Bellatrix Exploration Ltd. (“Bellatrix”, "we", "us", "our" or the
“Company”) (TSX:BXE) (NYSE:BXE) announces its financial and
operating results for the first quarter ended March 31, 2018.
This press release contains forward-looking statements. Please
refer to our cautionary language on forward-looking statements and
the other matters set forth at the end of this press release and
the beginning of the Management’s Discussion and Analysis (the
“MD&A”) for the three months ended March 31, 2018 and 2017.
Bellatrix's unaudited 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.
|
|
|
|
|
Three months ended March 31, |
|
|
|
2018 |
|
|
2017 |
|
SELECTED
FINANCIAL RESULTS |
|
|
|
(CDN$000s except share
and per share amounts) |
|
|
|
Cash flow from
operating activities |
|
14,615 |
|
|
8,258 |
|
Per
diluted share (1) |
|
$0.30 |
|
$0.14 |
|
Adjusted funds flow
(2) |
|
14,670 |
|
|
14,891 |
|
Per
diluted share (1) |
|
$0.30 |
|
$0.26 |
|
Net profit (loss) |
|
(12,901 |
) |
|
13,049 |
|
Per diluted share (1) |
|
($0.26 |
) |
$0.23 |
|
Capital – exploration
and development |
|
24,232 |
|
|
43,978 |
|
Total
capital expenditures – net (3) |
|
22,074 |
|
|
51,219 |
|
Credit Facilities |
|
56,890 |
|
|
41,466 |
|
Senior Notes |
|
315,491 |
|
|
322,845 |
|
Convertible Debentures
(liability component) |
|
39,965 |
|
|
37,889 |
|
Adjusted
working capital deficiency (2) |
|
33,840 |
|
|
33,177 |
|
Total net
debt (2) |
|
446,186 |
|
|
435,377 |
|
SELECTED OPERATING RESULTS |
|
|
|
Total revenue (3) |
|
66,215 |
|
|
66,024 |
|
Average daily sales
volumes |
|
|
|
Crude
oil, condensate and NGLs |
(bbl/d) |
9,477 |
|
|
8,631 |
|
Natural
gas |
(mcf/d) |
163,579 |
|
|
156,715 |
|
Total oil
equivalent (4) |
(boe/d) |
36,740 |
|
|
34,750 |
|
Average realized
prices |
|
|
|
Crude oil
and condensate |
($/bbl) |
77.01 |
|
|
67.30 |
|
NGLs
(excluding condensate) |
($/bbl) |
26.42 |
|
|
18.18 |
|
Natural
gas |
($/mcf) |
2.16 |
|
|
2.87 |
|
Total oil
equivalent |
($/boe) |
19.50 |
|
|
20.83 |
|
Total oil equivalent (including risk management (5)) |
($/boe) |
20.68 |
|
|
21.81 |
|
Selected Key Operating
Statistics |
|
|
|
Commodity
sales |
($/boe) |
19.50 |
|
|
20.83 |
|
Other
income |
($/boe) |
0.52 |
|
|
0.28 |
|
Royalties |
($/boe) |
2.00 |
|
|
2.36 |
|
Production expenses |
($/boe) |
8.13 |
|
|
9.37 |
|
Transportation |
($/boe) |
1.99 |
|
|
1.03 |
|
Operating
netback (3) |
($/boe) |
7.90 |
|
|
8.35 |
|
Realized
gain (loss) on risk management contracts |
($/boe) |
1.17 |
|
|
0.99 |
|
Operating netback (3) (including risk management (5)) |
($/boe) |
9.07 |
|
|
9.34 |
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
SHARE STATISTICS |
2018 |
2017 |
COMMON
SHARES |
|
|
Common shares
outstanding (6) |
49,378,026 |
49,317,166 |
Weighted
average shares (1) |
49,378,026 |
49,317,166 |
SHARE TRADING
STATISTICS |
|
|
TSX and Other
(7) |
|
|
(CDN$, except volumes)
based on intra-day trading |
|
|
High |
2.22 |
6.83 |
Low |
1.24 |
4.85 |
Close |
1.41 |
5.25 |
Average
daily volume |
522,415 |
192,786 |
NYSE |
|
|
(US$, except volumes)
based on intra-day trading |
|
|
High |
1.78 |
5.15 |
Low |
0.99 |
3.63 |
Close |
1.08 |
3.97 |
Average
daily volume |
138,069 |
101,002 |
|
(1) Basic weighted average shares for the three months
ended March 31, 2018 were 49,378,026 (2017: 49,317,166). 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
ended March 31, 2018, a total of nil (2017: 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 (2017: 6,172,840) common shares issuable on conversion
of the Company's outstanding 6.5% convertible debentures (the
"Convertible Debentures") were added to the denominator for the
three months resulting in diluted weighted average common shares of
49,378,026 (2017: 55,490,006). |
|
(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 ended March 31, 2018 were 57,099,598 (2017:
57,552,026). This includes 1,548,732 (2017: 2,062,020) of share
options outstanding and 6,172,840 (2017: 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
Bellatrix's first quarter 2018 results were
marked by strong corporate production volumes and continued
reductions in total capital costs per well. First quarter 2018
performance included the following operational and financial
achievements:
- Production volumes in the first
quarter of 2018 averaged 36,740 boe/d (74% natural gas weighted),
representing 6% growth compared to first quarter 2017 average
volumes. Production levels in the first quarter 2018 exceeded
the mid-point of Bellatrix’s full year 2018 production guidance
range by 6%.
- Production expenses in the first
quarter of 2018 averaged $8.13/boe, down 13% compared with first
quarter 2017 production expenses. With the completion of
Phase 2 of the Bellatrix O’Chiese Nees-Ohpawganu’ck deep-cut gas
plant at Alder Flats (the “Alder Flats Plant”) the Company
forecasts additional reductions in per unit production expenditures
during the balance of 2018, with a full year guidance range of
$7.65 to $8.00/boe.
- Bellatrix continues to implement
efficiency improvements and reduce costs. In the first quarter of
2018, Bellatrix’s Spirit River development program averaged
approximately 10 days from spud to rig release, with all-in Spirit
River well costs reduced to approximately $3.5 million.
- Bellatrix’s borrowings under its
credit facilities (the "Credit Facilities") were $56.9 million at
March 31, 2018. Other than amounts outstanding under our Credit
Facilities, Bellatrix has no debt maturities until 2020 and
2021.
Bellatrix's first quarter performance supports
full year guidance expectations as summarized below:
|
First Quarter 2018 Results |
2018 Annual Guidance (1) |
Actual ResultsVersus
Guidance |
Average daily production (boe/d) |
36,740 |
34,750 |
6% |
Average product mix |
|
|
|
Natural
gas (%) |
74 |
74 |
- |
Crude
oil, condensate and NGLs (%) |
26 |
26 |
- |
Capital Expenditures ($000’s) |
|
|
|
Total net
capital expenditures(2) |
24,467 |
60,000 |
n/a |
Production expense ($/boe) |
8.13 |
7.83 |
4% |
|
|
|
|
(1) 2018 Annual Guidance metrics represent the
mid-point of guidance range where applicable. |
|
(2) Capital spending includes exploration and
development capital projects and corporate assets, and excludes
property acquisitions and property dispositions. |
CAPITAL COSTS REDUCED BY
10%
Bellatrix continued to deliver reductions in
average Spirit River well costs (drill, complete, equip and tie-in)
to approximately $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 and other proprietary drilling techniques, and reduced
nitrogen use are examples of cost reduction efforts implemented. 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 first quarter 2018 Spirit River well program
outperforming expected results by approximately 27% on an IP30
basis. The combination of lower capital costs and improved well
performance provide enhanced corporate competitiveness during this
period of weak natural gas prices.
COMMODITY PRICE RISK MANAGEMENT
PROTECTION AND MARKET DIVERSIFICATION INITIATIVES
During the first quarter of 2018, Bellatrix
added to its commodity price risk management protection to further
reduce the impact of price volatility on our business.
Specifically, Bellatrix has added AECO natural gas fixed price swap
contracts in the summer 2018 and summer 2019 months to insulate
against potential seasonal weakness in AECO spot natural gas
prices.
Bellatrix now has approximately 73 MMcf/d of
natural gas volumes hedged from April through December 2018, at an
average fixed price of approximately $2.91/mcf, representing
slightly less than 50% of 2018 daily average natural gas volumes
(based on the mid-point of 2018 average production guidance).
Bellatrix has also diversified its natural gas price exposure
through physical sales contracts that give the Company exposure to
the Dawn, Chicago, and Malin natural gas pricing hubs. This
long-term diversification strategy reduces Bellatrix’s exposure to
AECO pricing on approximately 33% of the Company’s forecast April
through December 2018 natural gas volumes.
In combination, the market diversification sales
and fixed price hedges cover approximately 80% of natural gas
volumes for the remainder of 2018, and approximately 50% in 2019
(based on the mid-point of 2018 average production guidance). A
summary of Bellatrix’s 2018 through 2020 commodity price risk
management contracts as at March 31, 2018 include:
Product |
Financial Contract |
Period |
Volume |
Average Price (1) |
Natural gas |
Fixed
price swap |
April
1, 2018 to December 31, 2018 |
67
MMcf/d |
$3.03/mcf |
Natural gas |
Fixed
price swap |
April
1, 2018 to October 31, 2018 |
8
MMcf/d |
$1.72/mcf |
Natural gas |
Fixed
price swap |
April
1, 2019 to October 31, 2019 |
18
MMcf/d |
$2.01/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$1.24/MMBtu |
Propane |
Fixed
price differential |
April
1, 2018 to December 31, 2018 |
1,000
bbl/d |
47%
of NYMEX WTI |
Crude
oil |
Sold
C$WTI call |
April
1, 2018 to December 31, 2018 |
1,500
bbl/d |
$80.00/bbl |
Crude
oil |
Sold
C$WTI call |
January 1, 2019 to December 31, 2019 |
2,000
bbl/d |
$80.00/bbl |
Crude oil |
Fixed
price swap |
April 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 40.0Mj/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 FULLY COMMISSIONED
IN MARCH, AHEAD OF SCHEDULE AND UNDER BUDGET
The Phase 2 expansion project of the Alder Flats
Plant was fully commissioned and began selling volumes mid-March.
The project, which more than doubles throughput capacity at the
Alder Flats Plant to 230 MMcf/d (from 110 MMcf/d), was brought
on-stream safely, ahead of schedule, and approximately 5% under
budget. The Alder Flats Plant has successfully tested inlet volumes
of approximately 210 MMcf/d (combined between both Phase 1 and
Phase 2). The turbo expander is operational on Phase 2, which was
designed with a colder process, thereby enhancing natural gas
liquid (“NGL”) extraction capabilities. Combined NGL recovery at
the Alder Flats Plant increases to approximately 55 to 60 bbl/MMcf,
from approximately 45 bbl/MMcf under Phase 1; this is in addition
to an expected condensate yield of an additional 10 bbl/MMcf.
Completion of Phase 2 adds an incremental 30
MMcf/d ownership capacity net to Bellatrix's 25% working interest.
Bellatrix has redirected approximately 65 MMcf/d of gross natural
gas volumes from third party processing plants to the Alder Flats
Plant to optimally process under its ownership and processing
volume commitments. Operating costs for natural gas processed
through Bellatrix’s ownership interest in the Alder Flats Plant are
approximately $0.16/mcf. The redirection of natural gas volumes
from more expensive third-party plants is anticipated
to reduce production expenses in 2018 to a range of $7.65/boe
to $8.00/boe. The completion of Phase 2 is also anticipated to
drive improved revenue generation through additional higher margin
NGL extraction of approximately 10 to 35 bbl/MMcf, resulting in an
average corporate liquid weighting of approximately 26% in 2018,
which we expect to, in turn, drive enhanced corporate profit
margins and cash flow.
The Phase 2 expansion project represents the
last stage of our multi-year infrastructure build out. With our
long term infrastructure build out complete, Bellatrix expects the
majority of future capital investment to be directed towards
drilling, completion and production activities with minimal capital
required for facilities and infrastructure projects over the near
term. Management expects that its existing facilities and
processing capacity will provide the capability to grow production
volumes beyond 60,000 boe/d, with minimal future facility related
capital.
OPERATIONAL UPDATE
Bellatrix maintained a focused capital program
in the first quarter of 2018, balancing infill development drilling
and expanded core area development. The Company will continue to
actively monitor commodity prices, and maintains flexibility to
adjust capital investment to our highest projected rate of return
wells between the Spirit River liquids rich natural gas and higher
liquids Cardium opportunities during the second half of 2018.
The Company's first quarter 2018 drilling
program has delivered the following initial production rates:
- 100/16-01-045-10W5 Spirit River (100% working interest) well
IP45: 10.5 MMcf/d
- 102/01-35-044-10W5 Spirit River (100% working interest) well
IP30: 10.4 MMcf/d
- 100/03-35-044-10W5 Spirit River (100% working interest) well
IP30: 9.8 MMcf/d
- 103/02-36-044-10W5 Spirit River (100% working interest) well
IP30: 6.9 MMcf/d
- 102/15-01-045-10W5 Spirit River (100% working interest) well
IP30: 9.5 MMcf/d
Bellatrix completed the majority of its first
half 2018 capital program during the first three months of the
year, in advance of the seasonal spring break up period.
Exploration and development capital expenditures invested during
the first quarter of 2018 were $24.2 million. The Company’s capital
expenditure plans remain in line with the current annual guidance
range of $55 to $65 million for 2018, with approximately 50% of
capital expenditures to be invested in the first half of the
year.
OPERATIONAL AND FINANCIAL
SUMMARY
- Production volumes in the first
quarter of 2018 averaged 36,740 boe/d (74% natural gas weighted),
representing 6% growth compared to first quarter 2017 average
volumes. Production levels in the first quarter 2018 remained
consistent with fourth quarter 2017 levels.
- Adjusted funds flow generated in
the three months ended March 31, 2018 was $14.7 million ($0.30 per
basic and diluted share), compared to $15.7 million ($0.32 per
basic share and diluted share) in the fourth quarter of
2017.
- Exploration and development capital
expenditures were $24.2 million in the first quarter of 2018 down
45% from the first quarter of 2017. The majority of first quarter
2018 capital expenditures were allocated to drilling, completion
and equipping activity.
- The Company drilled and/or
participated in 6 gross (5.2 net) Spirit River wells during the
first quarter of 2018, which included 5 gross (5.0 net) operated
wells. Completion and tie-in operations for all five operated wells
were concluded during the first quarter and all wells were brought
on-stream in February.
- Bellatrix’s borrowings under its
Credit Facilities were $56.9 million and total net debt was $446.2
million at March 31, 2018. At March 31, 2018, Bellatrix had a $120
million Credit Facility.
- For the quarter ended March 31,
2018, Bellatrix’s Senior Debt to Bank EBITDA (as defined in the
MD&A) ratio was 1.31 times, well below the financial covenant
of 3.0 times as permitted by the agreement governing the Credit
Facilities.
- Total revenue was $66.2 million for
the first quarter 2018, compared to $66.0 million in the first
quarter of 2017, primarily attributed to a 14% increase in average
realized crude oil and condensate prices, and a 45% increase in
realized NGL prices, offset by a 25% decline in corporate average
realized natural gas prices over the comparative period.
- The corporate royalty rate in the
three months ended March 31, 2018 averaged 11% of sales (after
transportation), consistent with 11% averaged in the fourth quarter
of 2017.
- Production expenses in the first
quarter of 2018 averaged $8.13/boe, down 13% compared with first
quarter 2017 production expenses. Bellatrix has provided a full
year 2018 production expenditure guidance range of $7.65/boe to
$8.00/boe given continued cost suppression activity, production
volume guidance, and the expected contributions from the Phase 2
completion in the first quarter of 2018.
- Bellatrix's corporate operating
netback (including risk management) realized for the three months
ended March 31, 2018 was $9.07/boe, down 3% compared with $9.34/boe
realized in the first quarter 2017. This change reflects lower
realized natural gas prices mitigated by 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 March 31, 2018 were $7.2 million
($2.18/boe), compared with $6.0 million ($1.93/boe) in the first
quarter of 2017. Net G&A costs increased in the three months
ended March 31, 2018, due to a decrease in capital recoveries from
partners as a result of an increase in Bellatrix's average working
interest in the operated wells drilled and less capital
expenditures in the first quarter of 2018 compared to the same
period of 2017, in addition to approximately $0.5 million in
workforce restructuring costs.
- Bellatrix recorded a net loss for
the three months ended March 31, 2018 of $12.9 million compared to
a net profit of $13.0 million for the three months ended March 31,
2017. The decrease in net profit period over period is primarily
due to a decrease in the unrealized gain on commodity contracts and
a 6% decrease in commodity prices, offset partially by a decrease
in production expenses.
- As at March 31, 2018, Bellatrix had
approximately 138,237 net undeveloped acres of land principally in
Alberta.
- As at March 31, 2018, Bellatrix had
approximately $1.36 billion in tax pools available for deduction
against future income.
- Bellatrix maintained a strong
Liability Management Rating of 10.97 in Alberta versus an industry
average of 4.74 as at April 7, 2018.
OUTLOOK & 2018 CORPORATE
GUIDANCE
On April 3, 2018, Bellatrix announced a
reduction to its 2018 capital expenditure budget aimed at
preserving balance sheet strength and liquidity, while optimizing
production levels. The updated budget contemplates a range of
capital expenditures in 2018 of between $55 to $60 million (down
from a range of $65 million to $80 million). Bellatrix's current
2018 guidance is summarized in the table below:
|
Current 2018 Annual Guidance (April 3,
2018) |
Previously Set 2018 Annual Guidance (December
14, 2017) |
Production |
|
|
2018
Average daily production (boe/d) |
34,000 - 35,500 |
35,000 - 37,000 |
Average product mix |
|
|
Natural
gas (%) |
74 |
74 |
Crude
oil, condensate and NGLs (%) |
26 |
26 |
Net Capital Expenditures |
|
|
Total net
capital expenditures ($000) (1) |
55,000 - 65,000 |
65,000 - 80,000 |
Expenses |
|
|
Production expense ($/boe) (2) |
7.65 - 8.00 |
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. |
Bellatrix plans to fund its 2018 capital budget
by reinvesting cash flow, asset dispositions and borrowings under
its Credit Facilities. The 2018 capital program will remain
flexible and focused on optimizing forecast return on invested
capital through focused development of the Spirit River liquids
rich natural gas play and higher liquids weighted opportunities in
the Cardium play.
Bellatrix is in active discussions with the
members of its revolving lending syndicate as part of the
semi-annual borrowing base redetermination process, and is also in
discussions with potential new lenders with a view to providing
additional liquidity to the Company. Bellatrix expects the
borrowing base redetermination to be completed by the end of
May.
CONFERENCE CALL INFORMATION
A conference call to discuss Bellatrix's first
quarter results will be held on May 9, 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, 8.5% senior
unsecured 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 and current portion of decommissioning liabilities.
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, expectations regarding future reductions in per unit
production expenses, 2018 annual guidance including forecast
average annual production and commodity mix, capital expenditures
and production expense, the expectation that the long-term
diversification strategy reduces Bellatrix's exposure to AECO
pricing, the expectation of the percentage of production hedged or
subject to other market diversification strategies, expectations
regarding the performance of, and benefits from, the commissioning
of Phase 2 of the Alder Flats Plant, including throughput capacity,
NGL recoveries and condensate yields, expectations regarding the
impact of redirecting volumes from third party plants, expectations
that the Company will be able to direct the majority of its future
capital to drilling, completion and production addition activities
with minimal capital required for facilities and infrastructure
projects over the near term, expectations that the Company’s
existing facilities and processing capacity will provide the
capability to grow production volumes beyond 60,000 boe/d, the
intent of the Company to continue to actively monitor commodity
prices and maintain flexibility to adjust capital investment to our
highest projected rate of return wells between the Spirit River
liquids rich natural gas and higher liquids Cardium opportunities
during the second half of 2018, the expectation that approximately
50% of 2018 capital expenditures will be invested in the first half
of the year, and expectations regarding the Company’s ability to
fund its 2018 capital budget by reinvesting cash flow, asset
dispositions and borrowings under its Credit Facilities. To the
extent that any forward-looking information contained herein
constitute a financial outlook, they were approved by management on
May 8, 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 or "IP" 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.
For further information, please
contact:
Steve Toth, CFA, Vice President, Investor Relations
& Corporate Development (403) 750-1270