reserves at year end 2017 increased by
8% and 3% respectively despite
the impact from the Strachan and West Pembina non-core asset
divestitures completed during the year. Strong positive
technical reserve revisions and infill drilling additions achieved
in 2017 more than offset the impact of net dispositions and
reserves produced during the year.
- The 2017 year end Proved Developed Producing (“PDP”) NPV10
before tax value of $475.3 million remained relatively unchanged
from the 2016 year end PDP NPV10 value of $498.9 million despite
the impact of lower forecast natural gas prices and the non-core
asset divestitures completed in 2017.
- Bellatrix maintained a focused capital program in 2017 adding
PDP reserves at an FD&A cost of $4.81/boe excluding capital
invested in the Bellatrix O’Chiese Nees-Ohpawganu’ck deep-cut gas
plant at Alder Flats (the “Alder Flats Plant”), and $5.27/boe
including the Alder Flats Plant. The PDP recycle ratio
excluding Alder Flats Plant capital was 1.9 times.
- Bellatrix’s 2P and 1P FD&A costs including changes in
future development capital (“FDC”) in 2017 averaged $3.36/boe and
$4.34/boe respectively. On a three year average basis (2015
to 2017), Bellatrix delivered strong 2P and 1P FD&A costs of
$2.39/boe and $4.05/boe respectively.
- The Company’s calculated 1P and 2P reserve life indices
remained relatively unchanged year over year at 13.5 years and 17.4
years, respectively.
CONFERENCE CALL DETAILS
Bellatrix plans to release its fourth quarter
and year end 2017 financial and operational results on March 13,
2018 after market close. The Company plans to host a
conference call to discuss both year end reserves and financial
results on March 14, 2018 at 9:00 am MT / 11:00 am ET. To
participate, 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://www.bxe.com/investors/presentations-events.cfm and will be
archived on the website for approximately 30 days following the
call. Additional reserve information as required under NI 51-101
will be included in the Company's Annual Information Form which
management anticipates will be filed on SEDAR on March 15,
2018.
STRONG RISK MANAGEMENT PROTECTION IN
2018 & SALES MARKET DIVERSIFICATION IN PLACE THROUGH
2020
During the fourth quarter of 2017, Bellatrix
added to its commodity price risk management protection for
calendar 2018 to further reduce the impacts of price volatility on
our business. Bellatrix has 66.1 MMcf/d of 2018 natural gas volumes
hedged at an average fixed price of approximately $3.06/mcf,
representing approximately 40% of forecast 2018 natural gas
volumes.
Bellatrix has also diversified its natural gas
price exposure through physical sales contracts that give the
Company access to the Dawn, Chicago, and Malin natural gas pricing
hubs. This long-term diversification strategy reduces Bellatrix’s
exposure to AECO pricing on approximately 26% of the Company’s
forecast 2018 natural gas volumes.
In combination, the market diversification sales
and fixed price hedges cover approximately 2/3 of natural gas
volumes in 2018 and just under 50% in 2019 (based on the mid-point
of 2018 average production guidance). Bellatrix’s 2018
through 2020 commodity price risk management contracts as at
February 28, 2018 include:
Product |
Financial Contract |
Period |
Volume |
Average Price (1) |
Natural gas |
Fixed
price swap |
January 1, 2018 to December 31, 2018 |
66.1
MMcf/d |
$3.06/mcf |
Natural gas |
AECO/NYMEX basis
swap |
April
1, 2018 to October 31, 2018 |
10,000 MMBtu/d |
-US$1.24/MMBtu |
Natural gas |
AECO/NYMEX basis
swap |
April
1, 2019 to October 31, 2020 |
10,000 MMBtu/d |
-US$1.24/MMBtu |
Propane |
Fixed price
differential |
January 1, 2018 to December 31, 2018 |
1,000
bbl/d |
47% of NYMEX WTI |
Crude oil |
Fixed
price swap |
January 1, 2018 to December 31, 2018 |
1,000 bbl/d |
$70.14/bbl |
(1) Prices for natural gas fixed price swap contracts assume a
conversion of $/GJ to $/mcf based on an average corporate heat
content rate of 40.3Mj/m3.
Bellatrix’s market diversification contracts as
at February 28, 2018 include:
Product |
Market |
Start Date |
End Date |
Volume |
Natural gas |
Chicago |
February 1, 2018 |
October 31, 2020 |
15,000 MMBtu/d |
Natural gas |
Chicago |
November 1, 2018 |
October 31, 2020 |
15,000 MMBtu/d |
Natural gas |
Dawn |
February 1, 2018 |
October 31, 2020 |
15,000 MMBtu/d |
Natural gas |
Dawn |
November 1, 2018 |
October 31, 2020 |
15,000 MMBtu/d |
Natural gas |
Malin |
February 1, 2018 |
October 31, 2020 |
15,000 MMBtu/d |
Bellatrix’s hedging program is part of its
overall risk management strategy focused on providing reduced
commodity price volatility and greater assurance over future
revenue and cash flows which help drive the capital and
reinvestment decisions within our business.
2017 HIGHLIGHTS
|
Twelve months ended December, |
|
|
2017 |
|
|
2016 |
|
Reserves (Working Interest (1), mboe) |
|
|
|
Proved Developed
Producing |
|
65,305 |
|
|
60,322 |
|
|
Total Proved |
|
171,198 |
|
|
158,400 |
|
|
Proved
Undrilled/Total Proved |
|
61 |
% |
|
62 |
% |
|
Total Proved and
Probable |
|
235,330 |
|
|
228,540 |
|
|
Probable/Total Proved and Probable |
|
27 |
% |
|
31 |
% |
|
|
|
Net
Present Value of Reserves (Before Tax, 10% Discount Rate)
(2) |
|
|
|
Total Proved ($MM) |
$1,016 |
|
$1,030 |
|
|
Proved and Probable
($MM) |
$1,501 |
|
$1,556 |
|
|
|
|
Net
Asset Value |
|
|
|
Proved and Probable
($MM) (3) |
$1,161 |
|
$1,238 |
|
|
Proved
and Probable Net Asset Value, per basic share (4) |
$23.52 |
|
$25.10 |
|
|
|
|
FD&A Costs (Including Changes in FDC) |
|
|
|
PDP, excluding Alder
Flats Plant capital ($/boe) |
$4.81 |
|
$5.30 |
|
|
1P, excluding Alder
Flats Plant capital ($/boe) |
$4.12 |
|
$3.98 |
|
|
2P, excluding Alder
Flats Plant capital ($/boe) |
$3.15 |
|
$3.83 |
|
|
3 year average 1P
($/boe) |
$4.05 |
|
$8.78 |
|
|
3 year
average 2P ($/boe) |
$2.39 |
|
$7.59 |
|
|
|
|
Selected Key Operating Statistics |
|
|
|
Annual average sales
volumes (boe/d) |
|
36,872 |
|
|
35,677 |
|
|
Q4 average sales
volumes (boe/d) |
|
37,077 |
|
|
31,888 |
|
|
Annual operating
netback ($/boe) (5) |
$9.02 |
|
$7.91 |
|
|
Total net
debt ($MM) (5) |
$420.8 |
|
$396.2 |
|
|
|
|
Reserve Life Index |
|
|
|
Proved |
|
13.5 yrs. |
|
|
14.1 yrs. |
|
|
Proved and
Probable |
|
17.4 yrs. |
|
|
18.8 yrs. |
|
Recycle Ratio |
|
|
|
PDP, excluding change
in FDC and Alder Flats Plant capital |
|
1.9 x |
|
|
1.5 x |
|
|
1P, excluding change in
FDC and Alder Flats Plant capital |
|
3.8 x |
|
|
4.0 x |
|
|
2P, excluding change in
FDC and Alder Flats Plant capital |
|
4.1 x |
|
|
4.3 x |
|
|
|
|
Evaluated Future Horizontal Drilling Locations
(6) |
|
|
|
Gross Spirit River |
|
177 |
|
|
187 |
|
|
Net Spirit River |
|
129 |
|
|
116 |
|
|
Gross Cardium |
|
147 |
|
|
182 |
|
|
Net
Cardium |
|
117 |
|
|
144 |
|
(1) “Working Interest” means Bellatrix’s working interest
(operated or non-operated) share excluding any royalty interest and
before deduction of royalties and is also referred to as “Gross”
reserves under NI 51-101. May not add due to rounding.(2) It should
not be assumed that the present worth of estimated future net
revenue presented in the tables above or elsewhere in this press
release represents the fair market value of the reserves. There is
no assurance that the forecast prices and costs assumptions will be
attained and variances could be material. The recovery and reserves
estimates of Bellatrix's crude oil and natural gas reserves
provided herein are estimates only and there is no guarantee that
the estimated reserves will be recovered. Actual crude oil, natural
gas and natural gas liquids reserves may be greater than or less
than the estimates provided herein.(3) Proved plus Probable net
asset value incorporates 2P NPV10 (before tax) value and adjusts
for year end total net debt, seismic, and land value.(4) Based on
49.38 million common shares outstanding as at December 31, 2017
(excluding common shares issuable pursuant to securities that are
convertible, exercisable or exchangeable into common shares).(5)
The terms “operating netback” and “total net debt” do not have
standard meanings under Canadian generally accepted accounting
principles (“GAAP”). Operating netback is calculated by
deducting transportation, royalties and operating costs from
revenue. Operating netback includes the impact of commodity price
risk management contracts. 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, Senior Notes, 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. See “Non-GAAP
measures” in the Reader Advisories at the end of this Press
Release. (6) Represents proved plus probable undeveloped
locations included in the InSite Report.
2017 RESERVES
Bellatrix engaged InSite to complete a reserve
report in accordance with NI 51-101, on 100% of Bellatrix’s oil and
gas properties effective December 31, 2017 (the “InSite
Report”). Highlights include:
- 235 million boe total working interest 2P reserves and 171
million boe 1P reserves.
- $1.5 billion net present value of future net revenue of 2P
reserves before tax at a 10% discount rate.
- A net asset value of $23.52 per basic share outstanding based
on the InSite evaluation of 2P reserves at a 10% discount
rate.
- Bellatrix’s corporate decline rate forecast by InSite for PDP
reserves in 2018 is 25% (relatively unchanged compared with an
estimated first year PDP decline rate at December 31, 2016 of
24%).
Working interest |
2017 Reserves |
|
2016 Reserves |
|
|
Oil & Liquids |
Natural Gas |
Total |
|
Total |
Variance |
|
|
(mbbl) |
(mmcf) |
(mboe) |
|
(mboe) |
% |
|
Proved |
48,445 |
736,519 |
171,198 |
|
158,400 |
8 |
% |
Probable |
18,411 |
274,326 |
64,132 |
|
70,139 |
-9 |
% |
Proved Plus Probable (1) |
66,856 |
1,010,845 |
235,330 |
|
228,540 |
3 |
% |
(1) Totals may not add due to rounding.
NET ASSET VALUE – PROVED PLUS PROBABLE
The following table of net asset value, as at
December 31, 2017, is based on the InSite evaluation of future net
revenue of the Company’s 2P reserves before tax, which does not
represent fair market value.
($000s except acre, unit and per unit amounts) |
|
|
PV 0% |
|
|
PV 5% |
|
|
PV 8% |
|
|
PV 10% |
|
|
PV 15% |
|
Proved plus Probable Reserves (1) |
|
3,539,707 |
|
|
2,181,248 |
|
|
1,724,725 |
|
|
1,500,620 |
|
|
1,110,514 |
|
Undeveloped Lands (2) |
|
55,635 |
|
|
55,635 |
|
|
55,635 |
|
|
55,635 |
|
|
55,635 |
|
Value of Seismic (3) |
|
26,048 |
|
|
26,048 |
|
|
26,048 |
|
|
26,048 |
|
|
26,048 |
|
Total Net Debt (4) |
|
(420,827 |
) |
|
(420,827 |
) |
|
(420,827 |
) |
|
(420,827 |
) |
|
(420,827 |
) |
Net Asset Value |
|
3,200,563 |
|
|
1,842,104 |
|
|
1,385,581 |
|
|
1,161,476 |
|
|
771,370 |
|
|
|
|
|
|
|
Per Basic Common Share (5) |
$64.82 |
|
$37.31 |
|
$28.06 |
|
$23.52 |
|
$15.62 |
|
(1) As evaluated by InSite as at December 31, 2017
based on forecast prices and costs before income tax. |
|
(2) As estimated by Bellatrix as at December 31, 2017
based on 148,804 net acres of undeveloped land at an average price
of $373.88per acre. |
|
(3)Based on 28% of $101.9 million replacement value
based on seismic costs to buy data at an average of approximately
$1,600/km for 2D and $14,500/km2 for 3D. |
|
(4) 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, Senior
Notes, 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.. |
|
(5) Based on 49.38 million common shares outstanding
as at December 31, 2017 (excluding common shares issuable pursuant
to securities that are convertible, exercisable or exchangeable
into common shares). |
|
|
|
NET PRESENT VALUE (“NPV”) OF FUTURE NET
REVENUE
The forecast prices used in the InSite Report
incorporate InSite’s commodity price forecasts as at December 31,
2017 (“InSite Forecast Prices”) which are noted below under the
heading “Reserve Report Commodity Pricing”.
It should not be assumed that the NPV
estimated by InSite represents the fair market value of Bellatrix’s
reserves. Estimated future net revenues are reduced for
estimated future abandonment and reclamation costs, estimated
royalties payable, estimated operating costs, and estimated capital
for future development associated with the reserves.
In the InSite Report, the net total future
capital over the life of the reserves associated with 1P reserves
is $663 million ($510 million discounted at 10%) and $832 million
($632 million discounted at 10%) for 2P reserves. The change in
2017 net total FDC over the life of the reserves associated with 1P
reserves is negative $22 million (negative $12 million discounted
at 10%) and negative $113 million (negative $81 million discounted
at 10%) for 2P reserves. Calculated changes in net FDC
exclude future capital from acquired properties. Negative
changes to FDC incorporate the impact from non-core dispositions
completed in 2017 and cost containment measures achieved during the
year.
SUMMARY OF NPV BEFORE INCOME TAXES (1),
(2)
As at December 31, 2017 |
0 |
% |
5 |
% |
8 |
% |
10 |
% |
15 |
% |
Proved |
|
|
|
|
|
|
Developed producing |
823,017 |
|
602,740 |
|
518,943 |
|
475,315 |
|
394,372 |
|
|
Developed non-producing |
9,506 |
|
6,850 |
|
5,823 |
|
5,283 |
|
4,268 |
|
|
Undeveloped |
1,388,278 |
|
826,962 |
|
631,793 |
|
535,043 |
|
366,035 |
|
Total proved |
2,220,802 |
|
1,436,551 |
|
1,156,559 |
|
1,015,642 |
|
764,675 |
|
Probable |
1,318,905 |
|
744,697 |
|
568,166 |
|
484,979 |
|
345,840 |
|
Total proved plus probable |
3,539,707 |
|
2,181,248 |
|
1,724,725 |
|
1,500,620 |
|
1,110,514 |
|
(1 )Forecast Prices and Costs ($000s). Discounted at
(%/year).(2) May not add due to rounding.
SUMMARY OF NPV AFTER INCOME TAXES (1),
(2), (3)
As at December 31, 2017 |
0 |
% |
5 |
% |
8 |
% |
10 |
% |
15 |
% |
Proved |
|
|
|
|
|
|
Developed producing |
823,018 |
|
602,740 |
|
518,943 |
|
475,315 |
|
394,372 |
|
|
Developed non-producing |
9,506 |
|
6,850 |
|
5,823 |
|
5,283 |
|
4,268 |
|
|
Undeveloped |
1,161,671 |
|
719,209 |
|
559,882 |
|
479,328 |
|
335,311 |
|
Total proved |
1,994,195 |
|
1,328,798 |
|
1,084,648 |
|
959,926 |
|
733,950 |
|
Probable |
976,641 |
|
558,972 |
|
431,142 |
|
370,988 |
|
270,322 |
|
Total proved plus probable |
2,970,835 |
|
1,887,770 |
|
1,515,790 |
|
1,330,914 |
|
1,004,272 |
|
(1)
Forecast Prices and Costs ($000s), Discounted at (%/year). |
(2)
May not add due to rounding. |
(3)
The after-tax NPV of Bellatrix's oil and gas properties reflects
the tax burden on the properties on a stand-alone basis and
utilizes corporate tax pools. It does not consider the
business-entity–level tax situation, or tax planning. It does
not provide an estimate of the value at the level of the business
entity, which may be significantly different. Bellatrix's
consolidated financial statements and management's discussion and
analysis should be consulted for information at the business entity
level. |
|
FD&A COSTS (1), (2)
The Company achieved another strong year of capital investment
in 2017 with average drill, complete, equip and tie-in costs for
its Spirit River program in 2017 averaging approximately $3.8
million per well. Reduced capital activity levels, and lower
probable undeveloped reserves have resulted in lower 2P FDC
forecast at year end 2017 compared with year end 2016 levels.
Total exploration and development capital expenditures in 2017
(before acquisition and divestiture activities) were $120.7
million. Total net capital expenditures after acquisition and
divestiture activities were $65.1 million in 2017.
|
2017 |
2016 |
2015(6) |
2015 – 2017 Avg. |
PROVED PLUS PROBABLE FD&A COSTS |
|
|
|
|
Excluding changes in FDC |
|
|
|
|
FD&A Costs, 2P ($/boe) |
|
|
|
|
Exploration and development (3) |
3.39 |
1.77 |
n/a |
4.56 |
Acquisitions (excluding dispositions) (4) |
0.04 |
3.26 |
2.43 |
1.31 |
Total (including acquisitions) |
2.43 |
2.02 |
n/a |
3.80 |
Total excluding Alder Flats Plant capital (5) |
2.22 |
1.82 |
n/a |
3.24 |
Including changes in FDC (3) |
|
|
|
|
FD&A Costs, 2P ($/boe) |
|
|
|
|
Exploration and development |
3.58 |
3.68 |
63.71 |
1.91 |
Acquisitions (excluding dispositions) (4) |
2.83 |
5.80 |
2.43 |
3.95 |
Total (including acquisitions) |
3.36 |
4.03 |
78.27 |
2.39 |
Total excluding Alder Flats Plant capital (5) |
3.15 |
3.83 |
98.13 |
1.82 |
|
|
|
|
|
PROVED FD&A COSTS |
|
|
|
|
Excluding changes in FDC |
|
|
|
|
FD&A Costs, 1P ($/boe) |
|
|
|
|
Exploration and development (3) |
3.42 |
1.88 |
26.63 |
4.27 |
Acquisitions (excluding dispositions) (4) |
0.05 |
4.34 |
2.87 |
1.68 |
Total (including acquisitions) |
2.61 |
2.22 |
25.24 |
3.80 |
Total excluding Alder Flats Plant capital (5) |
2.38 |
1.99 |
19.48 |
3.24 |
Including changes in FDC (3) |
|
|
|
|
FD&A Costs, 1P ($/boe) |
|
|
|
|
Exploration and development |
4.67 |
3.75 |
0.55 |
3.92 |
Acquisitions (excluding dispositions) (4) |
3.33 |
6.99 |
2.87 |
4.66 |
Total (including acquisitions) |
4.34 |
4.20 |
0.69 |
4.05 |
Total excluding Alder Flats Plant capital (5) |
4.12 |
3.98 |
n/a |
3.49 |
|
|
|
|
|
PROVED DEVELOPED PRODUCING FD&A COSTS |
|
|
|
|
FD&A Costs, PDP ($/boe) |
|
|
|
|
Exploration and development (3) |
5.56 |
5.02 |
12.65 |
7.14 |
Acquisitions (excluding dispositions) (4) |
0.47 |
11.14 |
2.87 |
7.19 |
Total (including acquisitions) |
5.27 |
5.90 |
12.37 |
7.14 |
Total excluding Alder Flats Plant capital (5) |
4.81 |
5.30 |
9.54 |
6.08 |
(1)
FD&A costs are used as a measure of capital efficiency.
FD&A presented above has been calculated based on exploration
and development capital and/or acquisition capital spent in the
applicable period (both including and excluding changes in future
development capital for that period) divided by the change in
reserves for that period including revisions for that same period.
Bellatrix provides FD&A costs that incorporate all acquisitions
and exclude the reserve, capital, and FDC impact of dispositions
during the year. The foregoing calculation is based on
working interest reserves. |
(2)
Certain of the information used in the foregoing calculation,
including exploration and development expenditures and acquisition
expenditures is based on unaudited financial information and is
subject to audit and may be subject to change as a result. |
(3)
The aggregate of exploration and development costs incurred in the
most recent year and the change during that year in estimated
future development costs generally will not reflect total finding
and development costs related to reserve additions for that
year. (4) FD&A is calculated using the announced purchase
price for corporate acquisitions rather than the actual amount
allocated to property, plant and equipment for accounting
purposes.(5) In 2017, the Company completed facilities and
equipment investments totalling $13.9 million including
approximately $12.0 million directly on the Alder Flats Plant. For
this reason, total FD&A costs are shown excluding capital spent
directly on the Alder Flats Plant.(6) Reserves for all years prior
to 2016 disclosed in this press release were independently
evaluated by Sproule Associates Limited (“Sproule”). See
“Information Regarding Oil and Gas Reserves” in the Reader
Advisories at the end of this Press Release for additional
information. |
|
RESERVE LIFE INDEX
Bellatrix’s reserve life index has been
determined for 1P and 2P working interest reserves using forecast
prices and costs. The reserve life index for 2017 is
calculated by dividing reserves as at December 31, 2017 by 2018
forecasted average production of 37,066 boe/d for 2P reserves and
34,665 boe/d for 1P reserves, as set forth in the InSite Report,
representing a measure of the amount of time production could be
sustained at the production rates based on the reserves at the
applicable point in time.
|
2017 |
2016 |
2015 |
2014 |
2013 |
Proved |
13.5 |
14.1 |
10.1 |
10.6 |
9.1 |
Proved and Probable |
17.4 |
18.8 |
14.3 |
13.3 |
13.7 |
RECYCLE RATIO (OPERATING NETBACK
(1)/FD&A
COST)
Recycle ratio is a measure for evaluating the
effectiveness of a company’s reinvestment program and the
efficiency of capital investment. It accomplishes this by comparing
the operating netback per boe to that year’s reserve FD&A cost
per boe. In 2017, the Company completed facilities and equipment
investments totalling $13.9 million including approximately $12.0
million directly on the Alder Flats Plant. For this reason,
recycle ratio information is included for the exploration and
development program excluding capital spent directly on the Alder
Flats Plant.
As at December 31, 2017 |
Proved Developed Producing |
Proved |
Proved and Probable |
Operating netback after commodity price risk management contracts
($/boe) (1) (unaudited) |
$9.02 |
$9.02 |
$9.02 |
Recycle ratio (excluding change in FDC) |
|
1.71 |
|
3.46 |
|
3.71 |
Recycle ratio (excluding change in FDC and Alder Flats Plant
capital) |
|
1.88 |
|
3.79 |
|
4.06 |
(1) Operating netback is calculated by deducting
transportation, royalties and operating costs from revenue and
includes the impact of commodity price risk management contracts.
(See Non-GAAP Measures)
FUTURE DEVELOPMENT COSTS USING FORECAST
PRICES AND COSTS
At year end, 2017, InSite had evaluated certain
future development opportunities on Company lands including 177
gross (129 net) evaluated future Spirit River horizontal locations
and 147 gross (117 net) future undrilled Cardium horizontal
locations representing proved plus probable undeveloped
locations.
For purposes of assigning net present value of
future revenue, future development locations were committed as
detailed in the following table.
($000s) |
Proved Future Development Costs |
Proved plus Probable Future Development Costs |
2018 |
67,378 |
69,431 |
2019 |
141,800 |
155,956 |
2020 |
137,882 |
178,843 |
2021 and subsequent |
315,776 |
427,795 |
Undiscounted total |
662,836 |
832,025 |
Discounted @ 10%/yr. |
510,174 |
632,192 |
RESERVES SUMMARY
The InSite Report is based on forecast prices
and costs, and applies InSite’s forecast escalated commodity price
deck, foreign exchange rate, and inflation rate assumptions as at
December 31, 2017 as outlined in the table below entitled "Reserve
Report Commodity Pricing". At December 31, 2017 the Company’s 2P
gross reserves as evaluated by InSite, using forecast prices and
costs, were 235,330 mboe, an increase of 3% compared to 228,540
mboe at December 31, 2016; total 1P gross reserves were 171,198
mboe, an increase of 8% compared to 158,400 mboe at December 31,
2016. By commodity type, natural gas made up 72% and crude
oil and natural gas liquids 28% of total 2P reserves. In
addition to the information disclosed herein, more detailed
information on the Company's reserves will be included in the
Company's Annual Information Form which management anticipates will
be filed on March 15, 2018.
Reserves, at December 31, 2017, as evaluated by InSite, are
summarized below and in the following tables.
Summary of Oil and Gas Working Interest Reserves (1)
(Gross) |
Forecast Prices and Costs |
|
|
As at Dec. 31, 2017 |
As at Dec. 31, 2016 |
|
|
Natural
Gas (2) |
Heavy
Oil |
Light
and |
Natural
Gas |
Total |
Total |
|
|
|
|
Medium
Oil |
Liquids |
|
|
|
|
(mmcf) |
(mbbl) |
(mbbl) |
(mbbl) |
(mboe, 6:1) |
(mboe, 6:1) |
Proved |
|
|
|
|
|
|
|
Developed producing |
283,869 |
8 |
1,056 |
16,929 |
65,305 |
60,322 |
|
Developed non-producing |
4,156 |
0 |
0.8 |
144 |
837 |
1,015 |
|
Undeveloped |
448,494 |
113 |
1,857 |
28,339 |
105,057 |
97,064 |
Total proved |
736,519 |
121 |
2,913 |
45,412 |
171,198 |
158,400 |
Probable |
274,326 |
200 |
1,373 |
16,837 |
64,132 |
70,139 |
Total proved plus probable |
1,010,845 |
321 |
4,286 |
62,248 |
235,330 |
228,540 |
(1)
“Working Interest" means Bellatrix's working interest (operated or
non-operated) share excluding any royalty interest and before
deduction of royalties. Also referred to as “Gross” reserves
under NI 51-101. May not add due to rounding.(2) Includes
natural gas from coal bed methane and shale gas reserves. Coal bed
methane and shale gas reserves represent an immaterial portion of
the Company’s natural gas reserves. |
Summary of Oil and Gas Net Reserves (1) (Net) |
Forecast Prices and Costs |
|
|
As at Dec. 31, 2017 |
As at Dec. 31, 2016 |
|
|
Natural
Gas (2) |
Heavy
Oil |
Light
and |
Natural
Gas |
Total |
Total |
|
|
|
|
Medium
Oil |
Liquids |
|
|
|
|
(mmcf) |
(mbbl) |
(mbbl) |
(mbbl) |
(mboe, 6:1) |
(mboe, 6:1) |
Proved |
|
|
|
|
|
|
|
Developed producing |
254,174 |
8 |
958 |
13,312 |
56,640 |
51,343 |
|
Developed non-producing |
3,515 |
0 |
0.7 |
101 |
688 |
846 |
|
Undeveloped |
399,209 |
95 |
1,544 |
24,102 |
92,277 |
82,826 |
Total proved |
656,897 |
104 |
2,503 |
37,515 |
149,604 |
135,015 |
Probable |
241,408 |
164 |
1,106 |
13,585 |
55,090 |
58,326 |
Total proved plus probable |
898,306 |
268 |
3,609 |
51,099 |
204,694 |
193,340 |
(1) "Net" means Bellatrix's working interest (operated or
non-operated) share after deduction of royalty obligations, plus
Bellatrix's royalty interests in reserves. May not add due to
rounding.(2) Includes natural gas from coal bed methane and shale
gas reserves. Coal bed methane and shale gas reserves represent an
immaterial portion of the Company’s natural gas reserves.
|
|
RESERVE REPORT COMMODITY PRICING
The following is a summary of InSite’s forecast
commodity prices as at December 31, 2017:
YearForecast |
WTI OilCushing Oklahoma
($US/bbl) |
Edmonton Crude Oil Ref
Price ($/bbl) |
AECO Natural Gas ($/MMBtu) |
Butane ($/bbl) |
Propane ($/bbl) |
Condensate ($/bbl) |
Exchange Rate (1) ($US/$Cdn) |
|
2018 |
60.00 |
71.36 |
2.52 |
51.38 |
35.68 |
74.93 |
0.79 |
2019 |
62.50 |
73.44 |
2.93 |
52.88 |
36.72 |
77.12 |
0.80 |
2020 |
65.00 |
75.47 |
3.22 |
54.34 |
35.85 |
79.25 |
0.81 |
2021 |
70.00 |
80.49 |
3.51 |
57.96 |
36.22 |
84.52 |
0.82 |
2022 |
72.50 |
82.38 |
3.75 |
59.31 |
37.07 |
86.50 |
0.83 |
2023 |
75.00 |
84.22 |
3.85 |
60.64 |
37.90 |
88.43 |
0.84 |
2024 |
77.50 |
86.01 |
3.95 |
61.93 |
38.70 |
90.31 |
0.85 |
2025 |
80.00 |
88.85 |
4.11 |
63.97 |
39.98 |
93.29 |
0.85 |
2026 |
81.60 |
90.62 |
4.27 |
65.25 |
40.78 |
95.15 |
0.85 |
2027 |
83.23 |
92.43 |
4.35 |
66.55 |
41.60 |
97.06 |
0.85 |
Thereafter |
+2.0%/yr. |
+2.0%/yr. |
+2.0%/yr. |
+2.0%/yr. |
+2.0%/yr. |
+2.0%/yr. |
|
(1) Exchange rates used to generate the
benchmark reference prices in this table
Weighted average historical prices realized by
Bellatrix (before commodity price risk management contracts) for
the year ended December 31, 2017, were $2.27/mcf for natural gas,
$62.93/bbl for crude oil and condensate, and $21.52/bbl for natural
gas liquids (excluding condensate).
LAND
As at December 31, 2017, Bellatrix had
approximately 148,804 net undeveloped acres in Alberta, British
Columbia, and Saskatchewan.
Land Holdings
(1) |
|
|
|
2017 |
2016 |
|
Gross |
Net |
Gross |
Net |
Developed |
|
|
British Columbia |
8,132 |
2,108 |
8,132 |
2,108 |
Alberta |
371,715 |
227,180 |
402,145 |
244,828 |
Saskatchewan |
13,327 |
12,720 |
13,327 |
12,719 |
Total |
393,174 |
242,008 |
423,604 |
259,656 |
Undeveloped |
|
|
British Columbia |
79,987 |
28,859 |
85,992 |
33,863 |
Alberta |
153,035 |
112,213 |
189,004 |
138,608 |
Saskatchewan |
8,005 |
7,732 |
8,005 |
7,732 |
Total |
241,028 |
148,804 |
283,001 |
180,203 |
Developed and Undeveloped |
|
|
British Columbia |
88,120 |
30,967 |
94,124 |
35,971 |
Alberta |
524,751 |
339,393 |
591,149 |
383,436 |
Saskatchewan |
21,332 |
20,452 |
21,332 |
20,452 |
Total |
634,202 |
390,812 |
706,605 |
439,859 |
(1) May not add due to
rounding |
|
|
|
|
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.
All amounts in this press release are in
Canadian dollars unless otherwise identified.
For further information, please
contact:
Steve Toth, CFA, Vice President, Investor
Relations & Corporate Development (403) 750-1270
Bellatrix Exploration Ltd.1920,
800 – 5th Avenue SWCalgary, Alberta, Canada T2P 3T6Phone: (403)
266-8670Fax: (403) 264-8163www.bxe.com
READER ADVISORIES:
Forward-Looking Statements. Certain statements
contained in this news release may constitute forward-looking
statements or forward-looking information. These statements relate
to future events or the Bellatrix's future performance. All
statements other than statements of historical fact may be
forward-looking statements. Forward-looking statements or
information are often, but not always, identified by the use of
words such as "seek", "anticipate", "plan", "continue", "estimate",
"expect", "may", "will", "project", "predict", "potential",
"targeting", "intend", "could", "might", "should", "believe" and
similar expressions. Statements relating to "reserves" are also
deemed to be forward-looking statements, as they involve the
implied assessment, based on certain estimates and assumptions,
that the reserves described exist in the quantities predicted or
estimated and that the reserves can be profitably produced in the
future. These statements involve known and unknown risks,
uncertainties and other factors that may cause actual results or
events to differ materially from those anticipated in such
forward-looking statements. Bellatrix believes that the
expectations reflected in those forward-looking statements are
reasonable, but no assurance can be given that these expectations
will prove to be correct and such forward-looking statements
included in this news release should not be unduly relied upon by
investors. These statements speak only as of the date of this news
release and are expressly qualified, in their entirety, by this
cautionary statement.
In particular, this news release contains
forward-looking statements, pertaining to the following:
projections of market prices and costs, supply and demand for oil
and natural gas, the quantity of reserves, oil and natural gas
production levels, the percentage of forecast production hedged
and/or subject to market diversification strategies, estimated
future drilling locations, future development costs and timing of
filing of Bellatrix's annual information form an annual financial
results for the year ended December 31, 2017.
With respect to forward-looking statements
contained in this news release, Bellatrix has made assumptions
regarding, among other things: prevailing commodity prices,
exchange rates, interest rates, applicable royalty rates and tax
laws; the legislative and regulatory environments of the
jurisdictions where Bellatrix carries on business or has
operations; future production rates and estimates of operating
costs; performance of existing and future wells; reserve and
resource volumes; anticipated timing and results of capital
expenditures; the success obtained in drilling new wells; the
sufficiency of budgeted capital expenditures in carrying out
planned activities; the timing, location and extent of future
drilling operations; the state of the economy and the exploration
and production business; results of operations; performance;
business prospects and opportunities; the availability and cost of
financing, labour and services; the impact of increasing
competition; ability to market oil and natural gas successfully and
Bellatrix's ability to obtain additional financing on satisfactory
terms.
Although Bellatrix believes that the assumptions
on which such forward-looking information is based are reasonable,
undue reliance should not be placed on the forward-looking
information because no assurance can be given that they will prove
to be correct. Bellatrix's actual results could differ materially
from those anticipated in these forward-looking statements as a
result of risk factors that may include, but are not limited to:
volatility in the market prices for oil and natural gas;
uncertainties associated with estimating reserves; uncertainties
associated with Bellatrix's ability to obtain additional financing
on satisfactory terms; geological, technical, drilling and
processing problems; liabilities and risks, including environmental
liabilities and risks, inherent in oil and natural gas operations;
incorrect assessments of the value of acquisitions; competition
for, among other things, capital, acquisitions of reserves,
undeveloped lands and skilled personnel. Readers are cautioned that
the foregoing list of factors is not exhaustive. Management has
included the above summary of assumptions and risks related to
forward-looking information provided in this news release in order
to provide security holders with a more complete perspective on
Bellatrix's future operations and such information may not be
appropriate for other purposes. Additional information on these and
other factors that could affect Bellatrix's operations and
financial results are included in reports on file with Canadian
securities regulatory authorities and may be accessed through the
SEDAR website (www.sedar.com).
This forward-looking information represents
Bellatrix's views as of the date of this document and such
information should not be relied upon as representing its views as
of any date subsequent to the date of this document. Bellatrix has
attempted to identify important factors that could cause actual
results, performance or achievements to vary from those current
expectations or estimates expressed or implied by the
forward-looking information. However, there may be other factors
that cause results, performance or achievements not to be as
expected or estimated and that could cause actual results,
performance or achievements to differ materially from current
expectations. There can be no assurance that forward-looking
information will prove to be accurate, as results and future events
could differ materially from those expected or estimated in such
statements. Accordingly, readers should not place undue reliance on
forward-looking information. Except as required by law, the Company
undertakes no obligation to publicly update or revise any
forward-looking statements.
Unaudited Financial Information: Certain
financial and operating information included in this news release
are based on estimated unaudited financial results for the year
ended December 31, 2017 and are subject to the same limitations as
discussed under "Forward- Looking Statements" set out above. These
estimated amounts are subject to change upon the completion of the
audited financial statements for the year ended December 31, 2017
and changes could be material. Bellatrix anticipates filing its
audited financial statements and related management's discussion
and analysis for the year ended December 31, 2017 on SEDAR on or
about March 15, 2018.
Information Regarding Disclosure on Oil and Gas
Reserves: The reserves data set forth above is based upon the
InSite Report which is an independent reserves assessment and
evaluation prepared by InSite with an effective date of December
31, 2017. The presentation summarizes the Company's crude oil,
natural gas liquids and natural gas reserves and the net present
values before income tax of future net revenue for the Company's
reserves using forecast prices and costs based on the InSite
Report. All reserve references in this news release are "Working
interest reserves" unless otherwise indicated. Working interest
reserves are Bellatrix’s working interest (operated and
non-operated) share before deduction of royalties, and is also
referred to as “Gross” reserves under NI 51-101. The InSite
Report has been prepared in accordance with the standards contained
in the COGE handbook and the reserve definitions contained in NI
51-101. All evaluations and reviews of future net cash flows are
stated prior to any provisions for interest costs or general and
administrative costs and after the deduction of estimated future
capital expenditures for wells to which reserves have been
assigned. It should not be assumed that the estimates of future net
revenues presented in the tables above represent the fair market
value of the reserves. There is no assurance that the forecast
prices and cost assumptions will be attained and variances could be
material. The recovery and reserve estimates of the Company's crude
oil, natural gas liquids and natural gas reserves provided herein
are estimates only and there is no guarantee that the estimated
reserves will be recovered. Actual crude oil, natural gas and
natural gas liquids reserves may be greater than or less than the
estimates provided herein. All future net revenues are estimated
using forecast prices, arising from the anticipated development and
production of the Company's reserves, net of the associated
royalties, operating costs, development costs, and abandonment and
reclamation costs and are stated prior to provision for interest
and general and administrative expenses. Future net revenues have
been presented on a before tax basis. Estimated values of future
net revenue disclosed herein do not represent fair market value.
The reserve data provided in this news release only represents a
summary of the disclosure required under NI 51-101. Additional
disclosure will be provided in the Company's Annual Information
Form which management anticipates will be filed on www.sedar.com on
or about March 15, 2018. Reserves at December 31, 2016, 2014, 2013
and 2012 were independently evaluated by Sproule Associates Limited
(“Sproule”). Bellatrix changed independent reserves
evaluators from Sproule to InSite for the 2017 evaluation. The
change was not the result of any disputes between Sproule and
management of Bellatrix.
Non-GAAP Measures: The terms “operating netback”
and “total net debt” do not have standard meanings under Canadian
general accepted accounting principles (“GAAP”). Therefore
reference to the non-GAAP measures of net debt may not be
comparable with the calculation of similar measures for other
entities. Operating netback is calculated by deducting
transportation, royalties and operating costs from revenue.
Operating netback includes the impact of commodity price risk
management contracts. 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, Senior Notes, 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. A reconciliation between
total liabilities under GAAP and total net debt as calculated by
the Company will be available in the Company’s Management
Discussion and Analysis for the year ended December 31, 2017 and
2016, to be filed on SEDAR on or about March 15, 2018.
Oil and Gas Metrics: This news release contains
metrics commonly used in the oil and natural gas industry, such as
"recycle ratio", "operating netback", "finding, development and
acquisition ("FD&A") costs", and "reserve life index ("RLI")".
These terms do not have a standardized meaning and may not be
comparable to similar measures presented by other companies, and
therefore should not be used to make such comparisons. Details of
how these measures have been calculated are included in the body of
this press release.
BOE Presentation: References herein to "boe"
mean barrels of oil equivalent derived by converting gas to oil in
the ratio of six thousand cubic feet (Mcf) of gas to one barrel
(bbl) of oil. Boe may be misleading, particularly if used in
isolation. A boe conversion ratio of 6 Mcf: 1 bbl is based on an
energy conversion method primarily applicable at the burner tip and
does not represent a value equivalency at the wellhead. In
addition, 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: This press release discloses
future drilling locations, which can be categorized as follows: (i)
proved locations; and (ii) probable locations. Proved locations and
probable locations are sometimes collectively referred to as
"booked locations", are derived from Bellatrix's most recent
independent reserves evaluation and account for drilling locations
that have associated proved plus probable reserves or probable-only
reserves, as applicable.
Initial Production Rates: Initial production
rates disclosed herein may not be indicative of long-term
performance or ultimate recovery. Such rates are not determinative
of the future production rates of such wells and do not reflect how
the production from such wells will decline thereafter. While
encouraging, readers are cautioned not to place reliance on such
rates in calculating the aggregate production for Bellatrix. A
pressure transient analysis or well test interpretation has not
been carried out in respect of all wells. Accordingly, Bellatrix
cautions that the test results should be considered to be
preliminary.