Bellatrix Exploration Ltd. (“Bellatrix”, "we", "us", "our" or the
“Company”) (TSX:BXE) (NYSE:BXE) announces its financial and
operating results for the fourth quarter and year ended December
31, 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 years ended
December 31, 2017 and 2016. Bellatrix's audited financial
statements and notes, and the MD&A are available on our website
at www.bxe.com, and are filed on SEDAR at www.sedar.com and on
EDGAR at www.sec.gov/edgar.
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Three months ended December 31, |
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Year ended December 31, |
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2017 |
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2016 |
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|
2017 |
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|
2016 |
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SELECTED
FINANCIAL RESULTS |
|
|
|
|
|
(CDN$000s except share
and per share amounts) |
|
|
|
|
|
Cash flow from
operating activities |
|
|
13,425 |
|
|
17,114 |
|
|
55,210 |
|
|
37,546 |
|
Per
diluted share (1) |
|
$0.27 |
|
$0.35 |
|
$1.12 |
|
$0.88 |
|
Adjusted funds flow
(2) |
|
|
15,700 |
|
|
8,437 |
|
|
58,240 |
|
|
40,916 |
|
Per
diluted share (1) |
|
$0.32 |
|
$0.17 |
|
$1.18 |
|
$0.96 |
|
Net profit (loss) |
|
|
(13,053 |
) |
|
23,085 |
|
|
(91,363 |
) |
|
(26,668 |
) |
Per diluted share (1) |
|
($0.26 |
) |
$0.47 |
|
($1.85 |
) |
($0.62 |
) |
Capital – exploration
and development |
|
|
25,755 |
|
|
24,640 |
|
|
120,651 |
|
|
78,660 |
|
Total
capital expenditures – net (3) |
|
|
26,212 |
|
|
(137,940 |
) |
|
65,084 |
|
|
(246,194 |
) |
Credit Facilities |
|
|
52,066 |
|
|
19,143 |
|
|
52,066 |
|
|
19,143 |
|
Senior Notes |
|
|
305,409 |
|
|
324,691 |
|
|
305,409 |
|
|
324,691 |
|
Convertible Debentures
(liability component) |
|
|
39,426 |
|
|
37,420 |
|
|
39,426 |
|
|
37,420 |
|
Long term loan
receivable |
|
|
— |
|
|
(8,775 |
) |
|
— |
|
|
(8,775 |
) |
Adjusted
working capital deficiency (2) |
|
|
23,926 |
|
|
23,716 |
|
|
23,926 |
|
|
23,716 |
|
Total net
debt (2) |
|
|
420,827 |
|
|
396,195 |
|
|
420,827 |
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|
396,195 |
|
SELECTED OPERATING RESULTS |
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|
|
|
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Total revenue (3) |
|
|
60,897 |
|
|
67,907 |
|
|
249,399 |
|
|
227,874 |
|
Average daily sales
volumes |
|
|
|
|
|
Crude
oil, condensate and NGLs |
(bbl/d) |
|
9,602 |
|
|
8,993 |
|
|
9,192 |
|
|
9,935 |
|
Natural
gas |
(mcf/d) |
|
164,848 |
|
|
137,372 |
|
|
166,078 |
|
|
154,453 |
|
Total oil
equivalent (4) |
(boe/d) |
|
37,077 |
|
|
31,888 |
|
|
36,872 |
|
|
35,677 |
|
Average realized
prices |
|
|
|
|
|
Crude oil
and condensate |
($/bbl) |
|
69.64 |
|
|
58.12 |
|
|
62.93 |
|
|
48.41 |
|
NGLs
(excluding condensate) |
($/bbl) |
|
27.68 |
|
|
18.87 |
|
|
21.52 |
|
|
13.14 |
|
Natural
gas |
($/mcf) |
|
1.79 |
|
|
3.29 |
|
|
2.27 |
|
|
2.27 |
|
Total oil
equivalent |
($/boe) |
|
17.42 |
|
|
22.95 |
|
|
18.12 |
|
|
16.86 |
|
Total oil equivalent (including risk management (5)) |
($/boe) |
|
20.80 |
|
|
22.19 |
|
|
20.45 |
|
|
18.38 |
|
Selected Key Operating
Statistics |
|
|
|
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Commodity
sales |
($/boe) |
|
17.42 |
|
|
22.95 |
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|
18.12 |
|
|
16.86 |
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Other
income |
($/boe) |
|
0.43 |
|
|
0.20 |
|
|
0.41 |
|
|
0.59 |
|
Royalties |
($/boe) |
|
1.78 |
|
|
2.64 |
|
|
1.78 |
|
|
1.43 |
|
Production expenses |
($/boe) |
|
7.81 |
|
|
10.57 |
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|
8.31 |
|
|
8.70 |
|
Transportation |
($/boe) |
|
1.92 |
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|
1.07 |
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|
1.75 |
|
|
0.93 |
|
Operating
netback (3) |
($/boe) |
|
6.34 |
|
|
8.87 |
|
|
6.69 |
|
|
6.39 |
|
Realized
gain (loss) on risk management contracts |
($/boe) |
|
3.38 |
|
|
(0.76 |
) |
|
2.33 |
|
|
1.52 |
|
Operating netback (3) (including risk management (5)) |
($/boe) |
|
9.72 |
|
|
8.11 |
|
|
9.02 |
|
|
7.91 |
|
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Three months ended December 31, |
Year ended December 31, |
SHARE STATISTICS |
2017 |
2016 |
2017 |
2016 |
COMMON
SHARES |
|
|
|
|
Common shares
outstanding (6) |
49,378,026 |
49,317,165 |
49,378,026 |
49,317,165 |
Weighted
average shares (1) |
49,378,026 |
48,716,487 |
49,351,848 |
42,821,013 |
SHARE TRADING
STATISTICS |
|
|
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TSX and Other
(7) |
|
|
|
|
(CDN$, except volumes)
based on intra-day trading |
|
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High |
3.52 |
7.00 |
6.83 |
9.95 |
Low |
1.85 |
4.80 |
1.85 |
4.80 |
Close |
2.15 |
6.40 |
2.15 |
6.40 |
Average
daily volume |
371,933 |
414,894 |
227,648 |
456,470 |
NYSE |
|
|
|
|
(US$, except volumes)
based on intra-day trading |
|
|
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|
High |
2.80 |
5.35 |
5.15 |
7.40 |
Low |
1.44 |
3.60 |
1.44 |
3.60 |
Close |
1.72 |
4.72 |
1.72 |
4.72 |
Average
daily volume |
125,134 |
104,850 |
96,969 |
191,849 |
(1) Basic weighted average shares for the three
months and year ended December 31, 2017 were 49,378,026 (2016:
48,716,487) and 49,351,848 (2016: 42,821,013),
respectively. In computing weighted average diluted loss per
share, weighted average diluted cash flow from operating activities
per share, and weighted average diluted adjusted funds flow per
share for the three months and year ended December 31, 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 were added to the denominator for the three months and
year resulting in diluted weighted average common shares of
49,378,026 (2016: 49,716,487) and 49,351,848 (2016: 42,821,013),
respectively.
(2) The terms “adjusted funds flow”, “adjusted
funds flow 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) The terms “operating netbacks”, “total
capital expenditures - net”, and “total revenue" do not have
standard meanings under GAAP. Refer to “Non-GAAP measures”
disclosed at the end of this Press Release.
(4) 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.
(5) 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.
(6) Fully diluted common shares
outstanding for the three months and year ended December 31, 2017
were 57,172,998 (2016: 58,063,029). This includes 1,622,132 (2016:
2,573,024) of share options outstanding and 6,172,840 (2016:
6,172,840) of shares issuable on conversion of the Convertible
Debentures. Shares issuable on conversion of the Convertible
Debentures are calculated by dividing the $50 million principal
amount of the Convertible Debentures by the conversion price of
$8.10 per share.
(7) TSX and Other includes the trading
statistics for the Toronto Stock Exchange (“TSX”) and other
Canadian trading markets.
FINANCIAL & OPERATIONAL HIGHLIGHTS
Strong fourth quarter 2017 results concluded a
solid operational year for Bellatrix, demonstrated by consistent
improvement in corporate operating guidance throughout the year and
full year results that met or exceeded expectations.
Fourth quarter 2017 performance included the
following operational and financial achievements:
- Production volumes in the fourth quarter of 2017 averaged
37,077 boe/d (74% natural gas weighted), representing 16% growth
compared to fourth quarter 2016 average volumes. Production
levels in the fourth quarter 2017 remained consistent with third
quarter 2017 levels, delivering a strong full year achievement from
the 2017 capital program.
- Production expenses in the fourth quarter of 2017 averaged
$7.81/boe, down 26% compared with fourth quarter 2016 production
expenses.
- Bellatrix’s borrowings under its Credit Facilities were $52.1
million at December 31, 2017 providing approximately $67.9 million
of undrawn capacity (before deducting outstanding letters of
credit). Other than amounts outstanding under our Credit
Facilities, Bellatrix has no debt maturities until 2020 and
2021.
In 2017, Bellatrix drilled and/or participated
in 26 gross (19.3 net) Spirit River liquids rich natural gas wells,
3 gross (3.0 net) Cardium wells and 4 gross (1.6 net) Ellerslie
wells. Bellatrix's operated drilling activity in 2017 included, a
total of 101,040 meters drilled, 35,297 meters of which was
horizontal length. All-in (drill, complete, equip and tie-in)
well costs in 2017 for our operated Spirit River program averaged
$3.8 million, meaningfully below the $4.0 million budgeted cost
level during the year.
Efficiency improvements continued in 2017, which
provide the foundation for continued cost suppression. In
2017, Bellatrix averaged 13.5 days from spud to rig release, an 8%
improvement year over year. These operational efficiencies
achieved through 2017 are enduring and Bellatrix continues to
improve on its already industry leading well cost and performance
metrics year to date in 2018.
Bellatrix delivered strong operational
performance in 2017 relative to guidance expectations as summarized
below:
|
2017 Results |
|
2017 Annual Guidance |
|
Actual ResultsVersus
Guidance |
|
Average daily production (boe/d) |
36,872 |
|
36,000 |
|
2 |
% |
Average product mix |
|
|
|
|
Natural gas (%) |
75 |
|
76 |
|
(1 |
)% |
Crude oil, condensate and NGLs (%) |
25 |
|
24 |
|
1 |
% |
Capital Expenditures ($000’s) |
|
|
|
|
Total net capital expenditures(1) |
122,636 |
|
120,000 |
|
3 |
% |
Property disposition - cash(2) |
(48,798 |
) |
(50,500 |
) |
(3 |
)% |
Total net capital expenditures after property disposition -
cash |
73,838 |
|
69,500 |
|
7 |
% |
Production expense ($/boe) |
8.31 |
|
8.50 |
|
(2 |
)% |
(1) Capital spending includes exploration and
development capital projects and corporate assets, and excludes
property acquisitions, property dispositions, and facilities
transferred.
(2) Property disposition - cash guidance refers
to the Strachan and West Pembina asset sales and does not include
transaction costs or adjustments, 2017 results include
adjustments.
LOW FD&A COSTS ACHIEVED IN
2017
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. Bellatrix maintained a focused capital
program in 2017 adding Proved Developed Producing ("PDP") reserves
at a finding, development and acquisition ("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
including changes in future development capital of $2.39/boe and
$4.05/boe, respectively. Strong FD&A costs were once again
achieved in 2017 highlighting the low cost structure Bellatrix has
built in finding and developing its resource base in West Central
Alberta. With an inventory of 354 net well locations in the
Spirit River liquids rich natural gas play and 213 net well
locations in the higher liquids Cardium play, Bellatrix maintains
decades of low cost development drilling opportunities. 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.
CAPITAL COSTS STRUCTURALLY REDUCED BY
10% IN 2018 FURTHER IMPROVING LONG TERM
COMPETITIVENESS
A series of incremental improvements and
operational measures have delivered a step change reduction for
all-in average Spirit River well costs (drill, complete, equip and
tie-in) to under $3.5 million in the first quarter of 2018 (from
$3.8 million in 2017). An enhanced focus on pad drilling to
reduce surface disturbance (reduced need for pipeline
infrastructure and improved efficiency for operating wells),
increased monobore style drilling, other proprietary drilling
techniques, and reduced nitrogen use are examples of cost reduction
efforts achieved. In addition, drilling efficiency gains have
continued in 2018, averaging approximately 10 days from spud to rig
release for the Spirit River program down from a full program
average of 13.5 days in 2017.
In addition to the cost savings, Bellatrix
delivered productivity improvements with average well performance
from the Company's 2017 Spirit River well program outperforming
expected results by approximately 38% on an IP180 basis. The
combination of lower capital costs and improved well performance
provide enhanced corporate competitiveness against weak natural gas
prices.
CREDIT FACILITIES RECONFIRMED AT $120
MILLION DURING THE FOURTH QUARTER
During the fourth quarter of 2017, Bellatrix
completed the semi-annual borrowing base redetermination under the
Company’s syndicated revolving credit facilities (“Credit
Facilities”), and the borrowing base was reconfirmed at $120
million, comprised of a $25 million operating facility and a $95
million syndicated facility. The next semi-annual
redetermination, scheduled for May 2018, will incorporate the
results of Bellatrix’s recently completed 2017 year-end independent
reserves evaluation. Other than $52 million outstanding under
the Credit Facilities as at December 31, 2017, the Company has no
debt maturities until 2020, providing the Company with
approximately $55 million of available liquidity, after deducting
letters of credit.
STRONG RISK MANAGEMENT PROTECTION IN
2018 & SALES MARKET DIVERSIFICATION THROUGH 2020
During the fourth quarter of 2017, Bellatrix
added to its commodity price risk management protection for
calendar 2018. 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 hedging
program is part of the Company's overall risk management strategy
providing reduced commodity price volatility and greater assurance
over future revenue and operating funds flow which help drive the
capital and reinvestment decisions within our business. Bellatrix’s
2018 through 2020 commodity price risk management contracts as at
March 13, 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 |
NYMEX
-US$1.24/MMBtu |
Natural gas |
AECO/NYMEX basis swap |
April
1, 2019 to October 31, 2020 |
10,000 MMBtu/d |
NYMEX
-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 March 13, 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 |
|
|
|
|
|
ALDER FLATS PHASE 2 EXPANSION PROJECT
REMAINS ON SCHEDULE AND UNDER BUDGET
Utilization remained strong at the Alder Flats
Plant (Phase 1) with an average utilization rate of 99% in 2017,
providing strategic benefits to Bellatrix including reduced
operating costs, improved deep cut liquids extraction and
reliability of processing.
The Phase 2 expansion project of the Alder Flats
Plant remains on schedule and approximately 5% under budget.
The project represents the last stage of our multi-year
infrastructure build out and upon completion will more than double
gross throughput capacity at the Alder Flats Plant to 230 MMcf/d
(from 110 MMcf/d currently). Major equipment installation
progressed throughout the fall and was completed on plan in
November. Major mechanical construction was completed in
December and electrical and instrumentation installation activity
began in August 2017 and was completed in early 2018.
Pre-commissioning activity has commenced with full commissioning of
the Phase 2 expansion expected in March, with operations on-stream
early in the second quarter of 2018.
Completion of Phase 2 of the Alder Flats Plant,
will add an incremental 30 MMcf/d ownership capacity net to
Bellatrix's 25% working interest, and forecasted 2018 production
volume additions are expected to deliver continued reductions in
production expenditures in 2018 to a range of $7.50/boe to
$7.90/boe. Completion of Phase 2 is anticipated to drive
improved revenue generation through additional higher margin
natural gas liquids (“NGL”) extraction, resulting in an improvement
in our average corporate liquid weighting to approximately 26% in
2018, which we expect to, in turn, drive enhanced corporate profit
margins and cash flow.
Capital costs remaining for the Phase 2
expansion, net to Bellatrix`s 25% working interest, are estimated
at approximately $3 million in calendar 2018 (excluding received
partner prepayment). Upon completion, Bellatrix expects the
majority of capital investment to be utilized directly in drilling,
completion and production addition activities with minimal capital
required for facilities and infrastructure projects over the near
term. 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.
OPERATIONAL AND FINANCIAL SUMMARY
- Production volumes in the fourth quarter of 2017 averaged
37,077 boe/d (74% natural gas weighted), representing 16% growth
compared to fourth quarter 2016 average volumes. Production
levels in the fourth quarter 2017 remained consistent with third
quarter 2017 levels.
- Adjusted funds flow generated in the three months ended
December 31, 2017 was $15.7 million ($0.32 per basic and diluted
share), an increase of 89% from $8.3 million ($0.17 per basic share
and diluted share) in the third quarter of 2017. Fourth
quarter 2017 adjusted funds flow represented an increase of 86%
from the comparable period of 2016, largely reflecting a stronger
oil and liquids prices, and higher realized gains on risk
management contracts between the periods.
- Exploration and development capital expenditures were $25.8
million in the fourth quarter of 2017 and $120.7 million for the
year ended December 31, 2017, which was in line with total net
capital expenditure full year corporate guidance.
- The Company drilled and/or participated in 2 gross (1.9 net)
Spirit River wells during the fourth quarter of 2017.
Completion and tie-in operations during the fourth quarter included
7 gross (4.6 net) Spirit River wells and 1 gross (1.0 net) Cardium
well. Facilities related capital investment was focused primarily
on the Phase 2 expansion project of the Alder Flats Plant.
- Bellatrix’s borrowings under its Credit Facilities were $52.1
million and total net debt was $420.8 million at December 31,
2017. At December 31, 2017, Bellatrix had approximately $55.0
million of undrawn capacity (approximately 46% undrawn) on its $120
million Credit Facilities after deducting outstanding letters of
credit of $12.9 million that reduce the amount otherwise available
to be drawn on the Credit Facilities. Upon completion of Phase 2 of
the Alder Flats Plant, Bellatrix expects the amount of its
outstanding letters of credit to reduce by $6.2 million, thereby
increasing available liquidity.
- For the quarter ended December 31, 2017, Bellatrix’s Senior
Debt to Bank EBITDA (as defined in the MD&A) ratio was 1.22
times, well below the financial covenant of 3.0 times as permitted
by the agreement governing the Credit Facilities.
- Total revenue was $60.9 million for the fourth quarter 2017,
compared to $67.9 million realized in the fourth quarter 2016,
primarily attributable to a 10% decrease in corporate average
realized prices over the comparative period.
- The corporate royalty rate in the three months ended December
31, 2017 averaged 11% of sales (after transportation), consistent
with 10% averaged in the third quarter of 2017.
- Production expenses in the fourth quarter of 2017 averaged
$7.81/boe, down 26% compared with fourth quarter 2016 production
expenses. Full year 2017 production expenses averaged
$8.31/boe, compared with $8.70/boe in 2016. Bellatrix has
provided a production expenditure guidance range of $7.50/boe to
$7.90/boe in 2018 given continued cost suppression activity, strong
production volumes, and the contribution from the Phase 2
completion in the second quarter 2018.
- Our corporate operating netback (including risk management)
realized for the three months ended December 31, 2017 was
$9.72/boe, up 20% compared with $8.11/boe realized in the fourth
quarter 2016. This change reflects lower realized natural gas
prices mitigated by higher production volumes, lower production
expenditures, and increased realized gains on risk management
contracts over the comparable periods.
- Net general and administrative (“G&A”) expenses (after
capitalized costs and recoveries) for the three months ended
December 31, 2017 were $8.8 million ($2.57/boe), up modestly
compared with $7.3 million ($2.11/boe) in the third quarter of
2017.
- Bellatrix recorded a net loss for the three months ended
December 31, 2017 of $13.1 million compared to a net profit of
$23.1 million for the three months ended December 31, 2016. The
decrease in net profit period over period is due to a non-cash
impairment reversal recognized in the fourth quarter of 2016 of
$264 million with no equivalent reversals in 2017, offset partially
by a loss on property disposition recognized in the fourth quarter
of 2016 with no equivalent costs in 2017 and an increase in
realized and unrealized gains on commodity contracts.
- As at December 31, 2017, Bellatrix had approximately 148,804
net undeveloped acres of land principally in Alberta.
- As at December 31, 2017, Bellatrix had approximately $1.35
billion in tax pools available for deduction against future
income.
- Bellatrix maintained a strong Liability Management Rating of
10.86 in Alberta versus an industry average of 4.64 as at January
6, 2018.
OUTLOOK & 2018 CORPORATE GUIDANCE
On December 14, 2017 Bellatrix’s Board of
Directors approved the 2018 capital budget of between $65 to $80
million, designed to achieve average production volumes of between
35,000 to 37,000 boe/d. The 2018 capital budget will remain
flexible throughout the year, and given continued weakness in the
forward strip natural gas prices, Bellatrix intends on managing our
capital investment program near the lower end of the capital
guidance range.
Development activity in 2018 focuses on
achievement of the following strategic objectives:
- Completing construction of Phase 2 of the Alder Flats deep cut
gas plant with commissioning planned to commence early in the
second quarter of 2018.
- Optimizing forecast return on invested capital through a
flexible drilling program focused on Spirit River liquids rich
natural gas investment opportunities and higher liquids weighted
opportunities in the Cardium play.
- Maintaining a flexible approach to capital investment with the
potential to accelerate or decelerate capital expenditures
throughout the year.
- Enhancing adjusted funds flow through optimal delivery of
production volumes during periods of stronger commodity prices by
leveraging Bellatrix’s controlled infrastructure and firm service
delivery capacity.
- Preserving liquidity and balance sheet strength.
- Continuing to work on cost suppression activities through
ongoing technological and operationally focused initiatives.
Bellatrix’s 2018 guidance estimates are outlined
in the following table.
|
2018 Guidance |
Production |
|
2018
Average daily production (boe/d) |
35,000-37,000 |
Average product mix |
|
Natural
gas (%) |
74 |
Crude
oil, condensate and NGLs (%) |
26 |
Net Capital Expenditures |
|
Total net
capital expenditures ($000)(1) |
65,000-80,000 |
Expenses |
|
Production expense ($/boe)(2) |
7.50-7.90 |
(1) Net capital spending includes
exploration and development capital projects and corporate assets,
and excludes property acquisitions and dispositions. Net capital
spending also excludes the previously received prepayment portion
of Bellatrix's partner’s 35% share of the cost of construction of
Phase 2 of the Alder Flats Plant during calendar 2018.
(2) Production expenses before net
processing revenue/fees.
CONFERENCE CALL INFORMATION
A conference call to discuss Bellatrix's fourth
quarter and year end results and reserves will be held on March 14,
2018 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://www.bxe.com/investors/presentations-events.cfm 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.
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. For additional information about these non-GAAP
measures, including reconciliations to the most directly comparable
GAAP terms, see our MD&A.
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 "adjusted
funds flow" 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 adjusted funds flow or adjusted
funds flow per share may not be comparable with the calculation of
similar measures for other entities. Management uses adjusted funds
flow to analyze operating performance and leverage and considers
adjusted funds flow 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. Adjusted funds flow 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 adjusted funds flow can be found
in the MD&A. Adjusted funds flow 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, 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
decommissioning liabilities 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, the expectation that operational efficiencies
achieved through 2017 will be enduring, the number of future well
locations in the Spirit River liquids rich natural gas play and in
the higher liquids Cardium play, the expectation that Bellatrix
maintains decades of low cost development opportunities, the
expectation that lower capital costs and improved well performance
may provide enhanced corporate competitiveness against weak natural
gas prices, the percent of forecast 2018 natural gas volumes
hedged, the percent of forecast 2018 natural gas volumes subject to
AECO pricing, the percent of forecast 2018 natural gas production
volumes subject to hedges or market diversification in 2018 and
2019, the expectation that the Company's risk management strategy
provides reduced price volatility and greater assurance over future
revenue and operating funds flow, the expectation that the Phase 2
expansion project of the Alder Flats Plant remains on time and on
budget, the capacity of the Alder Flats Plant upon completion of
Phase 2, expected timing for full commissioning of the Phase 2
expansion, Bellatrix's expected net ownership capacity from
Phase 2 of the Alder Flats Plant, expected benefits of completion
of the Alder Flats Plant including reductions in production
expenditures, increased liquids extraction and expected
improvements in corporate profit margins and cash flow, expected
capital costs remaining for the Phase 2 expansion, the expectation
that after completion of Phase 2 of the Alder Flats Plant the
majority of Bellatrix's 2018 capital investment will be utilized
directly in drilling, completion and production addition activities
with minimal capital required for facilities and infrastructure
projects over the near term, the expectation 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, forecast 2018
production expenditure, expected details of the Company's 2018
capital budget, the intent that the 2018 capital budget will remain
flexible throughout the year, the intent that Bellatrix will manage
the Company's capital investment program near the lower end of the
capital guidance range, Bellatrix's strategic objectives for the
Company's planned 2018 development activity, the intent that the
2018 drilling program will be focused on Spirit River liquids rich
natural gas investment opportunities and higher liquids weighted
opportunities in the Cardium play, the expectation that Bellatrix
will be able to accelerate or decelerate capital expenditures
throughout the year, the expectation that the Company may enhance
adjusted funds flow in 2018 through optimal delivery of production
volumes during periods of stronger commodity prices by leveraging
Bellatrix’s controlled infrastructure and firm service delivery
capacity, guidance relating to 2018 average daily production,
average production mix, net capital expenditures and production
expense and the intent to principally focus on profitable
development of the Spirit River liquids rich natural gas play. To
the extent that any forward-looking information contained herein
constitute a financial outlook, they were approved by management on
March 13, 2018 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 and dispositions, 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,
2017, 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.bxe.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.
OIL AND GAS METRICS
This press release contains metrics commonly
used in the oil and natural gas industry, such as FD&A costs,
recycle ratio, operating netback, and reserve life index. These
terms do not have standardized meanings and may not be comparable
to similar measures presented by other companies, and therefore
should not be used to make such comparisons. FD&A costs are
used as a measure of capital efficiency. FD&A presented herein
has been calculated based on exploration, development and
acquisition capital spent in the applicable period (including
changes in future development capital, if applicable, 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 calculation of
FD&A herein is based on working interest reserves. 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. See "Non-GAAP Measures"
above for a description of how operating netbacks are calculated.
The reserve life index for 2017 is calculated by dividing reserves
as at December 31, 2017 by 2018 forecasted average production and
has been presented to provide 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. Additional details of how
these measures have been calculated are included in the press
release of the Company dated March 1, 2018, which is available on
the Company's website at www.bxe.com, and are filed on SEDAR at
www.sedar.com and on EDGAR at www.sec.gov/edgar.
DRILLING LOCATIONS
This press release discloses drilling locations
in three categories: (i) proved locations; (ii) probable locations;
and (iii) unbooked locations. Proved locations and probable
locations, which are sometimes collectively referred to as “booked
locations”, are derived from the Company’s most recent independent
reserves evaluation of the Company's assets as prepared by InSite
Petroleum Consultants Ltd. (“InSite”) as of December 31, 2017 and
account for drilling locations that have associated proved or
probable reserves, as applicable. Unbooked locations are internal
estimates based on the Company’s prospective acreage and an
assumption as to the number of wells that can be drilled per
section based on industry practice and internal review. Unbooked
locations do not have attributed reserves or resources. Of the 354
net Spirit River drilling locations identified herein, 129 are
proved or probable locations and 225 are unbooked locations. Of the
213 net Cardium drilling locations identified herein, 117 are
proved or probable locations and 96 are unbooked locations.
Unbooked locations have specifically been identified by management
as an estimation of our multi-year drilling activities based on
evaluation of applicable geologic, seismic, and engineering,
production and reserves data on prospective acreage and geologic
formations. The drilling locations on which we actually drill wells
will ultimately depend upon the availability of capital, regulatory
approvals, seasonal restrictions, oil and natural gas prices,
costs, actual drilling results and other factors. While certain of
the unbooked drilling locations have been derisked by drilling
existing wells in relative close proximity to such unbooked
drilling locations, the majority of other unbooked drilling
locations are farther away from existing wells where management has
less information about the characteristics of the reservoir and
therefore there is more uncertainty whether wells will be drilled
in such locations and if drilled there is more uncertainty that
such wells will result in additional oil and gas reserves,
resources or production.
INFORMATION REGARDING DISCLOSURE ON OIL
AND GAS RESERVES
The reserves data set forth herein is based upon
a report prepared by InSite, the Company's independent reserves
evaluator, which is an independent reserves assessment and
evaluation prepared by InSite with an effective date of December
31, 2017. The report prepared by InSite was prepared in accordance
with the Canadian Oil and Gas Evaluation Handbook and National
Instrument 51-101 - Standards of Disclosure of Oil and Gas
Activities.
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